Sample Research Paper: The Economics of Hong Kong after 2020
The effects of the COVID-19 pandemic on the worldwide economy resulted in poor economic conditions for various countries and their citizens. Top players in certain industries struggled to maintain operations during the lockdown while others incurred massive debts to secure economic survival. Hong Kong, a city highly engaged in international trade, was one of the victims of the pandemic. The region was already experiencing a downtrend economy just before the COVID-19 pandemic began. This created a challenging landscape for the city’s economy and the lives of its citizens. However, the city’s efforts to revive its economic status allowed it to overcome the challenges and improve its economic performance. Hong Kong, after 2020, experienced overall economic growth in its export, import, retail sales, and eCommerce sectors while having poor performances regarding its labor market and consumer price index.
Hong Kong’s Economic Status During 2020
While the adverse economic effects of the coronavirus disease are major factors in the poor economic condition of Hong Kong, the city was already experiencing a recession before the pandemic. The recession, which occurred in 2019, was due to US-China trade tensions along with the persisting social unrest in the city (Yuen, 2020). When Hong Kong reported its first COVID-19 case, the city employed strict health protocols which limited the city’s economic activities further leading to the decline of its economy. The city’s real gross domestic product (GDP) decreased by nine percent during the first two quarters of 2020 (Yuen, 2020). This large decline in real GDP became a major concern as the city continues to suffer from the implications of the pandemic, both economic and social.
Despite the economic decline, Hong Kong’s government attempted to secure the economic condition of the city through government assistance packages. The local government issued “stimulus packages” to its citizens as subsidies to aid against the high unemployment rate and low economic activity. The “stimulus packages” allowed employers to continue hiring employees and allowed citizens to take loans and mortgages despite the pandemic. The 2020 packages provided subsidies worth US$2,322 while costing US$17.74 billion or nearly equal to Hong Kong’s GDP (Yuen, 2020). Additionally, Kong Kong Economy (2022) stated that exportations and increased private consumption aided in the city’s economic recovery in 2021. These improved sectoral performances allowed Hong Kong to maintain an active economic environment which allowed businesses and citizens to survive regardless of the pandemic.
Export and Import Sector Conditions after 2020
Since international relations affect strategies against the pandemic , establishing strict export and import protocols were necessary to control the spread of the disease. This led to longer logistical operations which affected the productivity and earnings of certain businesses in 2020. However, Hong Kong eventually experienced improved performance after 2020 in its export sector as it continued to expand its international market. According to Hong Kong Economy (2022), the total merchandise value of the city in 2021 amounted to $10,268.4 billion which is 15.6% higher than its 2018 value. This increase in value was due to improved performances in sectors that involved electrical machinery, electrical parts, data processing machines, telecommunications equipment, and jewelry products (External Merchandise, 2022). These sectors experienced an average increase of 25% comparing their performances during December 2020 and December 2021.
Hong Kong’s importation value performances experienced a similar increase. Products, such as electrical machinery, office machines, data processing machines, jewelry, and telecommunications equipment, performed better in 2021 than in 2020. However, non-metallic mineral manufactured products had a decrease in value (External Mechandise, 2020). This decrease in value may be due to the purchasing priorities of consumers during the pandemic as well as the value of the materials for the products. Despite this decline, Hong Kong’s overall import value increased a year after the pandemic indicating a healthy economic condition.
In 2022, Hong Kong faces another COVID-19 outbreak that could potentially affect its export and import sectors. The increasing number of new COVID-19 cases per day may lead to another long-term lockdown that can negatively affect economic activities. However, experts claim that while the new COVID-19 outbreak causes logistics disruption for the export and import sectors, Hong Kong will remain an important figure in global trade (Yeping, 2022). Since most countries have conducted mass vaccinations and established effective health protocols, Hong Kong may manage the situation better than before and experience less pressure from the outbreak.
Hong Kong’s Improved Retail Sales
The COVID-19 pandemic had a large impact on local businesses due to the lockdown and social distancing protocols. The limited social activity in Hong Kong led businesses to struggle which resulted in poor total retail sales. Food and beverage businesses along with tourism experience low customer count as social distancing becomes a health priority. Sellers of luxury products lost valuable customers as the economic condition worsen. Considering that Hong Kong’s 2019 recession already had an impact on retail sales, the pandemic may have led to the eventual closure of certain businesses. According to Census and Statistics Department (2022), Hong Kong’s total retail sales for 2021 were 27.2% lower than in 2018, which was before the recession. This indicates that the current performances of local businesses in the city are still struggling and may have not yet regained their losses from the recession and the pandemic.
