Hong Kong GDP records 3.5 per cent growth for second quarter on strong consumption and markets
But government says prospects clouded by escalating US-China trade war
Hong Kong’s economic health surged 3.5 per cent in the second quarter of 2018 amid buoyant consumption and robust stock and property markets, but prospects are clouded by the escalating US-China trade war.
The solid performance brought gross domestic product (GDP) to 4 per cent growth in the first half of 2018, the government said on Friday. The most recent figures followed 4.6 per cent growth in the first quarter – Hong Kong’s strongest in almost a decade. The government’s full-year forecast for GDP growth is an increase between 3 and 4 per cent.
Adolph Leung Wing-sing, deputy government economist, warned that the city’s GDP growth will slow down on a worsening trade war.
The trade war between the world’s two largest economic powers worsened on Thursday when Beijing threatened to match Washington’s decision to levy 25 per cent tariffs on US$16 billion worth of Chinese goods on August 23.
America’s move raised the value of punitive tariffs to US$50 billion from the US$34 billion that already took effect on July 6. Another batch of US$200 billion worth of Chinese goods will be subject to 10 per cent tariffs, pending a US congressional hearing on August 20. US President Donald Trump warned earlier of targeting US$500 billion worth of Chinese imports.
Leung said the trade war could hurt the city’s exports in coming months, for example, the US$250 billion worth of Chinese goods at stake would affect 3.5 per cent of the city’s exports.
“If the US-China trade conflicts persist or even escalate, there would be some indirect impact on Hong Kong in terms of trade, which will affect global trade and investment,” he said. “But so far we are still not totally certain to what direction this will develop.”
Fatigues in the asset markets emerged in the second quarter. The Hang Seng benchmark index drifted 3.8 per cent lower to 28,955 on June 29 from the first quarter. On Friday, it closed at 28,607. The stubbornly strong housing market saw home prices gain 5 per cent in the second quarter while affordability worsened.
Bank of East Asia chief economist Paul Tang Sai-on said private consumption showed signs of weaknesses in the second quarter as shoppers’ “wealth effect” soured along with a volatile stock market. Private consumption grew at 6.1 per cent in the second quarter, slower from 8.8 per cent in the first quarter.
He was cautious about the prospects of the rest of the year.
“Risks are rising in Hong Kong, which is a free port and with high asset prices,” he said. “Exports will worsen gradually, and we will see more apparent impact on the forth quarter.”
Tang forecast the GDP growth will slow to 3 per cent in the second half, leaving the full-year rate at 3 per cent.
Hong Kong General Chamber of Commerce senior economist Wilson Chong Sze-kit said its members in air and sea freight forwarding services started to see clients’ orders shorten as first signs of the trade war.
“The recent depreciation of yuan would possibly undermine the mainland tourists’ shopping power,” he said, and pointed out that they accounted for 75 per cent of the city’s tourist arrivals.