{ "title": "IMF Executive Board Concludes 2024 Article IV Consultation Discussions with the People’s Republic of China—Hong Kong Special Administrative Region", "publication": "IMF News, January 23, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region", "canonical": "https://www.imf.org/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region", "overlayPath": "/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/index.md", "summary": "Washington, DC – January 23, 2025: The Executive Board of the International Monetary Fund (IMF) concluded on January 14, 2025, the Article IV consultation discussions with the People’s Republic of China—Hong Kong Special Administrative Region and considered and endorsed the staff appraisal without a meeting on a lapse of time basis.", "publishDate": "2025-01-23", "sections": [ { "heading": "Overview and Executive Board Assessment", "content": "- The Executive Board concluded the Article IV consultation discussions on January 14, 2025, and endorsed the staff appraisal without a meeting on a lapse‑of‑time basis.\n- Hong Kong SAR’s economy is on a path of gradual but uneven recovery following three years of recession since 2019.\n- The financial system has remained resilient, supported by strong institutional frameworks, substantial capital and liquidity buffers, and the Linked Exchange Rate System (LERS) continued to function smoothly.\n- The preliminary assessment for 2024 suggests that Hong Kong SAR’s external position is in line with fundamentals and desirable policies." }, { "heading": "Economic Outlook and Risks", "content": "- 2024 growth: real GDP growth is estimated to have moderated to 2.7 percent in 2024 from 3.3 percent in 2023.\n- Projection: growth is projected to stand at 2.7 percent in 2025 and decelerate modestly to around 2½ percent over the medium term.\n- Output gap: projected to continue to narrow and close by 2029.\n- Inflation: projected to rise gradually to around 2½ percent.\n- Downside risks (key): \n - A sharper‑than‑expected slowdown in Mainland China due to escalation of trade tensions or a deeper and more protracted adjustment in the property market.\n - Tighter‑for‑longer monetary policy in the U.S.\n - Rising geoeconomic fragmentation pressures.\n - Increased regional competition.\n- Upside scenarios:\n - Meaningful improvement of consumer and business confidence in Mainland China.\n - Deeper integration with the Greater Bay Area (GBA).\n - Increased investment in high value industries.\n - Sustained inflows of skilled workers." }, { "heading": "Fiscal Policy and Revenue Mobilization", "content": "- Assessment: The medium‑term fiscal consolidation path is appropriate; the plan to delay attainment of a balanced budget until FY2027/28 is considered appropriate given economic slack and the need to protect social welfare spending.\n- Recommendation: Revenue mobilization efforts need to be stepped up to meet aging‑related and investment spending needs.\n- Specific revenue measures suggested:\n - Increasing the progressivity of personal income tax.\n - Raising excise taxes.\n - Introducing a VAT.\n - Introducing taxes on capital gains and dividends.\n- Social policy: Steps to expand the coverage of social safety nets and increase their adequacy are needed." }, { "heading": "Financial Sector, Macroprudential Policy, and Housing", "content": "- Banking sector: well‑capitalized and profitable, but proactive monitoring of emerging risks is needed due to weakening debt servicing capacity and rising liquidity risk among local firms.\n- Supervisory recommendations:\n - Ensure banks apply prudent risk management, including in expected loss recognition and provisioning.\n - Prioritize systemic risk assessments for NBFIs and high‑risk activities, augmented with enhanced data collection and stress testing at system‑wide and sector‑specific levels.\n - Integrate climate risks into financial institutions’ risk management practices.\n- SME policy: Support should be well‑calibrated to balance necessary assistance with facilitating an orderly exit of non‑viable firms.\n- Macroprudential stance and housing:\n - Risks of a sharp and disorderly house price correction and speculative demand have eased, justifying recent abolition of demand‑side management measures and relaxation of macroprudential policies.\n - Further macroprudential easing should be carefully designed to maintain prudent underwriting standards and avoid excessive risk‑taking.