The position of Hong Kong as a hub for air and sea freight as well the co-ordination of China based supply chains is under pressure. New figures from Hong Kong’s Census and Statistics department describe exports in December 2022 from the city-state as falling by 28.9% year-on-year, which is said to be the heaviest fall in percentage terms since 1953.
Trade fell not just with China but the rest of East Asia as well. The effects were also seen in exports to economies such as Germany, which fell by 44% and the US which was down 18.9%. However, the fact that trade with America saw a below average might be a clue to some of the reasons behind the fall.
The Department of Census and Statistics commented that “the year-on-year fall in the value of merchandise exports widened further in December 2022, reflecting the significant drags of the deteriorating external environment and disruptions to cross-boundary land transportation.” However it also observed that activity was “adversely affected by the weak global growth in the near term. Nonetheless, the gradual revival of cross-boundary land transportation after the recent relaxation of relevant restrictions should offset some of the pressure”. This strongly suggests that although the phasing-out of COVID restrictions will benefit cross-border activity, part of the reason for the depression in trade is weak demand, especially weak consumer demand.
The effects of the downturn are reflected in Hong Kong’s logistics markets. For example, airfreight through Hong Kong Chek Lap Kok Airport fell by 26.4% year-on-year in December 2022. For the full year, airfreight was 16.4% lower than 2021. This is despite passenger volumes quadrupling in December.
These numbers seem extraordinary and are likely to be reversed in the medium-term, however questions still remain about the competitive position of the city. Once a powerhouse of globalisation, Hong Kong has suffered badly from the effects of COVID policies but also the underlying changes in the geography of supply chains. A key question for Hong Kong will be how it can adapt to new trade patterns and possibly change its relationship with the Chinese economy.
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