In this guide to Hong Kong’s National Debt, we discuss the country’s level of debt, its debt history, who manages the debt, how the government raises funds, and the country’s credit rating.
The National Debt Of Hong Kong
The national debt is the total general government debt of the state. Hong Kong is part of China, but it is defined as a special administrative region (SAR).
Hong Kong has its own government and it is counted as a separate entity from the People’s Republic of China by international financial monitoring bodies.
As of June 2020, Hong Kong’s debt is $1,676,363,958,005 (USD).
Hong Kong’s GDP over $366 trillion (USD), making its debt-to-GDP ratio 0.46%, according to the World Bank.
Status of Private Business Debt
The debts of private businesses in Hong Kong are not counted as part of the country’s national debt. The private debts of the inhabitants of the country are also excluded from the national debt figure.
Hong Kong’s Debt History
Hong Kong has highly developed financial markets and a large English-speaking population. These two factors, together with a legal system that is based on English law, have made Hong Kong one of the financial centers of the world.
The country’s high property values allow property taxes to cover nearly all of the small government’s costs.
Avoiding Global Financial Crises
South-East Asia has experienced two financial disasters in the past few decades. The first was the Asian Financial Crisis of 1997 and the second was the global liquidity crisis of 2008.
Neither of these events caused problems in Hong Kong and the government did not need to take on extra debt to keep its economy afloat as other developed countries were forced to do.
A combination of constant success and an escape from world financial shocks means that Hong Kong has managed to pay down its low level of debt to almost nothing.
Who Manages Hong Kong’s National Debt?
Hong Kong is not a sovereign state — it is part of the People’s Republic of China, so it cannot have its own central bank.
However, the region has its own currency, the Hong Kong Dollar (HKD), and so it needs an institution to manage that money.
Hong Kong Monetary Authority
The SAR government created the Hong Kong Monetary Authority (HKMA) to handle the region’s financial activities. This agency is in charge of managing the sale of new issues of Hong Kong government securities.
The HKMA is effectively the central bank of the region and it is in charge of managing government debt as well as being the authority over the money supply.
What is Hong Kong’s Credit Rating?
Despite being one of the richest areas of the planet with almost no debt, the Special Administrative Region of Hong Kong does not enjoy the top credit rating.
The very best rating is “AAA.” Hong Kong’s rating is a little The table below shows the rating awarded to the SAR by the three top credit rating agencies.
Agency Foreign currency Local currency Outlook
Moody's Aa2 Aa2 Stable
Standard & Poor's AA+ AA+ Stable
Fitch AA+ AA+ Stable
These are high-grade ratings. The “Stable” outlook means that the ratings awarded by the agencies are unlikely to change in the near future.
How Does the Hong Kong Government Raise Debt?
The Hong Kong Monetary Authority runs the Government Bond (GB) program. Only “recognized dealers” can trade in government bonds and they have to do that through accounts set up in the HKMA system.
Some of the recognized dealers are selected to be the “primary dealers.” When the HKMA sells new issues of bonds the primary dealers are invited to submit tenders.
Primary and Secondary Markets
The market for government bonds is organized thus:
- The primary market is an auction carried out by the HKMA selling to primary dealers.
- The secondary market is made up of recognized dealers trading through their HKMA accounts. The primary dealers resell their bond allocations into this market.
Hong Kong Government Bonds
Hong Kong’s government bonds pay a fixed rate of interest. The interest payments on the bonds are made twice a year. The maturity dates used by the HKMA are:
- 5 years
- 10 years
- 15 years
Although trading of bonds in the secondary market can only be carried out by registered recognized dealers through their HKMA accounts, the prices of the bonds are listed on the Stock Market of Hong Kong.
More Facts About Hong Kong’s Debt
- You could wrap $1 bills around the Earth 547 times with the debt amount.
- If you lay $1 bills on top of each other they would make a pile 15,353 km, or 9,540 miles high.
- That's equivalent to 0.04 trips to the Moon.
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