\n - Public housing supply should be further expanded and eligibility criteria strictly enforced to alleviate affordability pressures and reduce social tensions." }, { "heading": "Digital, Sustainable Finance, and GBA Integration", "content": "- Digital and sustainable finance:\n - Creating a vibrant, well‑regulated digital and sustainable finance ecosystem would reinforce Hong Kong SAR’s status as an international financial center.\n - Recent efforts to step up regulation of crypto asset intermediation are welcome and should be part of a comprehensive regulatory strategy.\n - Strategy elements: risk‑based approach for stablecoin issuers, close cross‑sectoral monitoring, and continued supervisory efforts to ensure financial institutions appropriately manage risks.\n - Continued improvements in transparency regarding climate‑related risks will strengthen the climate information infrastructure and help position Hong Kong SAR as a global green and sustainable finance hub.\n- GBA initiative:\n - The GBA initiative has the potential to lift growth prospects by creating a new global technology cluster and attracting skilled labor.\n - Critical priorities: mobilize private sector‑led R&D leveraging finance, academic institutions, and the pro‑market legal framework; encourage private investment; monitor talent attraction programs.\n - Labor force: steps needed to raise labor force participation, particularly among older adults and women." }, { "heading": "Climate and Energy Policy Recommendations", "content": "- Prioritize regional collaboration with Mainland China to develop zero‑carbon energy and improve energy efficiency in aging and poorly maintained buildings.\n- Consider incentivizing energy saving and green transportation with additional forms of carbon pricing mechanisms.\n- Continue efforts to bolster infrastructure and enhance resilience against climate‑related risks." }, { "heading": "Selected Economic and Financial Indicators (highlights from table, various years and projections)", "content": "- Real GDP (percent change): 2019 -1.7; 2020 -6.5; 2021 6.5; 2022 -3.7; 2023 3.3; 2024 2.7; 2025 2.6; 2026 2.5; 2027 2.4.\n- Private consumption (percent change): 2019 -0.8; 2020 -10.6; 2021 5.6; 2022 -2.2; 2023 7.7; 2024 -0.7; 2025 0.5; 2026 1.0; 2027 1.4; 2028 1.9.\n- Gross fixed capital formation (percent change): 2019 -14.9; 2020 -11.1; 2021 8.3; 2022 -7.4; 2023 11.1; 2024 3.6; 2025 8.1; 2026 1.5; 2027 1.6.\n- Output gap (in percent of potential GDP): 2019 -7.3; 2020 -2.3; 2021 -4.1; 2022 -1.1; 2023 -0.6.\n- Unemployment rate (percent, period average): 2019 2.9; 2020 5.8; 2021 5.2; 2022 4.3.\n- Consumer prices (inflation, percent change): 2023 2.1.\n- GDP deflator (percent change): 2019 2.0; 2020 0.7; 2021 1.7.\n- Consolidated budget balance (percent of GDP) 1/: 2019 -9.4; 2020 -6.7; 2021 -5.8; 2022 -5.2; 2023 -3.0; 2024 (table shows data but not labelled for some years).\n- Revenue (percent of GDP): 2019 20.8; 2020 21.1; 2021 24.2; 2022 22.1; 2023 18.4; 2024 19.4; 2025 20.6; 2026 21.5; 2027 22.0; 2028 22.4.\n- Expenditure (percent of GDP): 2019 21.4; 2020 30.5; 2021 28.9; 2022 24.6; 2023 23.6; 2024 23.2; 2025 21.8.\n- Fiscal reserves (as of end‑March, percent of GDP): 2019 40.8; 2020 34.7; 2021 33.4; 2022 29.7; 2023 21.3; 2024 20.0; 2025 19.7; 2026 19.3.\n- Credit‑to‑GDP gap 3/: 2019 21.2; 2020 23.9; 2021 11.5; 2022 3.2; 2023 -14.5; 2024 -38.9.\n- Current account balance (percent of GDP): 2019 7.0; 2020 11.8; 2021 10.2; 2022 9.2; 2023 12.0; 2024 10.6; 2025 10.0; 2026 9.9; 2027 9.5.\n- Foreign exchange reserves (in billions of U.S. dollars, end‑of‑period): 2019 441; 2020 492; 2021 497; 2022 424; 2023 426; 2024 439; 2025 453; 2026 477; 2027 503; 2028 529; 2029 544.\n- Foreign exchange reserves (percent of GDP): 2019 121; 2020 143; 2021 135; 2022 118; 2023 112; 2024 109; 2025 108; 2026 106.\n- Net international investment position (percent of GDP): 2019 432; 2020 615; 2021 574; 2022 468; 2023 457; 2024 446; 2025 435; 2026 413; 2027 403.\n- Market rate (HK$/US$, period average): 2019 7.836; 2020 7.757; 2021 7.773; 2022 7.831; 2023 7.830.\n\nIMF Executive Board press release, January 23, 2025.\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- People's Republic of China - Hong Kong Special Administrative Region and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/index.md)", "[Structured JSON version](/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/index.json)", "[Bundle manifest](/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/bundle-manifest.json)", "Published: January 23, 2025", "The Executive Board concluded the Article IV consultation discussions on January 14, 2025, and endorsed the staff appraisal without a meeting on a lapse‑of‑time basis.", "Hong Kong SAR’s economy is on a path of gradual but uneven recovery following three years of recession since 2019.", "The financial system