Hong Kong’s Financial Hub Lies in Ruins! Foreign Cash Flees, Mainland Cash Flees Even Faster

This is Hong Kong. This is Xiongshui, Hong Kong. It used to be packed. Now look how quiet it is. San Hong Street used to be crowded too. Now there are hardly any people. The whole street feels empty. I really don't know what to do. Hong Kong is really not that bad. Look at the whole street. There aren't 9 shops in 10 shops. It's so exaggerated. I never thought Hong Kong would get this bad. Look down this street. It's not quite 9 out of 10 shops sitting empty, but there are definitely more vacant storefronts. With so many people living here, a small rent cut should solve the problem. But it's not that landlords won't cut rents. They can't. Most shop owners in Hong Kong borrow money to buy their properties. They have to open a rent collection account at the same bank that issued the loan, and the bank monitors it. A shop's value depends on its rental income. When rent falls, the property's value falls too. The bank can then reassess the property and demand a lump sum repayment to cover the drop in value. Everyone has their own problems. Cutting rent is a problem, and so is keeping it the same. There's no easy solution. Online discussions about the damage to Hong Kong's economy and a widespread downturn have grown in recent years. Many link the situation to worsening economic conditions and policies in mainland China. The latest data shows mainland investors pulling money out of Hong Kong stocks at the fastest pace in more than five years, adding pressure to the city's weak economy. Bloomberg reported on the evening of October 29th that Chinese investors had made net sales of HK$24 billion in Hong Kong stocks so far that month. Those trades went through the Shanghai and Shenzhen Stock Connect programs. October could become the biggest month for mainland outflows since 2021. The report said mainland investors had long been steady buyers of Hong Kong stocks, providing strong support during market downturns. Their shift towards selling is a troubling sign for the market. Historically, the Hang Seng Index has often faced extended declines when mainland investment flows turn negative. Hong Kong stocks have now fallen for three straight months. Reasons include fading enthusiasm for AI stocks and rising financing costs. Technology stocks have taken the biggest hit in the sell-off. Mainland investors have heavily sold shares in SMIC, Alibaba, and Xiaomi. The Hang Seng Index has fallen 6.7% this month and could record its biggest monthly drop since June. The Hang Seng Tech Index has almost erased all its gains since Beijing launched broad monetary stimulus in September 2024. A lackluster start to earnings season and Beijing's failure to deliver strong fiscal stimulus are seen as key reasons for investor disappointment and the outflows. Ping An Insurance reported a sharp profit decline as investment income fell. Shengtai Brewery also posted results below expectations. Scarlett Liu, an Asia-Pacific equity derivative strategist at BNP Paribas, said investors remain concerned that higher capital spending could squeeze profit margins at many Hong Kong-listed companies. She said some consumer electronics and EV companies listed outside mainland China were also being hurt by higher costs. Jasmine Duan, a senior investment strategist at RBC Wealth Management Asia, said the Hong Kong stock market could fall another 10 to 15 percent before finding a bottom. Right now, the market most sensitive to moves in U.S. Treasury yields and investment flows. Jason Lemire, chief investment officer at Bold Wealth Partners, said sharp cuts to earnings forecasts are weighing on stock valuations. He said the decline may only reverse once those earning cuts ease and competitive pressure lets up. Poor earnings are only part of the problem. Many mainland Chinese companies have listed on the Hong Kong Stock Exchange in recent years. Financial fraud, misconduct in initial public offerings, and other problems have led to trading suspensions at more than 100 companies. Some have been forcibly delisted. Industry insiders say these cases have seriously damaged investor confidence and hurt Hong Kong's financial markets. Brokerage China, a publication under the major Chinese financial newspaper Securities Times, reported on October 18 that Hong Kong was stepping up the removal of so-called zombie companies from its stock market. Data from Wind showed that 36 companies had been delisted this year as of October 15. More than 80% were from mainland China. Of the total, 25 were forcibly delisted by the exchange. Several others had received delisting approval from its listing