A Few Words On Hong Kong Economy17 August, 2011, 13:14. Posted by Zarathustra
Tags: Economy, Hong Kong
Perhaps you may be happy about what the Vice Premier Li Keqiang has to say about “supporting Hong Kong” by allowing Hong Kong stocks ETF to be listed in China, or you get excited about the further development of offshore RMB businesses in Hong Kong as hinted by the Vice Premier. Whatever, a few words are necessary on the status of Hong Kong economy at this point in time.
Last week, the government said the gross domestic product (GDP) of the second quarter grew by 5.1% in real term over a year ago. That is a pretty decent performance compared to the rest of the world. But one should also have noted that on a quarter-on-quarter basis, GDP fell by 0.5% in the second quarter, something not seen since the 2008 recession.
Source: Census and Statistics Department
I am not sure if anyone is very surprised by the figure. Given my somewhat pessimistic view on the global economy and Hong Kong property sector, I don’t think readers should be very surprised to see that I am not at all surprised by such a strange contraction. Is this necessarily pointing to a recession? Well, not necessarily, but there is always a possibility of it happening. But what I would suggest is that, as an externally driven economy, and with the ridiculously inflexible currency peg which makes monetary policy in Hong Kong pro-cyclical rather than counter-cyclical, Hong Kong can be vulnerable with both the West and China now slowing.