Kong is back in the headlines after recent elections showed how fractured
politics in the city are.
Politics have also impacted business and hurt the city’s traditional role as the business capital and the gateway to China.
Hong Kong has also been losing its place as the favourite shopping destination of mainland Chinese who have been turned off by protests against mainland interference in Hong Kong, and also the strength of the Hong Kong dollar.
Mark Godfrey has been talking to some of the city’s business people to find out the fate of the Hong Kong economy.
There’s plenty of excitement down here at the convention centre for the opening of Hong Kong’s annual expo of fine food and beverages. With dragon dancers giving some atmosphere visitors are sampling fine wines, spirits and gourmet food.
The fair’s organiser is Stuart Bailey and he says that Hong Kong’s recent economic predicament has impacted the hospitality sector.
“People are feeling a bit battered, it’s been a poor 12 months, but we are seeing the shoots of optimism. Government statistics on restaurant receipts for the second quarter of 2016 show growth, we’re up 3.2 percent though overall volume is down 0.2 percent. That means that the amount of money is up. It’s not stellar but it’s growth,” Bailey says.
The city’s retailers are having a tougher time, Bailey explains, due to mainland Chinese tourists going elsewhere for shopping.
“The retail industry, the people coming to buy watches and shoes and handbags in Hong Kong, that’s down 12 and a half percent. Traditionally the mainland spend has been on retail rather than food and beverage. The mainlanders are very savvy people, they understand currency and exchange rates and they understand where they’re going to get more of a bargain. And when the yen in Japan fell lots more tourists started going to Japan. If Thailand becomes cheaper they go there.”
One of those showing his wares at the event is Chris Hanselman, who’s spent several decades in Hong Kong and supplies the city’s airlines and restaurants with imported seafood.
“My business selling to the airlines has been steady. I think the domestic market is steady. What’s suffered in Hong Kong is the influx of mainland Chinese has slowed down. So it’s all the watches, the luxury goods retail that’s really had a hammering,” Hanselman says.
“There’s been a big clamp down in China on banking, and money laundering and credit. I don’t think money is as easy and they are more specific in what they’re buying,” concludes Hanselman.
Down in the city’s financial district economist Alicia Herrero from French investment bank, Natixis, explains how Hong Kong’s economic fortunes are tied to the fate of the US dollar and interest rates.
Hong Kong’s peg to the dollar dictates local interest rates.
“The fear that Chinese tourists would no longer come to HK was exaggerated,” Herrero stated.
“Although it’s true the numbers are down. The other reason why we were negative on Hong Kong is that Hong Kong was extremely expensive is because the dollar was expensive. It has come down which has helped HK’s competitiveness,” she continued.
Herrero explains how Hong Kong is also drawing in investment due to the low interest rates in other key economies like the European Union.
“Negative rates in Europe and Japan pushes money to Hong Kong. We’re starting to see a reversal of the housing market. So it’s moving up again, which seems impossible given how expensive it is! [There’s] Nowhere else to go. People prefer property in an environment of very low rates. And Hong Kong is profiting from that,” Herrero says.
Mainland Chinese shoppers may be staying away but Hong Kong looks like it’s sailing out of some stormy economic waters.
For Stuart Bailey it’s a question of confidence
“We have 7 million people and they’re got plenty of money to spend. You have only to look at the real estate where you’ve had thousands of people queuing to buy because they think the prices are going to go up.”
Bailey continues, “they’ve got money but it’s a question of how confident they feel. The Hang Seng has had a poor past year but in the past three months there’s been an upward trend. It’s small things like that that make people think ‘you know what the Hang Seng’s doing alright, maybe the world isn’t falling apart lets go out and have a nice dinner.”
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