The Secretary for Commerce and Economic Development Bureau of Hong Kong Edward Yau said (August 23) the number of people visiting the Hongkong Special Administrative Region (HKSAR) has dipped in the last two months, taking a toll on its tourism and retail sectors. The trade war between the world’s two largest economies has been hitting Hong Kong’s logistics sector, a key pillar of the harbor city’s economy. In the first half of 2019, the value of goods exported and imported via Hong Kong fell 3.6% and 4.5% year-on-year respectively. The value of goods exported to the Chinese mainland fell 6%, while exports to the U.S. fell 11.1%. These figures demonstrate the close links between the economies of the mainland and Hong Kong. Most of the mainland’s inbound direct investment comes from Hong Kong. And most outbound direct investment by the mainland flows to Hong Kong. In the first seven months of 2019, $55.37 billion of inbound direct investment in the mainland came from Hong Kong (including investment via free ports such as the Cayman Islands, Mauritius and Barbados), accounting for 70.27% of the total, according to data from China’s Ministry of Commerce.

The value of direct investment from Hong Kong in the mainland in 2018 was $89.9 billion — excluding investment through free ports — which was way more than investment from anywhere else. Hong Kong is on the verge of recession amid social unrest and the escalating trade war. Official data released Aug. 16 showed that Hong Kong’s GDP growth for the second quarter dipped to 0.5% YOY, the lowest in more than seven years. The city’s GDP declined 0.4% quarter-on-quarter. In 2017, $91.2 billion of the mainland’s outbound direct investment flowed into Hong Kong, making it the most important destination for mainland capital. Britain’s Virgin Islands ranked second, attracting $19.3 billion.