Despite this lower total retail sales in comparison to 2018, Hong Kong’s retail performance in 2021 is an improvement to 2020. According to Census and Statistics Department (2022); durable goods, jewelry and valuable gifts, apparel, medicine and cosmetics, motor vehicles and parts, fuel, furniture, clothing accessories, books and newspapers, Chinese drugs and herbs, and optics, experienced improved sales. These increases showcase the current activities of citizens, such as the preference for personal transportation, prioritization of health, and engaging in house customization due to lockdowns. However, the data also indicated that businesses like supermarkets that offer food, alcohol, tobaccos, and department store commodities experienced sales decreases. Most notably, supermarkets that offer food had a -8.4% decrease between 2020 and 2021. This decrease may indicate the citizen’s preference in purchasing food products which the current economic and social condition can affect.
Hong Kong’s eCommerce
The lockdowns, social distancing, and homes quarantines during 2020 led to the increase of online transactions. The eCommerce market grew substantially during this period as citizens began to conduct most businesses online. Entrepreneurs utilized social media platforms, such as Facebook and Instagram, to sell products directly to consumers while in the comfort of their homes. According to the International Trade Administration (2022), Hong Kong experienced a 27% increase in eCommerce sales during 2020 with 50% of consumers preferring online shopping. Engaging in eCommerce allowed Hong Kong citizens to purchase local, cross-border, and international products through online platforms. Projections regarding the city’s eCommerce indicate that the market may reach $25,498 million in 2022 along with a market volume of $1,412,109 (eCommerce, n.d.) Considering that the pandemic has led to an increase in eCommerce sales and activities, the current outbreak in the city will continue to promote the practice and result to the city’s further economic recovery.
Increased Consumer Price
Hong Kong’s consumer price experienced an increase resulting in high costs of goods and services. This increase is due to various reasons, such as inflation, logistic disruptions, and pandemic-related expenses. Longer logistic processes required additional costs increasing the values of goods. Pandemic-related expenses, such as additional equipment and materials for health protocols, led to higher operational costs which then results in higher charges. According to Census and Statistics Department (2022); transport, clothing and footwear, takeaway food, durable goods, basic food, and miscellaneous services experienced increased prices. However, the data also showed that costs for electricity, gas, water, miscellaneous goods, housing, alcoholic drinks, and tobacco experienced a decrease in prices. These price increases and decreases are indicative of consumer behavior during the pandemic as well as the efforts of the Hong Kong government to assist its citizens.
Poor-Performing Labor Market
Many businesses performed poorly during the pandemic which resulted in high termination and unemployment rates. During the rise of the COVID-19 outbreak, Hong Kong experienced a 5.8% unemployment rate causing many citizens to lose jobs and livelihoods (Textor, 2021). As previously mentioned, the Hong Kong government helped their unemployed citizens by providing “stimulus packages” which contributed to the city’s economic recovery. In 2022, Hong Kong’s unemployment rate has decreased to 3.9% while its underemployment rate increased to 1.8% from November 2021 to January 2022. Sectors, such as manufacturing, transportation, storage, courier services, and communications, experienced a decrease while food and beverage services, arts, and entertainment experienced an increased unemployment rate despite the overall decreased rate (Unemployment and Underemployment, 2022). Underemployment is also an issue in the labor market as citizens struggle to find their desired jobs. Hong Kong’s poor-performing labor market may eventually recover as the other sectors continue to experience improved performances which can create opportunities for citizens.
Hong Kong’s economic condition during 2020 resulted in financial and social challenges for the city and its citizens. It experienced high unemployment rates, high consumer prices, low retail sales, and lower than average export and import values. Through the efforts of the Hong Kong government to maintain economic activities, the city manages to recover from its previous poor performances. After 2020, Hong Kong has high export and import values, making the city a significant part of the global market. The city’s retail and eCommerce sales experienced an increase which will contribute to its further economic recovery. While there are existing poor performances regarding consumer price and labor market, the continuous economic development in other sectors will contribute to their recovery. Hong Kong, after 2020, is an economically sustainable city that can offer further opportunities to its citizens as it recovers from the effects of the pandemic.
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