GDP growth slows to 3.5% in Q2 as trade war eats into exports

Around $136b of total exports stand at risk.

Hong Kong’s economic growth slowed from 4.6% in Q1 to 3.5% in Q2 as the SAR bears the growing strain of escalating trade tensions between the US and China, according to a government statement.

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“[E]xternal uncertainties increased markedly in the latter part of June, as a result of escalating trade conflict between the US and the Mainland,” Adolph Leung, deputy government economist said in a statement.

Hong Kong exports crashed from double-digit growth of 12.9% in May to a measly 0.7% in June with trade volumes to India and the Mainland plunging 21.8% and 0.7% respectively.  

“For the impact of the trade conflicts, basically can affect Hong Kong through several channels. The most direct channel is through the trade channel and it will probably affect Hong Kong's re-exports of China origin to the US,” he added.

The amount of Hong Kong’s re-exports to China with origin to the US that stand affected by the US list of goods with additional levy is about $136b, representing about 3.5% of total exports, Leung added.

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With a strong year-on-year growth of 4% in the first half of the year, coupled with increased external headwinds, the forecast real GDP growth for 2018 is maintained at 3% to 4%.

Despite the muted performance, Hong Kong’s Q2 GDP figures represent the seventh quarter of expansion above the trend rate growth of 2.7% per annum in the past decade.