Between a USD-pegged currency (the HKD) and the reaffirmation of its Chinese nature after its handover in 1997, Hong Kong lies right at the heart of the famous trade war between the United States and China. This context largely explains the island’s economic difficulties, creating the conditions for the well-known troubles.
A longer-term perspective also highlights the structural problem posed to Hong Kong by the highly competitive environment that has been built in the region. Back in March, before the riots exploded on the peninsula, we wrote this recommendation within the GEAB: “Hong Kong: The harbour is under water. It’s never good to be number one, because when you stop being number one, not only have you been overtaken, but you also shrink in importance. Hong Kong’s Asian business hub is struggling with its demotion behind the new Asian hubs, mainly Shanghai. To keep up with the new juggernauts, Hong Kong would need to invest huge sums of money, to modernise its harbour for example, but investments are heading mostly to Shanghai rather than to Hong Kong… So be cautious when it comes to assets related to this city.” 
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