With very low labour taxes, social contributions and other employment regulations, Hong Kong is an attractive investment destination for many of our clients. Its growing workforce supplies cheap and flexible labour, complemented by the rapid expansion of its university-educated labour force. Supply chains benefit from an extensive and high quality transport network which offers excellent connections to global trade routes. That said, Hong Kong faces significant challenges from mainland China.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. They also benefit from in-depth analysis on 18 of Hong Kong’s most important industries. We provide interactive data and forecasting, alongside detailed and risk-assessed analysis from our experts. We aim to keep you one step ahead, so you can operate with confidence in Hong Kong.

Hong Kong Country Risk

BMI View:

Hong Kong

Core Views

  • Hong Kong is likely to experience modest real GDP growth through 2017, and we maintain our forecast for real GDP growth to come in at 1.2% in 2016 and 1.7% in 2017. Trade activity and private consumption in the Special Administrative Region will be undermined by China-related headwinds, coupled with weakness in the domestic real estate market.

  • Hong Kong's September 4 Legislative Council elections saw the opposition pro-democracy alliance gain ground against the ruling pro-Beijing camp, with a group of young politicians gaining seats amid displeasure over the government's failure in pushing for universal suffrage in the territory. However, we see limited prospects for significant change in the city-state...

Hong Kong Operational Risk Coverage (9)

Hong Kong Operational Risk

BMI View:

BMI View: Investors in Hong Kong stand to benefit from the country's modern and highly reliable logistics network. As a major regional and global trade hub, Hong Kong has invested heavily in its transport network, developing a range of supply chain options across road, rail, air and maritime connections. The country's utilities infrastructure is similarly advanced and there is therefore very little risk to businesses in terms of interruptions to supply. Reliability does come at a cost, however, and fuel and electricity prices are among the highest regionally. Overall this does little to dampen Hong Kong's appeal and the country is ranked a positive fifth out of the 38 Asia region states for Logistics Risk, with a score of 77.2 out of 100.


Hong Kong Crime & Security

BMI View:

Overall, crime and security risks for investors and businesses in Hong Kong are very low with regards to all types of risks (crime, terrorism, interstate conflict) due to low crime rates, the absence of domestic terror groups/attacks and an effective security/counter-terrorism apparatus, as well as a secure neighbourhood under the security patronage of military heavyweight China. Thus we have awarded Hong Kong a total score of 90.9 out of 100 in our Crime and Security Index, ranking Hong Kong among the most secure countries/territories in the world, six places behind global leader Slovenia, outperforming all other regional peers in Asia.

In comparison, the greatest risks for companies and the general public in Hong Kong relate to the global terrorism threat that affects Hong Kong as global financial hub and capitalist engine of China. Terrorism threats in China are related to the Muslim Uighur minority in the north-western region of Xinjiang...

Hong Kong Labour Market

BMI View:

BMI View: Hong Kong offers businesses a highly flexible and low-cost work force, with a high minimum wage offset by low labour and social tax contributions. A relatively large domestic labour force alongside a steady supply of migrant workers from mainland China and other Asian states helps to ensure labour availability, as does Hong Kong's near total urbanisation. Investors may however face a shortage in terms of skilled labour which detracts somewhat from the country's score in this section. Overall, however, Hong Kong's labour market is competitive and the country has a score of 72.0 out of 100 for Labour Market Risks, placing the country third in the Asia region behind New Zealand and Singapore and sixth on a global basis.

Almost 75% of Hong Kong's workforce has a...

Hong Kong Logistics

BMI View:

Hong Kong is a clear outperformer with regard to Logistics Risks. Its very well-developed transport system with top-rated road, rail, port and airport infrastructure, its easy trade procedures and strong governance leading to extremely low import and export lead times and documentation as well as high freight capacities by sea and air combine to put it in first place out of 30 countries in the region and in second globally after the Netherlands. The only category in which Hong Kong scores comparatively poorly is Market Size and Utilities, since Hong Kong has no natural resources of its own and is thus forced to import resources.

The Transport Network in Hong Kong is very sophisticated, ranking in third place regionally and in 16 th position out of 170 countries in the world, which is many places in front of mainland China. The need to develop very smart and efficient transport infrastructure, both in terms of extent and quality,...

Hong Kong Trade & Investment

BMI View:

Hong Kong presents minimal trade and investment risks owing to its relatively open economy and attractive foreign investment policy. Specifically, investors are exposed to reduced costs due to a transparent legal system, limited corruption and strong contract enforceability. These risks are further mitigated by favourable tax rates and attractive financial incentives. Overall, Hong Kong is the regional outperformer in the BMI Trade and Investment Risk Index with a score of 82.4 out of 100, outperforming fellow financial hub Singapore, which places second in the Asian rankings.

Hong Kong is an open country for economic activity due to its market-oriented economy and superior financial market development. The government offers financial incentives for foreign investors in the shape of tax breaks, and government assistance, which boosts its attractiveness. In addition, foreign entities are able to access credit in Hong...

