(Bloomberg) -- Hong Kong’s economy faces a ‘perfect storm’ amid unprecedented political protests, China’s slowdown and the U.S.-led trade war.

That’s according to Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets Ltd. He has covered Hong Kong since 1996, a period that includes the Asian financial crisis, the SARS epidemic and global financial crisis.

A bear on the local economy, Lai has previously warned of another Asia financial crisis type hit to growth as a credit boom cooled.

This time, Lai is “a lot more worried than any time in the past,” he said in an interview. “I can see a lot of similarities between now and 1997, the only difference is all indicators look a lot worse.”

A surge in lending to Chinese companies is among the risks that make Hong Kong vulnerable, he says.

The crucial difference this time is that Hong Kong faces an acute political crisis -- not an economic or public health one. How it plays out and whether or not it can be resolved will dictate the extent of economic damage.

“Nothing in the past was political,” Lai said. “There are serious questions about One Country, Two Systems, is it going to last?” he said, referring to the degree of autonomy afforded to Hong Kong after its return to Chinese rule in 1997.

“Clients and investors are confused, they don’t know what’s going on,” Lai said.

With recession a certainty, watching capital flows will offer clues on how serious the hit will be, he argues.

“I have heard many individuals and companies have started to move money out for all sorts of reasons,” he said.

To contact the reporter on this story: Enda Curran in Hong Kong at ecurran8@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Karthikeyan Sundaram

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