Hong Kong economy cools as trade tension mounts

November 16, 2018 - 4:31 am
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HONG KONG (AP) — Hong Kong's economic growth sank to a two-year low in the latest quarter and the government warned it will face headwinds from U.S.-Chinese trade tension, weakening global demand and higher interest rates.

The Chinese territory's economic output expanded by 2.9 percent over a year earlier in the three months ending in September, down from the previous quarter's 3.5 percent, government data showed Friday. Measured quarter-on-quarter, activity expanded by 0.1 percent over the three months ending in June, rebounding from that quarter's 0.2 percent contraction.

Hong Kong faces "increasing downside risks" due to slowing growth in its European and Asian trading partners, the government said. It said the U.S.-Chinese tariff dispute is weighing on global trade and investment sentiment.

"The impacts on Hong Kong's external trade have begun to surface, and are likely to become more apparent in the near term," said chief government economist, Andrew Au, in a statement.

Hong Kong isn't directly targeted by U.S. President Donald Trump's tariffs on Chinese goods in a dispute over technology policy. But as a major port that serves Chinese exporters, it is exposed to any weakening of foreign demand.

Exports rose 5 percent over a year earlier but growth decelerated in September as the impact of the tariff conflict "began to surface," said Au's statement.

Hong Kong also faces a drag from higher interest rates, according to Au. The Hong Kong dollar has a fixed exchange rate with the U.S. dollar, which requires the central bank to raise interest rates along with the U.S. Federal Reserve even though economic growth is slowing.

The slowdown is "a trend we think will continue over the quarters ahead," said Chang Liu of Capital Economics in a report.

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Hong Kong economic agency: www.hkeconomy.gov.hk

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