Coface Group
Hong Kong

Hong Kong

Population 7.3 million
GDP per capita 40,033 US$
Country risk assessment
Business Climate
Under watch list
Since 01/26/2016
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major macro economic indicators

  2013  2014 2015 (f) 2016 (f)
GDP growth (%) 3.1 2.5 2.2 1.5
Inflation (yearly average) (%) 4.3 4.4 2.9 3.0
Budget balance (% GDP) 1.1 3.8 3.5 2.7
Current account balance (% GDP) 1.5 1.9 3.0 4.1
Public debt (% GDP) 0.5 0.1 0.1 0.1


(e) Estimate (f) Forecast


  • Successful specialisation in services (92% of GDP)
  • Robust and transparent banking sector
  • High-quality infrastructures
  • Retention of "one country, two systems" principle, considering the complementarity of the two economies
  • Good business climate


  • Economy vulnerable to slowdown in Chinese activity and world trade
  • Industry completely delocalised to Mainland China
  • Growing competition from Mainland China in services sector
  • Highly exposed to property sector
  • Rising inequalities in the territory
  • Lack of transparency of financial data

Risk assessment

Activity is expected to continue to slow in 2016

Despite the Chinese economic slowdown, Hong Kong's growth proved resilient in 2015, because of robust domestic demand. In 2016, Activity is expected to be hit by the US Federal Reserve's gradual hike in key rates, which will be passed on by the Hong Kong monetary authority because of the Hong Kong dollar's peg to the US dollar. The tightening of monetary policy is expected to affect the property market, which has surged strongly in recent years. In addition, the government has announced the building of several homes and the steps taken to contain the property bubble are unlikely to be relaxed. Accordingly, property prices are likely to come under significant downward pressure, which will hit domestic demand. Household consumption will continue to be the main driver of activity, but is expected to slow despite employment holding firm and wages rising. Moreover, investment is likely to stall, with the contraction in property prices and liquidity putting pressure on the construction sector.

In 2016, exports of goods and services (200% of GDP) will continue to suffer from the Chinese slowdown. The sectors linked to tourism, such as retail sales, will be most affected. Tourists from Mainland China, who represent 75% of visitors, are expected to continue to curb their spending. The anti-corruption policy introduced in Mainland China has hit sales of luxury goods and the entry quotas put in place by the Island have prompted some Chinese tourists to visit other destinations. Moreover, activity at the port of Hong Kong, which acts as a trade hub for Mainland China, is also likely to be affected.

Finally growth in financial services is expected to remain dynamic, with the Hong Kong Stock Exchange as the second largest financial centre in Asia in terms of capitalisation and the Island is an entry point for capital from Asia. Nevertheless, it will be hit by increased competition from neighbouring centres.


Robust financial system

Hong Kong's public finances will remain solid: in 2016, the country is expected to continue to post a significant budget surplus and public debt will remain almost zero. Nonetheless, the moderation in property prices will affect the public accounts by reducing the income generated by sales of land. Meanwhile, the current account surplus is like to continue to grow, because of the moderation in imports. In this context, foreign exchange reserves will remain satisfactory (more than 7 months of imports).

Meanwhile, even if the property bubble bursts, the banks should remain sound because of the limits imposed on household debt and the regular stress tests conducted by the supervisory authorities.

The offshore yuan market for non-residents introduced by the Chinese authorities remained dynamic in 2015. This market is accompanied by an offshore yuan bond market, called the Dim Sum Bond market, making Hong Kong the world's financial centre for the xeno-yuan, just as London became the financial centre for eurodollars in the 1960s, when controls were placed on outflows of bank capital in the United States. Moreover, the Hong Kong-Shanghai Stock Connect investment channel, launched in November 2014, has established a connection between the Hong Kong and Shanghai Stock Exchanges. Subject to keeping within certain quotas, the Island's investors can thus trade securities listed in Shanghai and vice versa. A similar project with the Shenzhen Stock Exchange is being studied.


Status quo on the electoral law

In August 2014, the National People's Congress put forward new rules on the election of the Chief Executive in 2017. Although the rules allow for direct universal suffrage, the pro-democracy activists see the proposal as a backward step, since candidates authorised to stand are required to be approved in advance by a committee made up of 1,200 members, most of whom belong to the Chinese Communist Party. The pro-democracy activists, who will thus no longer be able to nominate a candidate, have launched major protests, The movement, labelled the "Umbrella Revolution", because of the umbrellas used by the demonstrators to protect themselves against the tear gas used by the police, occupied Hong Kong's streets between late September and early December 2014 demanding that Leung Chun-ying, the Chief Executive, step down and calling for "genuine democracy". In early 2015, the situation stabilised gradually and in June the Legislative Council rejected the reform proposal by a large majority. The electoral law is, therefore, likely to remain unchanged until the 2017 elections. Nonetheless, the ruling party won the most seats in the November 2015 local elections.

Finally, despite a lack of transparency regarding financial data, Hong Kong enjoys a favourable business climate.


Last update : January 2016

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