The Hong Kong government announced on Monday (1st) that the second-quarter GDP fell by 1.4% year-on-year, which was slightly narrower than the 3.9% in the previous quarter.
Affected by various internal and external factors, Hong Kong's economic performance this year has been unsatisfactory, reversing the pace of recovery since 2021 and falling into recession again.
After the second quarter, it is generally expected that the adverse factors will be largely digested, and the Hong Kong economy is expected to bottom out.
However, since mid-July, a sudden event has changed expectations for a recovery.
The crisis caused by US House of Representatives Speaker Nancy Pelosi's planned visit to Taiwan has rapidly escalated the situation between China and the United States and across the Taiwan Strait. With both China and the United States holding back on each other, there is no way at this moment to say what will happen in the future.
In serious cases, China and the United States may sanction and retaliate against each other, causing the two economies to decouple in essence.
This crisis may make Hong Kong suffer another heavy blow. The Hong Kong stock market closed down nearly 500 points on Tuesday (2nd) because of the cross-strait crisis. The government and citizens should be prepared for this.
Hong Kong's economy is in full swing this year
Since the beginning of this year, Hong Kong's economy has faced multiple unfavorable factors in an overall downturn.
The rapid increase in interest rates in the United States to control inflation has quickly tightened various demands.
On the other hand, the mainland's economy was also very weak in the first half of this year.
On the one hand, it is affected by the interest rate hike in the United States, but on the other hand, it is also because the mainland's economy is very weak this year.
In the second quarter, the mainland tightened its anti-epidemic policies due to the Omicron variant, adding to the downward pressure on the economy.
The overall economic environment is poor, coupled with the Russian invasion of Ukraine at the beginning of the year, which has had a negative impact on global supply chains and the economy.
The Western sanctions against Russia have disrupted the energy market, causing energy prices to record violent fluctuations this year, indirectly aggravating the world's transportation problems and accelerating the response of advanced Western economies to raise interest rates.
Hong Kong's economy faces multiple difficulties this year (file photo)
The decline in global demand has had a significant impact on Hong Kong's trade. The epidemic has also hindered land freight between the mainland and Hong Kong. The significant decline in Hong Kong's export data in the first half of the year reflects the impact of these factors on Hong Kong, and it is also a major contributor to the decline in GDP. major factor.
In the export value data in the second quarter of this year, in addition to the 1.1% increase in April, May and June recorded 1.4% and 6.4% respectively, especially in June, the export value was much lower than expected. Hong Kong is facing a lot of economic pressure.
Decoupling between China and the US under extreme circumstances
These problems have already brought a lot of negative economic impact to Hong Kong. If the government should actively deal with them, the recent Taiwan Strait crisis is more likely to have a greater impact than these.
First, China may take retaliatory action against Taiwan, including an embargo on Taiwan.
Hong Kong has always been the most important entrepot between the Mainland and Taiwan, and Taiwan is Hong Kong's second largest trading partner, and trade is on the rise.
In 2021, the total trade volume between Taiwan and Hong Kong will reach 691.3 billion, an increase of 37.1% over 2020, and an average annual increase of 13.3% from 2017 to 2021.
If Hong Kong is to participate in the embargo at that time, it will have a great impact on Hong Kong's economy.
Pelosi's visit to Taiwan could trigger a crisis.
(AP)
On the other hand, no matter how China responds, it is likely to attract countermeasures from the United States in the name of protecting Taiwan.
Although the chances of the US going to war directly with China are slim, the chances of sanctioning China and Hong Kong for Taiwan are not low.
Among them, even the milder sanctions may not directly affect Hong Kong, but as the direct confrontation between China and the United States heats up, funds are likely to begin to flow out of Hong Kong to avoid risks, and economic investment plans in the Mainland and Hong Kong will also be suspended due to unstable factors. , the economy will further slow down.
The Hong Kong government has to rethink how to continue to roll out policies to support Hong Kong's economic stability.
More seriously, the United States may be determined to use this crisis as an opportunity to decouple from China and introduce aggressive economic sanctions.
For example, imposing sanctions on China similar to those against Russia, and using the U.S. dollar as a weapon prohibits China and Hong Kong from conducting U.S. dollar settlements.
Hong Kong uses the linked exchange rate system to maintain currency stability. Once the US dollar settlement is sanctioned by the United States, it is equivalent to freezing all of Hong Kong’s dollar reserves, and the entire linked exchange rate system will collapse and collapse, bringing unimaginable results to Hong Kong’s status as a financial center.
In fact, not long after the outbreak of the Russian-Ukrainian war, some experts warned that international conflicts were becoming more and more common, and Hong Kong should make plans for various situations that may arise.
Hong Kong needs to prepare a plan in case of a ban on U.S. dollar settlements or if local banks are cut off from the SWIFT system.
The currency value of the Hong Kong dollar cannot support itself without the US dollar. The safest way is to discuss a contingency plan with the central government. If Hong Kong is cut off from US dollar transactions, the mainland will quickly replace the renminbi as the supporting currency of the Hong Kong dollar, or even more. Simply convert HKD to CNY directly at a fixed ratio and then use CNY directly in Hong Kong.
What Hong Kong also needs to think about is how to maintain economic stability if China and Hong Kong are cut out of the Western economic system.
For example, how can Hong Kong reduce its dependence on the Western economy, and whether there is a consensus with the mainland and Southeast Asian countries and regions on how to deal with the situation of being sanctioned.
Although Hong Kong cannot completely avoid the negative impact, early response mechanisms can also avoid greater harm.
The Pelosi incident has proved that a crisis can come at any time, and even if the incident does not ultimately cause serious aftertastes, it is time to review and establish a contingency plan.
Irrigation cannot solve economic problems Prepare for the worst and best prepare for economic downturn. We must grasp the golden mean and not be spoiled by the low interest rate environment. Are epidemic prevention and the economy antagonistic or dialectical?