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Hong Kong enters recession

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Protests in Hong Kong

Hong Kong has fallen into recession, hit by five months of anti-government protests that erupted in flames at the weekend, and is unlikely to achieve any growth this year, the city’s Financial Secretary said.

Black-clad and masked demonstrators set fire to shops and hurled petrol bombs at police on Sunday following a now-familiar pattern, with police responding with tear gas, water cannon and rubber bullets.

TV footage showed protesters, who streamed into the Kowloon hotel and shopping artery of Nathan Road on Sunday, setting fires to street barricades and squirting petrol from plastic bottles on to fires at subway entrances.

Protesters have routinely torched store fronts and businesses including banks, particularly those owned by mainland Chinese companies and vandalized the city’s MTR Corp metro which has shut down services to stop protesters gathering.

Protesters are angry about what they view as increasing interference by Beijing in Hong Kong, which returned to Chinese rule in 1997 under a “one country, two systems” formula intended to guarantee freedoms not seen on the mainland.

Following five months of anti-government protests that have shown no sign of abating, the city of Hong Kong has fallen into a technical recession, the city’s Financial Secretary Paul Chan said on Monday.

A recession is defined as a decline of economic activity over two consecutive quarters. In a blog post, Paul Chan wrote that “the blow to our economy is comprehensive”, adding that estimates for third-quarter GDP showed two successive quarters of contraction.

Chan said it would be “extremely difficult” to achieve the government’s pre-protest forecast of 0-1 per cent annual economic growth.

Chan added that exports in September had fallen 7.3 per cent year-on-year and that tourist footfalls had come down by nearly 50 per cent in the first half of October. In August, footfalls had come down by 40 per cent (which Chan covered in another blog post at the time).

Hong Kong’s economy was estimated at $363 billion in 2018 and by itself contributes 0.59 per cent of global GDP.

Multinational companies stationed in Hong Kong have also been hit by protests. HSBC bank lowered its growth forecasts on Monday, as net profits dropped by 24 per cent. Most of HSBC’s revenues come from Asia, with the bank one of three lenders authorized to issue currency in Hong Kong.

Protestors set fire to shops and hurled petrol bombs at police, who responded with tear gas, water cannons and rubber bullets according to Reuters. Hopes of a comedown in the protests following the withdrawal of the anti-extradition bill that had sparked protests in the first place have since declined, as a larger pro-democracy movements takes over the streets with demands including universal suffrage and an independent inquiry into the Hong Kong Police.

While authorities have announced measures to support local small and medium seized enterprises, Chan said the measures could only “slightly reduce the pressure.”

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