Real test for Hong Kong’s economy comes at Lunar New Year as new wave of tariffs hit amid US-China trade war
- City’s companies on the mainland will be hit hardest, with 25 per cent levy on US$200 billion worth of Chinese goods
- Smaller firms may seek new markets in chain effect that will deal blow to Hong Kong
Hong Kong’s economy will be tested early next year as a new wave of American tariffs on Chinese goods kick in and trigger many small manufacturers across the border to go under, the city’s trade promotion body has warned.
Hong Kong Trade Development Council chairman Vincent Lo Hong-sui said the time around Lunar New Year would be critical to the survival of Hong Kong’s mainland-based producers facing a 25 per cent levy on US$200 billion worth of Chinese goods on January 1.
The tariffs, an increase from the present 10 per cent under the China-US trade war, could deal a blow to the city’s economy through a chain effect, as smaller firms step up the pace in looking for new markets, he said.
“I am not optimistic at all about the trade war,” Lo said in an interview at the city’s biggest overseas trade mission – Think Global, Think Hong Kong – in Tokyo last Thursday. “Who can guess [US President Donald] Trump’s next step? If it worsens, not only Hong Kong, but the world’s economy will slow down.”
Since the first shots between the two superpowers were fired in July, Beijing and Washington have yet to reach any solutions despite on-and-off dialogues. Hopes on a breakthrough emerged on Friday when it was reported Trump had offered to host a dinner for Xi on December 1 in Buenos Aires after the G20 leaders summit. Beijing tentatively accepted it, the Post revealed.
Nevertheless, the outlook for the city’s economy was gloomy. After a 4 per cent growth in its gross domestic product in the first half of the year, economists estimated the full-year growth to be at 3 per cent – the low end of the government’s forecast of 3 to 4 per cent.
Lo said the 25 per cent tariffs were beyond anything companies could afford, which affected about 5,700 items ranging from seafood, vegetables, textiles and garments to footwear, car parts, vehicles, batteries and furniture. The Hong Kong government estimated about half of the city’s exports would be affected.
“The manufacturing industry across the border is undergoing a reshuffle, and it is inevitable some smaller ones with a funding bottleneck will go bust,” he said. “Lunar New Year [in early February] is a critical time.”
He said Hong Kong companies should strengthen efforts on diversifying into the robust consumer market across the border and explore new sectors such as those along the “Belt and Road Initiative”, President Xi Jinping’s global trade strategy.
“The Hong Kong government has offered some relief measures, but these are short term,” he said.
Lo added that from what was observed at a recent meeting between Japanese prime minister Shinzo Abe and Xi in Beijing, Japan was interested in China’s go global strategy.
“The US wants to make Japan an ally, but Abe’s visit in Beijing shows his stance,” Lo said.
Denise Tsang is reporting from Tokyo