How private credit can help unlock Hong Kong’s potential
4 December 2025
Hong Kong’s economy today is a tale of two cities: one thriving on the strength of its financial sector, and another weighed down by a sluggish real economy, struggling under the shadow of slower growth in mainland China.
The macro picture remains challenging. Hong Kong’s commercial property market remains depressed, tourism revenues — though improving — are still below pre-pandemic levels, and local consumers are spending more time and money in southern China, lured by a widening gulf in prices between Hong Kong and mainland China.
More trouble could be on the way. Just last month, China’s exports fell for the first time in eight months, a setback that will ripple through Hong Kong’s trade-support ecosystem.[1] Hong Kong’s property sector faces a reckoning next year, when developers face a 70% surge in bond maturities.[2] Retail spending is fragile: sales turned positive in September after 14 straight months of declines.[3] Mainland Chinese tourists are back in large numbers, but they are not spending as much as they used to.[4]
On the other hand, the city’s financial industry is charging ahead. Hong Kong’s markets have been buoyed by a surge of mainland money in search of yield — with all 20 of the exchange’s busiest trading days by volume occurring within the past 12 months. Foreign investors are also returning, drawn by Hong Kong’s appeal as a liquid conduit for China exposure as they diversify away from US assets.[5]
Private credit offers one way to translate the health of Hong Kong’s financial sector to the real economy through easier access to finance. Equity-backed financing, in particular, offers a way to unlock value from listed shares, providing flexible funding for entrepreneurs, investors and individuals without sacrificing long-term upside.
Waiting for China to act
As the gateway to mainland China, Hong Kong’s prosperity is closely tied to decisions made in Beijing. Stimulus efforts have stalled, even as deflationary pressures intensify and overcapacity squeezes industrial margins.[6] Chinese households, wary of falling prices and uncertain income prospects, have driven savings to an unprecedented 110% of GDP.[7] To counter the slump, market analysts expect more decisive policy support ahead of the Two Sessions in March, when major policy decisions are typically unveiled.[8]
But Hong Kong businesses cannot wait. As supply chains rewire and tariffs reshape trade flows, many businesses are already looking to Southeast Asia, Africa and Europe for new sourcing, production and distribution options.[9] Hong Kong–Morocco trade, for instance, has expanded by 17% annually since 2019 — far outpacing Hong Kong’s overall trade growth of 2.6%.[10] Chinese outbound investment into the EU and UK also jumped 47% in 2024, reflecting shifts in production and market-access strategies for Chinese tech firms.[11]
Traditional bank lending, however, remains conservative due to property-sector risks such as rising office vacancies and tightening credit standards.[12] Businesses need alternative capital that can move faster and respond to changing conditions.
This is where private credit — especially equity-backed lending — comes in. Nearly one-third of Hong Kong residents hold equities.[13] Monetizing that wealth can give businesses a means to restructure, bridge cash-flow gaps, invest abroad or diversify income streams while retaining the long-term potential for capital appreciation. While macro and property pressures are real, the city’s role as a bridge between China and global capital remains vital.
What’s more, the pool of private credit available in Hong Kong is growing as global investors expand their presence. The city remains one of the preferred jurisdictions for private-credit fund formation thanks to its infrastructure, legal framework and proximity to mainland China.[14] That means more capital could be available locally, often with fewer covenants, quicker underwriting and more flexible use of corporate or sponsor backing.
For Hong Kong’s entrepreneurs, these trends represent an opportunity. As private credit evolves from a niche product to a mainstream financing tool, business owners stand to benefit from a wider range of financing options that allow them to pivot quickly, pursue regional expansions or upgrade operations.
A challenge — and an opening
Despite its difficulties, Hong Kong has continued to defy expectations. The economy grew 3.8% year-on-year in the third quarter.[15] Rising IPO activity on the city’s exchange suggests investors are again willing to price a China recovery story — a small but meaningful signal that sentiment is stabilizing.
The question now is whether the real economy can capture this momentum. If businesses can access the right form of financing — flexible, fast and tailored to a shifting regional landscape — the successes of Hong Kong’s financial sector can be a catalyst for real growth.
[1] https://www.bloomberg.com/news/articles/2025-11-07/chinese-exports-unexpectedly-fall-after-us-trade-tensions-spiked
[2] https://www.reuters.com/world/china/hong-kong-property-sector-clouded-by-rising-debt-repayment-risks-2025-08-18/
[3] https://www.bloomberg.com/news/articles/2025-10-31/hk-s-economy-grows-most-since-2023-on-strong-exports-retail
[4] https://www.scmp.com/opinion/comment/article/3328583/hong-kong-businesses-must-adapt-new-tourism-and-spending-trends
[5] https://www.ft.com/content/df68254d-a1f5-4fc1-9ee2-6d29bca012e5
[6] https://www.bloomberg.com/news/articles/2025-08-21/xi-overcapacity-fight-leaves-economy-vulnerable-without-stimulus
[7] https://www.bloomberg.com/graphics/2025-china-deflation-cost/
[8] https://www.bloomberg.com/news/articles/2025-11-17/china-pulls-back-government-spending-by-most-in-over-four-years
[9] https://www.spglobal.com/market-intelligence/en/news-insights/research/2025/10/what-does-transshipment-trade-mean-for-china-asean-trade-and-us-tariffs
[10] https://research.hktdc.com/en/article/MjExOTQzNTIwMw
[11] https://www.scmp.com/business/banking-finance/article/3327182/asian-firms-shift-investment-towards-europe-supply-chain-realignment-ing-says
[12] https://www.ft.com/content/352f58a4-ee6d-4cc4-bd3e-b0398abfb376
[13] https://www.hkex.com.hk/News/News-Release/2015/1504162news
[14] https://www.deacons.com/2024/12/19/hong-kongs-potential-as-a-new-hub-for-private-credit-funds/
[15] https://gbcode.rthk.hk/TuniS/news.rthk.hk/rthk/en/component/k2/1831861-20251116.htm
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