Hong Kong Seen Hit by China Slowdown, Fed Rate Move in 2015

With an economy increasingly linked to mainland China yet a monetary policy still tied to the U.S., Hong Kong is set to be squeezed by diverging dynamics in the two nations, compounding challenges posed by political unrest.

The U.S. Federal Reserve yesterday reinforced forecasts for higher interest rates next year that would typically prompt Hong Kong to raise its borrowing costs. When the Fed was last tightening in 2004-06, Hong Kong’s economy was bolstered by surging growth in China. This time, China is contending with its weakest expansion in almost a quarter century, putting Hong Kong “between a rock and a hard place,” Nomura Holdings Inc. says.