Hong Kong Trade Figures Gradually Recovering

by Mary Swire, Tax-News.com, Hong Kong

28 May 2002

After Hong Kong's exports surprised economists by growing 2.2% year on year in March, they have now disappointed by growing only 2.5% year on year in April. Citibank economist Joe Lo had said he expected an 11.3% rise, while Goldman Sachs had forecast 7%. Five economists polled by Reuters variously estimated between 3% and 10%.

The apparent rise in volumes masks continued domestic weakness, demonstrated by a 2.2% drop in imports to HK$130.4 billion; they had risen 0.2% in March. It is the stronger performance of Hong Kong as a trading entrepot that underlies the rise in exports, with re-exports increasing 4.7% after a 3.7% increase in March, due mostly to improved demand from East Asia and the mainland. Hong Kong's domestic exports shrank to only 8.2% of total exports, continuing their declining trend by shrinking 17.4% by value year on year.

This pattern of trade helped to reduce the trade deficit to HK$7.3 billion last month, down from HK$10.5 billion in March.

The trade figures were more encouraging on a trend basis, with seasonally adjusted total exports up 14.4% and re-exports up 16% in the three months to last month.

Some analysts pointed out that the value-based trade figures underestimate volume trend growth during a deflationary period, such as now, and also that due to the move to trans-shipment through Hong Kong rather than re-exporting, figures for container traffic, which had shown consistent increases, might present a more accurate guide to conditions. Both of these measures suggest that Hong Kong's performance is better than would appear from the value-based trade figures, although it is these that grab the headlines.

The IMF and the Asian Development Bank have both recently increased their growth forecasts for Hong Kong this year, albeit from a low base.

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