Saturday, August 18, 2007

Hong Kong Growth Accelerating

Economic growth in Hong Kong accelerated to a 6.9% rate in the second quarter, up from a upwardly revised 5.7% in the first quarter, according to the volume measure of GDP. In terms of trade adjusted terms, growth was even more impressive, at 7.7% (Calculated by me using numbers available here)
, up from a upwardly revised 6.4% in the first quarter.

Both private consumption (+6.6% ) and investments increased faster(+11.1%), while trade surplus was flat. Government consumption increased in absolute terms, but continued to decline relative to the overall economy.

Hong Kong's economy benefit both from its strong microeconomic fundamentals -being the freest, most laissez faire oriented economy in the world- and from the boom in its dominant trading partner, mainland China.

The latter however constitute the greatest threat to Hong Kong's growth. While China's economy enjoys an enormous structural strength with its massive supply of cheap labor and savings, its quasipeg to the U.S. dollar is creating great distortions, including malinvestments, rising consumer price inflation and an excessive current account surplus. The latter makes China highly vulnerable to a U.S. recession, especially if that would make U.S. lawmakers pass anti-Chinese trade legislation.

And if China's economy would weaken, so would Hong Kong's.


Post a Comment

<< Home