Hong Kong Industry Coverage (18)

Hong Kong Autos

BMI View:

BMI View: A slowdown in economic growth and weak consumer sentiment will lead to subdued growth in passenger vehicle sales over our forecast period 2016-2019, with average growth of 1.9% over this period.

Weak Econony Dampening Passenger Vehicle Sales
Passenger Vehicle Sales,Units
e/f = BMI estimate/forecast. Source: HKDT, BMI
Table: Key Views
* Weak economic outlook...

Hong Kong Commercial Banking

BMI View:

Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Hong Kong Consumer Electronics

BMI View:

BMI View: Our core scenario is for consumer electronics device spending to remain flat over the medium term in Hong Kong, with a CAGR of -0.1% forecast over 2016-2020. The domestic market is saturated across all core product categories, and we do not currently see any mass market upgrade triggers, though are watching the wearables category closely for vendor innovation and pricing strategies that could drive sales growth. There is, however, also downside for spending in Hong Kong should economic trends in China either derail domestic growth or result in a contraction in the number of mainland visitors shopping for devices in Hong Kong.

Latest Updates And Industry Developments

  • ...

Hong Kong Food & Drink

BMI View:

BMI View: We forecast private consumption growth to slow down in 2016, due to mounting economic headwinds, especially the slowdown in China. Combined with a small and ageing population and existing high levels of food consumption, we expect only moderate growth in food and drink sales throughout our forecast period to 2019.

Headline Industry Data

  • Total food consumption (local currency) growth in 2015: +4.4%; forecast compound annual growth rate (CAGR) 2014-2019: +3.7%.

  • Alcoholic drinks value (local currency sales growth in 2015: +3.4%; forecast CAGR 2014-2019: +3.9%.

  • Mass grocery retail sales (local currency) growth in 2015: +3.0%; forecast CAGR 2014-2019: +2.7%.

Hong Kong Freight Transport

BMI View:

BMI View: We forecast modest but nonetheless positive growth for Hong Kong's freight sector in 2016 and beyond. The current slowdown in the Chinese economy is affecting trade flows in Hong Kong, hurting the economy and consequently impacting all freight modes in the city state owing to its dependence on trade with China. Due to the developed nature of the freight sector in Hong Kong, and with a forecasted downturn in demand for goods over the medium term, we expect growth to be robust, but subdued for all freight modes.

GDP growth is forecasted at 3.5% for 2016 and to steadily increase over the medium term at an annual average of 3.5%. However, Hong Kong's economy is...

Hong Kong Freight Transport

BMI View:

BMI View: Despite a shaky outlook in 2016 on the back of weak Chinese demand, we expect that Hong Kong's trade will enjoy positive real growth this year, following a contraction in 2015. Things will improve onwards from 2017, but imports will continue to drive growth in total trade, with exports growth set to remain comparatively weak.

Latest Updates And Forecasts

  • Hong Kong continues to struggle to remain a major global player in container shipping, and following a drop in box throughput volumes in 2015, we forecast a fifth consecutive year of declines in 2016. Growth will return in 2017 but will remain only modest over the course of our forecast period to 2020. Beyond that, the port authorities will need to make substantial investments in order to encourage a return in growth.

  • Although we...

Hong Kong Information Technology

BMI View:

BMI View: After a sharp decline in hardware spending dragged down Hong Kong's IT market in 2015 we forecast a much more stable outlook over the medium term, with a CAGR of 5.3% forecast for 2016-2019 to a total of HKD45.76bn. The volatility in the hardware market was the result of the boom and subsequent slowdown in the tablet market, as well as concentrated desktop and notebook replacement demand in 2014, but 2016-2019 dynamics will be more stable and based on income growth and replacement spending. Meanwhile, the lucrative enterprise software and services markets will continue to outperform retail spending and Hong Kong's position as a regional datacentre and cloud services hub will sustain growth rates above those observed...

Hong Kong Infrastructure

BMI View:

BMI View: Hong Kong has a substantial pipeline of infrastructure projects, but construction growth will be muted over the long-term due to the territory's worsening business environment and a lack of manpower.

Forecasts and Latest Updates

  • We believe that Hong Kong's infrastructure growth will be hampered by a worsening business environment and continued labour shortage.

  • The Hong Kong government's aims to develop the territory's transport infrastructure will continue to be hampered by continued delays and cost overruns, which will keep growth muted over the coming years.

  • The long-term outlook for Hong Kong's residential and non-residential construction sector is subdued...

Hong Kong Insurance

BMI View:

BMI View: As of late 2016, the latest results from the leading insurance companies highlight the dynamism and sophistication of the players in both the life and the non-life segments. In the life segment, demand is being boosted by high savings rates, the central role played by insurers in the organised savings landscape and mainland visitors. In the non-life segment, growth has been driven by accident & health insurance.

Headline Insurance Forecasts (Hong Kong 2013-2020)
Indicator 2013 2014 ...

