The 2024 Hong Kong Economic Outlook: Growth Drivers from People Flow, Goods Flow, and Capital Flow
As a global financial hub, Hong Kong's economic development has always attracted widespread attention. In 2024, what challenges and opportunities might Hong Kong face? Li Luxia, Deputy General Manager of the Southeast Asia Research Center at Industrial and Commercial Bank of China (Asia), explores the driving forces behind Hong Kong’s economic growth from three key aspects. She also anticipates that Hong Kong’s real estate market will gradually stabilize in 2024.
Three Growth Drivers Powering Hong Kong: People Flow, Goods Flow, and Capital Flow
Li Luxia, Deputy General Manager of the Southeast Asia Research Center at Industrial and Commercial Bank of China (Asia), analyzes Hong Kong’s economic outlook from three perspectives—people flow, goods flow, and capital flow. She believes that people flow will continue to be a stable growth engine for Hong Kong’s economy in 2024. In the first 11 months of 2023, visitor arrivals recovered to about 50% to 57% of pre-pandemic levels (2018–2019), suggesting room for further recovery. This, combined with the Hong Kong SAR Government’s vigorous implementation of various talent admission schemes and the easing of employment and study visa policies for countries such as Vietnam, Laos, and Nepal, indicates sustained cross-border movement. This should continue to support steady growth in industries tied to people flow, such as wholesale and retail, accommodation and food services, and personal services.
Secondly, goods flow is expected to make a moderate contribution to growth. With improving conditions in sectors like the electronics supply chain, there has been a noticeable rebound in global trade since Q3 2023. Benefiting from this recovery and a low base from the previous year, Hong Kong's exports in October 2023 recorded positive year-on-year growth for the first time since April 2022. As global manufacturers enter a new inventory restocking cycle, trade-related activity in Hong Kong—particularly re-export trade from the Mainland—is likely to strengthen.
In addition, capital flow is poised to be another driver of growth. There is a high likelihood that the U.S. Federal Reserve will begin cutting interest rates by mid-2024. Meanwhile, mainland China's economic indicators remain positive, and signals from the Central Economic Work Conference suggest a proactive policy stance. Improvements in corporate performance, along with a series of measures aimed at revitalizing the capital market, are expected to boost investor confidence. This could spark a rebound in Hong Kong’s capital markets and real estate sector. A stronger secondary market may also revive IPO activity, creating a positive feedback loop between the primary and secondary markets.
Hong Kong’s Property Market Expected to Stabilize in 2024
The property market remains a hot topic in Hong Kong. Li Luxia notes that, driven by a strong capital market rebound and the reopening of borders, the property market saw a short-lived recovery in Q1 2023. However, sentiment cooled in subsequent quarters due to rising mortgage rates and capital market volatility dampening income expectations. In the first 11 months of 2023, the number and value of property transactions fell by 3.2% and 15.9% year-on-year, respectively. A more accommodative interest rate environment and improved income confidence are expected to support market stabilization in 2024.
On the demand side, the SAR government’s various talent admission programs, coupled with incentives such as the "stamp duty rebate for new talent homebuyers," are likely to continue stimulating housing demand.
On the cost side, under the Linked Exchange Rate System, a shift in U.S. monetary policy would also lead to a lower interest rate environment in Hong Kong, injecting more momentum into the property market. This could prompt some renters who have been on the sidelines to turn into buyers. In the first 10 months of 2023, the official private home price index fell by 4%, while the rental index rose by 6.2%, indicating that due to weak confidence and wait-and-see sentiment, some demand shifted from buying to renting. As rates decline and income expectations improve, this deferred purchasing demand is expected to gradually re-enter the market.
Monitoring Risks: Fed Policy and Geopolitical Uncertainty
Regarding investment opportunities and risks in 2024, Li Luxia believes that the start of interest rate cuts in the U.S. and Europe will ease global liquidity, helping to boost market performance and reduce capital outflow pressures from non-U.S. markets. Currently, valuations for Hong Kong stocks and Chinese USD bonds remain at historical lows. With international capital returning and mainland China’s economy gaining momentum, both markets are well-positioned for recovery. Declining mortgage rates may also help lift sentiment in the property sector.
However, Li also warns that investors should closely monitor potential market volatility caused by changing expectations around U.S. monetary policy and the impact of unexpected geopolitical events. As an offshore financial center, Hong Kong is historically more sensitive to such developments.
2024 Economic Outlook: Gradual Recovery with Growth Forecast of 3.2%–3.3%