PortandTerminal.com, November 8, 2019
Hong Kong slid into recession for the first time in a decade in the third quarter, weighed down by increasingly violent anti-government protests and the protracted U.S.-China trade war
HONG KONG – Months of protests in Hong Kong that forced shops to close, paralyzed public transportation and scared off tourists have left the city’s economy in worse shape than feared. Bankruptcies in Hong Kong have also spiked significantly.
The protests and escalating violence have plunged the former British colony into its biggest political crisis in decades and unnerved many in the business and financial communities.
“Frankly, there is no room for optimism,” embattled Hong Kong Chief Executive Carrie Lam said at a business event in late October when speaking about the economy.
As a major trading hub, Hong Kong was already hurting from the US-China trade war and China’s slowing growth. Five months of mass demonstrations are now pushing the city toward an full-blown economic crisis.
Mass demonstrations have decimated the city’s tourism industry. Visitor numbers plunged 37% year on year for the third quarter.
Hotels are on average only two-thirds full, a drop of 28% compared to the same period a year earlier. InterContinental Hotels Group said in an earnings report earlier this month that revenue per room in Greater China fell 36% last quarter, citing “ongoing unrest in Hong Kong.” The company operates several luxury hotels located in areas frequently targeted by protesters.
“Visits from mainland China that usually account for 80% of arrivals are down most as people fear for their safety,” said Yiu Si-wing, Chairman of China Travel Service (HK) Ltd, a major mainland tour operator.
Organizers of several conferences and exhibitions are scrambling to postpone events.
If the current trends continue, operating income at Hong Kong Disneyland could fall by $275 million in Disney’s current fiscal year, which ends in September 2020, the company’s chief financial officer Christine McCarthy said during a recent earnings call.
And the blows keep coming. Retail figures are also taking a beating as several shops have been forced to close early or shut down for a full day several times over the last few months.
The city’s economy shrank 3.2% in July-September from the preceding period, contracting for a second straight quarter and meeting the technical definition of a recession, according to preliminary government data on Thursday.
From a year earlier, gross domestic product (GDP) contracted 2.9%. The readings were the weakest for the Asian financial hub since the global financial crisis in 2008/2009.
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