12 Sept 2016
What Are the Solutions of Hong Kong’s Trade Predicament?
1. Mired in a predicament of persistent contraction
Hong Kong’s trade has been persistently contracting. It has contracted for 15 months in a row from May last year to July this year. The period of contraction not only exceeds the period during the global financial crisis between 2008 and 2009, but also breaks the record during the Asian financial crisis. Judging by the current external and internal environment, the contraction in Hong Kong’s trade will undoubtedly become the longest since records began. Although the contraction is less severe than the previous two occasions, the negative impacts on exports of services, cargo logistics, financial services, labor market and economic development would be no less harmful due to the ultra-long period of sluggishness. This is an important feature of Hong Kong’s trade recently.
Another feature of Hong Kong’s trade predicament is that Hong Kong underperforms the overall global standard. For a long period of time, as the most important trading hub in Asian Pacific, Hong Kong imports and exports trade performed outstandingly. In the 25 years between 1990 and 2014, Hong Kong’s trade outperformed the overall global standard by an average annual growth rate around 3%. Nevertheless, the situation has reversed since early last year. According to World Trade Organization (WTO) statistics, the volumes of global trade increased by 2.8% last year, while the volumes of Hong Kong’s trade decreased by 2.5%. The volumes of Hong Kong’s trade dropped 2.1% for the first seven months of this year. Negative growth will likely be recorded for this year, while WTO estimates the volume of global trade will increase by 2.8% this year.
Compared with global performance, the consistently lower growth of Hong Kong’s trade completely diverges from the previous trend. In the past few decades, this situation only happened during the Asian financial crisis in 1998. Hong Kong was seriously impacted by the regional financial crisis at that time, but no similar financial crisis took place recently. What are the underlying reasons of this phenomenon?
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