Strengthening Hong Kong's currency will stimulate tourism and reduce the price of services, predict experts.
It appears the Hong Kong dollar (HKD) is losing ground against certain regional currencies, enticing an influx of tourists while curtailing the cost of services, according to economic experts and industry leaders.
The local currency is tied to the US dollar in a narrow band, which has seen a marked decline in strength lately. In the first quarter, the US dollar index, a yardstick that measures the currency against a group of six others, dwindled by 4 percent.
Hong Kong Monetary Authority, the city's central banking stand-in, has stepped in repeatedly since last weekend to keep the HKD within its designated range due to its recent appreciative surge against the greenback.
"A weakened HKD can be a catalyst for tourism growth, yielding significant economic advantages for the city," remarked Billy Mak Sui-choi, an associate professor at Baptist University's Department of Accountancy, Economics, and Finance, on Tuesday.
He elaborated that the diminished connection between the HKD and the weakening US dollar would initiate the HKD's depreciation relative to other currencies, inducing cheaper export prices from the city and local professional services.
"This reduces travel and accommodation expenses for tourists, thus propelling the tourism sector. Moreover, tourists might be drawn to Hong Kong, and international investors may seek our professional services such as legal and accounting services," he furthered.
Mak pointed out that the influx of foreign capital will kindle more economic activity in Hong Kong. As banks tend to lower interest rates due to increased liquidity, international investment in professional services is likely to rise, resulting in an increase in economic activity within the sector.
However, a key challenge lies with mainland Chinese tourists, as the weakening Chinese yuan's value against the HKD has lessened their spending capacity despite their increasing numbers. This could detract from Hong Kong's ability to appeal to substantial spending from Chinese visitors.
Overall, while the HKD's depreciation sets the stage for tourism and professional services exports, it presents hurdles associated with mainland tourists' spending power.
[1] - The depreciation brings down the cost of professional services such as legal and accounting when exported, making them more attractive globally and boosting international investments in professional services.
[2] - The reduction in mainland tourists' spending power due to the depreciation of the Chinese yuan ultimately affects Hong Kong's ability to draw significant spending from Chinese visitors.
[3] - The weakening Hong Kong dollar can lead to unexpected currency fluctuations in the finance sector, potentially shaking up the city's business and financial landscape.
[4] - Consequently, the HKD's depreciation might have repercussions on the city's lifestyle, as even daily necessities such as food and utilities may become more expensive due to currency adjustments.
[5] - On the flip side, a cheaper local currency encourages increased business travel as costs like accommodation and meals could be lower, making Hong Kong a more budget-friendly destination for international corporate event stakeholders.
