28 October Hong Kong

Transcription

1 Hong Kong 28 October 2014 Hong Kong s economy expanded by 2.2% year-on-year, in real terms, in the first half of 2014, after growing by 2.9% in For 2014 as a whole, the economy is forecast to grow by 2-3%. Growth in local consumption demand and tourist spending lose steam. The value of retail sales, in nominal terms, saw a small decline of 1% year-on-year in January-August The labour market conditions remain tight. The seasonally adjusted unemployment rate was 3.3% for July-September 2014, close to the lowest level in 16 years. Consumer prices increased 4.2% year-on-year in the first nine months of For 2014 as a whole, Hong Kong s consumer prices are forecast to increase by 4.4%. Hong Kong s merchandise exports saw an increase of 3.9% year-on-year in the first nine months of Exports should continue to expand, despite sustained challenges. Major Economic Indicators Forecast/Latest Population, Mid-year (million) a Gross Domestic Product (US$billion) b GDP Per Capita (US$) 35,100 36,500 37,900 39,200-39,500 b Real GDP Growth (%) b Inflation (% Change in Composite CPI) c Unemployment Rate (%) d Retail Sales Growth (%) e Visitor Arrival Growth (%) e a 2014; b government forecast for 2014; c year-on-year change in January-September 2014; d seasonally adjusted, July-September 2014; e year-on-year change in January-August 2014 Merchandise Trade Performance (in nominal terms) January-September 2014 US$billion Growth % US$billion Growth % US$billion Growth % Total Exports Domestic Exports Re-exports Imports Total Trade Trade Balance N/A N/A N/A Service Trade Performance (in nominal terms) January-June 2014 US$billion Growth % US$billion Growth % US$billion Growth % Exports Imports Total Trade Trade Balance 70.2 N/A 76.5 N/A 36.0 N/A

2 Current Economic Situation The world's freest economy The world's most services-oriented economy, with services sectors accounting for more than 90% of GDP The second largest recipient of foreign direct investment (FDI) in Asia, after Chinese mainland The third largest source of FDI in Asia, after Japan and Chinese mainland 1. Latest Developments After expanding by 2.9% in 2013, Hong Kong s economy recorded a real growth of 2.2% in the first half of 2014, compared with the same period a year ago. Domestic demand saw some slowdown in growth. In the first half of 2014, growth in private consumption expenditure weakened to 1.4% year-on-year. Investment expenditure, including machinery and equipment acquisition, dropped 1.5% year-on-year from a high base. On the external front, total exports of goods and services saw only mild year-on-year growth of 1.4% and 0.5% respectively. Looking ahead, domestic demand is expected to remain on a moderate recovery path for the second half of 2014 while Hong Kong s export prospects should turn more positive. For 2014 as a whole, the government revised downwards its forecast on Hong Kong s economic growth to 2-3% in the latest round of review in August. Local consumption demand and tourist spending weakened. The value of retail sales, in nominal terms, dropped 1% year-on-year in the first eight months of 2014, after growing by 11% in Yet the labour market conditions remain tight. The seasonally adjusted unemployment rate was 3.3% for July-September 2014, close to the lowest level in 16 years. Meanwhile, Hong Kong s consumer prices rose another 4.2% year-on-year in January-September 2014, after rising by 4.3% in In the latest round of review in August, the government forecast Hong Kong s consumer price inflation at 4.4% for 2014 as a whole, amid the phasing out of the one-off relief measures in the second half of the year. In 2013, a total of 54.3 million visitors, more than seven times the size of Hong Kong s local population, were recorded, with those from the Chinese mainland accounting for 75% of the total. Visitor arrivals to Hong Kong increased 12.3% year-on-year in January-August 2014, after rising by 11.7% in 2013, while those from the Chinese mainland saw a stronger growth of 15.5% year-on-year in January-August 2014, after rising by 16.7% in In 2013, total tourism expenditure associated to inbound tourism amounted to HK$332 billion, an increase of 14.8% from the previous year. The four pillar economic sectors of Hong Kong are: trading and logistics (24.6% of GDP in terms of value-added in 2012), tourism (4.7%), financial services (15.9%), and professional services and other producer services (12.8%). On the other hand, the six industries which Hong Kong has clear advantages for further development are cultural and creative, medical services, education services, innovation and technology, testing and certification services and environmental industries, which together accounted for 8.7% of GDP in terms of value-added in Budget and Government Initiatives The Chief Executive, Mr C Y Leung, has unveiled major initiatives in his annual Policy Address on 15 January 2014 to support those in need, nurture the next generation and underpin Hong Kong's economic future. New initiatives include a Low-income Working Family Allowance; a Task Force on Vocational Education; and a housing target of 470,000 units over the next decade, with public housing accounting for 60%. On promoting the development of the financial industry, the government would examine and follow up on the proposals submitted by the Financial Services Development Council in respect of Hong Kong's opportunities and challenges in RMB business, asset and wealth management, and real estate investment trusts 2

