Economic Studies
Hong Kong, S.A.R.

Hong Kong, S.A.R.

Population 7.4 million
GDP per capita 49,865 US$
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major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -6.5 6.3 -3.2 3.0
Inflation (yearly average, %) 0.3 1.6 1.9 2.2
Budget balance (% GDP)* -9.2 -0.6 -3.1 0.2
Current account balance (% GDP) 7.0 11.3 8.0 6.0
Public debt (% GDP) 1.0 2.1 3.3 4.3

(e): Estimate (f): Forecast *Fiscal year 2023: 1st April 2023 - 31st March 2024


  • Open economy
  • High-quality infrastructure
  • Top-class global financial centre, airlock between China and the rest of the world
  • Healthy banking system
  • Currency pegged to the U.S. dollar


  • Lack of innovation and diversification of the economy
  • Exposure to slowdown in mainland China
  • Mismatch between business cycles in the United States and China, as HKD is pegged to USD
  • Real estate sector risks and housing affordability
  • Rising income inequality
  • Industry has fully relocated to mainland China
  • Caught in between U.S. - China tensions

Risk assessment

Economic recovery continues

The Hong Kong economy rebounded in 2021, led by a recovery in private spending and investment. A stable epidemic situation for much of the year had underpinned the normalisation of domestic demand, although strict border control measures continued to weigh on the tourism sector. In 2022, we expect growth momentum to moderate, subject to any downside risks posed by the uncertainty of the pandemic’s evolution. Financial and insurance services (20% of GDP), which have continued to expand through the pandemic, contributed notably to the recovery.

Private consumption (68% of GDP) grew by 5.5% in the first three quarters of 2021, making a major contribution to recovery in economic activity. The rebound in private consumption was supported by a stable local pandemic situation, financial handouts (consumption vouchers), and an improved labour market. The seasonally adjusted unemployment rate fell to 4.3% in October 2021, the lowest since the onset of the pandemic in early 2020. Nevertheless, the job recovery remains incomplete. About 80% of job gains in the first semester of 2021 were in the accommodation and food service sectors (10% of total employment), which saw massive job losses in 2019 and 2020. Jobs growth in financial and insurance services (8% of total employment) continued, though the size of increase remains well below pre-pandemic levels. Employment in retail and manufacturing (13% of total employment), meanwhile, continued to decline. The labour force participation rate also fell to a record low of 59.1% in October 2021. Furthermore, population ageing and reportedly large exodus of working-age people would see the labour supply continuing to shrink. Household spending is therefore expected to recover at a slower pace in 2022.

Investment (20% of GDP) expanded by 12.8% in the first nine months of 2021, driven by acquisition of machinery, equipment and intellectual property products amid an improved business outlook and strong trade performance. Furthermore, there were major public capital projects worth HKD 135 billion planned for commencement in FY2021-22, including health facilities, infrastructure projects and sewerage works. The government’s plans to develop the northern part of Hong Kong into an innovation and technology (I&T) hub under the Northern Metropolis Development Strategy, aiming for further integration into Shenzhen and the broader Greater Bay Area that could bode well for investment inflows.

Exports (178% of GDP) have been a key driver for economic recovery, especially in goods and financial services while the tourism sector (4.5% of GDP), remaining at a standstill, contributed to weak travel services exports. Robust growth in merchandise exports (150% of GDP, but 97% being re-exports) is likely to continue in 2022, although prolonged supply bottlenecks would be a key risk. Meanwhile, the tourism outlook remains dim as Hong Kong maintains a strict quarantine regime for international travellers and prioritises reopening borders with mainland China.


Budget deficits to persist

Hong Kong registered a record budget deficit in the financial year ending March 2021, but the fiscal shortfall is expected to narrow for the current fiscal year (ending March 2022) and the next (ending March 2023) on higher revenue and lower spending. Spending cuts will come from constraining growth in civil service and reducing non-livelihood related outlays, with an expected savings of HKD 3.9 billion (0.5% of total government expenditure). On housing, the government planned to provide 316,000 housing units in the coming decade, with 101,400 to be constructed within the five years starting 2020-21. From 2011 to 2021, the stock of public permanent housing units rose by 135,000 to 1.27 million. Further issuances of green bonds to finance eligible capital investments would also help relieve the fiscal pressure on the government. Increased fiscal spending and the rollout of relief measures (4% of GDP) had resulted in the fiscal reserves falling sharply in two years from 23 months of government expenditure to 13 months (or 33% of GDP).

The current account surplus is expected to have remained solid in 2021, before narrowing modestly in 2022. This is in part driven by an anticipated reduction of the trade surplus due to a widening merchandise trade deficit. Owing to a subdued tourism outlook, the services trade surplus is unlikely to notably strengthen as travel services should remain under pressure. Financial services are expected to be resilient as Hong Kong remains an attractive location for wealth and asset management, and corporate fundraising, particularly for mainland China enterprises.


Changing political climate

Following the passage of the National Security Law in June 2020 and the mass resignation of opposition legislators in November 2020, dramatic changes to Hong Kong’s election system were made, including reducing the number of directly-elected seats in the Legislative Council (LegCo), and imposing a strict vetting process for candidates. The LegCo is expanded from 70 to 90 seats, but directly-elected seats fell from 35 to 20. The Election Committee will not only be responsible for electing the Chief Executive of Hong Kong SAR, but also in appointing 40 seats in the LegCo, while 30 would remain trade-based functional constituencies. The Election Committee meanwhile is enlarged from 1,200 to 1,500 members, comprising representatives from industries, professions, grassroots, labour, religions, LegCo and various national organisations. International reactions to Hong Kong’s electoral changes were mostly negative, with G7 foreign ministers expressing ‘grave concerns’. The tightening of the political system is likely to curb the incidence of widespread (and sometimes chaotic) protests seen during 2019-20. 


Last updated: February 2022


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 75,000 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 75,100 to HKD 3,000,000;
  • The High Court deals with much larger legal disputes and is additionally charged with handling claims of over HKD 3,000,000. 

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 14 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

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. 


Formal proceedings

The main formal procedures for companies in financial difficulties in Hong Kong are as follows:

  • A scheme of arrangement.
  • Appointment of receivers.
  • A members’ voluntary liquidation (which is only available for a company which is still solvent) but may be used where, for example, an entity is itself solvent but is part of a wider group which is in financial difficulty.
  • A creditors’ voluntary liquidation.
  • A compulsory liquidation.

Hong Kong legislation also contains a procedure which allows the directors of a company to commence a voluntary liquidation without holding a shareholders’ meeting.


Scheme of Arrangement

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. 


Appointment of receivers

An application for the appointment of a receiver by the Court is made by summons to a Judge of the High Court of Hong Kong following a procedure set out in the Rules of the High Court of Hong Kong. Note that a Master of the High Court of Hong Kong also has the power to appoint a receiver where the appointment of the receiver is made by way of equitable execution against a judgment debtor.

As regards the appointment of receivers out of Court, the procedure for appointment will normally be set out in the relevant security document. A receiver appointed under the statutory power implied into mortgages of land must be appointed in writing. In order for the appointment of a Receiver out of Court to be valid, the receiver must accept his appointment.



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 February 13, 2017. These updates were 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