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Hong Kong, powerful port and global symbol of free trade since
the 19th century, is caught in escalating tensions between Beijing
and Washington.
In addition to harboring a robust manufacturing base, the
semi-autonomous territory of seven million, under the loose control
of China, has long functioned as one of the world's key
transshipment hubs. A 1909 account says that "tea, silk, opium,
sugar, flax, salt, earthenware, oil, amber, sandal-wood and
granite" were traded in the port.
How Hong Kong adapts now to the 21st century trade crisis will
signal the resiliency of global trade and the fate of mega-ports.
In response to the crisis, Hong Kong has increased subsidies for
domestic businesses, and is forging new free-trade alliances with
third countries.
City leaders estimate that roughly half of all Chinese goods
shipped via Hong Kong to the US are subject to Trump administration
tariffs on hundreds of billions of dollars of Chinese shipments.
Increasingly, Hong Kong is a free-trade area in a tariff world.
With the exception of alcohol, tobacco and oil, it has no import
duties, a big reason it has a trade deficit.
Hong Kong trade deficit, first 9 months
2018: $44 billion
2017: $24.4 billion
2016: $18.4 billion
2015: $39.4 billion
2014: $56.7 billion
Hong Kong was originally occupied by the UK in 1841 and was
returned to China in 1997. When that happened, Beijing promised to
restrain itself from imposing a socialist economic model. Hong Kong
is densely packed with people and has few natural resources,
meaning it needs to import most of what it consumes, and most of
that comes from China and Taiwan.
Hong Kong top sources of imports, first 9 months,
2018
China $199.9 billion
Taiwan $44.6 billion
South Korea $31.8 billion
Japan $27.2 billion
US $20.7 billion
Malaysia $18.5 billion
Switzerland $12.2 billion
India $11.8 billion
Singapore $11.4 billion
Thailand $10 billion
China is also Hong Kong's chief export destination. For decades,
it was Beijing's ticket to the rest of the world, a place where
Chinese entrepreneurs and political leaders could engage Western
companies and learn about technology. Now China and its
manufacturing regions have become the economic heart of the
continent, consuming and producing more than anywhere else.
Hong Kong top destinations for exports, first 9 months,
2018
China $235 billion
US $33.9 billion
India $13.8 billion
Japan $12.2 billion
Thailand $10.5 billion
Singapore $9 billion
Taiwan $8.8 billion
Vietnam $7.9 billion
Germany $7.2 billion
Netherlands $6.4 billion
Maintaining a strong relationship with the US, its top consumer
market after China, is crucial for Hong Kong. A 1992 law affirms
the territory's commercial independence.
A recent congressional report has called for revising the US'
terms with Hong Kong, citing infringements on civil liberties and
press freedom. In response to a congressional report, Hong Kong
chief executive Carrie Lam Cheng Yuet-ngor warned the US that any
change in Hong Kong's privileged status could hurt both sides. So
far, the US has maintained that it will keep separate ties with
Hong Kong, despite that report.
Separately, Hong Kong is slowly forging its own path in the
global trading system. It now has separate free-trade agreements
with mainland China, New Zealand, the European Union's free trade
area, Chile, Macao, Georgia, the Maldives, and the Association of
Southeast Asia Nations, or ASEAN.
Hong Kong this month signed its ninth free trade deal, with
Australia, which, despite its size and proximity, is merely its
16th biggest export market. The deal locks in tariff-free trade,
and also opens Hong Kong's lucrative services sector to Australian
investment. Edward Yau Tang-wah, secretary for commerce and
economic development, said the deal was "important" because the two
economies compliment each other, particularly in services.
The agreement, he added, would send a "positive message" during
a time of skepticism about free trade. Hong Kong is a major
exporter of consumer goods to Australia.
Hong Kong's top exports to Australia, 2017
TV, sound equipment, electronics $1.8 billion
Electrical machinery $620.7 million
Medical, optical equipment $296.9 million
Knit apparel $260.2 million
Precious stones $257.2 million
Apparel, not knit $196.5 million
Leather art, handbags, etc. $158.7 million
Toys, games, sports gear $153.4 million
Clocks, watches $113.4 million
Books, newspapers $95.4 million
Going the other way, Australia mostly sends niche products like
beer and wine, and gold. Australia is one of the world's biggest
gold miners, producers and exporters.
Australia's top exports to Hong Kong, 2017
Gold $5.1 billion
Beverages $300.7 million
Edible fruits and nuts $271.8 million
Meat $223.8 million
Dairy and honey $166.7 million
TV, sound equipment $165.8 million
Packaged food $150 million
Fish $102.4 million
Oil and gas $84.6 million
Pharmaceuticals $72.9 million
Hong Kong hopes agreements like the one with Australia can keep
its free-trade legacy alive. The government this month said that
economic growth had sunk to a two-year low. The territory, the
government added, is subject to "increasing downside risks" because
of lower growth in Europe and Asia. In addition, the US-China
dispute over tariffs is hurting global trade, it said. "The impacts
on Hong Kong's external trade have begun to surface, and are likely
to become more apparent in the near term," chief government
economist Andrew Au said in a statement.
Posted 18 November 2018 by John Miller, Guest Blogger
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions.
