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IMF says Hong Kong’s financial system resilient to future shocks, cautions property valuations and deep China links as potential risks

  • The International Monetary Fund said the city’s financial system remains strong after a challenging two-year period
  • Sky high real-estate valuations, extensive links to China are among potential vulnerabilities to city’s financial system

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Managing director Kristalina Georgieva. The IMF found Hong Kong’s financial system remains stable after a challenging two-year period that saw the city’s economy face its worst contraction on record. Photo: AFP
Chad BrayandEnoch Yiu
The International Monetary Fund (IMF) said Hong Kong’s financial system remains resilient to future financial shocks and crises even after a challenging two years that saw the city’s economy experience its worst contraction on record.
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In its latest financial system stability assessment, the international organisation’s executive directors found the main vulnerabilities for the city’s economy related to sky-high real-estate valuation and exposures to shifts in global markets and domestic risk sentiment. They also cited the extensive linkages of the city’s economy to mainland China as a potential vulnerability.

Potential pockets of vulnerability within the financial system included households, non-financial companies and investment fund sectors, the IMF said in a report published on Wednesday.

“Sound macroeconomic and prudential policies over the years have provided Hong Kong SAR with important buffers to cope with the current slowdown and future shocks,” the IMF said. “The banking sector remains well capitalised, profitable, and non-performing loan ratios remain low. ”

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Hong Kong’s economy was battered by months of anti-government protests in 2019, followed by the coronavirus pandemic in 2020, which hit global trade and travel. The city’s economy suffered its worst contraction on record in 2020, but grew by 7.9 per cent in the first quarter, its fastest pace in more than a decade.
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