【AMRO】2025年中国香港年度磋商报告

AMROCountryReportACR/25-08

AMROAnnualConsultation

Report

HongKong,China-2025

ASEAN+3MacroeconomicResearchOffice(AMRO)

August2025

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

ASEAN+3MacroeconomicResearchOffice(AMRO)Page1of64

Acknowledgments

1.ThisAnnualConsultationReportonHongKong,ChinahasbeenpreparedinaccordancewiththefunctionsofAMROtomonitor,assessandreportonitsmembers’macroeconomicstatusandfinancialsoundness,toidentifyrelevantrisksandvulnerabilities,andtoassisttheminthetimelyformulationofpolicytomitigatesuchrisks(Article3(a)and(b)oftheAMROAgreement).

2.ThisReportisdraftedonthebasisoftheAnnualConsultationofAMROwithHongKong,ChinafromMay12-23,2025(Article5(b)oftheAMROAgreement).TheAMROMissionteamwasheadedbyDrJaeYoungLee,GroupHeadandLeadEconomist.MembersincludeMrJungsungKim,EconomistandDeskEconomistforHongKong,China;DrFanZhai,SeniorEconomist;MrSuanYongFoo,SeniorEconomist;MsVanneKhut,Economist;andDrChenxuFu,AssociateEconomist.FormerAMRODirectorDrKouqingLiandformerChiefEconomistDrHoeEeKhoralsoparticipatedinkeypolicymeetingswiththeauthorities.ThisAMROAnnualConsultationReportonHongKong,Chinafor2025waspeer-reviewedbyagroupofeconomistsfromAMRO’scountrysurveillance,financialsurveillance,fiscalsurveillance,andpolicyreviewteams;endorsedbyJiangyanYu,SeniorEconomist,thePolicyandReviewGroup;andapprovedbyDrDongHe,AMROChiefEconomist.

3.TheanalysisinthisReportisbasedoninformationavailableuptoJune10,2025.

4.Bymakinganydesignationoforreferencetoaparticularterritoryorgeographicalarea,orbyusingtheterm“member”or“country”inthisReport,AMROdoesnotintendtomakeanyjudgmentsastothelegalorotherstatusofanyterritoryorarea.

5.OnbehalfofAMRO,theMissionteamwishestothanktheHongKong,ChinaauthoritiesfortheircommentsonthisReport,aswellastheirexcellentmeetingarrangementsandhospitalityduringourvisit.

Disclaimer:Thefindings,interpretationsandconclusionexpressedinthisReportrepresenttheviewsofthestaffofASEAN+3MacroeconomicResearchOffice(AMRO)andarenotnecessarilythoseofitsmembers.NeitherAMROnoritsmembersshallbeheldresponsibleforanyconsequencefromtheuseoftheinformationcontainedherein.

