BOFIT Viikkokatsaus / BOFIT Weekly 2019/25

The Hong Kong Census and Statistics Department reports that the special administrative region’s GDP grew by just 0.6 % y-o-y in the first quarter of this year, the lowest growth pace since the 2009 financial crisis. Growth in private consumption was negligible, while investment in construction and machinery & equipment contracted. Foreign trade goods exports began to fall and growth in services exports slowed to around 1 % y-o-y. Imports of goods and services also contracted. Economic trends remained generally weak in April.

For Hong Kong, a small open economy, mainland China has huge economic importance. The movement of goods, services, people and money between the special administrative region and the mainland is quite lively. The slowdown in Hong Kong’s economic growth also reflects weakness in the mainland China economy. Trade war, heightened protectionism and slowing growth in world trade also have diminished the region’s economic growth.

When the UK surrendered control over Hong Kong to China in 1997, the parties agreed, among other things, that Hong Kong’s economic system and constitution would remain in place until at least 2047. In recent years, however, China has tightened its grip on Hong Kong. The mass protests of recent weeks reflect dissatisfaction with this trend. The regional government postponed a change in the law that would make it easier to extradite a person accused of a crime to mainland China, but protestors continue to demand that the proposed law never be enacted and that Hong Kong’s chief executive Carrie Lam step down.