3 in collaboration with financial regulators. To capitalise on Hong Kong's close economic links with the Chinese mainland, the government would set up more offices in the mainland. This will include a new Hong Kong Economic and Trade Office (ETO) in Wuhan, and liaison units under the Beijing Office and the Shanghai ETO. Besides, Mr Leung pledged to set up a Lantau Development Advisory Committee to prepare Lantau Island for the economic and social impact of major infrastructure projects in the area. In the Budget promulgated in 26 February 2014, Financial Secretary John Tsang announced a series of initiatives to strengthen Hong Kong's competitiveness by boosting R&D investments and commercialisation activities in Hong Kong, supporting technology start-ups, as well as promoting the four pillar industries. For example, he proposed to fund R&D activities in private companies, subject to a ceiling of HK$10 million and waive stamp duty on the trading of all ETFs to lower transaction costs. Also, Mr Tsang announced a number of support measures for small and medium-sized enterprises in terms of financing, market expansion, brand building and productivity enhancement, which include, for example, reducing profits tax for by 75%, subject to a ceiling of $10,000 and extending the application period for the special concessionary measures under the SME Financing Guarantee Scheme for one year to the end of February On top of the provisions granted in earlier phases of the Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA), the Supplement X to CEPA was signed on 29 August This provides for a total of 73 services liberalisation and trade and investment facilitation measures, aiming to strengthen Hong Kong and the Chinese mainland s cooperation in areas of finance and trade and investment facilitation of the two places. The measures have been effective from 1 January CEPA was firstly concluded in June 2003, and supplemented with further liberalisation measures in subsequent years. At present, all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff free under CEPA. Also, service suppliers in Hong Kong can enjoy preferential treatment to develop the mainland market. There are also agreements on trade and investment facilitation, and mutual recognition of professional qualifications between the mainland and Hong Kong. Details and new developments about CEPA, including our analysis of its impacts on Hong Kong, can be found in 3. Investment Flows Hong Kong is a highly attractive market for foreign direct investment (FDI). According to the UNCTAD World Investment Report 2014, global FDI inflows to Hong Kong amounted to US$77 billion in 2013, only after the three giant economies of the US (US$188 billion), Chinese mainland (US$124 billion) and Russia (US$79 billion). In terms of outflows, Hong Kong ranked fifth with US$92 billion, after the US (US$338 billion), Japan (US$136 billion), Chinese mainland (US$101 billion) and Russia (US$95 billion). According to a government survey, Hong Kong's total stock of inward direct investment was estimated at US$1,237 billion at the end of 2012, some 4.7 times of its GDP in that year. One distinct feature of such direct investment was the indirect channelling of capitals from non-operating companies in tax haven economies. Against this background, British Virgin Islands, Netherlands and Bermuda accounted for 32.7%, 7% and 6.4% of the total stock of inward direct investment in Even including tax haven economies, the Chinese mainland was the most important source of direct investment in Hong Kong (accounting for 37% of the total). Other major sources include the US (3.1%) and Singapore (2.1%). The majority of the stock of investment was related to service industries including investment and holding, real estate, professional and business services; banking; and import/export, wholesale and retail trades. For more information and assistance in establishing an operation in Hong Kong, contact InvestHK ( 3