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

ASEAN+3MacroeconomicResearchOffice(AMRO)Page2of64

TableofContents

Acknowledgments 1

ExecutiveSummary 3

A.RecentDevelopmentsandOutlook 5

A.1RealSectorDevelopmentsandOutlook 5

BoxA.RevitalizingHongKong’sRetailSector:SomeRecentEffortsandInitiatives7

A.2ExternalSectorandtheBalanceofPayments 8

A.3MonetaryConditionsandtheFinancialSector 9

A.4FiscalSector 12

B.Risks,Vulnerabilities,andChallenges 13

B.1Near-termRiskstotheMacroeconomicOutlook 14

B.2Longer-termChallengesandVulnerabilities 17

C.PolicyDiscussionsandRecommendations 18

C.1CalibratingMacroeconomicPoliciestoFortifyFullerRecovery 18

C.2PreventingDisorderlyAdjustmentinthePropertySector 19

C.3AchievingaStrongandSustainableFiscalPositionintheMediumTerm.20

C.4AddressingLaborMarketChallengesAmidanAgingPopulation 22

C.5HarnessingNewGrowthEngines 23

C.6ElevatingHongKong’sRoleasaPremierInternationalTradeand

InvestmentHub 24

Appendices 27

Appendix1.SelectedFiguresforMajorEconomicIndicators 27

Appendix2.SelectedEconomicIndicatorsforHongKong,China 33

Appendix3.BalanceofPayments 34

Appendix4.StatementofCentral/GeneralGovernmentOperations 35

Appendix5.MonetarySurvey 36

Appendix6.DataAdequacyforSurveillance 37

Appendix7.ClimateClipboard—Risks,Responses,andOpportunities 38

Annexes:SelectedIssues 40

1.HongKong’sRetailSector:KeyDriversandPolicyImplications 40

2.AssessingtheFallout:Trump’sTradeWaranditsImpactonHongKong’s

Economy 48

3.AdvancingInclusiveandSustainableGrowthinHongKong 53

BoxA3.ConceptofInclusiveGrowth 53

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

ExecutiveSummary

1.Amidheighteneduncertainty,HongKong,China’s

1

economyiscontendingwithacomplexbalanceofheadwindsandtailwinds.Themostimmediateandpressingconcernstemsfromthecity'ssensitivitytoglobaltrade,particularlythetensionsbetweentheUSandChinaandtheassociatedslowdowninglobaltrade.However,withinthischallengingenvironment,HongKong’suniqueroleasa“superconnector”betweenMainlandChinaandtherestoftheworldhascomeintosharperfocus.Thishassupportedapickupinfinancialactivity,offeringapotentialopportunityamidrisinguncertainties.

2.HongKong’seconomyisexpectedtosustainsteadybutmoderategrowth,withprojectionsof2.1percentin2025and1.9percentin2026.TherecoveryindomesticconsumptionmayremainsubduedduetoashiftinspendingpatternsamongHongKongresidents.Investmentisexpectedtorecoverslowlyamidweaknessinthepropertysector.Externally,iftradetensionsre-escalate,concernsovertheoutlookforHongKong’stradesectormayintensify.Amoderateeconomicexpansionalongsidelowfoodinflationisexpectedtoeasepricepressures,withheadlineCPIprojectedtoriseto1.8percentin2025and1.6percentin2026.

3.WhileUS-Chinatensionsposeexternalrisks,theirdirectimpactonHongKongislikelylimited,withrelatedre-exportsmakinguponlyaround6percent.HongKonghastraditionallyservedasatradehub,bridgingMainlandChinaandtherestoftheworld.Asre-exportsbetweentheUSandChinaroutedthroughHongKongaccountforonlyaround6percentoftotalexports,thedirectnegativeimpactonHongKongmaybelimited.

4.Thatsaid,tradetensionscouldhavesecond-roundeffectsonHongKongbydampeningglobaldemandforitsservicesexports,particularlytoMainlandChina.Servicesexportsaccountedfor25.5percentofHongKong’sGDPin2023,withMainlandChinaasthelargestdestination.AlthoughservicestradehasnotbeendirectlytargetedbyPresidentTrump’stariffmeasures,itremainssusceptibletospilloverimpacts.Asglobaltradevolumesdeclineandbusinessconfidencedeteriorates,demandforassociatedservices—suchaslogistics,finance,legalconsulting,andinsurance—isalsolikelytoweaken.

5.Domestically,cyclicalfactors—includingsubduedconsumptionanduncertaintiesinthepropertymarket—couldweighontherecovery.Thechangesinresidents’spendingpatternsmayconstrainareboundindomesticconsumption.Weaknessinthepropertymarketcouldweighonbothhouseholdandbusinesssentiment,althoughthesectorisshowingsignsofrecovery,supportedbygovernmentmeasuresandthegeneraldeclineinlocalinterestrates.Inthemediumterm,HongKong’svulnerabilitytobroadenedgeoeconomicfragmentation,agingpopulation,andclimatechangearemajorrisks.

