Hong Kong trade body slashes export forecasts by almost half and warns of volatile start to year with all eyes on US-China tariffs truce
- TDC research director Nicholas Kwan says 90-day ceasefire is not enough time to resolve deep-rooted issues
- Cuts forecasts for growth in exports to 5 per cent from 9 per cent
Growth in Hong Kong’s exports will be nearly halved to 5 per cent in 2019 from 9 per cent this year, with the outlook the most uncertain in the coming first quarter amid a temporary truce in the US-China trade war, the city’s trade development body forecast on Thursday.
Washington and Beijing on December 1 agreed to hold off on imposing extra tariffs on each other for 90 days to allow talks for a deal, but Hong Kong Trade Development Council director of research Nicholas Kwan Ka-ming said that could lead to more uncertainty as the time was too short to resolve deep-rooted and complicated issues.
As exporters avoided tariffs by advancing shipments before the end of this year, Hong Kong’s exports grew a better-than-expected 9.8 per cent in the first 10 months of 2018, he said.
“The most volatile situation will be the first quarter next year,” Kwan said. “The two parties may turn the tables or return to the negotiating table at any time.”
With the United States the city’s second largest market after mainland China, a pessimistic Hong Kong Small and Medium Enterprises Association honorary chairman Danny Lau Tat-pong estimated a 25 per cent drop in export orders in the first three months of 2019 from the same period this year.
The city’s import and export sector employed the most people, at about 478,000, and contributed 17.7 per cent to its economy last year.
On the day of the trade ceasefire, US-China relations took an unexpected turn with the high-profile arrest of Huawei Technologies chief financial officer Sabrina Meng Wanzhou in Canada.
Washington is pursuing Meng’s extradition to face fraud charges relating to the telecom firm’s alleged violations of US sanctions on Iran.
“The arrest itself is unlikely to hurt electronics exports significantly because it doesn’t involve a ban on exports,” Kwan said.
Electronics accounted for 70 per cent of Hong Kong’s exports last year.
According to a quarterly export index that gauged 500 Hong Kong exporters and manufacturers, 54.4 per cent of those polled in the fourth quarter this year expected the trade war to have an negative impact on their business. That was 9.9 percentage points higher than in the third quarter.
In response to the trade war, two-thirds of those polled would seek to diversify their markets outside the US while one-third planned to add value to their products to raise their competitiveness.
ING Bank’s Greater China economist Iris Pang, who also estimated export growth for 2019 at 5 per cent, said she was not optimistic the trade war would be resolved next year. Her estimate was based on an assumption that the existing 10 per cent tariffs on US$200 billion worth of Chinese goods would remain unchanged next year.
“China has revealed two cards by lowering import tariffs on cars and buying American soy beans, but [US president Donald] Trump has yet to do so,” she said.
“There are holidays between Christmas in the US and Lunar New Year in China, which means the negotiation time is less than 90 days.”