Selected Issues Papers

Corporate Sector Vulnerabilities in Hong Kong SAR: Hong Kong, Special Administrative Region

By Phakawa Jeasakul, Hong Xiao

May 6, 2025

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Format: Chicago

Phakawa Jeasakul, and Hong Xiao. "Corporate Sector Vulnerabilities in Hong Kong SAR: Hong Kong, Special Administrative Region", Selected Issues Papers 2025, 050 (2025), accessed May 22, 2025, https://doi.org/10.5089/9798229009324.018

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Summary

Hong Kong SAR’s corporate sector vulnerabilities appear manageable but have increased in recent years. Local non-real estate firms have seen weakening profitability and lower debt-servicing capacity, reflecting pandemic scarring effects and higher funding costs driven by the hiking cycle of U.S. monetary policy. While, on aggregate, their leverage level and liquidity appear manageable, there is high heterogeneity across firms, with smaller listed firms appear to be more vulnerable. As for the local real estate firms, they are exposed to changes in property prices given their sizeable holding of investment properties and inventory. However, their relatively low leverage helps mitigate risks. Mainland Chinese firms listed in Hong Kong SAR show rising financial vulnerabilities, primarily due to weakening profitability and property market adjustment that have adversely affected property developers’ balance sheets. Proactive efforts are warranted to ensure effective monitoring and management of financial vulnerabilities in the corporate sector, including ensuring banks’ proactive management of nonperforming assets, assessing the impact of the ongoing property market adjustments, and calibrating policies to support small businesses appropriately.

Subject: Corporate sector, Economic sectors, Financial regulation and supervision, Financial sector policy and analysis, Financial sector risk, Financial statements, Labor, Liquidity risk, Public financial management (PFM), Wages

Keywords: C. Hong Kong SAR, Corporate sector, Corporate sector vulnerabilities, Debt-servicing capacity, Financial sector risk, Financial statements, Hong Kong, Liquidity risk, Profitability risk, Property market, Property market adjustment, RE firm, Wages

Publication Details

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