Already hurting from the U.S.-China trade war, Hong Kong’s economy could be facing something much worse than a recession.

With protests continuing to disrupt the territory’s retail and tourism industries and bringing the airport to a standstill on Monday  analysts say it wouldn’t take much to tip the economy into negative territory. Total merchandise trade is more than triple Hong Kong’s gross domestic product.

Yet that’s only half the story. Hong Kong is an important gateway for capital, too. So the bigger fear is the damage done to Hong Kong’s standing as a conduit between China and the rest of the world.

Even if its economic relevance to China has faded over time, it’s still an important valve for foreign money flowing into and out of the world’s second-biggest economy.

Analysis by Bloomberg Economics forecasts a recession in the second half and warns of a risk of an erosion in the high standards of corporate governance and rule of law that underpin its status as an international financial hub. That would significantly undermine the city’s long-term growth prospects, Bloomberg economist Qian Wan writes.

Here’s some data from Bloomberg Economics on why Hong Kong still matters for China and global trade:

  • Some 58% of China’s outbound investment including for President Xi Jinping’s signature Belt & Road Initiative is channelled through Hong Kong.
  • The city’s nearly $5 trillion stock market could become home to a potential listing for e-commerce giant Alibaba, underscoring Hong Kong’s continued importance as source of IPO fund raising for mainland firms.
  • While bond issuance in Hong Kong is small, it is also a significant source of funds for Chinese companies.
  • The Shanghai-Hong Kong Connect shows the continued importance of Hong Kong as a channel for the managed opening of China’s capital markets.
  • Worldwide, Hong Kong was ranked the seventh-biggest container port by volume last year. In the first half of 2019, its throughput was down 8.1% versus the same period last year.

A hit to Hong Kong’s status as a financial and trade hub would reverberate around a region already showing increased signs of damage from the tariffs that the U.S. and China are lobbing at each other. Singapore was the latest to sound the alarm on Tuesday when the government cut its forecast for economic growth this year to almost zero.

Charting the Trade War

A jump in U.S. Customs receipts tied to higher American tariffs on Chinese imports is noticeable when isolated from the overall budget picture but it remains a tiny portion of the Treasury’s total revenue.

The nation’s budget deficit widened in the first 10 months of the fiscal year to $867 billion, as spending advances at more than double the pace of the money the government is bringing in.