## Corporate Sector Vulnerabilities in Hong Kong SAR

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**Canonical URL:** [Corporate Sector Vulnerabilities in Hong Kong SAR](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025050.pdf)

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### Overview
- Document: SIP/2025/050, IMF Selected Issues Paper, Asia and Pacific Department.
- Prepared by Phakawa Jeasakul and Hong Xiao; authorized for distribution by Thomas Helbling.
- Completed on January 13, 2025; published May 2025.
- Also published separately as IMF Country Report No 25/16.
- JEL Classification Numbers: E6, E22, G3, G10, G15.

### Executive summary and main message
- Hong Kong SAR’s corporate sector vulnerabilities appear manageable but have increased in recent years.
- Key drivers of increased vulnerabilities include pandemic scarring effects and higher funding costs driven by the hiking cycle of U.S. monetary policy.
- Heterogeneity across firms is high; smaller listed firms appear to be more vulnerable.
- 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.

### Key findings on firm types and financial conditions
- Local non-real estate firms:
  - Have seen weakening profitability and lower debt-servicing capacity.
  - Weakening reflects pandemic scarring effects and higher funding costs driven by the hiking cycle of U.S. monetary policy.
  - On aggregate, leverage level and liquidity appear manageable.
  - High heterogeneity: smaller listed firms appear to be more vulnerable.
- Local real estate firms:
  - Exposed to changes in property prices given sizeable holding of investment properties and inventory.
  - Relatively low leverage helps mitigate risks.
- Mainland Chinese firms listed in Hong Kong SAR:
  - Show rising financial vulnerabilities.
  - Weakening profitability and property market adjustment have adversely affected property developers’ balance sheets.

### Policy recommendations and suggested priorities
- Ensure effective monitoring and management of financial vulnerabilities in the corporate sector.
- Ensure banks’ proactive management of nonperforming assets.
- Assess the impact of the ongoing property market adjustments.
- Calibrate policies to support small businesses appropriately.

_© International Monetary Fund. SIP/2025/050. Completed January 13, 2025; published May 2025._

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025050.pdf_