Economic studies
Hong Kong

Hong Kong

Population 7,4 million
GDP per capita 43,561 US$
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major macro economic indicators



  2015 2016 2017(f) 2018(f)
GDP growth (%) 2.4 1.5 3.3 2.4
Inflation (yearly average, %) 3.0 2.5  1.9 2.4
Budget balance (% GDP)* 0.6 1.5 1.5 1.3
Current account balance (% GDP) 3.1 3.3 3.6  3.2
Public debt (% GDP) 0.1 0.1 0.1 0.1

* 2018 fiscal year: 1 April 2018 – 31 March 2019 (f): forecast


  • Flexibility of the economy
  • High-quality infrastructures
  • First-rate financial centre, airlock between China and the rest of the world
  • Healthy banking system
  • Favourable business climate
  • Anchoring of the currency to the US dollar
  • Maintaining the “one country, two systems” principle between mainland China and Hong Kong


  • Vulnerability to the slowdown of the economy in mainland China
  • Exposure to the US economy via the US dollar anchoring
  • Industries fully relocated in mainland China
  • High exposure to real estate conditions characterised by lack of housing
  • Rise of inequalities
  • Lack of transparency of financial information

Risk assessment

Activity will slow down in 2018

2017 was the year of the strongest growth in six years, thanks to exports to Chinese and European markets, as well as domestic demand. Household consumption was the main driver, supported by a wealth effect due to the excellent health of the stock market. However, activity will slow down in 2018. The slowdown in the Chinese economy and new trade barriers in key markets, such as the United States, will negatively affect the exports of goods and services (200% of GDP, more than 50% of which goes to mainland China), especially tourism (Chinese representing over 75% of visitors). The Hong Kong dollar will remain anchored to the US dollar. The key rates have been adjusted to reinforce the anchoring. This will continue to weigh on competitiveness. In addition, China’s anti-corruption policy and entry quotas initiated by the island will lead some Chinese tourists to focus on other destinations and spend less. In addition, Hong Kong port activity, a hub of Chinese trade is expected to continue to suffer from increasing competition from mainland China ports. However, the growth of financial services will remain dynamic.

In addition, even if real estate prices and rents hinder growth, consumption will remain well oriented thanks to the increase in disposable incomes and to an easing of the pressure on import prices through a depreciation of the renminbi against the Hong Kong dollar. It will be very vigorous in the luxury sectors (fashion, cosmetics and electronics) because of the concentration of income among the wealthy classes. However, the low unemployment rate – 3.1%, close to full employment –, regular wage growth and increased redistributive spending for the poorest and the elderly will help stimulate other sectors. Confident and attracted by a further 8.25% reduction in corporate taxes, foreign investors will finance projects in the new technology, transportation and real estate sectors. The latter, will remain a significant risk factor in 2018, despite measures to contain prices and prevent the bursting of a housing bubble.


Solid financial system

The budget balance will remain in surplus in 2018; the budgetary situation of the Special Administrative Region (SAR) is solid in view of large reserves, representing almost 23 months of expenditure. The public debt will remain virtually non-existent. Despite a slight decrease due to the increased imbalance in the trade balance, the current balance will remain largely in surplus. The significance of resident and company foreign investment income makes it possible to transition from a trade deficit in goods to the current account surplus. In this context, the level of foreign exchange reserves will remain satisfactory at 8.5 months of imports.

Banks should remain strong, even if the real estate bubble bursts, thanks to household debt limits and regular stress tests by supervisory authorities. The offshore non-resident yuan market is generating an offshore yuan bond market, which is expected to remain buoyant in 2018, making Hong Kong the world’s financial centre for xeno-yuan. In addition, the connection between the Hong Kong and Shanghai stock exchanges since 2014 allows investors on the island to exchange listed securities in Shanghai and vice versa.


The new head of the executive power embodies continuity

In March 2017, Carrie Lam, former chief secretary of the Administration, was elected, for five years, head of the executive power by the Electoral College, in which the pro-Chinese are the majority. She won against two other candidates, also from the upper administration of the SAR and selected by a committee set up by Beijing. Her previous duties suggest that there will be no major change in political leadership. The main challenges will be the management of popular discontent, relations with the opposition and the Chinese central government. She will avoid the political controversies related to Chinese interference and the limits of the “one country, two systems” principle, focusing on the economy. She intends to integrate young people into civic life and introduce educational reforms. The “Umbrella Revolution” of 2014 and the rejection in 2015 by the pro-democracy parliamentarians of the voting system considered a “sham democracy”, with Beijing retaining control over the candidates, confirm that identity and political tensions subsist. A free trade agreement between ASEAN and Hong Kong is under negotiation. Finally, despite a lack of transparency of financial information, Hong Kong enjoys a very favourable business climate.


Last update : January 2018


Bank transfers are one of the most popular payment instruments for international and domestic payments in Hong Kong, thanks to the territory’s highly developed banking network.

