The year-on-year decline in Hong Kong’s foreign trade extended into January, recording its biggest monthly decline in 70 years; an expert says it’s evidence that “mainland China is slowly decoupling from the world.”
Exports fell 36.7 percent and imports fell 30.2 percent in January from a year earlier, according to the January merchandise trade statistics released by the Hong Kong authorities on Feb. 27. The declines widened by 7.8 percent and 6.7 percent, respectively, from December.
In December 2022, Hong Kong’s exports and imports fell by 28.9 percent and 23.5 percent, respectively, according to the prior report.
The annual decline in exports and imports in 2022 was 8.6 percent and 7.2 percent, respectively.
Hong Kong’s exports to Japan fell by half year-on-year in January, while exports to Taiwan dropped by 45.1 percent, Vietnam reduced by 41.7 percent, Germany declined by 40 percent, the United States lowered by 28.8 percent, and the UK shrank by 27 percent.
Hong Kong’s Decline Sharper Than Taiwan
Hong Kong’s exports have been hit by slowing demand from advanced economies, but the year-on-year decline has been much sharper than in neighboring Taiwan.
Taiwan’s exports (pdf) fell 21.2 percent (12.8 percent in Taiwan dollar terms) in January from a year earlier, while imports fell 16.6 percent (7.7 percent in Taiwan dollar terms).
In addition, Taiwan’s exports to some western developed countries increased while to others it decreased.
For example, its exports to Japan increased by 3.1 percent year on year; to Europe, its exports rose by 2.5 percent year on year; while to the United States they decreased by 14.5 percent year on year. The decline was about half of that of Hong Kong’s exports to the United States in January.
In May 2022 Hong Kong’s exports fell 1.4 percent year on year, and since then it has fallen each month through January, nine months in a row. Its imports have fallen for seven consecutive months since July 2022.
Hong Kong’s port cargo throughput for the whole year of 2022 was 10.1 percent lower than that of 2021, with imports down 10.3 percent and exports down 9.9 percent, according to the March 2 statistics on vessels, port cargo, and containers for the fourth quarter of 2022.
Among the data, shipments from Hong Kong to the United States fell 35.5 percent by weight in the fourth quarter of 2022 year on year. Other major double-digit declines in tonnage of export cargo included Australia (-37.9 percent), Taiwan (-30.4 percent), Japan (-24.1 percent), Vietnam (-19.9 percent), and Thailand (-13.6 percent).
‘Decoupling From the World’
“If both exports and imports in Hong Kong are falling, it shows that mainland China is slowly decoupling from the world,” Albert Song, a researcher at the think tank Tianjun Political Economy, told The Epoch Times on March 2.
The removal of supply chains and industrial chains outside of mainland China is reflected in the drop in Hong Kong’s foreign trade, he said.
For historical reasons, Hong Kong has traditionally held a unique advantage in independent foreign exchange, enabling trade by managing complexity between mainland China and the United States, he said.
Previously, China was the largest trading partner of the United States and the United States was the second largest trading partner of China; mainland China was the largest trading partner of Hong Kong and the United States was the second largest trading partner of Hong Kong; Hong Kong was the fourth largest trading partner of the mainland of China and Hong Kong was the 19th largest trading partner of the United States and the ninth largest exporter of goods, he said.
“As a free port and free trade zone, Hong Kong can count on mainland China to undertake a huge volume of entrepot orders,” the researcher said. Entrepot orders refer to orders that are imported and stored to later be re-exported.
In 2016, Hong Kong’s entrepot trade volume was close to $500 billion, he said.
In 1992, the United States Congress passed the “United States-Hong Kong Policy Act,” which provided trade preferences for Hong Kong, allowing it to become an independent customs territory, Song said.
‘Expected to Weaken Further’
“Demand from advanced economies is expected to weaken further in 2023, which will weigh on Hong Kong’s exports of goods, but this will be partially offset by an expected acceleration in mainland China’s economic growth,” the Hong Kong government said in its “2022 Economic Overview and 2023 Outlook” released on Feb. 22.
However, China also faces the impact of falling external demand, and there are still many uncertainties about its economy in 2023. The balance of payments service trade deficit stood at $15.4 billion in January, up 40 percent from $11 billion in December 2022, according to January international balance service trade data released by China’s State Administration of Foreign Exchange (SAFE) on Feb. 24. As of March 3, the SAFE had yet to release data on goods trade in the balance of payments.
In December 2022, the Guangdong provincial government organized 140 provincial enterprises, sending China’s largest foreign trade charter flight in 2022 in an effort to “grab orders and expand markets.”