Hong Kong Medical Devices

BMI View:

BMI View: Hong Kong's medical device market will continue to expand steadily despite a slowdown in the economy. The aging population, continued investment in the health sector and increased private sector involvement will drive market growth.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local Currency mn) Per Capita (Local Currency) Exchange Rate (Local Currency/USD)

Hong Kong Oil & Gas

BMI View:

BMI View: Plans for a LNG import terminal will pose upside risk to Hong Kong's increasing natural gas consumption. In line with our Country Risk team's downward economic growth outlook for Hong Kong, we have downgraded Hong Kong's refined fuels consumption growth to a rough average of 1.1% per annum over the next ten years.

Headline Forecasts (Hong Kong 2014-2020)
2014 2015 2016f ...

Hong Kong Pharmaceuticals & Healthcare

BMI View:

BMI View: The demand for healthcare services in Hong Kong will be robust. With an ageing population dovetailing with lifestyle changes, chronic conditions will become increasingly prevalent in the region. This bodes well for medicine sales especially as access to healthcare is high. We expect telecare to play a more prominent role in the delivery of healthcare in Hong Kong as the authorities seek to adapt the medical system to accommodate the changing epidemiological profile.

Headline Expenditure Projections

Pharmaceuticals: HKD13.0bn (USD1.7bn) in 2015 to HKD13.9bn (USD1.8bn) in 2016; +7.1% in local currency and 6.9% US dollars terms. Forecast maintained from previous quarter.

Healthcare: HKD142.7bn (USD18.4bn) in 2015 to HKD153....

Hong Kong Power

BMI View:

BMI View: Hong Kong remains heavily dependent on thermal energy, with coal accounting for approximately 66.1% of the city-state's energy production as of 2015. Although the government is actively researching renewable energy solutions to curb this dependency, it is most likely Hong Kong will become increasingly reliant on mainland China and imported natural gas over the medium term.

BMI forecasts Hong Kong's real GDP growth will average 2.3% a year between 2016-2025, with an increase of 1.2% forecasted for 2016. BMI is forecasting an average annual increase in total electricity consumption of 0.4% to 44.87TWh between 2016-2020. Thermal generation, comprising coal, gas and oil, is expected to grow by an average of 0.6% per annum over the same...

Hong Kong Real Estate

BMI View:

BMI View : The office sub-sector is likely to perform better than retail and industrial real estate over the next two years. However, the outlook for all three sub-sectors points to greater vibrancy, with higher levels of activity in both the leasing and investment market as economic growth picks up momentum from 2017 onwards.

Economic growth in Hong Kong is expected to be weak in 2017, with GDP forecast to rise by 1.7%. This reflects the slowdown in domestic demand and residential real estate market, as well as China-related external headwinds which will continue to undermine trade activity. The rate of growth is forecast to improve slightly to 2.5% in 2018 and to stabilise at this level through to 2021.

All three...

Hong Kong Retail

BMI View:

BMI View: Retail sales in Hong Kong have been declining for several quarters in a row, mostly on account of declining tourist arrivals from Mainland China. Struggling residential real estate market and poor external demand present additional headwinds, which will continue weighing on Hong Kong's economic and retail sector's performance over the coming year. As a result, we forecast 2016 total household spending growth to record the lowest levels since 2011.

Headline Household Spending

Hong Kong Telecommunications

BMI View:

BMI View: A decline in total mobile subscribers is attributable to high market saturation, which cannot sustain further growth in light of Hong Kong's slowing economic growth. Operators are deriving growth by migrating subscribers on to greater revenue-generating networks such as LTE. In addition, the potential for postpaid subscribers to outnumber prepaid ones will remove some subscriber number volatility and reduce churn rates for operators in the longer term. This change in the mobile landscape will also buoy average revenues per user (ARPU).

Operators Combat Market Saturation With LTE
Hong Kong Mobile Market Forecasts

Hong Kong Tourism

BMI View:

B MI View : Hong Kong is home to a well-developed and mature tourism market. The country attracts high volumes of visitors from mainland China, and as a major regional travel hub also welcomes many visitors from throughout the Asia Pacific region and beyond. Tourism infrastructure is modern, including an extensive public transport network and one of the largest and busiest airports in the world. A spate negative media coverage in mainland China and recent political tensions led to an acute decline in mainland tourists in 2015 and early 2016; however, the government has stepped in to support the industry and the long-term...

Hong Kong Water

BMI View:

BMI View: Hong Kong is a reasonably attractive market, with customers concentrated in a densely populated area that is well served by existing water infrastructure. Mains domestic consumers represent the larger user base. While we expect this trend to continue, water conservation campaigns are being launched by the government to bring consumption down. We believe this will have an effect on water consumption habits of domestic consumers in particular, and relieve some of the city-state's burden. However, we expect that as the country's water-consuming industries maintain their momentous growth, demand for water will continue to increase.

Latest Updates And Key Forecasts

  • Hong Kong plans a desalination project worth HKD9.3bn (USD1.19bn) to meet water...

Latest Hong Kong Articles

Latest Hong Kong Blogs

  • The People's Bank of China (PBoC)'s decision to lower interest rates again ...

  • The Chinese equity market is now completely detached from the fundamentals....

  • China's trade accounts continue to defy expectations of a slowdown, with ex...

Latest Hong Kong Podcasts


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