Why Hong Kong Is Facing a Recession Amid Protests and Trade Wars | WSJ
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Why Hong Kong Is Facing a Recession Amid Protests and Trade Wars | WSJ


– [Narrator] Hong Kong is
facing its first recession since the global financial crisis in 2008. Influenced by unprecedented factors. Including its own ongoing
anti-government protests and the trade stalemate
between Washington and Beijing. In February, the government
predicted Hong Kong’s economy would grow up to 3% this year. Six months later, that
forecast was slashed to zero to 1%. (speaking in foreign language) Since June, the city’s
tourism industry has suffered from the increasingly violent and disruptive pro-democracy protests. In August, normally a
strong month for tourism, arrivals in Hong Kong dropped
nearly 40% from a year ago. It’s the worst decline since May, 2003 when Hong Kong was grappling
with the deadly SARS virus. Occupancy rates of hotels in
some districts fell around half while room rates decreased 40 to 70%. – Mainland Chinese
tourists make up over 70% of total tourist arrivals in Hong Kong. But when protests started in June, that number has dropped. And there’s also increase
in anti-China sentiment in the city. – [Narrator] 16 years ago,
once the all clear came after the SARS outbreak, visitor arrivals and business
confidence swiftly recovered. But, as the anti-Beijing
mood grows in Hong Kong, so does opposition to the
protests in mainland China. The protests and the drop
in tourists have disrupted the city’s retail sales. In August, sales dropped
23% from a year ago. Their worst monthly decline on record. Luxury items were among
the biggest victims. Sales of jewelry, watches, and other valuable gifts fell nearly 50%, marking a record low. – The protests have
been disruptive for life especially on the weekends. In early October, there was a time when entire department stores were closed and major train stations
were also shut down. And also, if you go to
popular shopping districts like (speaking in foreign language), it’s actually a popular
destination for protests now. – [Narrator] And then
there’s the trade dispute between China and the U.S. Though the two sides emerged
from the latest round of trade talks with a truce in place, there’s still a lot to be worked out. The effects of the stalemate
have been felt in Hong Kong which relies heavily on
reexporting Chinese goods. Total exports are expected to
shrink nearly 4% this year. So far, the finance sector
has weathered the protests. – Prohibition on face
cuffering regulation. – [Narrator] However, when
the government invoked colonial-era emergency powers, it put to the test Hong
Kong’s rule of law. The authorities say they will only use the emergency provision to ban people from wearing masks at public gatherings but it also allows the chief executive to enact drastic regulations such as censorship, arrests,
and foreign exchange controls. The government said it had no such plans. Declining reexports and
the government’s struggle to restore order to the city have erased any economic
momentum from the start of 2019. Experts believe numbers for
the third quarter will confirm Hong Kong is in technical recession. – Despite the major decline in Hong Kong’s economic indicators, Hong Kong’s financial
buffers still remain strong. That can come under pressure if Hong Kong’s status
as a global financial and business center comes under fire and that could be really
difficult and challenging for its longterm growth prospects.

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