Growth rates during each individual period could also be affected by specific factors. Direct comparisons between one economy and another for a short period of time could therefore be misleading. Nevertheless, this article will attempt to examine some of the reasons underlying the relatively weaker economic numbers in Hong Kong. Trade statistics show that Hong Kong's manufacturers continued to do well in their exports. One common line of argument is that Hong Kong's linked exchange rate, coupled with China's unwillingness to devalue the Renminbi, resulted in a lack of export competitiveness for Hong Kong's manufacturers as currencies in the other Asian economies devalued massively.
Exchange rates do have some impact on trade performance.
Anecdotal evidence suggests that many manufacturers and exporters in Hong Kong had to cut their product prices in order to stay competitive, given the contraction in market demand during the Asian crisis and the increase in competition from lower cost producers from economies which have devalued their currencies. Thus, while they are able to maintain their business volume, their profit margin has been squeezed. Thus, the argument that Hong Kong has lost its export competitiveness has not been demonstrated by trade statistics so far. This is a main factor underlying Hong Kong's relatively weak economic performance. Exhibit 2 A relatively high level of consumer debt in Hong Kong is a key reason for the weakness in consumer demand.