Trade war clips HK’s economy

hong kong — Hong Kong economic growth slowed in the second quarter, amid a deepening US-China trade conflict and rising interest rates that are weighing on the outlook.

As a key trading hub for the flow of goods, services and capital between the world’s two biggest economies, Hong Kong is vulnerable to second-round effects as China and the US impose tariffs on each other’s products.

While official forecasts show limited impact because the territory isn’t subject to US tariffs on China due to the United States-Hong Kong Policy Act, the worry is that volumes will decline as production and shipping get moved elsewhere in Asia to avoid getting hit by the new duties.

“Over 50 per cent of trade in Hong Kong is related to Mainland China,” said Iris Pang, greater China economist at ING Bank in Hong Kong.

“When China is in a trade war, Hong Kong’s trade, logistic and ports would be negatively affected,” Pang added.

Even before those effects kick in, growth softened from the fastest expansion since 2011 in the first quarter. Gross domestic product grew 3.5 per cent in the second quarter from a year ago, according to the government, compared with 4.7 per cent in the first. Growth fell 0.2 per cent quarter-on-quarter. The government maintained its full-year forecast between 3 and 4 per cent. —