Chief economist update: This land is ours

Five months and one day. This is the latest count since Hong Kongers started marching on the streets of China's Special Administrative Region (SAR) - on March 31 - protesting the withdrawal of the extradition bill proposed by China's "hand-picked" HK government.

While HK chief executive Carrie Lam announced the suspension of the extradition bill on June 15, protesters list five demands for their weekly trip to HK airport to stop: (1) full withdrawal of the extradition bill; (2), Carrie Lam's resignation; (3) retraction of the government's characterisation of the violent clashes between protesters and the police as "riots"; (4), a full independent inquiry into police responses and; (5) arrested protesters are unconditionally freed.

Months of disruptions to everyday life and businesses in Hong Kong are taking their toll on the Hang Seng index, compounding the US-China trade war the territory appeared to have overcome since it started in early 2018.

After rising by 4% in the first three months of the year, the Hang Seng index has dropped by massive 11.5% since March 2019.

With the protesters laying siege on Hong Kong airport, the hit on the country's tourism industry would be non-negligible. More so, because tourism's contribution to GDP has grown to 17.4% (as at 2018) from 13.9% in 2008.

This comes on the back of an already slowing economy. Hong Kong GDP growth slowed to 0.5% in the year to the June 2019 quarter from 0.6% in the first. This is less than market expectations, the fist straight quarter of year-on-year deceleration since the March 2018 quarter and the slowest annual growth rate since the September 2009 quarter (-1.7%).

Forward indications from the IHS Markit Hong Kong PMI survey point to continued deterioration in the SAR. The HK PMI dropped from a reading of 47.8 in June to 43.8 in July - the fastest rate of deceleration since March 2009 and the 16th straight month slowdown.

As per IHS Markit: "The survey is now broadly indicative of the economy contracting at an annual rate of around 2.0%."

Problem is Hong Kong is no longer an economic heavyweight as far as Beijing is concerned - according to, it now contributes only 3% to China's economy versus around 27% in the 1990s.

The escalating heavy-handed police responses to the protesters indicate the determination of the powers that are determination to enforce its authority on whatthey consider as its rightful sovereign territory.

As well, muted responses from the international community emboldens China on its claim.

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