‘Hong Kong is not out of the woods yet,’ despite signs of US-China trade war deal, says trade chief Edward Yau
- Trade war flattened Hong Kong’s GDP growth to 0.5 per cent, year on year, in the first three months of 2019 – the worst in a decade
- Secretary for Commerce and Economic Development Edward Yau says there is little confidence things can return to how they were, ‘as if nothing had happened’
The dark clouds over Hong Kong’s trade sector will not go away overnight, even if a breakthrough is imminent in the US-China trade war, the city’s commerce minister has warned.
Edward Yau Tang-wah, secretary for commerce and economic development, said there was little confidence in the industry that it could return to how things were before, “as if nothing had happened”.
US media reports indicated that Beijing and Washington could reach a deal to end the trade war, which has gone on for almost a year, as early as next week, setting the stage for a summit between the countries’ respective presidents, Xi Jinping and Donald Trump, to sign it.
The trade war, which worsened sharply in September, flattened Hong Kong’s GDP growth to 0.5 per cent, year on year, in the first three months of 2019 – the worst in a decade.
Hong Kong is not out of the woods yet. I won’t count on a deal that will bring in very smooth trade for Hong Kong
Yau urged Hong Kong’s business sector to exploit Xi’s global trade and commerce strategy, the Belt and Road Initiative, for future growth.
“Business sentiment has improved in the first quarter, but exports were down 2.4 per cent during that period. Does it mean we can rid ourselves of concerns about the trade war?” he said in an interview on Thursday when the growth figures were revealed.
“There is a silver lining in the trade war – China’s latest commitment to the Belt and Road Initiative.”
Yau said whether Hong Kong could shrug off the threat of the trade war hinged on a deal between the US and China, how many tariffs on Chinese exports would be lifted and to what extent the bilateral trade of the two economic powers would return to normal.
Nearly half of Chinese goods shipped via Hong Kong to the US – the city’s second-largest trading partner – last year were estimated to be affected by the tariffs. This is despite Hong Kong being shielded by a separate economic arrangement under the US Hong Kong Policy Act, in force since the handover of the city’s sovereignty to China in 1997.
News of the imminent breakthrough has spread since Thursday when the American newspaper Politico quoted sources saying Beijing and Washington were close to a broad agreement on how the Trump administration would roll back a portion of the tariffs it has imposed on more than US$250 billion worth of Chinese goods.
Corporate China hit by worst earnings on record, as trade war bites
The two countries were also reported to have reached an understanding on how to enforce the agreement.
China earlier imposed tit-for-tat tariffs on US$60 billion worth of American goods.
“Hong Kong is not out of the woods yet,” Yau said. “I won’t count on a deal that will bring in very smooth trade for Hong Kong.”
Yau, who returned from Beijing’s second belt and road summit with a near-70-member delegation earlier this week, said Hong Kong should open up business opportunities in the 126 member countries of Xi’s global trade and infrastructure strategy.
Although the number of its member countries has nearly doubled since its inception six years ago, the strategy is seen by such economic powers as the US, Japan, India, Germany and France as Xi’s ploy to expand mainland China’s sphere of influence at their expense.
These powers ignored the summit.
Yau said it was a positive sign that Xi committed to global rules and standards and best practices in a joint communique during the summit.
In a rare move, the Chinese state leader addressed scepticism by vowing to prevent debt risk and promote green growth, and to make the vast, infrastructure-focused project more transparent and inclusive.
“This is music to our ears,” Yau said. “Hong Kong is not a country; not a pure financier. Hong Kong is a deal maker and a facilitator in the initiative.”
To tap into belt and road economies, Yau will lead a delegation composed of about 40 entrepreneurs, professionals and start-ups to visit the United Arab Emirates, Spain and Serbia in June. The delegation will be joined by about 24 mainland state-backed enterprises.
“Hong Kong needs to go out as a cluster of integrated strengths, not individually,” he said.
Nicholas Ho Lik-chi, 32, an architect and the second-generation owner of Hong Kong-based architecture consultancy firm Ho & Partners Architects, said the city’s investors could seek a local partner in a new market, to mitigate risks.
The company is among the first wave of investors under the Belt and Road Initiative.
“Partnering with a local company is a proven strategy in our expansion in Southeast Asia,” he said.
He said the company wanted to expand into the UAE, which he said had a thirst for innovation and technology development.
