Financial decoupling, Hong Kong retail collapse

The restrictions on US capital flows into China reportedly being considered by the Trump administration would, at the margin, constrain China’s ability to fund overseas investment. But given China’s limited reliance on inflows from the US, a financial decoupling is unlikely to be as painful as the trade decoupling that is already ongoing. Meanwhile, we now expect Hong Kong’s GDP to contract this year after the city’s retail sales dropped the most on record last month.