Impact of US trade policy shifts on Hong Kong ‘primarily psychological’: Paul Chan

Changes in US trade policy and interest rate trends will significantly affect Hong Kong’s economy but the impact will be “primarily psychological”, the finance chief has said, while expressing optimism that growth momentum will continue in the second half of the year. Financial Secretary Paul Chan Mo-po also revealed on Sunday that Hong Kong welcomed 31 million visitors in the first seven months of 2026, a 12 per cent year-on-year increase. Passenger traffic at Hong Kong International Airport rose 11 per cent year on year to 32.8 million in the first half. Two days after the government raised its full-year economic growth forecast for 2026 to a range of 3.5 to 4.5 per cent, Chan, who appeared on a radio show on Sunday, addressed questions about the biggest risks facing the city in the second half of the year. Chan warned of external risks caused by “psychological factors”, saying changes in US trade policy and interest rate trends would “naturally carry a significant impact” on Hong Kong. He said interest rates would see little change for the remainder of the year, with one additional 0.25 percentage point increase already priced in by the market. “Meanwhile, the US is facing midterm elections, but the risks for the remainder of the year will be manageable,” he said. “We believe the impact here is primarily psychological. Psychological factors will affect the financial markets, leading to greater market volatility, so we simply need to manage our risks effectively.” Chan noted that the United States was Hong Kong’s fourth largest export market, and its scale was relatively smaller than Southeast Asia and other regions. He added that mainland Chinese and Hong Kong businesses had responded to shifts in US trade policy very quickly over the past few years. Last month, Washington partially eased Hong Kong-related sanctions and trade restrictions first imposed by US President Donald Trump in 2020 in response to Beijing’s imposition of the national security law, but did not restore the city’s special trade and economic status. Hong Kong is treated on a par with the mainland for tariffs and export controls. According to official figures released on Friday, the economy expanded by 5.1 per cent in the first half, its strongest half-yearly performance in nearly five years, with the government raising the full-year economic growth forecast to a range of 3.5 to 4.5 per cent, from the previous 2.5 to 3.5 per cent. Chan pointed to growth in the retail, property and stock markets, while the catering sector had stabilised in recent months. He expressed cautious optimism for the second half of the year. He highlighted that private investment marked its third consecutive quarter of double-digit expansion, with growth driven by artificial intelligence (AI). “We estimate that the companies brought in through our investment promotion efforts, along with incoming innovation and technology firms, are increasing their research and development investments,” he said. “Combined with our push towards advanced manufacturing in Hong Kong, investment in these areas will rise. “AI serves as a key catalyst because it is both an industry in itself and an enabler for upgrading and transforming all sectors.” In response to public perceptions that some residents had yet to benefit from the economic recovery, Chan said growth in the trade, logistics and finance industries would drive development in other sectors. “Certain sectors will naturally move faster while others follow,” he said. “We believe it will take some time for this momentum to broaden across all levels of society.” As for the catering industry, which faced greater challenges, Chan acknowledged that the sector was in a period of adjustment due to residents’ increased spending on the mainland or other economic shifts. He encouraged catering businesses to upgrade or transform. The Northern Metropolis megaproject in the New Territories would gradually yield results by the end of the year, with major stakeholders moving in, Chan said, although he stopped short of revealing their identities. Chan said the results would become apparent over the next year or two, giving the public more confidence in the megaproject. Hong Kong will unveil its first-ever five-year plan next month, aligning the city’s priorities with the nation’s 2026-30 development blueprint. China’s central bank is stockpiling more gold in Hong Kong as part of efforts to turn the city into a major bullion-trading hub. Chan said gold served as a first step towards turning the city into a commodity trading centre. But he noted that storage facilities being developed by the Hong Kong Monetary Authority were insufficient and authorities planned to further scale capacity beyond 2,000 tonnes. In a weekly blog post, Chan also pledged that the government would continue to leverage Hong Kong’s advantages as an aviation hub through a multipronged approach to attract more passenger and cargo traffic. “With the reshaping of geopolitics and regional trade patterns, we are more proactively expanding our aviation network, exploring more bilateral air service arrangements, and continuously upgrading our airport’s hardware facilities,” he wrote. He called Hong Kong’s status as an international aviation hub the “lifeline” of local industry and the hardware foundation for the city to perform its functions as a “super value-adder” and a “superconnector”, a role heavily emphasised by Beijing.

Impact of US trade policy shifts on Hong Kong ‘primarily psychological’: Paul Chan

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Finance chief cites US trade and interest rate trends as risks for city’s economy for rest of 2026, but expects growth momentum to continue

Finance chief cites US trade and interest rate trends as risks for city’s economy for rest of 2026, but expects growth momentum to continue