Hong Kong Country Risk Report

Published 29 April 2015 | Quarterly

  • 50 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
Hong Kong Country Risk Report

Hong Kong

Core Views

  • Hong Kong's real economic growth slowed to 2.3% in 2014, versus 2.9% in 2013. While we still envisage a modest growth rebound to 2.7% in 2015, dual headwinds from China as well as the overvalued domestic property market provide downside risks to this forecast.

  • We expect the ongoing run-up in Hong Kong residential property prices to fade in 2015, particularly as supply limitations subside and interest rates increase. However, the eventual correction is likely to be relatively mild, with price declines in the range of 10-15% within the realm of possibility.

  • Extremely large-scale pro-democracy protests, which began in September 2014 and were only wound up in December, failed to bring about any significant political compromise from either the Hong Kong or Chinese governments. While there remains potential for similar protests in the future, we do not believe that Beijing is likely to give in to popular sentiment. As such, our expectations for meaningful democratic reform in Hong Kong remain limited.

Key Risk To Outlook

  • The main downside risk to the Hong Kong economy continues to stem from China. Should the ongoing economic slowdown in China hit crisis levels, Hong Kong would not be unscathed, and real GDP growth would likely fall short of even our below consensus forecast. Likewise, should the People's Bank of China (PBoC) opt to gradually devalue the Chinese yuan (which we continue to note as a risk to our core CNY forecast), this would put pressure on the HKMA to re-peg the Hong Kong dollar.

Macroeconomic Forecasts (Hong Kong 2013-2016)
Indicator 2013 2014e 2015f 2016f
BMI/Census and Statistics Department
Nominal GDP, USDbn 274.8 289.6 309.4 331.0
Real GDP growth, % y-o-y 2.9 2.3 2.7 3.6
Consumer price inflation, % y-o-y, eop 4.3 4.9 3.5 3.0
Exchange rate HKD/USD, eop 7.75 7.76 7.77 7.77
Budget balance, % of GDP 0.6 0.8 0.4

Table of Contents

Executive Summary
Core Views
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Sino-US Geopolitical Competition To Intensify In 2015-2020
Table : Political Over view
Long-Term Political Outlook
Benign Outlook Despite Democratic Reform Uncertainty
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
China, Property Headwinds Elicit GDP Downgrade
Table : Economic Acti vit y
Fiscal Policy
Despite High Cost, Airport Expansion Boosts Construction Outlook
Table : Fiscal Polic y
Monetary Policy
HKMA In Tightening Mode As House Prices Surge Anew
Table : Monetar y Polic y
Balance Of Payments
Trade Growth To Stagnate As China, Currency Peg Weigh
Table : Curre nt Acc ount
Chapter 3: 10-Year Forecast
The Hong Kong Economy To 2024
Integration With Mainland Key To Growth
Table : Long-Ter m Macr oec onomic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
Table : Operati onal Risk Index
Legal Environment
Table : Asia - Legal Risk
Costs Of Labour
Table : Asia - Lab our Cost Risk
Table : Regulati ons Gover ning Flexibilit y Of Workforce
Table : Average Annual Wage By Sector (HKD)
Chapter 5: Key Sectors
Freight Transport
Table : Air Freight
Table : Maritime Freight
Table : Inland Waterway Freight
Table : Road Freight
Table : Rail Freight
Table : Inbound Tourism
Table : Outbound Tourism
Other Key Sectors
TABLE: Oil & Gas Sector Key Indicators
TABLE: Pharma Sector Key Indicators
TABLE: Infrastructure Sector Key Indicators
TABLE: Telecoms Sector Key Indicators
TABLE: Food & Drink Sector Key Indicators
TABLE: Autos Sector Key Indicators
Chapter 6: BMI Global Macro Outlook
Global Outlook
Softening Growth Picture
Table : Global Assumptions
Table : Developed States , Real GDP Growth, %
Table : Emerging Markets , Real GDP Growth , %

The Hong Kong Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Hong Kong. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Hong Kong's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Hong Kong's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Hong Kong's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Hong Kong, including currency volatility, the commodity price boom and protectionist policies.

The Hong Kong Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Hong Kong' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Hong Kong through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Hong Kong Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:


  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Hong Kong and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Hong Kong, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Hong Kong over the next 5-years?

BMI's Hong Kong country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Hong Kong Market - Political Strengths, Weaknesses, Opportunities and Threats facing Hong Kong.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Hong Kong's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Hong Kong’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Hong Kong's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Hong Kong?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Hong Kong against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Hong Kong’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Hong Kong will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Hong Kong's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

Benefit from discounts when you add multiple products to your basket
2 Products SAVE 10%
3 Products SAVE 15%
4 Products SAVE 20%
5 Products SAVE 25%
6 Products SAVE 30%
7 - 20 Products SAVE 35%
21 Products or more SAVE 40%


The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express