China's reopening may boost Hong Kong's economic growth by 7.6 percent, says Goldman Sachs.

Hong Kong, Thailand, and Singapore will likely be the biggest beneficiaries as China drops its Covid restrictions and reopens its economy, driving up demand for imports and overseas travel, according to the investment bank.

The estimates are based on the assumption that China's reopening currently underway will increase the nation's domestic demand by 5 percentage points and push international trips back to 2019 levels, Goldman's economists Hui Shan and Goohoon Kwon wrote in the note on Sunday.

"China's reopening is likely to have the most positive effect on international travel followed by stronger goods imports," they said.

Hong Kong will likely see a boost to travel spending amounting to 6 percent of its GDP, while the impact on Thailand is estimated at 3 percent, Goldman said. The impact may be even stronger if Chinese citizens turn out to have significant "pent-up" demand for travel after three years of borders being closed, the economists said.

Excluding Hong Kong and Singapore, the direct trade boost from China's reopening will be small for most Asian economies, driving up their GDPs by 0.2-0.4 percentage points, the economists estimated. The increase in Chinese oil demand could lift global oil prices by US$15 (HK$117) per barrel, which would have a negative impact on some economies like Hong Kong and Singapore.

The economists said their analysis is based on the direct effects only of China's reopening on trade and travel and doesn't take into account potential supply chain disruptions, like what happened in Shanghai and Zhengzhou previously, when workers get infected.

In other news, about half of Hong Kong firms surveyed expect their profitability to be worse this year than in 2021, according to a report from American Express.

Among them, SMEs (51 percent) are more pessimistic than larger companies (37 percent).

Looking ahead, one-third of the respondents were pessimistic about the overall business environment next year.

Meanwhile, over 60 percent of surveyed enterprises believed the relaxation of travel restrictions would bring more business opportunities, to meet these opportunities, 21 percent rated increasing manpower as the most important mission and 15 percent believed enhancing marketing is more critical.

The survey was conducted by the Hong Kong Productivity Council, commissioned by American Express, which interviewed more than 1,000 local companies of various sizes in October.

Travel spending will likely be boosted to 6 percent of GDP. BLOOMBERG

Reopening may boost HK GDP by 7.6pc says Goldman