Abstract
Abstract. Hong Kong is one of the main economies operating a currency board system today. With its currency fixed to the U.S. dollar, the system has functioned successfully since it was restarted in 1983. The last time it faced severe challenges was during the East Asian financial crisis of 1997-98. However, with the comparatively large depreciation of renminbi (RMB, and sometimes referred to as Yuan) during the past two years, a rising question is how Hong Kong might be affected by a possible future crisis originating from China. In this paper, we examine the impact of RMB depreciation on Hong Kong, with a focus on three sectors of Hong Kong’s economy: foreign direct investment, external trade, and tourism.
Keywords. RMB, China, Hong Kong, Asian financial crisis, FDI, Trade, Tourism, Retail sales.
JEL. E39, O53.References
Athukorala, P.-C. (2003). FDI in crisis and recovery: Lessons from the 1997-98 Asian crisis. Working Paper, Australian National University. [Retrieved from].
Bank for International Settlements. (2017). Effective Exchange Rate Indices(data file). Accessed May 2017): [Retrieved from].
Campa, J.M. (1993). Entry by foreign firms in the United States under exchange rate uncertainty. Review of Economics and Statistics, 75(4), 614–622. doi. 10.2307/2110014
Carruth, A., Dickerson, A., & Henley, A. (2000). What do we know about investment under uncertainty. Journal of Economic Surveys, 14(2), 119–153. doi. 10.1111/1467-6419.00107
Chao, Y. (2015). Effects of RMB exchange rate changes on China’s outward FDI. 14th International Symposium on Distributed Computing and Applications for Business Engineering and Science. doi. 10.1109/DCABES.2015.38
Chen, K.-M., Hsiu-Hua, R., & Chia-Ching, L. (2006). The impact of exchange rate movements on foreign direct investment: Market-oriented versus cost-oriented. The Developing Economies, 44(3), 269-287. doi. 10.1111/j.1746-1049.2006.00017.x
Cheng, K.M. (2012). Tourism demand in Hong Kong: income, prices, and visa restrictions. Current Issues in Tourism, 15(3), 167-181. doi. 10.1080/13683500.2011.569011
Cheng, K.-M., Hyeongwoo, K., & Thompson, H. (2013). The real exchange rate and the balance of trade in US tourism. International Review of Economics and Finance, 25, 122-128. doi. 10.1016/j.iref.2012.06.007
China, Ministry of Commerce. (2016). Statistics of FDI in China in January-December 2015. Accessed May 2017. [Retrieved from].
China, Ministry of Commerce. (2016). 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment.
Crouch, G.I. (1993). Currency exchange rates and the demand for international tourism. Journal of Tourism Studies, 4(2), 45-53. doi. 10.1177/004728759403300262
Federal Reserve Bank of ST. Louis, Economic Research. (2017). China / U.S. Foreign Exchange Rate [data file]. Accessed May 2017. [Retrieved from].
Froot, K., & Stein, J. (1991). Exchange rates and foreign direct investment: An imperfect capital markets approach. Quarterly Journal of Economics, 106(4), 1191-1217. doi. 10.2307/2937961
Greenwood, C. (2007). How do currency exchange rates influence the price of holidays? Journal of Revenue & Pricing Management, 6(4), 272-273. doi. 10.1057/palgrave.rpm.5160095
Hill, H., & Juthathip J. (2009). Outward foreign direct investment and the financial crisis. Asian Development Review, 26(2), 1-25.
Hong Kong, Census and Statistics Department. (2015). External Direct Investment Statistics of Hong Kong. Hong Kong: Census and Statistics Department. Accessed May 2017. [Retrieved from].
Hong Kong Tourism Board, PartnerNet. 2017. Visitor Arrival Statistics. Hong Kong: Tourism Board. Accessed May 2017. [Retrieved from].
Hong Kong Trade and Development Council. (2017). Hong Kong’s Merchandise Trade(data file). Hong Kong: Trade and Development Council. Accessed May 2017. [Retrieved from].
IMF, (2015). Exchange rates and trade flows: Disconnected? Adjusting to Lower Commodity Prices, Chapter 3, pp.105-142.
Jao, Y.C. (2001). The Asian Financial Crisis and the Ordeal of Hong Kong.Westport, Connecticut: Quorum Books.
Liu, H.Y., & Deseatnicov, I. (2016). Exchange rate and Chinese outward FDI. Applied Economics, 48(51), 4961-4976. doi. 10.1080/00036846.2016.1167831
Ruane, M., & Claret, M. (2014). Exchange rates and tourism: Evidence from the island of Guam. Journal of Economics and Economic Education Research, 15(2), 165-186.
Shik, T. (2015). Renminbi depreciationand the Hong Kong Economy. Hang Seng Bank Analyst’s Report.
Stephen, C. (2014). Hong Kong’s feel-bad tourism. Accessed May 2017. [Retrieved from].
Tse, R.Y.C. (2001). Estimating the impact of economic factors on tourism: Evidence from Hong Kong. Tourism Economics, 7(3), 277-293. doi. 10.5367/000000001101297874
UNCTAD, (2016). World Investment Report 2016. New York: United Nations.
Vogt, M.G. (2008). Determinants of the demand for US exports and imports of tourism. Applied Economics, 40, 667-672. doi. 10.1080/00036840600749698
Wang, H.-C., Nai-Hua, C., Ching-Lung, L., Tsorng-Chyi H., & Shuo-Wen T. (2008). Tourism demand and exchange rate in Asian countries: New evidence from copulas approach. Third 2008 International Conference on Convergence and Hybrid Information Technology, pp.1188-1193.
World Bank, World Development Indicators. (2017). China GDP (constant 2010 US$), GDP growth (annual %)(data file). Accessed May 2017. [Retrieved from].
Yap, G. (2011). Modelling the spillover effects of exchange rates on Australia's inbound tourism growth. Unpublished Working Paper. Accessed May 2017. 10.2139/ssrn.1789645
Yu, J., & Yao, C. (2010). An empirical study of the effects of RMB exchange rate on China’s inflows of FDI. Journal of International Economic Studies, 24, 99-111.