6.Despitemountingrisks,HongKongiswellpositionedtonavigateuncertaintiesandseizeemergingopportunities.ArenewedpickupinfinancialactivityamidtradetensionprovidesnewopportunitiesforHongKong.HongKongplaysacriticalroleasthemostpreferredoffshorefundraisinglocationforMainlandfirms,particularlyamidintensifyingUS-Chinatensions.WithmoreMainlandcompaniespotentiallyreconsideringUSlistings,HongKongispoisedtobenefit.

1HongKong,ChinawillbereferredtoasHongKonghereafter.

ASEAN+3MacroeconomicResearchOffice(AMRO)Page3of64

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

ASEAN+3MacroeconomicResearchOffice(AMRO)Page4of64

7.TheLinkedExchangeRateSystem(LERS)hasremainedstable,supportedbytheauthorities’consistenteffortstomaintainmonetaryandfinancialstability.Recently,theHongKongdollarhasexperiencedheightenedvolatility.Asfund-raisingactivities,includingIPOs,pickedup,theHongKongdollartouchedthestrongsideoftheconvertibilitybandinMay.Itthendepreciatedtowardtheweaksideoftheband.TherecentweaknessprimarilyreflectsabundantliquidityduetoFXmarketintervention,whichhasledtoadeclineinHIBORandwidenedinterestratedifferentials.Therefore,theincreasedvolatilityintheHongKongdollarisnotabnormalbutratherareflectionofmarket-drivencapitalflows.

8.Thegovernmentshouldstandreadytodeploytimelyandtargetedsupportmeasurestocushiontheeconomyagainstrisingrisks.Itwouldbeprudentforthegovernmenttodevelopcontingencyfiscalmeasuresthatcanbequicklyrefined,approved,androlledoutintheeventofasharpslowdown.Withfiscalreservesdeclining,anycontingencymeasuresshouldbetemporaryandwell-targeted,withafocusonsupportinglower-incomehouseholds,vulnerablegroups,andaffectedsectors.Atthesametime,theauthoritiesshouldcontinueeffortstopreventadisorderlyadjustmentinthepropertymarket.

9.AMROwelcomesthegovernment’scommitmenttomedium-termfiscalconsolidation.Toensuresuccessfulfiscalconsolidation,thegovernmentshouldconsiderreviewingitstaxsystemwithaviewtodiversifyingandstrengtheningitsrevenuestreams.Byadoptingastrategythatincludesamixofbroadeningthetaxbase,tappingalternativerevenuesources,andimplementingreformsgradually,HongKongcanstrengthenitsfiscalpositionwhilemaintainingitstaxcompetitiveness.

10.Addressinglabormarketchallengesandfosteringnewgrowthdriversareessentialtoensuringsustainableeconomicgrowth.Thegovernment'songoingeffortstoattractskilledtalentareanimportantstepforwardandshouldbesustained.Inparallel,continuedsupportforartificialintelligence(AI),fintech,andsustainablefinanceisvitaltodevelopingnewgrowthdrivers.

11.ThegovernmentshouldcontinuetoenhanceHongKong’suniqueroleasa“superconnector”betweenMainlandChinaandtherestoftheworld.Theongoingrevitalizationoffinancialactivity,evenamidglobaltradetensions,underscoresthestrengthofthispolicydirection.Inthefaceofprolongedgeopoliticaltensions,HongKongwillneedtocontinuetodiversifyitseconomicrelationships.Expandingtradepartnersandgloballinkageswillbeessentialtomaintainingitspositionasaleadinginternationalbusinessandfinancehubamidrisingprotectionism.

