As Hong Kong’s financial sector soars, what about food and retail?

Hong Kong is at risk of splitting up into two economies. On one end, Hong Kong’s financial, professional and business services are being revived on the back of China’s resurgent, tech-driven economy and the shifting balance of power between Washington and Beijing. US President Donald Trump’s global tariff war, announced on April 2, was supposed to kneecap the world. But the shock and awe unleashed have rapidly dissipated due to rising misgivings about the looming fiscal crisis, compounded by the US immigration crackdown and Trump’s “big, beautiful bill” to cut taxes for the wealthy, which is likely to add an estimated US$2.8 trillion to the fiscal deficit. Credit rating downgrades, poor responses to auctions of US Treasuries and slower growth as predicted by the World Bank – lowered to 1.4 per cent in June from 2.3 per cent in January – have sent the mighty US dollar on a downtrend and a flight of capital to Asia for better returns. Hong Kong’s stock market is positioned in the right place at the right time. As tariff chaos and policy flip-flops erode the US’ credibility and moral standing, China has emerged as an oasis of certainty in an increasingly volatile and dangerous world. The mainland’s use of Hong Kong as a platform for its new tech champions to raise funds and connect with global markets has fuelled the city’s return to its role as one of the world’s top fundraising venues. More than 100 enterprises – including leading companies from the mainland – are said to be in line for public listing on Hong Kong’s stock exchange. The Hang Seng Index is up 15 per cent in the first quarter of this year, building on a surge of over 17 per cent in 2024. State policies aimed at maximising the use of Hong Kong’s internationally connected financial and capital markets have helped, but local officials have not sat on their hands either. Taking advantage of the city’s reformed legislative system, the government has taken action to bolster Hong Kong’s position as a global financial hub. The Companies Ordinance has been amended to promote the re-domiciliation of overseas companies. The Legislative Council also passed a law on stablecoins in May. It is scheduled to be implemented in August, ahead of the passage of the US’ Genius Act to regulate cryptocurrencies pegged to the US dollar. The coming implementation of a new, comprehensive regulatory regime on stablecoins and legislative amendments to streamline the trading, management and investment of digital assets have generated widespread interest. Altogether, these policies will catapult Hong Kong into a full-fledged digital financial trading centre. The economic benefits of Hong Kong’s revitalised financial markets are clear. Business receipts of the computer and information technology services rose by 60.2 per cent compared to the same period last year; finance services – excluding banking – by 32.5 per cent, insurance by 23.1 per cent, import and export by 19.4 per cent and banking by 19 per cent. Real estate and retail receipts fell by 6.7 per cent and 6.5 per cent, respectively. While financial services are bouncing back, Hong Kong’s consumer services data tell a totally different story. In April, Hong Kong’s retail sales dropped for a 14th consecutive month. Local restaurant receipts dipped in the first quarter of this year, with total receipts by value falling by 0.6 per cent. Interestingly, the total value receipts of Chinese restaurants declined by 4.9 per cent compared to the same period last year; for fast food shops, the value increased by 1.9 per cent, while that of non-Chinese restaurants rose by 2.4 per cent. Bars registered the sharpest gain of 6.5 per cent, possibly due to last year’s substantial reduction of the excise duty on spirits. The economic integration of Hong Kong with cities in the Greater Bay Area development zone has contributed to a divergence between the local economy and the city’s internationally connected sectors. The improvement of cross-boundary transport infrastructure following the opening of the high-speed rail links with the mainland and the Hong Kong-Zhuhai-Macau Bridge, has practically turned Hong Kong and nearby mainland cities into a single market. The free movement of people from Hong Kong and the much better value-for-money offered by services in neighbouring cities have seriously dented local demand for consumer services. Chinese restaurants cannot compete with their counterparts on the mainland on price or variety. There is not much the government can do to prop up these ailing sectors except to allow market forces to produce new demand for more attractive offerings. Even consumption vouchers – assuming the government could issue another around – would only have a short-term effect. The best hope for resuscitating Hong Kong’s local consumer services lies in price adjustments and innovation. Price cuts are already happening. Commercial rentals for offices and shops have dropped significantly, though not as sharply as desired by small operators. Many local eateries are offering two-dish meals at attractive prices for low-income workers. A major fast food chain recently applied for their signature baked pork chop rice to be listed as an “intangible cultural heritage” and offered a limited number of deeply discounted coupons for the popular dish. The coupons were snapped up instantly. However, it will be a long and painful process if markets are left to regain competitiveness solely based on price adjustment. New products, service delivery innovation and the creative redesign of shopping malls are key to offering greater customer satisfaction. Government planners cannot rely on old models. They must work with business to be bold and forward-looking, or else Hong Kong will be left behind.

As Hong Kong’s financial sector soars, what about food and retail?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Sound policies have helped boost internationally connected capital markets, but fresh ideas are still needed to uplift the local consumer economy

Sound policies have helped boost internationally connected capital markets, but fresh ideas are still needed to uplift the local consumer economy