Gazdasági elemzések
Hong Kong

Hong Kong

Population 7,311 million
GDP 42 294 US$
A3
Country risk assessment
A2
Business Climate
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Synthesis

major macro economic indicators

   2014 2015 2016 (e) 2017 (f)
GDP growth (%) 2.8 2.4 1.9 2.4
Inflation (yearly average) (%) 4.4 3.0 2.5 2.6
Budget balance (% GDP) 3.6 0.6 1.5 1.5
Current account balance (% GDP) 1.3 3.1 3.3 2.9
Public debt (% GDP) 0.1 0.1 0.1 0.1

 

(e) Estimate (f) Forecast

STRENGTHS

  • Successful specialisation in services (92% of GDP)
  • Robust and transparent banking system
  • High-quality infrastructure
  • Retention of "one country, two systems" principle for China and Hong Kong
  • Good business climate

WEAKNESSES

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

Risk assessment

Activity expected to stabilise in 2017

After falling in 2016, Hong Kong's growth is expected to stabilise in 2017. Domestic demand will remain firm and household consumption will continue to be the main driver of activity, thanks to solid employment levels, the control of inflation and rising wages. Activity is also expected to benefit from improved consumer confidence in a context of stabilising property prices. The price of real estate assets is likely to be hit by downward pressures, although these are likely to lessen: in November 2016 the authorities introduced new measures (higher stamp duty on property transactions) aimed at containing the property bubble, although their effects are likely to remain limited. The hike in the US Federal Fund rate in December 2016 is expected to be passed on by Hong Kong's monetary authority because of the Hong Kong dollar's peg to the US dollar, which will dampen activity.
Moreover, exports of goods and services (200% of GDP) are likely to continue to suffer from the Chinese economic slowdown. Tourism-related sectors such as retail sales will continue to be among the most affected. Tourists from Mainland China, who represent 75% of visitors, are not expected to increase their spending. The anti-corruption policy introduced in Mainland China is hitting sales of luxury goods and the entry quotas initiated by the Island have prompted some Chinese tourists to prefer other destinations. Nonetheless, the slight upturn in the US economy should help sustain external demand. Moreover, with the port of Hong Kong acting as a trade hub for Mainland China, its activity is likely to continue to suffer since it is subject to growing competition from China's own ports.
Finally, growth in financial services is expected to remain dynamic: the Hong Kong Stock Exchange is the second largest financial centre in Asia in terms of capitalisation and the Island is an entry point for capital in Asia. Nonetheless, it will be hit by sharper competition from neighbouring centres.

 

Robust financial system

The public finances remain sound: in 2017, the pays country is expected to continue to post a significant budget surplus and public debt will remain almost zero. Meanwhile, the current account surplus is likely to remain large. However, it is expected to reduce: imports will remain firm and exports are expected to decline slightly because of the Chinese economic slowdown. Against this background, the foreign exchange reserves will remain satisfactory (almost 8 months of imports).
Moreover, even if the property bubble bursts, the banks should remain sound because of the limits placed on household debt and regular stress tests carried out by the supervisory authorities.
The offshore yuan market for non-residents introduced by the Chinese authorities is projected to remain dynamic during 2017. This market is accompanied by an offshore bond market in yuan, called the Dim Sun Bond market, making Hong Kong the world's financial centre for xeno-yuan. Furthermore, the Hong Kong-Shanghai Stock Connect investment channel launched in November 2014 enables the Hong Kong and Shanghai Stock Exchanges to connect with each other. Subject to adherence to certain quotas, the Island's investors can trade securities listed in Shanghai and vice versa. A similar project with the Shenzhen Stock Exchange was launched in December 2016.

 

A new chief executive will be appointed in 2017 in a climate of tension

In August 2014, the National People's Congress put forward new rules on the election of the chief executive in 2017. Although these rules provide for direct universal suffrage, the pro-democracy activists see the proposal as a backward step, since candidates authorised to put themselves forward for nomination have first to be approved by a committee made up of 1,200 members, most of whom belong to the Chinese Communist Party. This proposal was greeted with large-scale demonstrations between September and December 2014, with the formation of a movement called the "Umbrella Revolution", and was rejected by the Legislative Council in December 2015. As a result, the electoral law is likely to remain unchanged for the election of the chief executive in March 2017. These elections are likely to take place in a tense climate since the Pro-Democracy Party strengthened its position during the September 2016 elections and since two of its members were excluded from the Assembly for failing to respect Mainland China.
Finally, despite a lack of transparency regarding financial data, Hong Kong enjoys a favourable business climate.

 

Last update : January 2017

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