Hong Kong is on the brink of a recession as its private sector activity dived to a decade-low in August amid an escalating trade war and its gravest political crisis in decades.
The business survey, released on Wednesday, noted “the steepest degeneration in the health of the private sector since February 2009”, adding that spreading depression had seen business confidence collapsed to its lowest on record.
Since early June, Hong Kong has been entangled in its worst political disaster in decades. The ripples of protests, sparked by the controversial extradition bill under which people might be despatched to mainland China for trial, have entered their 13th week. Over the previous three months, the protests have grown to be a broader and increasingly violent anti-authorities’ movement because the hostility between demonstrators and police reaches boiling point.
Beijing sees the increasingly violent demonstrations as a direct challenge to its rule over Hong Kong and has accused “hostile foreign forces,” particularly the US and Britain, of instigating unrest.
The survey, the IHS Markit Hong Kong purchasing managers’ index (PMI), sank to 40.8 in August from 43.8 within the previous month. Any figure beneath 50 indicates contraction.
Based on the survey, new business fell to its lowest charge in a decade, as orders from China declined at a record rate. Practically half of the survey respondents reported decreased Chinese demand, citing the continued US-China trade dispute, a sharp depreciation in the renminbi and huge-scale protests as causes.
It comes after figures on Friday showed tourist arrivals fell 12% in July, with the numbers for August anticipated to be even worse. Retail gross sales, one other important part of the economy, fell 4% in July.