People’s Republic of China—Hong Kong Special Administrative Region: Financial System Stability Assessment-Press Release and Statement by the Executive Director for the People’s Republic of China—Hong Kong Special Administrative Region
IMF Staff Country Reports, June 8, 2021
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- People’s Republic of China—Hong Kong Special Administrative Region: Financial System Stability Assessment-Press Release and Statement by the Executive Director for the People’s Republic of China—Hong Kong Special Administrative Region
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Bibliographic details
- Published: June 8, 2021
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513573106.002
Summary findings
- The main macro-financial risks relate to extensive linkages to Mainland China, stretched real estate valuations, and exposure to shifts in global market and domestic risk sentiment, compounded by escalating U.S.-China tensions.
- Stress tests show that the financial system is resilient to severe macro-financial shocks, but there are pockets of vulnerabilities in foreign bank branches, investment funds, households, and nonfinancial corporates.
- Hong Kong SAR’s financial sector is also exposed to physical and transition risks from climate change.
Key vulnerabilities and channels
- Extensive linkages to Mainland China are identified as a principal source of macro-financial risk.
- Stretched real estate valuations represent a material area of concern for financial stability.
- Exposure to shifts in global market and domestic risk sentiment increases systemic sensitivity, exacerbated by escalating U.S.-China tensions.
- Specific pockets of vulnerability include:
- Foreign bank branches
- Investment funds
- Households
- Nonfinancial corporates
Stress testing and resilience
- Stress tests indicate resilience of the overall financial system under severe macro-financial shock scenarios.
- Despite system-wide resilience, stress testing results highlight concentrated vulnerabilities in the entities listed above (foreign bank branches, investment funds, households, nonfinancial corporates).
Climate-related financial risks
- The financial sector faces both physical risks and transition risks arising from climate change.
Subjects and keywords
- Subject: Commercial banks, Financial institutions, Financial regulation and supervision, Financial Sector Assessment Program, Financial sector policy and analysis, Financial sector stability, International organization, Monetary policy, Stress testing
- Keywords: Asia and Pacific, Commercial banks, Financial Sector Assessment Program, Financial sector stability, Global, H. investment fund liquidity stress tests, Hong Kong SAR authorities, Hong Kong SAR economy, liquidity risk monitoring, market expectation, property market development, risk sentiment, Stress testing
IMF Staff Country Report No. 2021/102 (People’s Republic of China—Hong Kong Special Administrative Region: Financial System Stability Assessment-Press Release and Statement by the Executive Director for the People’s Republic of China—Hong Kong Special Administrative Region), June 8, 2021.
Content in this bundle
- Executive Summary