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

A.RecentDevelopmentsandOutlook

A.1RealSectorDevelopmentsandOutlook

1.Followinganotablereboundin2023,HongKong’seconomymaintainedmoderategrowthin2024,ledbyexternaltrade.HongKong’sGDProseby3.2percentin2023andstoodat2.5percentin2024amidweakeningdomesticdemand.Privateconsumption,whichhadexpandedsignificantlyin2023,contractedby0.7percent(year-on-year)in2024duetoweakerconsumersentimentandashiftinresidents’spendingpattern.Investmentgrowthalsoslowedsharplyto1.9percent(yoy)in2024from11.4percentin2023,reflectingpropertysectorweaknessandtightfinancialconditions.Nonetheless,therecoveryinthetechcycleandthesubsequentexpansioninexternaldemandsupportedgoodsexports,partiallyoffsettingthedomesticslowdown.FromApril2025,theimpositionofhighimporttariffsbytheUSonChinaheightenedconcernsaboutapotentialglobaltradeslowdownanditsadverseimpactontheglobaleconomyandHongKong.TheseconcernseasedfollowingsubstantivepositivedevelopmentsarisingfromtheUS-Chinatradedealinmid-May.Despitetheuncertainoutlook,HongKong’sGDPgrewby3.0percentinthefirsthalf2025,supportedbyfront-loadedexports,steadyexternaldemand,increasedinboundtourismandactivecross-boundaryfinancialactivitiessupportedbyChina’sadvancementincutting-edgetechnology(Figure1).

Figure1.GDPGrowthbyExpenditure(PercentagePointContribution)

Source:Census&StatisticsDepartment(C&SD);HaverAnalytics

Figure2.UnemploymentRateandLaborForceParticipationRate

Source:C&SD;HaverAnalytics

2.Thelabormarketshowedcontinuedimprovement,butprogressremainedunevenacrosssectors.Theseasonallyadjustedunemploymentratedeclinedfromitsrecentpeakof5.5percentinFebruary-April2022to3.4percentinthesameperiodof2025(Figure2).Asthelabormarkettightenedwithanelevatedratioofjobvacanciesperunemployedpersons

,2

wagescontinuedtoriseatarelativelyhighrate,averaging3.6percent(yoy)in2023and3.7percentin2024.Totalemploymentreached3.7millioninFebruary-April2025butremained4.4percentbelowthelevelrecordedinQ42019(Figure3).Asof2024,theeconomicallyinactivepopulationaged15andaboveinHongKongstoodat2.9million(about38.2percentofthepopulation),drivenbyanagingdemographic.Amongthem,thepopulationaged60andaboveaccountedfor61.0percent,markinga13.1percentagepointincreasecomparedtoa

2Thegeneralincreaseintheratioofjobvacanciesperunemployedpersons(wholeyear,20200.17→20210.25→20220.41→20230.69→20240.59)reflectsongoinghiringdifficultiesinthelabormarket.

ASEAN+3MacroeconomicResearchOffice(AMRO)Page5of64

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

ASEAN+3MacroeconomicResearchOffice(AMRO)Page6of64

decadeago.Overthepastyears,manysectorshavewitnessedemploymentgrowth,withnotablegainsinpublicadministration,socialworkactivities,andhumanhealthactivities.However,employmentgrowthinsectorssuchasretail,accommodationservices,manufacturing,andimportandexporttradehasremainedsubdued.

3.Despitetheeconomicrecovery,inflationhasremainedlow.TheheadlineCPIincreasedby2.1percentin2023,mainlydrivenbythepricesofenergy-relateditems,food,miscellaneousservices,andhousing.CPIinflationeasedto1.7percentin2024andstayedatanaverageof1.7percentduringthefirstfourmonthsin2025(Figure4).Inflationinthehousingcomponent,whichaccountsfor40percentofthecompositeCPIbasket,rosefrom1.0percent(yoy)in2023to2.1percentin2024.However,themoderationinfoodinflationandthedeclineinpricesofdurablegoodshelpedcontainoverallCPIinflation,despiterisinglaborcosts.Withthestabilizationofglobaloilprices,externalpricepressureswerefurtheralleviated.

