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 27 June 2000 Bounce
Back in External Trade in May Comment by the Chamber Chief Economist, Ian K Perkin, on the external trade numbers for May 2000 and the first five months of the year, issued today. The pace of growth of the SAR's external trade bounced back in May after a slightly weaker performance in April, but the improvement was off a low base in the same month last year and on the back of a robust Mainland trade picture. Maintaining the pace of growth from here will be more difficult, however, as it was in June last year that the SAR¡¦s external trade began to improve from recession levels and the second half of 1999 showed a big improvement over 1998. Much will depend on the whether demand from the US, Europe and the East Asian region can continue to improve and, importantly, whether the demand for Mainland exports - and therefore re-exports through Hong Kong - is sustained. The big questions hanging over future export demand are whether interest rates in the US will rise further, whether the US economy and consumer demand are slowing, and whether this will have a direct effect on US imports? At the same time, the imminent prospect of the Mainland's formal entry to the World Trade Organization (WTO) could to be enough to continue boost Hong Kong and China trade during the remainder of this year and into 2001. The prospect of a more open China in the near term as a result of WTO entry may encourage more traders from around the world to enter the market sooner rather than later to ensure their position ahead of formal entry. This could help both exports from and imports to China moving through the SAR. But it needs to be understood that the pace of growth of Hong Kong exports is likely slow and if there were any downturn in external demand, especially in the US, the rate of growth could slow more dramatically than most people expect. Some of the lift in imports so far this year would have been due to higher prices on world markets, but they still provide a pointer to somewhat better local demand and a probable further lift in re-exports as a result of the re-processing trade.
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