Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

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Hong Kong’s emerging recovery from an historic recession fueled by the pandemic and political protests is throwing into stark relief the deepening wealth imbalances between the city’s working class and elite.

The economy’s return to growth in the first half of the year has been led by a combination of resurgent trade, property prices back to near record-highs in the world’s most expensive housing market, and a resilient financial services industry backed by a surge in initial public offerings.

Yet the city’s tourism, consumer and services industries, the biggest employers of many of Hong Kong’s working class, remain constrained by pandemic restrictions, and have likely suffered permanent damage waiting for borders to reopen.

As Hong Kong’s economy gets back on its feet, the government needs to do more to make sure the city’s increasing numbers of working poor are not left behind by the two-speed recovery, economists say.

Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

“In the face of potential restructuring of Hong Kong’s economy, the retraining of the labor force and the improvement in the social safety net become even more urgent,” said Tommy Wu, lead economist at Oxford Economics in Hong Kong. “Hong Kong could see more re-industrialization happening, while the tourism sector will likely be shifting away from mainly serving the mass market toward the niche market.”

Not surprisingly, the working class have suffered the brunt of the two-year recession, especially as unemployment swelled.

Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

Joblessness in the city’s financing, real estate, insurance and business services sectors remains well below the headline rate and about half that of the unemployment rate in the retail, accommodation and restaurant sectors, even as those measures have fallen in recent months as the economy improved.

Retail jobs shrunk by 20% in the first quarter from pre-pandemic levels in 2019, while the number of people working in finance has actually grown, the data show.

Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

Growth in the city’s financial sector “is unlikely to benefit the low-income group directly,” said Aries Wong, a lecturer at Hong Kong Baptist University. “In the absence of a sustainable recovery and significant relief measures supported by the government, the situation of the low-income group is unlikely to see an improvement soon.”

The number of low-income households in the city, defined as those with monthly income less than HK$9,100 ($1,171.2) in 2021 prices has almost doubled over the past two years to 149,700 as of March 2021, according to a government report.

Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

Among people in the demographic who are working, 79% were lower-skilled workers including in elementary work, services and sales. Almost 30% held jobs in the retail, accommodation and food services sectors, with another 13% in transportation, the data show.

Retail spending has shown some improvement in recent months, returning to year-on-year growth for the first time in two years in February. However, retail dollar values have fallen by almost 40% during the recession, down to about HK$29.6 billion in May compared with the pre-downturn peak of HK$48 billion in January 2019.

Hong Kong’s Economy Is Finally Recovering, But Only for the Rich

And there is uncertainty over whether the key tourism dollars that flowed through the city prior to the 2019 protests and subsequent pandemic will return amid persistent social distancing restrictions and a sluggish vaccine drive.

“I expect tourists will be slow to come back,” said Oxford Economics’ Wu. “What’s important going forward is to increase labor force participation and employment by retraining workers so that at least more people can participate in the economic recovery.”

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