Hong Kong optimism gets boost from China reopening

[HONG KONG] Hong Kong is “quite optimistic” about its economic prospects in 2023, with China’s reopening expected to soften any potential blow the city may sustain from the looming global downturn, a senior official said a day after border restrictions were scrapped.

“We believe that our outlook for 2023 is quite optimistic,” Joyce Cheung, principal economist in Hong Kong’s Office of the Government Economist, said during a briefing for visiting foreign journalists on Monday (Jan 9).

“While high inflation and tight monetary policy in advanced economies will continue to drag global demand – and hence our exports – the expected revival in the mainland economy should provide some offset on that part,” she said.

Cheung did not provide a growth forecast for 2023, noting that it is set to be announced at Hong Kong’s upcoming Budget in February.

But just last week, the International Monetary Fund warned that a third of the world, including the United States and the eurozone, is headed for a recession this year.

“We are returning to normal,” Cheung said in response to questions. “You can see from the cases from other Asian economies and cases in Europe, even (when) the global demand has been slowing, actually the relaxation of epidemic-related measures will boost some of the private consumption and that will help the economy a lot.”

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Meanwhile, the Hong Kong General Chamber of Commerce has pencilled a growth rate of 3.8 per cent, with other economists predicting a rate between 2 and 5 per cent, the South China Morning Post reported on Monday.

The economy has taken a severe beating from the Covid-19 pandemic, following the administration’s relentless pursuit of a zero-Covid strategy that it only bowed out of last quarter.

Advance estimates suggest the economy in 2022 shrank 3.2 per cent, which means the city’s gross domestic product would be expanding from a low base this year.

Cheung said the optimism was fuelled by the highly anticipated resumption of trade and travel between Hong Kong and mainland China, which started on Sunday after a three-year border closure, although she cautioned that the city cannot be “immune” to a slowdown in other parts of the world.

“Domestically, the tightened financial conditions will continue to have some negative impact, but the better economic outlook and sentiment and the improved labour market should stimulate our private consumption and investment demand,” she said.

She added that the medium to long-term economic outlook for Hong Kong is “bright” since the “eastward shift of the global economic gravity should continue”.

This is because China’s continued pursuit of “high-quality development” is likely to make Asia a “major engine” of global economic growth, she said.

Asked about the dozens of media reports that have documented the flow of talent and capital out of the city over the last three years, Cheung said that Hong Kong is putting in the effort to attract talent “from all over the world”.

“People move and come and go, this is a characteristic of Hong Kong,” she said. “We don’t even keep statistics on who has gone.”

Noting that the labour market has shrunk slightly, she said: “If we boost the economy (and) bring the economy on track, if they see the opportunities here, they are going to come back.”