Title: Hong Kong Economic Indicators in Decline, Treasury Faces Continued Deficit
Date: August 3, 2023
Hong Kong’s economy, which had hoped for a strong rebound after the resumption of normalcy, is showing signs of decline, as revealed by the latest data from S&P Global’s Purchasing Managers’ Index (PMI). The PMI score for July fell to 49.4, below the “dry prosperity line” of 50, indicating a contraction in economic activity. This is the lowest PMI since November 2022 and the worst performance since the government announced the full return to normal in March.
S&P Global cited weak economic conditions as the cause of reduced orders and a decline in business activity. Pan Jingyi, deputy director of S&P Global Economic Research, mentioned that the growth momentum of Hong Kong companies seems to have faded in the latter half of 2023.
Adding to the concerns, Hong Kong’s gross domestic product (GDP) in the second quarter only grew by 1.5% year-on-year, lower than market expectations of 3.5%. Government consumption expenditure, as well as the value of imports and exports, recorded significant declines. The disappointing performance of consumption and inbound tourism, both considered essential for economic growth, have further dampened the prospects for a robust recovery.
Despite the Hong Kong government’s efforts to support the economy through initiatives like “Happy Hong Kong” and consumer coupons, private consumption expenditure only grew by 4.5%, showing a slowdown in growth. Tourist arrivals have also continued to remain below pre-pandemic levels, with only 13 million visitors in the first half of the year, less than half of the previous figures. Moreover, the real estate market, often seen as an economic indicator, has shown steep declines in housing prices and increased vacancy rates for office buildings.
Li Zhaobo, a scholar at the Asia-Pacific Business Research Institute of the Business School of CUHK, warned that the government’s treasury may continue to face deficits if it does not address the issue of increasing income and reducing expenditure. He highlighted the potential consequences of relying on increasing debt issuance, which could lead to social problems and a possible debt crisis.
In another concerning development, the National Security Department of Hong Kong Police has planned an arrest operation against Danish artist Jens Galschiøt, the creator of the “Pillar of Remembrance.” The police have accused Galschiøt of planning to carry out political riots with the sculpture and are considering transferring the case to mainland China for trial under the Hong Kong National Security Law. The artist expressed surprise and sadness over the situation, highlighting the disappearance of Hong Kong’s “one country, two systems” principle.
The increased arrests and charges under the National Security Law have raised concerns about the erosion of civil liberties in Hong Kong. The national security flag is being used as a tool to suppress opposition and dissent, resulting in a growing number of political prisoners.
Critics have condemned Secretary for Security Tang Bingqiang’s remarks blaming external forces for previous protests and movements, suggesting that the government fails to acknowledge its own governance mistakes. The government’s focus on national security has raised questions about political ambitions and its relationship with Beijing.
The National Security Department’s continued harassment of the families of wanted individuals living overseas is another concerning development. Recently, three more family members of Yuan Gongyi, a wanted individual, were taken in for investigation, raising questions about the extent of the police’s actions in these cases.
As Hong Kong grapples with economic challenges and a shrinking space for dissent, the future of the city’s economy and civil society remains uncertain.