Strong Hong Kong dollar weighing on tourist spending, finance chief Paul Chan says

A strong Hong Kong dollar is weighing on spending by tourists, the finance minister has said, urging businesses to develop new offers and innovate as customers’ tastes change.

Financial Secretary Paul Chan Mo-po also sounded the alarm on Sunday over the possibility that interest rates in the United States could stay higher for longer, which he said could hurt the city’s exports, inbound investment and capital markets.

The knock-on effect could hamper the city’s economic recovery despite recent positive signs, he said.

“But the external environment remains complicated and there are a lot of uncertainties,” Chan said in his weekly blog. “The US Federal Reserve last week held interest rates steady. Coupled with stubborn inflation, the market expectation for a rate cut has weakened compared with earlier this year.”

He said the conditions could “bring adverse impacts to global economic recovery, Hong Kong’s exports, as well as the sentiment of local investment and capital markets”.

The Fed announced last week it was holding its benchmark lending rate steady in the 5.25 per cent to 5.5 per cent range as core inflation remained above the target of 2 per cent.

Chan said the city’s tourism sector was one of the key drivers of the economy in the first quarter, but warned of the drawbacks of a strengthening Hong Kong dollar, which is pegged to the US dollar.

The number of arrivals for the first three days of the Labour Day “golden week” holiday reached nearly 650,000, up by 25 per cent against last year’s figures, he said.

The break runs from May 1 to 5 on the mainland.

He said “changing consumption patterns among locals and tourists”, coupled with the strong Hong Kong dollar, could hit the retailing and catering sectors in particular.

Chan urged companies to develop new products and to embrace technology.

Finance minister Paul Chan has been attending the annual meeting of the board of governors of the Asian Development Bank in Tbilisi, Georgia. Photo: ISD

“New products can not only meet the changing needs of consumers, but also create demand and thus boost sales,” he said. “As for new ways of management, companies can lower costs and enhance efficiency by adopting more digital solutions.”

Chan has been attending the annual meeting of the board of governors of the Asian Development Bank in Tbilisi, Georgia, which is themed “From Billions to Trillions – Promoting Private Sector Development for Climate Change”.

He said many participants were interested in the development of Hong Kong’s digital economy, as well as the innovation and technology sector.

Chan said at the plenary session a huge funding gap of trillions of US dollars existed for climate and transition investments, as well as in helping developed and developing economies in climate financing.

He urged members to work together to mobilise private sector resources and channel funds to support green and climate transition projects through innovative financial products and services.

In his weekly blog post, Chan also noted Hong Kong’s gross domestic product had increased for five consecutive quarters, expanding 2.7 per cent year-on-year in the first three months of the year.

The city’s benchmark Hang Seng Index also gained almost 14 per cent recently, while the property market had become more active after authorities scrapped cooling measures in February.



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