Figure3.TotalEmploymentandLaborForce(3-monthAverage,NSA)

Source:C&SD;HaverAnalytics

Figure4.ContributiontoHeadlineInflation

Source:C&SD;HaverAnalytics;AMROstaffcalculations

4.Lookingahead,HongKongeconomyisexpectedtoseefurthermoderaterecoverydespiteexternalheadwinds.Theservicesandtourismsectorsareexpectedtoremainrobust,supportedbyeasingcross-bordertravelandproactivegovernmentinitiativestoattracttourists.However,thechangesinresidents’spendingpatternsmayconstrainareboundindomesticconsumption.BoxAsummarizesthegovernment’sinitiativestosupportretailandconsumption.Therecoveryininvestmentisexpectedtoslowamidanuncertainoutlookfortherealestatesector.GlobaltradeuncertaintyremainsheightenedfollowingtheUStradetariffhikesandChina’scountermeasures.Theelevateduncertaintyhasraisedconcernsthatthetradesector—whichdrovegrowthin2024—couldbeunderpressure,thoughrenewedtradenegotiationsamongmajoreconomiesmayoffersomeupsidepotential.Asaresult,GDPgrowthisexpectedtomoderateto2.1percentin2025,followedby1.9percentin2026.Despiteatightlabormarket,theeconomicslowdownisexpectedtoeaseinflation,withheadlineinflationforecastat1.8percentin2025and1.6percentin2026.

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

BoxA.RevitalizingHongKong’sRetailSector:SomeRecentEffortsandInitiatives

3

HongKongauthorities’recenteffortsandinitiativestorevitalizethecity’sretailsectorreflectarecognitionthatsustainedsupportforinboundtourism,targetedmeasurestoretaindomesticspending,andeffortstolimitoutboundleakageareneeded.InadditiontotheCentralGovernment’ssupportivemeasuressuchasexpansionofIndividualVisitScheme(IVS)to10morecitiesandthereinstatementofmultiple-entryIVSforShenzhenresidents,theauthoritieshaveimplementedsomeimportantinitiativesoverthepasttwoyears,including;thehostingofmega-eventsandtherevitalizationofsometouristattractionsofahistoricalorculturalnature,amongothers.Othersupportmeasuresincludethedevelopmentofthe“silvereconomy”and“greeneconomy”aswellastargetedgovernmentmeasurestoincentivizeretailersacrosstheentirespectrum—fromhigh-endluxurybrandstostart-upsofferingnicheproducts(FigureA1).Theauthoritiesalsorecognizethat,toreduceoutboundspendingleakage,policiesshouldaimtoretainlocalconsumptionthroughprovidingseasonaldomesticshoppingincentives—suchastime-limitedretailvouchersorrebatesduringpeakoutboundtravelperiods—andtheintroductionofretail-linkedloyaltypoints.

TheseeffortscanhelpinjectsomevitalityintoHongKong’sretailsector.Thecityhastheinfrastructure,creativetalent,andglobalappealtobecometheworld’sleadingexperientialretaildestination.Byblendingcutting-edgetech,art,andculturalthemes—andtakingacomprehensiveapproachtoaddresschallengesrelatedtoinboundtourism,domesticspending,andoutboundleakage,HongKong’sretailsectorcangainanewleaseoflife.

FigureA1.BoostingHongKong’sRetailSector:SomeKeyEfforts

Source:HongKongauthorities;AMROstaffcompilation

OnefactorthatcouldaffecttheretailsectoristhestrengthoftheHongKongdollar.WhiletheHongKongdollarexchangerateismarket-drivenwithinthecontrolledbandoftheLERS,thegovernmentcanhelpsupportHongKong’scompetitivenessbyprovidingrentalormarketingsupporttotourism-facingretaildistricts.DuringperiodsofHongKongdollarstrength,theauthoritiesandretailsectorcouldreinforce“value-for-money”messagingbyhighlightingHongKong’sVAT-freeadvantageandenhancingthequalityofretailservicestomaintaincompetitiveness.TheauthoritiescouldalsoconsiderpositioningHongKongasanicheretailshoppingdestinationbydevelopinginteractiveflagshipstores,themedmarkets,andart-techretailcorridorsthatofferunique,experientialretailenvironments.

