HONG KONG (Reuters) - A record number of Hong Kong firms shut up shop last year as China, the mainstay of the city’s economy, trundled to its slowest economic growth in a quarter of a century and spending by mainland visitors dried up.
Some 122,479 companies were dissolved, according to data from the city’s Companies Registry compiled by financial research platform Webb-site.com. New firms incorporated in Hong Kong also slid 17 percent, leaving the net number of new firms at a low since 2003’s SARS outbreak slammed the city’s economy.
The numbers show just how tightly Hong Kong’s business prospects remain tied to mainland China, despite its aspirations as a global financial center. Bleak as last year was, the problem for the city’s entrepreneurs - and their lenders - is that China’s growth may keep slowing, with an even more painful sting in the tail down the line.
“We haven’t seen the worst yet,” said Kevin Lai, chief economist Asia Ex-Japan at Daiwa Capital Markets in Hong Kong. “We’re not too sure what may happen to the currency, we’re not sure whether this slowdown in China will spill into some kind of a bigger trouble or financial crisis. We’re still at the very beginning of the whole process.”
Hong Kong’s experience with SARS showed the city’s resilience - while thousands more firms were closed in 2003 than were started, the city was back in business with a net 21,605 new firms just a year later. But China’s lingering economic health problems may yet leave a deeper scar this time around.
Editing by Kenneth Maxwell