Volkswacht Bodensee - Hong Kong sees 3.1% growth in second quarter

Hong Kong is a special administrative region in China with its own trade policies, but is still vulnerable to tariff threats from US President Donald Trump, thanks to its significant re-exporting of Chinese goods.

Improved domestic demand coupled with an increase of 11.5 percent in exports saw the economy "expand solidly", a Hong Kong government spokesperson said.

The "temporary easing of US tariff measures led to some 'rush shipments'" which also helped growth, they added.

Earlier in the year tariffs between China and the United States reached triple digits before a truce slashed them to more manageable levels.

A 90-day grace period is meant to end on August 12, but the latest round of trade talks ended Tuesday without a deal.

The US president on Wednesday announced tariffs on major trading partners South Korea, Brazil and India -- a pattern Hong Kong's government said would also affect its economy in the second half of the year.

"The US' renewed tariff hikes of late will exert pressure on global trade flows as well as its domestic economic activity and inflation. The uncertain pace of US interest rate cuts will also affect investment sentiment," the government spokesperson said.

- Trouble ahead? -

Thursday's estimates showed private consumption, which had declined for four consecutive quarters, increased 1.9 percent, while exports of services saw 7.5 percent growth.

Hong Kong's capital market has rebounded strongly this year, with dozens of companies from China piling into the city to raise overseas capital due to policy support from the Chinese government and optimised listing rules by Hong Kong regulators.

But China's regulator this month approved the fewest number of listing applications in eight months, Bloomberg reported, raising concerns that the IPO boom in the first half of this year may be slowing.

Hong Kong's government warned that the second half of the year could be harder.

"Given the geopolitical landscape, there is enormous uncertainty and volatility (for Hong Kong)," Financial Secretary Paul Chan told a press conference on Wednesday.

Growth in the first quarter was three percent, but nevertheless authorities have set a goal of two to three percent for the whole year -- which would be "prudent to keep", Chan said.

"The seemingly modest growth has not been fully reflected in the labour market," Gary Ng, senior economist at Natixis Corporate and Investment Banking, told AFP.

"It is hard to say the recovery is solid and shielded from geopolitical and trade tensions."

E.Burkhard--VB