Preliminaryoutcomesfromtheretailrevitalizationinitiatives,coupledwithHongKong’scontinuedglobalstanding,reflecttentativeprogressintheretailsector’srecovery.Inthe2024GlobalCitiesIndex(GCI),HongKongrosetoninthplaceglobally,aheadofmostAsianpeersexceptTokyoandSingapore,whicharerankedfourthandfifthglobally,respectively.Authoritiesandeventorganizershavecoordinatedastrongpipelineofmegaevents—over90scheduledforthefirsthalfof2025,withapproximately840,000touristsexpectedtoparticipateandspendHKD3.3billioninHongKong.The“silver”and“green”economiesarealsogainingmomentum,withfirmsexpandingofferings

3PreparedbySuanYongFooandVanneKhut

ASEAN+3MacroeconomicResearchOffice(AMRO)Page7of64

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

inelderly-friendlytech,health,homesafety,andleisure.Luxuryretailisshowingsignsofacomeback,attractinganewwaveofMainlandChinesemiddle-classshoppers.Inasignofreturningconfidenceafteryearsofcontraction,prominentbrandslikeHermes,Dior,andPradahavesecuredhighprofileretailspaces,includingan8,000squarefeetPradastore.

A.2ExternalSectorandtheBalanceofPayments

5.Theexternalpositionremainsstrong,supportedbyalargecurrentaccountsurplusandsubstantialforeignreserves.HongKong’scurrentaccountsurplusrosesignificantlyto12.9percentofGDPin2024,from8.5percentin2023,mainlydrivenbyhighernetprimaryincomefromincreasedinvestmentearnings

4

andasmallergoodstradedeficit(Figure5).Thenetservicessurplusmoderatedslightlyto4.6percentofGDPin2024,from4.8percentin2023,reflectinghigherimportsofservices,particularlyintravelandtransport

.5

Meanwhile,thegoodstradedeficitnarrowedto0.5percentofGDP,downfrom4.2percentin2023,duetoasurgeinexports.However,thefinancialnon-reserveaccountdeficitwidenedby7.4percentagepoints,reaching18.2percentofGDPin2024,attributabletoincreasedportfolioinvestmentoutflows.Asaresult,theoverallbalanceofpaymentsdeficitwidenedslightlyto2.8percentofGDPin2024(Figure6).ThisledtoamoderatedeclineinHongKong’sforeignreservestoUSD412.5billionasofMarch2025,downfromUSD425.6billioninDecember2023,andequivalentto37.6monthsofretainedgoodsimports.

Figure5.CurrentAccountBalance

%ofGDP

20

15

10

5

0

-5

-15

-30

-10

2018

2019

2020

2021

2022

2023

2024

Q1

Q2

Q3

Q4

2023

Q1

Q2

Q3

Q4

2024

Tradebalance(goods)Netservices

PrimarynetincomeSecondarynetincome

Currentaccountbalance

Figure6.BalanceofPayments

%ofGDP

20

15

10

5

0

-5

-10

-15

-20

-25

2018

2019

2020

2021

2022

2023

2024

Q1

Q2

Q3

Q4

2023

Q1

Q2

Q3

Q4

2024

Currentaccount FinancialaccountOverallbalance

Capitalaccount

Neterrorsandomissions

Source:C&SD;HaverAnalytics;AMROstaffcalculationsSource:C&SD;HaverAnalytics;AMROstaffcalculations

Note:HongKong’sbalanceofpaymentsfollowsBPM6.Financialaccountsignshavebeenreversedforchartingpurposesand

excludesreserveassets.

