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Hong Kong recorded moderate economic growth in the first quarter of 2024, with the economy expanding by 2.7% year-on-year, according to the Census and Statistics Department. This growth was primarily driven by the export of services and an improvement in the total exports of goods. Private consumption and overall investment expenditures also saw an uptick. Despite these positive indicators, there are concerns about Hong Kong’s future as a leading international financial centre.
The Hong Kong government is optimistic about the economy’s prospects for the rest of the year, maintaining its full-year growth forecast at between 2.5% and 3.5%. Tourism is expected to play a crucial role in this growth, with a significant increase in arrivals in the first three months of the year. Tourism arrivals surged by 154.3% to 11.22 million, with mainland Chinese visitors making up 77.4% of this figure. Deputy government economist Adolf Leung Wing-sing noted that the revival of post-pandemic tourism would bolster the export of services and support the economy.
However, the broader economic landscape remains challenging. Real GDP is still below its level from five years ago, and property values have plummeted by approximately 25% since their peak in 2019, investment company Northern Trust points out. The equity market has also struggled, with the Hang Seng Index being among the worst performing equity markets globally in 2023. According to Vaibhav Tandon, Chief International Economist within the Global Risk Management division of Northern Trust, the index has posted negative returns for four consecutive years, losing nearly 50% of its value over the past three years.
“Fundraising activity dropped to a two-decade low in 2023. The number of delistings is also on the rise. These trends could jeopardise Hong Kong’s standing as an international financial centre,” Tandon remarked.
He attributed much of this underperformance to the economic slowdown in mainland China and geopolitical tensions with the US, which have dampened investor sentiment. Additionally, high interest rates have negatively impacted the fundraising environment.
Despite these challenges, Tandon pointed out that Hong Kong remains a vital global financial hub, not just for Chinese businesses but also for international firms. The city hosts a large number of global fund managers, advisory businesses, and private banks and also holds the distinction of being the world’s largest clearing centre for the yuan outside of mainland China, handling nearly two-thirds of cross-border yuan payments.
Tandon concluded, “While the glow of Hong Kong’s markets has certainly dimmed in recent years, the lights will not go off anytime soon.”
