Home / World Economy / World Economy News / US-China trade war could knock half a percentage point off Hong Kong’s economic growth, says commerce chief Edward Yau

US-China trade war could knock half a percentage point off Hong Kong’s economic growth, says commerce chief Edward Yau

The US-China trade war could cost Hong Kong half a percentage point of economic growth, the city’s commerce chief said on Saturday, while warning increased tariffs from the end of this month could hit local consumers in the pocket.

But one local economist said that was probably an underestimate, while a business leader slammed the government for, as he saw it, failing to help smaller firms cope with the uncertain climate.

Hong Kong, nearly half of whose exports are originally from mainland China and destined for the US, is caught in the middle of the tariff feud. China and the US agreed to a 90-day truce, putting planned import tariff increases on hold to hammer out a deal. If they do not reach an agreement by March 1, the tariffs will rise from 10 per cent to 25 per cent.

Edward Yau Tang-wah, secretary for commerce and economic development, told a radio programme the direct impact of such tariffs on the city’s GDP growth would be limited to 0.5 of a percentage point.

He added, though, that the impact on the overall economy was unmeasurable.

“Hong Kong’s economy is no longer only about manufacturing. Therefore, under the influence of the global economic environment, it is difficult to estimate the impact on the investment prospects or the profitability of enterprises,” Yau said.

“As we have seen from the past 10 months, the trend of the global stock market has become increasingly uncertain.”

Yau’s was a bigger estimate of the damage than the government had given previously. In July finance chief Paul Chan Mo-po estimated the impact of the trade war at just a tenth or a fifth of a percentage point of growth.

Officials revealed in November that the city had grown at a slower-than-expected 2.9 per cent in the third quarter – the slowest quarterly growth in the preceding two years.

It estimated full-year growth at 3.2 per cent, which was still within its earlier projection of 3 to 4 per cent for 2018.

Yau on Saturday said tariff-hit businesses could just about withstand the 10 per cent levies, but expected they could no longer avoid passing on costs to consumers if the US unilaterally increased them on March 1.

Saying it was hard to predict the outcome of the upcoming trade talks, Yau added that the government would continue to help local businesses explore new markets. He cited as an example countries involved in the “Belt and Road Initiative”, the central government’s ambitious global trade plan.

Not everyone agreed with Yau’s outlook.

Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, said the actual overall damage would be greater than the minister predicted, because the trade war had dampened consumer sentiment on the mainland.

“After the trade war started, the mainland economy seriously slowed down and mainlanders’ consumption also slowed down,” Kwan said.

He cited as evidence weakening retail growth in Hong Kong, pointing out that there was a rise of just 0.1 per cent in December, despite many mainlanders flooding into the city in recent months.

Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, meanwhile, maintained his prediction that Hong Kong firms exporting to the US faced a drop in business of at least 25 per cent in the first quarter on 2019.

He criticised the government for failing to help small and medium-sized businesses explore new manufacturing sites and move from the mainland.
Source: South China Morning Post

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping