In 2025, Hong Kong’s economy presented a “better than expected” report card on the surface, with the government raising the full-year GDP growth to 3.2%, and the government’s fiscal situation looking more ideal than earlier estimates. However, behind the prosperity figures, issues such as the overheating commercial property market, rising pressure on bank bad debts, and significant incidents exposing accountability and governance gaps have led to a sense of “Hong Kong anomaly” with apparent cracks. While the economy and capital markets are showing signs of recovery, the institutional and social trust are eroding, showing a clear intersection of two trends towards the end of the year.
Looking back at the year, there were significant economic and financial news events that serve as signals pointing to the structural contradictions and unresolved issues in Hong Kong during this transition period.
At the beginning of the year, the market was generally conservative, with the government estimating growth at around 2%, and there were doubts whether the target could be achieved. However, in the fourth quarter, the full-year growth was revised up to 3.2%, reflecting economic resilience surpassing expectations.
Key to the fiscal aspect, stamp duty revenue became one of the “pleasant surprises,” with approximately HK$44 billion recorded in the first half of the year. Coupled with stabilizing property transactions and increased property listings, the improvement in related tax revenues exceeded the initial estimates. When Chief Executive Li mentioned upon returning to Hong Kong from Beijing that the fiscal situation was improving “without needing to wait for 2-3 years,” it might imply that this year’s storyline is “a quick improvement in figures as the cycle turns,” but it also reminds the market that the fiscal improvement is more cyclical and tax structure-related, rather than a return of comprehensive structural growth.
Hong Kong’s GDP in the third quarter grew by 3.8% annually, surpassing expectations.
Putting Hong Kong in a global context, the contrast this year is particularly sharp. With the volatile global economy, the U.S. claims strong economic performance on one hand but faces challenges in employment and inflation pressures, making it harder for the market to build confidence. Therefore, Hong Kong’s decent growth amid global weaknesses highlights its resilience.
However, this anomaly does not mean that Hong Kong has returned to its past comprehensive prosperity. It is more like the financial and capital markets are driving confidence and some activities up (especially IPOs and the stock market), rather than consumption, industry, and livelihoods rising simultaneously. In other words, the highlight of Hong Kong this year is more like “Hong Kong of the capital market” outshining “Hong Kong of the street economy.”
The residential property market showed clearer signs of bottoming out this year, but conditions for a rapid rebound are lacking. The U.S. interest rates did not decrease significantly as expected by the market; local first-hand supply remains abundant, and developers continue to exercise restraint in pricing, indicating a lack of unanimous belief in “significant short-term price hikes.”
The situation in the commercial real estate sector is more severe, with pressures on small and medium-sized developers’ funding chains, while some major developers rely on substantial financing to “weather the storm.” The pressure has also spread to the banking system, with banks like HSBC (00011) being indicated to have hit record high bad debt ratios. Rental and valuation adjustments in commercial buildings will gradually transform into a long-term test of credit quality and financial stability.
Another significant development in 2025 was the increasing pace of HSBC’s organizational restructuring. Speculations about HSBC’s privatization or various breakup scenarios abound in the market. However, more importantly, HSBC itself has been implementing a broader business reorganization, restructuring business divisions, streamlining management, and accelerating integration execution. Against the backdrop of geopolitical and regulatory risks, such actions have their strategic rationality: isolating risks, thickening firewalls to prevent one geopolitical impact from affecting another region. The key observation in the market this year is the faster execution pace and stronger decision-making, preparing the ground for larger deployments in the next fiscal year while the capital market environment still allows for maneuverability.
Capital markets were one of the shining sectors in Hong Kong this year, with IPO fundraising sizes touted to re-enter the “global top ranks,” potentially reaching the HK$200 billion level for the year. While there is the narrative of “Hong Kong regaining its attractiveness,” more concrete structural factors are at play. Mainland China tightening the pace of A-share new listings has led many companies to turn to Hong Kong. This is advantageous for Hong Kong but also brings a side effect of oversupply and varied quality; cases of unsuccessful IPOs and below-expectation performances are more common. The lesson for investors this year is that IPO fever does not guarantee profitable new stocks; when the market shifts from “short supply” to “overwhelming supply,” risk pricing becomes more realistic and diverse.
The tussle over CK Hutchison’s sale of the port becomes one of the most reflective cases this year of “commercial transactions becoming politically charged.” From a corporate standpoint, the essence of the port is a rental income asset; selling off assets at a good price amid a slowdown in global trade and rising geopolitical risks makes economic sense. But when the transaction escalates to the levels of “strategic assets” and “national interests,” the logic shifts from commercial valuation to political positioning. As a result, what could have been negotiated based on commercial terms gradually evolves into uncompromising demands for controlling stakes and political struggles, leaving the billion-dollar deal in a state of “unresolvable negotiations.” This real-life scenario serves as a reminder that companies’ former practice of maintaining vague balances with multiple parties is now facing higher costs.
The year-end fire at Hong Fook Court in Tai Po became a turning point in 2025 because it brought the institutional rift from “beyond economic figures” directly onto the stage. Residents had previously raised safety concerns, and spontaneous mutual aid energy had increased; however, post-incident accountability seemed challenging to be held at the responsible official level but rather focused more on the contractor, corporation, or individuals. Simultaneously, societal discussions also exhibited tensions of “suppression,” creating a deeper contradiction. The government had to maintain the narrative of “economic improvement and everything is normal” while reinforcing control through the safety narrative. These conflicting narratives made it difficult to establish them both simultaneously after a major incident. This dilemma of “the inability to correct institutions but the need to maintain image” prompted many to reassess the underlying structures of Hong Kong’s governance ability.
Unemployment in Hong Kong in 2025 remained between 3.6% and 3.9%, with the latest figure around 3.7% to 3.8%, showing no sharp rise, but underemployment increased to 1.6%, indicating many workers facing pressures on actual working hours and income. There were significant shifts in industry structures, with positions related to real estate and retail continuously shrinking, while demands for positions in fintech, compliance, risk management, and data-related areas were increasing. The employment issue shifted from total quantity to skills and industry mismatches. Additionally, bankruptcy cases hit a near three-year high, involving over 120,000 individuals, highlighting that low unemployment rates may not fully reflect the economic reality.
On the quality of life front, rising costs became a pervasive concern. Food prices, daily expenses, and service prices increased, putting pressure on many residents who felt a gradual erosion of their financial security. Various surveys indicated that about 70% of Hong Kong residents have insufficient savings, with an average retirement postponement of 12.8 years. A majority of the population lacks confidence in retirement savings, showcasing that despite seemingly stable employment figures, there is fragility in income security and long-term protection, making it one of the most representative societal concerns of 2025.
Retail in Hong Kong showed a trend of initial weakness followed by stabilization in 2025, with the recovery pace uneven. The return of inbound tourists improved retail foot traffic, but the recovery in consumptive power remained limited, with overall sales performing only moderate repairs.
The retail market started under pressure at the beginning of the year, with retail sales plunging significantly by 13% year-on-year in February. The decline gradually narrowed, and there was a slight rebound later on. In the second half of the year, as tourism activities continued to recover, retail performance improved further, with retail sales increasing by 1.8% in July, 6.0% in September, and 6.9% in October on a year-on-year basis. From a structural perspective, online and experiential retail show more noticeable growth, while offline stores and non-core business districts still face challenges of insufficient foot traffic and rental pressures, placing the retail sector in an adjustment phase.
In 2025, Hong Kong appeared as a divided sample, with one side showing GDP growth, fiscal deficits narrowing, IPOs returning to form, and upward trends in the stock market, while the other side exhibited issues in commercial property, rising bad debts in banks, accountability fractures in significant incidents, and the forced confrontation of institutional capabilities with reality. The so-called “Hong Kong anomaly” is not a miracle but an expansion of differentiation and fissures. While the economy can look better under financial impetus, once there are institutional shortcomings, the entire narrative will be brought back down to reality at the most inopportune time. This combination of “surface prosperity plus underlying erosion” is likely the prelude to longer cycles post-2026.