committee and were preparing to leave. Companies with long trading suspensions were being delisted faster than during the same period in 2025. In one week, the exchange forcibly delisted maternal and child health management company ID Gong, mechanical and electrical service provider Kuhn Group, and China 21st Century Education. Kuhn Group was founded in Singapore, and its ultimate controlling owner is Chen Zhi of Prince Group. Chen faced accusations involving online fraud and money laundering. He was sanctioned by the U.S. Treasury Department's Office of Foreign Assets Control. The listed company he controlled, Kuhn Group, was also added to the sanctions list. This ultimately led to its auditor's resignation, a trading suspension, and the cancellation of its listing. Forced delistings rose sharply after the Hong Kong Stock Exchange introduced a fast-track delisting system in 2018. There were 19 in 2019, rising to a record 47 in 2022. From 2020 through 2025, the exchange forcibly delisted 219 companies, with more than 30 removed each year. Many companies whose shares remain suspended are also approaching delisting. Exchange data showed that 98 companies had been suspended for more than three months as of September 30. Of those, eight had already received delisting from the Listing Committee. The report said the 25 companies forcibly delisted this year shared several traits. Most had low market values, operated in consumer businesses, and had little real business activity. Their earnings could not support their valuations as listed companies. They were suspected of keeping their listing alive as shells. In financial markets, this means taking control of a listed company without immediately putting the buyer's main business assets into it. Instead, the owner waits to sell at a high price to another buyer seeking a stock market listing through the shell. A partner at Dehang Law Offices in Guangzhou, Zhengfan Jun, said years of cases and court rulings had turned the exchange's fast-track delisting rules into a regularly used regulatory tool. Regulators have tightened approvals for extensions to the period companies receive to fix problems. Only a very small number facing procedural obstacles can apply for more time. The exchange has also tightened the requirements for keeping a listing. Misconduct at some mainland companies listed in Hong Kong makes them more likely to trigger forced delisting. Hong Kong Securities and Futures Commission suspended trading in mainland tea chain Cha Bai Dao on October 13. It said the company's IPO may have been manipulated to create a false appearance of demand for its shares. The Futures and Securities Commission also expressed deep concern after reviews of other listed companies uncovered suspicious IPO arrangements. Some listing applicants were suspected of secretly providing share purchase funds or guaranteed returns to selected investors or people connected to them. These arrangements distorted real investor demand, undermined market integrity, and weakened the fairness of the process that determines share prices. Misleading disclosures and possible trading manipulation after listing also harmed public investors. Analysts say some mainland companies have brought harmful business practices into Hong Kong's stock market, with repeated cases of fraud and IPO manipulation. The Securities and Futures Commission said IPOs involving T-Chain, Cha Bai Dao, and other companies were suspected of creating false demand. It froze more than HK$4.6 billion in assets, a record amount for such cases. Analysts say these companies have weakened investor confidence and damaged their reputation for integrity and the rule of law that supports Hong Kong's role as an international financial center. A market once known for transparency and strict standards is now weighed down by shell companies focused on cashing out. They see this as an example of mainland business practices spreading into Hong Kong, and of the city becoming more like the mainland. Many people commenting online say Hong Kong has lost its old character and increasingly resembles an ordinary mainland city. They point to the following changes. First, the streets have quietly changed. Many of the old Toyota Crown taxis once seen everywhere have been replaced by Chinese EVs. There are also many more cars with Guangdong license plates on the streets. Second, the wave of demolition and redevelopment seen in mainland cities has spread to Hong Kong. The neon signs that gave the city its distinctive look have largely been removed. It's already narrow. Aging streets have lost their colorful lights and could come to resemble mainland streets. Third, roads are