Standby Letters of Credit also constitute reliable payment methods, as the issuing bank guarantees the debtor’s credit rating and repayment abilities. Irrevocable and confirmed documentary letters of credit are also widely used, as the debtor guarantees that a certain sum of funds will be made available to the beneficiary via a bank, once specific terms agreed by the parties are met.

Cheques and Bills of Exchange are also frequently used in Hong Kong.

Debt collection

Amicable phase

During the amicable phase, the creditor sends one or more notice letters (summons) to the debtor, in an attempt to persuade them to pay the due debts.

The Practice Directions on Mediation, introduced in 2010, set out voluntary processes that involve trained and impartial third party mediators. This helps both parties involved in a dispute to reach an amicable agreement for repayment. Debtors and creditors are usually urged to pursue this process before resorting to legal action.


Legal proceedings

Ordinary proceedings

The judicial system in Hong Kong comprises three distinct courts:

• The Small Claims Tribunal handles relatively small cases (of up to HKD 50,000) in a fast and efficient manner. The rules of procedure are less strict than in those of other types of courts and no legal representation is permitted.

• The District Court has jurisdiction over more substantial financial claims, ranging from HKD 51,000 to HKD 1,000,000.

• The High Court deals with much larger legal disputes and is additionally charged with handling claims of over HKD 1,000,000.

Hong Kong’s District court and High Court allow legal representation. Cases in these courts are initiated by issuing a Writ of Summons to the debtor, who then has fourteen days to file a defence. The creditor is also required to file a notarised Statement of Claim. If the debtor responds to the Writ and requests a payment plan, the creditor has two weeks to reply. If the parties find it impossible to enter into an agreement, a hearing will be called for by the judge, during which a judgment is normally made. If the debtor does not respond, a default judgment can be rendered.

Enforcement of a legal decision

A domestic judgment is enforceable once it becomes final (if no appeal is lodged within 28 days). If the debtor fails to comply with the judgment, the creditor can request an enforcement order from the court. This usually entails either a garnishee order (allowing the creditor to obtain payment of the debt from a third party which owes money to the debtor), a Fieri Facias order (which enables a bailiff to seize and sell the debtor’s tradable goods), or a charging order (for seizing and selling the debtor’s property to satisfy the debt).

Foreign judgments are enforced under the Foreign Judgments (Reciprocal Enforcement) Ordinance. Decisions issued in a country with which Hong Kong has signed a reciprocal treaty (such as France or Malaysia) only need to be registered and then become automatically enforceable. Where no such treaty is in place with a country, enforcement can be requested before the court, via an exequatur procedure.

An “Arrangement on Reciprocal Recognition and Enforcement of judgments in Civil and Commercial Matters” (REJA) was concluded with the People’s Republic of China in 2006. This makes judgments rendered in Mainland China or in Hong Kong automatically enforceable by the courts of the other contracting party.

Insolvency proceedings

The only formal insolvency procedure under the Companies Ordinance Act is liquidation.


Out-of court proceedings

The law does not provide for formal procedures for restructuring company debts. Restructuring proceedings therefore need to take place through informal “workouts” or a scheme of Arrangement.

A workout is an out-of-court agreement made between a debtor company and its major creditors for the rescheduling of its debts. This proceeding can be initiated at any time. Restructuring plans are usually recommended by a committee which is chaired by a lead creditor. The courts are not involved and the process is entirely voluntary. Once a plan has been agreed, the company continues to operate and is managed under the terms of the arrangement. This procedure does not provide legal protection from creditors.

A scheme of Arrangement is a statutory, binding compromise reached between a debtor and its creditors. It must be accepted by all classes of creditors. A court reviews the plan, before sanctioning the convening of separate meetings with creditors. The scheme must be approved by the court, at least 50% of creditors in terms of number and 75% of creditors in terms of value of debts. An administrator is appointed to implement the scheme.



Liquidation can be voluntary or compulsory. It involves selling the debtors’ assets in order to redistribute the proceeds to creditors and dissolve the company. Voluntary liquidation can be either a member’s voluntary liquidation (MVL), or a creditors’ voluntary liquidation (CVL). In both cases, company directors lose control and a court-supervised liquidator is appointed.

Creditors can initiate a compulsory liquidation by filing a winding-up petition with the courts on the grounds of insolvency. An MVL is a solvent liquidation process whereby all creditors are to be paid in full and any surplus distributed among the company’s shareholders. CVLs are insolvent liquidations.


Regulatory Update on Insolvency regime

The Hong Kong Government Gazette’s Companies (Winding Up and Miscellaneous Provisions) Ordinance 2016 (“Amendment Ordinance”) entered into force on the 13th February 2017. These updates have been introduced in order to increase protection for creditors and to streamline and improve regulations under Hong Kong’s corporate winding-up regime.

Insolvency trend Hong Kong 2015
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