6.Thetourismsectorrecoveredstronglyin2024,butvisitorarrivalsandspendingdidnotfullyreachpre-pandemiclevels.Thenumberoftouristarrivalsincreasedby30.9percentto44.5millionin2024,with76.5percentcomingfromMainlandChina(Figure7).Governmentinitiatives,includingpromotionalcampaigns,hostingofmajoreventssuchasArtBaselandtheHongKongSevens,andMainland’stravelfacilitationforvisitorstoHongKong

6

,helpedstimulateinboundtourism.Consequently,hoteloccupancyratesandbusinessreceipts

4Theseincludeportfolioinvestmentincome(mainlyfrominterest),otherinvestmentincomeandincomeonreservesassets.

5Thisisduetotheincreaseinoutboundtourism,whichgrewfasterthaninboundarrivals,wideningthetourismimbalance.

6Thisincludes(i)expandingtheIndividualVisitScheme(IVS)to10morecities,coveringallprovincialcapitals,and(ii)resumingthemultiple-entryIVSforShenzhenpermanentresidentsandexpandingthemultiple-entryIVStoShenzhenresidencepermitholders.Priortotheresumption,ShenzhenonlyalloweditspermanentresidentstovisitHongKongundera“onetripperweek”IVS.Theresumptionofthemultiple-entryIVSremovedrestrictionsonthenumberofvisitsforeligibleIVSholders.

ASEAN+3MacroeconomicResearchOffice(AMRO)Page8of64

ANNUALCONSULTATIONREPORT

HONGKONG,CHINA2025

intourism-relatedservicesimproved

7

,reflectingincreasedtourismspending

8

(Figure8).Thiscontributedtoanincreaseinservicesexportsto26.7percentofGDPin2024,upfrom25.5percentinthepreviousyear.However,totalvisitorarrivalsin2024reachedonly73.5percentoftheiraveragelevelin2018-19,attributabletoahostoffactorsincludingstrongerHongKongdollar,regionalcompetitionandthegradualrecoveryofoutboundtourismfromMainlandChina.ThesefactorshavecontributedtotheweakperformanceoftheretailsectorinHongKong.SelectedIssue1discussesthedeterminantsofHongKong’sretailsalesandpolicysuggestions.ThelaunchoftheDevelopmentBlueprintforHongKong'sTourismIndustry2.0inDecember2024representsapromisinginitiativeandisexpectedtofurthersupportthesector’sgrowth

.9

Figure7.TouristArrivalsFigure8.BusinessReceiptsIndicesofTourism-

relatedServices

Index(NSA,2015=100)

Peopleinmn

180

160

140

120

100

80

60

40

20

0

70

60

50

40

30

20

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

10

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

0

20172018201920202021202220232024

mwMainlandChinaKorea

EU

Visitorarrivals

ASEANJapanIndia

U.S.

AustraliammOthers

Transportation

AccommodationservicesFoodservices

Tourism,convention&exhibitionservices

Source:HongKongTourismBoard;AMROstaffcalculationsSource:C&SD

A.3MonetaryConditionsandtheFinancialSector

7.HongKong’sweakcreditgrowthhasrecentlyshownnascentsignsofstabilization,primarilysupportedbyasteadyingoftradefinanceanddomesticlending.LoansforuseinHongKonghavestartedtostabilizefromitsprolongeddownwardtrendsinceQ32023,althoughitremainsinnegativeterritory(Figure9).Credittothebuildingandconstructionsectorposteditsfifthconsecutivequarterofdecline,representingthesharpestcontractionamongallsectors.Totalproperty-relatedlendinginHongKong,includingmortgageloans,continuedtocontract—decliningby3.9percent(yoy)inQ12025—yetitstillaccountedforaroundone-thirdofthetotalcredit.Meanwhile,creditforuseoutsideHongKonghascontinueddecliningsinceQ12022andremainsadragonoverallgrowth.ThebankingsectorinHongKonghasreduceditsexposuretoMainlandChina(Figure10).

7Hoteloccupancyrateincreasedto85percentin2024from82percentin2023.Businessrec