Hong Kong is set to end the year in the midst of a full-blown recession, its finance chief said yesterday, as spiraling interest rates join strict COVID-19 controls in hammering the economy.
“There is a very high chance for Hong Kong to record a negative GDP growth for this year,” Hong Kong Financial Secretary Paul Chan (陳茂波) told reporters, adding that interest rates were being raised “at a pace that was never seen in the past three decades.”
Hong Kong’s monetary policy moves with the US Federal Reserve because its currency, one of the cornerstones of its business hub reputation, is pegged to the US dollar.
Photo: AFP
The Fed’s hawkish rate hikes, aimed at curbing soaring inflation, come at an especially difficult time for Hong Kong, dampening sentiment when the economy is struggling.
Hong Kong is currently in a technical recession — recording two consecutive quarters of negative growth this year.
The government has adhered to a version of China’s “zero COVID” policy for more than two-and-a-half years, enforcing strict controls and mandatory quarantine for international arrivals.
Chan signaled his support for making travel and business easier.
“The aspects related to the pandemic need to continue to improve in order for us to see larger investments, because people are more cautious in a high-interest-rates environment,” he said.
Business leaders have long been warning that the COVID-19 controls, combined with Beijing’s ongoing crackdown on dissent, have made it harder to attract talent and cut off Hong Kong internationally, especially as rivals reopen.
Hong Kong has seen a net outflow of more than 200,000 people in the past two years, a record population drop.
“Hong Kong should be ahead of other Asian cities, but now there’s a feeling that we’re falling behind and being left isolated,” Eden Woon (翁以登), the new head of the Hong Kong American Chamber of Commerce told the South China Morning Post in an article published yesterday.
“There are people leaving and the problems of retaining talent — all these things add up together and need to be addressed,” he added.
While the Hong Kong Monetary Authority has no choice but to follow the Fed, major banks such as Standard Chartered PLC and HSBC Holdings PLC had resisted that pressure.
However, HSBC yesterday raised its prime lending rate in Hong Kong by 12.5 basis points to 5.125 percent, the bank’s first rise in four years.
Others are likely to follow suit. That could affect the territory’s once hot property sector, with Goldman Sachs Group Inc estimating that prices could slide by about 20 percent over the next four years.
Hong Kong also experienced a recession in 2019 when months of huge and sometimes violent democracy protests rocked the business district.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
RSS