- [Narrator] Hong Kong is facing its first recession
since the global financial crisis in 2008.
Influenced by unprecedented factors.
Including its own ongoing anti-government protests
and the trade stalemate between Washington and Beijing.
In February, the government predicted Hong Kong's economy
would grow up to 3% this year.
Six months later, that forecast was slashed
to zero to 1%.
(speaking in foreign language)
Since June, the city's tourism industry has suffered
from the increasingly violent
and disruptive pro-democracy protests.
In August, normally a strong month for tourism,
arrivals in Hong Kong dropped nearly 40% from a year ago.
It's the worst decline since May, 2003
when Hong Kong was grappling with the deadly SARS virus.
Occupancy rates of hotels in some districts fell around half
while room rates decreased 40 to 70%.
- Mainland Chinese tourists make up over 70%
of total tourist arrivals in Hong Kong.
But when protests started in June,
that number has dropped.
And there's also increase in anti-China sentiment
in the city.
- [Narrator] 16 years ago, once the all clear came
after the SARS outbreak,
visitor arrivals and business confidence swiftly recovered.
But, as the anti-Beijing mood grows in Hong Kong,
so does opposition to the protests in mainland China.
The protests and the drop in tourists have disrupted
the city's retail sales.
In August, sales dropped 23% from a year ago.
Their worst monthly decline on record.
Luxury items were among the biggest victims.
Sales of jewelry, watches,
and other valuable gifts fell nearly 50%,
marking a record low.
- The protests have been disruptive for life
especially on the weekends.
In early October, there was a time
when entire department stores were closed
and major train stations were also shut down.
And also, if you go to popular shopping districts
like (speaking in foreign language),
it's actually a popular destination for protests now.
- [Narrator] And then there's the trade dispute
between China and the U.S.
Though the two sides emerged from the latest round
of trade talks with a truce in place,
there's still a lot to be worked out.
The effects of the stalemate have been felt in Hong Kong
which relies heavily on reexporting Chinese goods.
Total exports are expected to shrink nearly 4% this year.
So far, the finance sector has weathered the protests.
- Prohibition on face cuffering regulation.
- [Narrator] However, when the government invoked
colonial-era emergency powers,
it put to the test Hong Kong's rule of law.
The authorities say they will only use
the emergency provision to ban people
from wearing masks at public gatherings
but it also allows the chief executive
to enact drastic regulations
such as censorship, arrests, and foreign exchange controls.
The government said it had no such plans.
Declining reexports and the government's struggle
to restore order to the city
have erased any economic momentum from the start of 2019.
Experts believe numbers for the third quarter will confirm
Hong Kong is in technical recession.
- Despite the major decline
in Hong Kong's economic indicators,
Hong Kong's financial buffers still remain strong.
That can come under pressure
if Hong Kong's status as a global financial
and business center comes under fire
and that could be really difficult and challenging
for its longterm growth prospects.