has remained resilient, supported by strong institutional frameworks, substantial capital and liquidity buffers, and the Linked Exchange Rate System (LERS) continued to function smoothly.", "The preliminary assessment for 2024 suggests that Hong Kong SAR’s external position is in line with fundamentals and desirable policies.", "2024 growth: real GDP growth is estimated to have moderated to 2.7 percent in 2024 from 3.3 percent in 2023.", "Projection: growth is projected to stand at 2.7 percent in 2025 and decelerate modestly to around 2½ percent over the medium term.", "Output gap: projected to continue to narrow and close by 2029.", "Inflation: projected to rise gradually to around 2½ percent.", "Downside risks (key):", "Upside scenarios:", "Assessment: The medium‑term fiscal consolidation path is appropriate; the plan to delay attainment of a balanced budget until FY2027/28 is considered appropriate given economic slack and the need to protect social welfare spending.", "Recommendation: Revenue mobilization efforts need to be stepped up to meet aging‑related and investment spending needs.", "Specific revenue measures suggested:", "Social policy: Steps to expand the coverage of social safety nets and increase their adequacy are needed.", "Banking sector: well‑capitalized and profitable, but proactive monitoring of emerging risks is needed due to weakening debt servicing capacity and rising liquidity risk among local firms.", "Supervisory recommendations:", "SME policy: Support should be well‑calibrated to balance necessary assistance with facilitating an orderly exit of non‑viable firms.", "Macroprudential stance and housing:", "Digital and sustainable finance:", "GBA initiative:", "Prioritize regional collaboration with Mainland China to develop zero‑carbon energy and improve energy efficiency in aging and poorly maintained buildings.", "Consider incentivizing energy saving and green transportation with additional forms of carbon pricing mechanisms.", "Continue efforts to bolster infrastructure and enhance resilience against climate‑related risks.", "Real GDP (percent change): 2019 -1.7; 2020 -6.5; 2021 6.5; 2022 -3.7; 2023 3.3; 2024 2.7; 2025 2.6; 2026 2.5; 2027 2.4.", "Private consumption (percent change): 2019 -0.8; 2020 -10.6; 2021 5.6; 2022 -2.2; 2023 7.7; 2024 -0.7; 2025 0.5; 2026 1.0; 2027 1.4; 2028 1.9.", "Gross fixed capital formation (percent change): 2019 -14.9; 2020 -11.1; 2021 8.3; 2022 -7.4; 2023 11.1; 2024 3.6; 2025 8.1; 2026 1.5; 2027 1.6.", "Output gap (in percent of potential GDP): 2019 -7.3; 2020 -2.3; 2021 -4.1; 2022 -1.1; 2023 -0.6.", "Unemployment rate (percent, period average): 2019 2.9; 2020 5.8; 2021 5.2; 2022 4.3.", "Consumer prices (inflation, percent change): 2023 2.1.", "GDP deflator (percent change): 2019 2.0; 2020 0.7; 2021 1.7.", "Consolidated budget balance (percent of GDP) 1/: 2019 -9.4; 2020 -6.7; 2021 -5.8; 2022 -5.2; 2023 -3.0; 2024 (table shows data but not labelled for some years).", "Revenue (percent of GDP): 2019 20.8; 2020 21.1; 2021 24.2; 2022 22.1; 2023 18.4; 2024 19.4; 2025 20.6; 2026 21.5; 2027 22.0; 2028 22.4.", "Expenditure (percent of GDP): 2019 21.4; 2020 30.5; 2021 28.9; 2022 24.6; 2023 23.6; 2024 23.2; 2025 21.8.", "Fiscal reserves (as of end‑March, percent of GDP): 2019 40.8; 2020 34.7; 2021 33.4; 2022 29.7; 2023 21.3; 2024 20.0; 2025 19.7; 2026 19.3.", "Credit‑to‑GDP gap 3/: 2019 21.2; 2020 23.9; 2021 11.5; 2022 3.2; 2023 -14.5; 2024 -38.9.", "Current account balance (percent of GDP): 2019 7.0; 2020 11.8; 2021 10.2; 2022 9.2; 2023 12.0; 2024 10.6; 2025 10.0; 2026 9.9; 2027 9.5.", "Foreign exchange reserves (in billions of U.S. dollars, end‑of‑period): 2019 441; 2020 492; 2021 497; 2022 424; 2023 426; 2024 439; 2025 453; 2026 477; 2027 503; 2028 529; 2029 544.", "Foreign exchange reserves (percent of GDP): 2019 121; 2020 143; 2021 135; 2022 118; 2023 112; 2024 109; 2025 108; 2026 106.", "Net international investment position (percent of GDP): 2019 432; 2020 615; 2021 574; 2022 468; 2023 457; 2024 446; 2025 435; 2026 413; 2027 403.", "Market rate (HK$/US$, period average): 2019 7.836; 2020 7.757; 2021 7.773; 2022 7.831; 2023 7.830.", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[People's Republic of China - Hong Kong Special Administrative Region and the IMF](http://www.imf.org/external/country/HKG/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/index.md", "json": "/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/index.json", "bundleManifest": "/en/news/articles/2025/01/21/pr25010-china-exec-board-concludes-aiv-consult-discuss-hong-kong-special-admin-region/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:34:53.378Z" }