Inside Out | Hong Kong should be worried about the US-China trade war. Here’s why
At the very least, the dispute has the potential to directly impact the work of around a quarter of the city’s four million labour force
When journalists pressed Hong Kong’s trade and finance secretaries last week on how Hong Kong will be affected by the onset of the trade war between the United States and China, both ducked.
They were right to do so – the trade war has only just been launched, few of the tariffs are yet in place and precise impacts are unclear. We do not know exactly what the retaliations will be, nor the counter retaliations. Nor how long they will fight. For economies like ours, caught in the crossfire, estimating the likely harm is doubly difficult.
While Edward Yau and Kenneth Chan may be right to duck at this stage – they do not after all want to lend official authority to any form of alarmism, especially after Beijing has told the media to avoid talk about the trade war – that does not mean some serious back of the envelope assessments are not urgently needed.
I am particularly reminded of July 1, 1997 – not the first day of Hong Kong’s return to Chinese sovereignty, but the day the Thai Baht crashed, starting the Asian financial crisis that roiled our region for the next two years.
At that specific moment, Hong Kong was supine, even complacent. As countries like Thailand, South Korea and Indonesia fell off a precipice, crushed by massive and unpayable foreign currency debts, the mood in Hong Kong was quietly superior. Our companies were not overly burdened with debt. Nor were our banks financially stretched.
By early 1998, all that complacency had gone. Our economy was facing its worst crash in decades. Property prices fell through the floor. Unemployment soared, and it was a decade before wages recovered to 1997 levels.