The estimated maximum total losses to Hong Kong in the worst case under a so-called "three-links" scenario will probably be 0.3 to 0.5 percentage points off Hong Kong's 2007 GDP growth, largely as follows:

(1) Trade and logistics sector

• USD24 billion, about 6.9% of Hong Kong's total exports;
• 388,00 TEUs of port cargos, about 1.6% of Hong Kong's total container throughput, or an estimated revenue of HKD766 million for port operators; and
• 468,000 tonnes of air cargoes, about 13.0% of Hong Kong's total.

(2) Tourism sector

• 1 million Taiwan visitors, about 3.5% of Hong Kong's total visitor arrivals,
• HKD235 million of tourism spending, or about 0.2% of Hong Kong's total.

(3) Investment

• HKD34 billion of direct investment from Taiwan companies, or 0.6% of total FDI, in Hong Kong. In addition, the territory may lose a potential of HKD480-720 billion of FDI (or 8.9% to 13.1% of total) routed through tax haven economies.

The immediate impact does not seem to be material, but probably not the key message behind. The new Mainland-Taiwan economic relations serve as a reminder that Hong Kong's middleman role for the Mainland is under constant threat. The longer term impact would depend on how Hong Kong faces up to the challenge.

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