4 Latest Trade Performance The world's 8th largest trading economy The world's 10th largest exporter of commercial services Hong Kong s merchandise exports saw an increase of 3.9% year-on-year in the first nine months of 2014, after expanding by 3.6% in Hong Kong's major export markets are the Chinese mainland, the EU, the US, ASEAN and Japan, which respectively made up 54%, 9%, 9%, 7% and 4% of Hong Kong's total exports in the first nine months of During the period, year-on-year changes in exports to the above markets were +2.8%, +3.5%, +1.7%, +6.8% and -0.8%, respectively. Imports increased 4.1% year-on-year in January-September 2014, after increasing by 3.8% in A visible trade deficit of US$49.5 billion, equivalent to 12.5% of the value of imports of goods, was recorded in January-September Hong Kong's trade performance is in part affected by outward processing activities in Guangdong where the majority of Hong Kong companies have extended their manufacturing base. In 2013, 30.6% of Hong Kong's total exports to the Chinese mainland were related to outward processing activities; the figures were 16.7% for domestic exports and 30.7% for re-exports. Exports are expected to continue to expand. However, deflationary pressure and faltering growth in the developed economies, as well as a number of issues related to the proliferation of trading blocs and simmering geopolitical tensions, remain as potential threats to the export outlook. On the supply side, Hong Kong exporters have to live with a challenging production environment on the Chinese mainland, especially in the Pearl River Delta, which include the rising input costs. Economic Relations with the Chinese Mainland The most important entrepôt for the Chinese mainland The largest foreign investment source of the Chinese mainland The key offshore capital-raising centre for Chinese enterprises The Chinese mainland as Hong Kong's largest source of external investment Hong Kong is so far the most important entrepôt of the Chinese mainland. According to the HKSAR government statistics, in 2013, 62% of re-exports were of China origin and 55% were destined for the Chinese mainland. According to China's Customs statistics, Hong Kong is the second largest trading partner of the Chinese mainland after the US, accounting for 9.6% of its total trade in Hong Kong is the largest source of overseas direct investment in the Chinese mainland. By the end of 2013, among all the overseas-funded projects approved in the Chinese mainland, 44.3% were tied to Hong Kong interests. Cumulative utilized capital inflow from Hong Kong amounted to US$664.6 billion, accounting for 47.7% of the national total. The Chinese mainland, on the other hand, is the leading investor in Hong Kong. According to the HKSAR Census and Statistics Department, the stock of Hong Kong's inward investment from the Chinese mainland amounted to US$457 billion at market value or 37% of the total at the end of As of December 2013, there were 11 licensed banks and four representative offices, incorporated in Chinese mainland, operating in Hong Kong. Big lenders including the Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank have opened their branch operations in Hong Kong. Mainland commercial banks including Bank of Beijing, Bank of Dongguan, China Guangfa Bank and Ping An Bank have representative offices in Hong Kong. Hong Kong is also a key offshore capital-raising centre for Chinese enterprises. As of 4

5 December 2013, 797 mainland companies were listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalization of US$1.8 trillion, or 56.9% of the market total. Since 1993, mainland companies have raised more than US$400 billion via stock offerings in Hong Kong. Hong Kong as a Regional Centre A popular venue for hosting regional headquarters or representative offices A leading telecommunications hub for the Asia-Pacific region A premier offshore RMB centre The world's busiest airport for international cargoes One of the world's busiest container ports The second largest private equity centre in Asia The second largest stock market in Asia, the sixth largest in the world The third largest foreign exchange market in Asia, the fifth in the world Hong Kong is a popular venue for hosting regional headquarters or representative offices for multinational companies to manage their businesses in the Asia Pacific, particularly the Chinese mainland. Based on a government survey, as of June 2014, there were 3,784 regional headquarters (RHQs) and regional offices (ROs) in Hong Kong representing their parent companies located outside Hong Kong, increased 6% from five years ago. Of these companies, some 80% were responsible for business in the Chinese mainland, confirming Hong Kong's role as a conduit for doing business with the mainland. These companies came from diverse countries and sectors. The US had the largest number of RHQs/ROs in Hong Kong (21%), followed by Japan (19%), the UK (9%) and the mainland (7%). Most of the RHQs/ROs in Hong Kong were in I/E trade, wholesale and retail (52%). Others are in professional, business and education services (18%), finance and banking (12%), and transportation, storage and courier services (7%). Hong Kong is an important banking and financial centre in the Asia Pacific. As at end-2013, there were 201 authorised institutions and 62 representative offices in Hong Kong. Total loans provided by the authorised institutions to finance international trade and other loans for use outside Hong Kong totalled US$71 billion and US$248.8 billion respectively. According to the Bank for International Settlements, Hong Kong is the third largest foreign exchange market in Asia and the fifth largest in the world, with the net daily turnover of forex transactions reaching US$275 billion in Since the introduction of the Pilot RMB Trade Settlement Scheme by the Central Government in July 2009, Hong Kong has succeeded in expanding its RMB business by offering a number of RMB-denominated financial products and services, including trade finance, stocks, bonds and funds. Since the debut of the scheme, the related cross-border remittances totalled RMB8.7 trillion and RMB deposits in Hong Kong had surged over tenfold to RMB860 billion as at end In 2013, issuance of RMB bonds in Hong Kong (Dim Sum Bonds) reached RMB117 billion. In October 2012, the RMB-traded shares of Hopewell Highway Infrastructure Ltd were listed on Hong Kong Stock Exchange (HKEx) by way of placing under the Dual Tranche, Dual Counter (DTDC) model, which was the first RMB-traded equity security outside the mainland. As at end-2013, Hong Kong's stock market ranked the second largest in Asia and the sixth largest in the world in terms of market capitalisation. There were 1,643 companies listed on HKEx, including 179 companies on the Growth Enterprise Market and the total market capitalisation of Hong Kong's stock market reached US$3.1 trillion. Hong Kong is also the second largest private equity centre in Asia, managing about 19% of the total capital pool in the region as at end Hong Kong is a leading telecommunications hub for the Asia-Pacific region. Residential fixed line and household broadband penetration rates have exceeded 100% and 80% respectively. 5

