Political unrest in Hong Kong has triggered traders to pull as much as $5bn (£3.8bn) of capital from the region since April, according to the Bank of England (BoE).
The outflows account for nearly 1.25 per cent of Hong Kong’s GDP and began when protests broke out following the proposal of a controversial extradition bill in March.
The rising political tensions have highlighted a key vulnerability, having contributed to a drop in economic activity not seen since the global financial crisis.
GDP growth contracted by 3.2 per cent in the third quarter, its weakest quarterly growth rate since the peak of the financial crisis in 2009.
Its equity index is now 12 per cent lower than the level seen in April when protests began.
The BoE said that the political tensions “pose risks due to its position as a major financial centre”.
Speaking in Beijing yesterday, leader Carrie Lam said China will continue to support Hong Kong and offer the city favourable economic policies.
Recent developments in the region are encompassed within the Financial Policy Committee’s bank stress tests scenario yesterday.
The test modelled a fall of almost eight per cent in GDP and falls in property prices by more than 50 per cent.
Transactions in the commercial real estate market have contracted 31 per cent since April when compared to the same period last year, but the fall in property prices has so far been moderate.
Hong Kong police fired tear gas in clashes with anti-government protesters on Sunday, after small groups gathered in shopping centres.
The BoE monitors Hong Kong because of the significant exposure UK banks, such as HSBC and Standard Chartered, have in Hong Kong.