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Hong Kong Is Not Faring Well Under Tightened Chinese Control

By Alan Beaulieu on June 27, 2023

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Alan Beaulieu

With a reputation as an accurate, straightforward economist, Alan Beaulieu has been delivering award-winning workshops and economic analysis seminars across the world to thousands of business executives for the last 30 years.

Hong Kong’s GDP and stock market have both been underperforming since before COVID-19.


Hong Kong GDP established a record high in June 2019 (12-month moving total data trend). The December 2022 GDP 12MMT was 1.8% below that record high.

Other economies fared better from June 2019 to December 2022:

  • Southeast Asia GDP rose 10.3% despite the fact that Hong Kong GDP had outperformed it since late 2012 (see the chart below).
  • World GDP rose 6.6% through the same time period.
  • US GDP ended 2022 up a strong 21.6% from June 2019.

Hong Kong’s economic underperformance from mid-2019 through year-end 2022 was particularly noticeable given how well Hong Kong had performed up to mid-2019.

Hong Kong GDP

Stock Market

The Hong Kong Stock Market established a record high in August 2018 and has wandered lower since. The market is down a sharp 35.3% as of June 2023 (see the chart below).

Two of the following stock markets significantly outperformed Hong Kong’s through the same time period.

  • China’s stock market eked out a slim 0.8% increase from August 2018 to June 2023 (also visible in the chart below).
  • Japan experienced a gain of 27.9%.
  • The US S&P 500 posted a 47.6% increase.

Investment in the Hong Stock Market became unwise in the third quarter of 2018 while the world writ large continued to provide good opportunities.


Hong Kong’s population reached a peak in 2019 followed by annual declines in 2020, 2021 and 2022. The population in 2022 is estimated to be approximately what it was in 2016. A population in decline is an economic risk for a country.

Economic and Social Changes

Hong Kong was transferred to the People’s Republic of China in 1997. The preliminary agreement to this transfer was written in 1984, and it provided for one nation under two systems. The agreement stated that Hong Kong’s autonomy would last until 2034.

China began to tighten its grip on Hong Kong a little over 20 years ago, and since then there have been escalating protests. Democracy activists were imprisoned in 2017. 2019 saw the Chinese introduce a plan to allow for extradition from Hong Kong to China, a source of concern for millions of protesters and dissidents as well as a risk to localized rule of law. The plan was cancelled, but the concerns were real and still linger.


Be careful of investment and other exposure to Hong Kong. Hong Kong is an important exporter of electronics, and economic weakness could lead to supply chain issues. Investors would do well to consider other destinations for their foreign direct investment given the increased restrictiveness of the last 20 years.

Hong Kong Stock Market


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