How much economic pain has violence inflicted upon Hong Kong?

Editor's note: The article is an edited translation of an opinion piece first published by CCTV.com on November 17, 2019. The article does not necessarily reflect the views of CGTN.

Hong Kong, praised as the beautiful "Pearl of the Orient," is an important international financial center and one of the most prosperous and civilized free ports in the world. However, since the mass protest started in June, Hong Kong's reputation has been gravely tarnished. Shops have been trashed and set on fire, society has been deeply divided, and the economy and people's livelihood has been battered.

According to official statistics on Hong Kong's tourism, retail, catering and trade from June to September, profits of the four major industries fell by more than 300 billion HK dollars (about 38.3 billion U.S. dollars). Although the latest figures for October have not been released yet, it's estimated that there will be a further decline. It is believed that in the past five months (including October), the shortfall in profits may be as large as 400 billion HK dollars.

Violent protesters had staged radical actions to damage the city's international image – by paralyzing the airport, sabotaging the MTR, vandalizing businesses and assaulting pedestrians. As a result, tourists fear traveling to Hong Kong. According to Hong Kong's Immigration Department, tourist arrivals from June to September 2019 have dropped by over 3.78 million, compared with the same period in 2018.

Generally speaking, if the GDP growth of a region is negative for two consecutive quarters, it means that its economy is now in a technical recession. This is exactly what Hong Kong is undergoing currently.

The Census and Statistics Department of the Hong Kong government recently announced that the decline in GDP growth rate in the third quarter has fallen to 3.2 percent month on month, following a 0.4 percent decline in real terms in the second quarter of 2019. On the day of the release of the statistics, a spokesperson of the Hong Kong Special Administrative Region (HKSAR) government stated that the city's economy entered a technical recession.

The ongoing U.S.-China trade tensions have dampened both domestic and foreign investment interests in Hong Kong. In the first half of 2019, the GDP growth has seen a gradual decline. Only in the first quarter, its GDP registered a mere increase of 0.6 percent year on year. But in the second quarter, it's only 0.4 percent.

If it was the external environment that affected Hong Kong's economic growth in the first half of 2019, negative growth in the third quarter was mainly due to months of violence.

Since June 2019, illegal violence has flared up in more than one district of Hong Kong and undermined the rule of law and order. Tourism, retail, catering, transportation and other sectors have been severely impacted. Not only the operation of small and medium-sized enterprises but also the consumption and investor confidence were seriously undermined.

The external environment did play a role according to some analysis, but the escalating violence was the primary heavy blow to Hong Kong's economy.

Hong Kong's GDP rose from about 1.365 trillion HK dollars in 1997 to 2.845 trillion HK dollars in 2018. Since Hong Kong's return in 1997, its economy has more than doubled, despite two global financial crises – the 1997 Asian financial crisis and the 2008 international financial crisis. It can be found that the external influence on Hong Kong's economy is just limited.

It is noteworthy that besides the visible impact of violence on tourism, logistics and other industries, the invisible impact undermining Hong Kong's international reputation and financial status is more worrying. As an international financial center, safety and stability weigh a lot for Hong Kong as capital is most sensitive to risks.

Over 18 billion HK dollars lost in Hong Kong's tourism sector

Hong Kong's tourism industry has provided jobs to 270,000 people. From June to September this year, economic losses caused by the decline of tourist arrivals amounted to 18.3 billion HK dollars. The situation is worsening, with the tourism industry in the first half of October suffering a year-on-year drop in tourist arrivals by almost half.

According to Timothy Chui Ting-pong, executive director of the Hong Kong Tourism Association, the turnover of travel agencies in Hong Kong has generally come to a standstill since July 2019. In August, as mainland tourist group arrivals dropped by more than 40 percent, many Hong Kong travel agencies had no income for more than two months. It was usual for tourism workers not to receive new orders over the past five months, and many travel agencies had to resort to sending employees on "unpaid leave."

100 billion HK dollars estimated losses to Hong Kong's economy

Hong Kong's third-quarter GDP fell every quarter for the first time in nearly a decade. Hong Kong's Financial Secretary Paul Chan stressed that the city's economy shows no sign of improving at present. Though the HKSAR government has lowered its full-year growth forecast from two to three percent to zero to one percent in August, it's still rather difficult to reach, and chances of negative growth for the whole year cannot be ruled out.

If we leave aside the possibility of negative growth and just make a calculation based on the latest forecast of 0 to 1 percent: In view of its GDP of 2.845 trillion HK dollars in 2018, if Hong Kong's GDP growth remains the same as in 2019, the direct shortfall caused by violent demonstrations to the Hong Kong economy for the whole year will be close to 100 billion HK dollars. This is truly a chilling number.

Violence can only lead to nightmares. Only by stopping the riots and restoring order can Hong Kong embrace a bright future.