GDP has fallen for the first time since the global financial crisis in 2008

Hong Kong’s economic outlook is not optimistic

The continuation of the amendments and the Sino-US trade war caused Hong Kong to fall into a technical recession in the third quarter. The revised third quarter real GDP (GDP) growth rate was negative 2.9%, which was the first year-on-year decline since the global financial crisis from 2008 to 2009.

The weakening of the renminbi and the Hong Kong law enforcement storm continued to curb the export of tourism services (down 32.2%). In fact, the number of visitors in August and September fell by 39.1% and 34.2% respectively. Tourists’ popular items such as clothing, jewellery and cosmetics/drugs have fallen by 20% to 40%. Retail sales fell by 18.3% in September, the eighth consecutive month of decline. Looking ahead, the outlook for the retail industry is not optimistic due to weak local demand. Unemployment rates in the consumer and tourism-related sectors (16.5% of the workforce) have jumped from 3.9% in June to 5.0% in October.

Long-term trend grows or falls to 1.5%

Surprisingly, house prices rebounded after the policy address was announced. The October contract rose by 16.4% month-on-month, plus the latest best interest rate cuts, and the HKMA’s countercyclical capital buffer measures will continue to support asset prices. In addition, the land supply policy is only a medium- and long-term solution. For example, the Lands Resumption Ordinance and “Lantau Island tomorrow” will not create additional supply to curb prices in the short term. Therefore, despite the widespread negative sentiment in Hong Kong in the short term, property prices are still difficult to fall.

Investment prospects remain weak, with local fixed capital investment shrinking for the fourth consecutive quarter of GDP, now 16.3%, and machinery, equipment and intellectual property products plummeting 26.6%, which is a leading indicator of business sentiment

The PMI (Purchasing Managers Index) also fell to a low of 39.3 after the global financial crisis. The Quarterly Business Trends Survey (QBTS) also pointed out that both local and overseas investment prospects are not optimistic. Hong Kong’s capital expenditure has been weak. In fact, CAPEX (Capital Expenditure) has long been limited by the world’s most unaffordable high housing prices; the savings rate has dropped from 33.4% in 2006 to 21.8% in 2018, the first half of this year. Further dropped to 18.7%. In an ultra-low interest rate environment, capital flows to real estate and financial markets, which indirectly hinders long-term capital investment.

Labor productivity continues to decline year-on-year, which is related to the aging of the population. In the past decade, the labor force of the population over 65 years old (12.5%) has grown at a much faster rate than the overall workforce (2.8%). In addition, the outflow of human capital is serious, and the well-educated main labor force migrates due to continued political instability, which will put pressure on long-term labor productivity growth. Hong Kong’s long-term trend growth may be reduced to 1.5%, while the average growth rate over the past decade was 2.8%.

Indeed, Hong Kong is still an important financing gateway for mainland enterprises. The recent gathering of mainland e-commerce giants in Hong Kong is an example. After introducing the institutionalization of different rights in the same stock, Hong Kong ranked first in terms of raising funds through IPOs in 2018. More importantly, although the ratio of Hong Kong’s GDP to the mainland has fallen from 27% in the early 1990s to 2.7% in 2018, the number of foreign direct investment from the Hong Kong/Hong Kong through Hong Kong has increased from 27.8% in 2006 to 65.0 in 2018. %, so the role of the super agent in the financial sector is expected to be replaced in the short term. Altogether.


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