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AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2017
Hong Kong’s economic outlook in 2017 will remain largely dependent on the global economy, in
particular the slowdown in China and the US interest rate rise, which are expected to shape its
prospects over the coming year. The SAR’s economy is forecasted to experience another slow
year in 2017, with GDP growth at about 1.9 percent. Stock market volatility remains a key risk in
the region but confidence in the local bourse is expected to be buttressed by the Shenzhen-
Hong Kong Stock Connect, which was launched on December 5, 2016. This, together with other
pioneering policies, will help support the sustainable growth of the banking and finance sector.
Trading volume will continue to fall along with the slowdown in demand from China, although
the magnitude of the decline is expected to be smaller than that in 2016. The retail and
tourism sectors are also expected to remain lackluster amid strong competition from cheaper
destinations such as Japan, South Korea and the Eurozone, whose attractiveness to visitors
has increased due to their devalued currencies. Hong Kong’s competitiveness could further
erode if China further devalues the RMB, as it did in 2015 and 2016.
China Briefing believes that any interest rate hikes in 2017 will be gradual and minimal. However,
an increase in lending rates would reduce household spending power, leading to a fall in
private consumption. A rise in US interest rates would likely be followed by further currency
appreciation, which would cause the HK$ to follow suit. Any appreciation in the HK$ would
further damage exports and tourist consumption. Domestic spending could also face some
headwinds as local shoppers opt to spend more overseas.
The employment sector will remain exposed to downside risks in 2017 as the trading and retail
sectors continue to weaken. Oxford Economics forecasts that unemployment will edge up
slightly from 3.5 percent in 2016 to 3.6 percent in 2017, although this level is still considered
as near-full employment.
Looking beyond 2017, economic growth could pick up as China re-emerges from its period of
structural reform and the recovery in the US gains speed. In the longer term, the completion
of massive new infrastructure works such as the Hong Kong-Zhuhai-Macau Bridge and the
High Speed Rail (HSR) will provide new growth engines for Hong Kong.
Economic Outlook