Mounting U.S.-China tensions are ‘unhelpful’ for Hong Kong, city’s commerce secretary says

U.S.-China tensions are not good for Hong Kong, said the city’s secretary for commerce and economic development, as he urged everyone to recognize that the “common enemy” of the world is the coronavirus pandemic.

“We are … seeing U.S.-China tensions mounting, which is unhelpful to Hong Kong, and also to the trade between U.S. and China. But as we are fighting the pandemic, I think the last thing one would want is a further distraction that would disturb or disrupt the trade,” Edward Yau told CNBC’s “Squawk Box Asia” on Monday.

He pointed to the “economic scorecard across the Pacific,” which shows a “very strong” correlation between how well a country has contained the outbreak versus its economic performance. He cited China as an example, where its economy was among the earliest to bounce back, after being the first hit in the pandemic.

But some other economies in the region have been hit by double-digit growth declines. Hong Kong’s growth slowed to an “unprecedented” 9% decline in the second quarter, Yau said. The city’s economy has been pummeled on a few fronts: pro-democracy protests, which hurt businesses and tourism badly, and now the coronavirus. The city saw a flare-up in cases again recently, leading to restrictions being reimposed.

“If we are not able to contain Covid-19 individually and collectively, I think we are all bearing the toll. So either way, I’m saying that well, perhaps the economic tsunami arising from the Covid-19 … I think that’s something that we have to watch, in particular for Hong Kong being so internationalized, so intertwined with our trade with the globe,” Yau said. “I think we’re highly conscious that well, we should be taking every step to combat Covid-19, and also to ease any tensions which (are) unnecessary and unwarranted.”

The relationship between Washington and Beijing has worsened this year, as both countries squabble over a range of issues from the origins of the pandemic, to a controversial national security law and China’s claims of ownership in the South China Sea.

Hong Kong has been caught up in the quarrel. After Beijing imposed the national security law on Hong Kong, Washington said it would revoke the city’s special trading status with the U.S. That has raised fears that Hong Kong’s status as a financial hub could be eroded.

Additionally, the U.S. government announced last week that goods made in the city and exported to the U.S. will need to be labeled as made in China instead of Hong Kong after Sept. 25.

When asked about that development, Yau referred to World Trade Organization rules which state that Hong Kong is entitled to use its own labeling for its exports, adding that it will “take the matter up with the U.S.”

“We must recognize that the common enemy … for the entire world … is the pandemic, is the virus, not each other,” he said. “Unfortunately I think we are being dragged into the tensions on the geopolitical basis. But of course Hong Kong will soldier on.”