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Hong Kong

Tech sector reprieve, cyclical trough?

Officials are turning less hostile toward tech firms. But the economic drag from the regulatory crackdown, which we think has knocked 0.3%-pts off of annual GDP growth, is unlikely to dissipate entirely. Meanwhile, although the early indicators for April have been dismal there are some signs that the economy could start to recover this month, albeit tepidly.

6 May 2022

Hong Kong GDP (Q1 Preliminary)

Hong Kong’s GDP contracted in the first quarter of the year, and although there are signs that activity is rebounding, we expect the recovery to prove weak. While virus containment measures are being eased, rising interest rates, softer global trade and an absence of mainland visitors will hold back the city’s economic recovery in the coming months. EM Drop-In (5th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now

3 May 2022

Lack of finance undermines Xi’s infrastructure push

Today’s Politburo meeting repeated Xi’s recent call for a step-up in infrastructure construction. A shift is already underway on the ground, with spending accelerating. But the scope for even faster rises is limited by financing constraints.

29 April 2022
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No quick fix this time

China’s economy rebounded sharply from the initial COVID-19 outbreak. The recovery will be slower and more muted this time, even if the ongoing COVID outbreak is successfully quashed, as less policy support is planned and exporters face a reversal in fortunes.

Housing market revival delayed by outbreak

Prior to the latest COVID-19 outbreak, China’s housing market had appeared on the cusp of a rebound. But movement restrictions and weaker consumer confidence have since caused home sales to slump, further weighing on the outlook for property construction. Coupled with the wider hit to services activity, this strengthens the case for additional policy support, which officials have signaled is forthcoming. There is a decent chance of a cut to reserve requirements in the coming days.

Hong Kong underlines risks of zero-COVID opening

Mainland China and Hong Kong both have high vaccination rates in aggregate. But they share a common weakness in having few of their elderly vaccinated. A surge in deaths in Hong Kong is now demonstrating the dangers of allowing COVID to spread in these circumstances. Mainland officials will therefore tread carefully, with the “experimental opening” from zero-COVID that is reportedly being considered likely to be limited in scope.

Lockdown to tip Hong Kong into a deep recession

The expansionary budget unveiled today will provide some support to Hong Kong’s economy this year. But this is unlikely to fully offset the drag from Fed rate hikes, let alone the massive hit to economic activity from a citywide lockdown, which looks increasingly likely.

Green shoots in the housing market

Local-level support for the property market is stepping up a gear, with down-payment requirements being eased in a handful of cities. This follows national-level efforts to push down mortgage rates and boost mortgage lending, which already appear to be driving a rebound in demand. Daily home sales in 30 large cities are up almost a fifth this year compared with December.

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