6 Mobile subscribers in Hong Kong have exceeded 17 million, of which 70% were 2.5G and 3G/4G mobile subscribers, more than doubled the total population in Hong Kong. There are now over 20,000 public Wi-Fi access points. Hong Kong is a favourite place in the world to do business and host major conferences. Over 300 international conventions and exhibitions are held in Hong Kong each year. To name a few, in December 2005, Hong Kong hosted the sixth session of the WTO ministerial conference where a Hong Kong declaration was concluded. In December 2008, Hong Kong played host to the first Clinton Global Initiative international meeting outside the US. Infrastructure Developments Construction for the Hong Kong-Zhuhai-Macao Bridge (HZMB) started in December 2009 and the whole project is expected to complete in The bridge consists of three parts, including the main bridge, boundary crossing facilities of Hong Kong, Zhuhai and Macao, and link roads of the three places. The HZMB is of special strategic value in further enhancing the economic development of Hong Kong, Macao and the Western Pearl River Delta region (Western PRD). It will significantly reduce the cost and time for travellers and for the flow of goods between Hong Kong and the Western PRD, accelerating the economic integration of the PRD and its neighbouring provinces, and increasing its competitiveness. Meanwhile, the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) will be 26-km long, running from the terminus in West Kowloon to Shenzhen, Dongguan and Guangzhou with significantly reduced journey time. More importantly, it will become part of the 16,000 km national high-speed rail network now being developed in full steam, fostering closer economic ties between Hong Kong and the mainland. Upon completion of the railway, the travelling time from Hong Kong to Beijing and Shanghai will be shortened to about 10 and 8 hours respectively. Construction of the project has commenced for completion in Besides the cross-boundary endeavours, the government has undertaken other large-scale infrastructure projects to improve the local transportation system, promote long-term development for arts and culture, and provide quality living space to citizens. The MTR Corporation Limited has commenced the construction of the West Island Line, the South Island Line East and Shatin to Central Link for completion in 2014, 2016 and 2020 respectively. Also, the government has announced the Railway Development Strategy 2014, providing a framework for planning the further expansion of Hong Kong's railway network up to 2031 to cover areas inhabited by about 75% of the total population and about 85% of job opportunities. Besides, a new cruise terminal has been developed at the former Kai Tak Runway, with two alongside berths, well equipped with supporting facilities to accommodate the concurrent berthing of two mega cruise vessels (with gross tonnage of up to 220,000). The first berth was open in June 2013 and the second one is due for completion by end As the busiest cargo gateway and one of the 10 passenger airports in the world, the Hong Kong International Airport is expected to reach its full capacity in the next few years. There is an urgent need to construct a third runway. The Airport Authority is moving ahead with planning work for the construction of a third runway. This includes the statutory environmental impact assessment, scheme designs and the financial arrangements, with commissioning targeted for Turning to the port, the government is conducting two studies, the preliminary feasibility study for Container Terminal 10 (CT10) at Southwest Tsing Yi and the Study on the Strategic Development Plan for Hong Kong Port Upon completion of the studies, the government will decide on the need for developing CT10 based on the study results, the then global and local economic situation, the performance of the port sector, and the views of stakeholders. Research Department 6