Economic Update
2016/05/06Shopping for some painkillers
Retail sales extended its declining trend in March, falling 9.8% YoY during the month. On an aggregate basis, retail sales declined 12.5% YoY during the first quarter of 2016, confirming a persistent weakness in retail activities. The lacklustre retail performance continues to be highly correlated with inbound tourism, which is in a dire situation as visitor arrivals dropped 10.9% YoY in the first quarter. The weakening inbound tourism has also hurt the hotel industry, as hotel occupancy rates averaged only 83.3% during the first quarter (i.e. 2.3 percentage points lower than a year ago), while the average achieved hotel room rate was down 11.1% YoY during the same period (see Chart 1). These negative figures have served to increase pessimism in the overall business sector.
2016/04/15Growth is Slowing, But not Worrying
It was a busy week for the Chinese Statistics Bureau, which released a basket of first quarter economic data. The set of data is reflective of the stabilising trend of growth that we have expected (see April issue of Bulletin), while there are increasing signs that top government officials have successfully calmed market jitters (see here). In the near term, a stable recovery in sentiment should be due as indicated by the solid economic data, while a more significant boost will only come with proven results of leverage reduction and profitability enhancement further down the road.
2016/04/06As economic activities slow, labour demand flattens
Hong Kong’s economic momentum remained lacklustre in the first couple months of this year, with the usual indicators extending their respective streaks of year-on-year decline. While strong domestic demand has carried Hong Kong through some headwinds over the years (see Chart 1), with retail sales slowing down at a much accelerated pace, it could be a hint that domestic consumption’s contribution to growth may no longer be as robust in 2016. As such, the evolving trends of Hong Kong’s domestic sectors and their implication on the labour market must be monitored carefully.
2016/03/18Takeaway from the Two Sessions
After almost two weeks of substantial news coverage, you should be aware of the Two Sessions where Chinese leaders gathered in Beijing to decide on national priorities during the beginning of March. The meeting covered the aspects of growth and reform, among many other matters, and this short summary covers what we have learned from the Two Sessions. In short, while we do expect the efforts on reform will intensify during the course of the 13th Five Year Plan (FYP), stabilising growth and managing expectation are higher on the priority list.
2016/03/012016-17 Budget highlights
As you are no doubt aware, the Financial Secretary announced the Budget for 2016-17 last Wednesday, and the Chamber’s Economic Policy Committee welcomed representatives from the Financial Services and Treasury Bureau to brief our members on the Government’s vision. Below is a brief summary of things that caught our attention.
2016/02/18Other tools needed to rejuvenate the economy
China released its latest economic data this week, and at first glance, inflation has picked up slightly, while international trade continues to struggle. At the same time, monetary supply and bank lending figures suggest that banks have become more accommodative. While these trends indicate that stabilisation of the economy could be underway, concerns of the leveraging nature of the economy and size of non-performing loans (NPLs) linger.
2016/01/19China’s 2015 Growth Matched Expectations; What Should We Expect Next?
China announced the full-year results of a number of key economic indicators for 2015 (see Table 1). While some of these indicators have fallen short of targets laid out in March 2015, the combination of lower-than-expected inflation, robust growth of the tertiary sector, and improved trade surplus has helped stabilize the economy and kept its headline growth rate intact. Although we do not expect any V-shape growth rebound in 2016, a more proactive approach of fiscal spending and effects of expansionary monetary measures should help stabilize the Chinese economy.
2016/01/08Enduring the Cold Winter
While strolling around Central recently, I snapped up a few shirts for Chinese New Year. I may have got a bargain, but the exceptionally sweet deal makes me worry about the retail sector’s coming prospects.

2015/12/17End of an Era
The U.S. Federal Reserve raised its benchmark interest rate from the 0-0.25% range to 0.25-0.5% on 16 December. On the back of steadily recovering economic momentum and a stronger labour market, the move marks the end of a seven-year period with close-to-zero interest rate.
2015/12/01RMB Milestone
The International Monetary Fund (IMF) completed its review of the basket of currencies for the Special Drawing Right (SDR) and included the Chinese renminbi (RMB) for the first time. Effective 1 October 2016, as the fifth currency – after the US Dollar, euro, British pound, and Japanese yen – the RMB will be part of the SDR basket.
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