In-market presence is important; Hong Kong still a strong gateway for re-exports

The following is a report on the Hong Kong economy, by MFAT. The original is here.

Hong Kong’s real GDP grew by 2.7% year-on-year in Q1 2024, as exports of services continued to show growth due to the increase in visitor arrivals. For 2023, real GDP rose by 3.2% yoy. The Hong Kong Government has forecast GDP growth of 2.5% to 3.5% for 2024.

Consumer prices rose by 2% in March.  The Government forecast inflation at 1.7% for 2024.  The unemployment rate has stayed low at pre-pandemic levels, at 3%, for the period between January – March 2024.

Hong Kong exports and imports of goods rose 6.7% and 3.2% respectively in Q1 2024, (after exports fell by 10.3% in 2023).  Geopolitical tensions and tight financial conditions are expected to continue to affect exports, but external demand has held up relatively well.  Hong Kong’s exports (predominantly re-exports from other countries as well as tourism services) are forecast to grow by 4-6% in 2024.  Mainland China, ASEAN, the EU, and the USA accounted for 76.5% of its exports in 2023.

Hong Kong visitor arrivals continued to grow, helping to drive 2.7% growth in the local economy in Q1 2024.  However, there are signs tourists are spending less.  Tourists from the mainland China, in particular, are now predominantly day-trippers bringing their own snacks meaning limited cash-injection into Hong Kong’s sagging hotel and restaurant sector.  Major holiday periods now see large numbers of Hong Kongers heading across the border to the bright lights of Shenzhen and further afield, with mainland visitors not providing a commensurate balance in economic impact.

Action to boost Hong Kong’s economic confidence and recovery

In a fiscally challenging environment, Hong Kong’s budget announcements in March (with healthy government reserves continuing to fund a fifth consecutive budget deficit since 2019-20) included measures to restore economic confidence and create favourable conditions for recovery.  Measures included:

Bolstering tourism

• HK$100 million (NZ$21m) earmarked for international mega-events i.e. fireworks, creative arts and cultural festivals to enhance the city’s international image;
• offering extended tourist visas (for mainland visitors).

Building a diversified economy by

• reinforcing Hong Kong’s status as international financial centre, enhancing stock market liquidity, expanding offshore Renminbi business, deepening Greater Bay Area (GBA) collaboration and venturing into green finance;
• modernizing Hong Kong’s logistics industries through smart technologies sustainability, internationalization and facilitation;
• accelerating development of Hong Kong’s innovation and technology ecosystem including establishing a new office to support development of strategic enterprises; facilitating research and development of the microelectronics industry; setting up a supercomputing centre to foster development of artificial intelligence; and fostering international green finance and technology hubs; and
• promoting high value-added maritime services to facilitate GBA maritime collaboration.

Attracting and retaining talent

• encouraging more professionals from Mainland China…