Dock hands work at Hong Kong's container wharf yesterday. The SAR government said the city's exports had suffered the worst year-on-year decline in January since 1959. CNS

HONG KONG: The city's exports nosedived in January, recording their steepest descent in 50 years, as the global financial crisis slashed demand for products shipped through the city.

Overseas sales crashed 21.8 percent in January from a year earlier, the government said yesterday on its Web site.

The slump followed an 11.4 per cent year on year shrinkage over the previous month. Economists surveyed by Bloomberg News had predicted a 20.5 percent decline.

The global recession is dragging down Asia's export-dependent economies. Japan, South Korea and Taiwan all report unprecedented, precipitate falls in overseas shipments in January.

Hong Kong, a trade hub for the mainland, is headed for its first full-year economic contraction since the Asian financial crisis of 1997-98, the government said yesterday.

"It's not just Hong Kong, the financial crisis is dragging down the whole of Asia," said Wang Qian, an economist at JPMorgan Chase & Co in Hong Kong. "The trade environment is going to get worse."

The export decline was the biggest since March 1958. Imports fell 27.1 percent in January from a year earlier, resulting in a trade surplus of HK$7.2 billion ($930 million) last month, the government said.

A slump in the U.S. housing market has caused more than $1 trillion in losses at financial institutions globally.

The sub-prime disaster touched off a global recession, driving down demand. World trade will shrink in 2009 for the first time in more than 25 years, the World Bank predicts.

Shrinking Economy

Hong Kong's declines were also affected by the timing of the Chinese New Year holiday, which fell during January this year and February, 2008.

The city's economy will probably shrink 2 percent to 3 percent in 2009, after a 2.5 percent expansion last year, Financial Secretary John Tsang said yesterday. Gross domestic product contracted 2.5 percent in the fourth quarter of 2008 from a year earlier.

"A slowdown in exports leads to a loss in incomes for businesses and households, stalling investment and consumption," said Sean Yokota, an economist at UBS AG in Hong Kong. "We won't see a recovery in Hong Kong's economy until global demand and exports start to stabilize."

On a quarter-on-quarter basis, the city has been in a recession since the third quarter. GDP shrank a seasonally adjusted 2 percent in the fourth quarter from the previous three months.

Tsang yesterday announced salary-tax refunds, property- rates waivers and infrastructure spending to spur growth.

Reuters

(HK Edition 02/27/2009 page16)