constantly being dug up and repaired. Municipal projects are increasingly becoming a source of income for officials. Roads are repeatedly torn open and patched up, another pattern associated with the mainland. Fourth, local Cantonese-speaking atmosphere is fading. Mandarin and even Northeastern Chinese dialects are heard more often on the streets. Sometimes people briefly forget which city they're in. Fifth, many long-time local shops have struggled to stay open. Lower-quality mainland brands have moved in. Local people commenting online say Hong Kong is no longer the city they knew. Many mainland visitors also say it has lost some of its distinctive appeal. A mainland worker in Hong Kong said, What's going on in Hong Kong right now? Based on my first initial understanding, it's like The way I see it, a lot of so-called middle-class people are holding the whole city up. The wealthy left years ago. Actually, they started leaving a long time ago. They sold their assets and moved their families abroad. People leave every year. The middle-class left behind pays the heaviest taxes to support poor people like me. Then there are ordinary low-income workers. They just get by here and barely spend anything. Apart from going to work, buying lunch, picking up a few groceries, and taking buses or the subway, they don't make any major purchases. A mainland concert-goer who had just seen global R&B star The Weeknd said, After the concert in Hong Kong, the special forces returned to Shenzhen. After the concert in Hong Kong, I rushed back to Shenzhen and went for a walk. Honestly, a few things really bothered me. I thought my seat was pretty close to the stage. I'd paid extra to get it from a scalper. I expected to be surrounded by diehard fans and have a great time. Instead, everyone around me was an influencer or some model-looking guy or girl. They were there to get pictures. Before the show even started, they'd taken 800 photos. Then the music started and they just sat there the whole time without singing along. Even when the intro to Starboy came on and the performer told everyone to sing, everyone within about 30 feet of me stayed seated. It was as quiet as a classroom. Even a morning reading class would have been louder. Many commenters agreed. One wrote, everyone around me was so quiet too. Hardly anyone sang along. Another said, same here. Even when the weekend tried to get everyone jumping, they just sat there quietly, showing no excitement at all. One commenter said, those seats near the front used to be mostly filled by local Hong Kong fans. The atmosphere would have been electric. Things have really changed. That kind of excitement from local fans is almost gone. Industry insiders say the weak economy is the main reason Hong Kong residents feel down and are more cautious about spending. The city has faced another wave of store closures this year, much like mainland China. That wave began emerging and intensifying after pandemic restrictions were lifted in 2023 and 2024. It has now lasted about three years. By July this year, petitions to force companies into liquidation has surged to 104, up 35.1% from a year earlier. It was the highest monthly total in 22 years, and the first time the figure had exceeded 100 during that period. Restaurants have been hit especially hard. Well-known chains and neighborhood landmarks operating for decades have closed. They include Kwok Kee Congee in Yuen Long, in Kowloon City. San Kee Congee and Noodles in Quarry Bay, and Hang Tang Court in Tai Po. Recent restaurant closures include all locations of Pizza Box, which had operated in Hong Kong for 23 years, and Fairwoods, a bowl of minced pork chain. Neighborhood restaurants have also shut down one after another. They include Star Seafood and Roast Goose in San Po Kong, Star Seafood Restaurant in Kwun Tong, Ho Yin Seafood Restaurant in Lantau, Qingyi Estate Restaurant. and Long Po Restaurant in Kwai Fong. Maxim's Jade Garden branch in Tsuen Wan O has also closed. A June report by the Hong Kong Legislative Council's Research Office found that restaurant industry revenue in the first quarter of 2026 was 7.2% below the same period in 2018. Bars and Chinese restaurants saw the deepest declines, at about 28%. 28%. Company liquidation petitions totaled 449 in 2022, 493 in 2021, and 481 in 2022. The figure rose 17.7% to 566 in 2023. It jumped another 30.7% to 740 in 2024, the highest since 2009. In 2025, it rose 12.2% to 831, the highest since 2005. The first seven months of 2026 alone recorded 595 petitions. Retail has also faced repeated upheaval this year. Leading supermarket chain ParknShop closed several neighborhood branches within six months. Fortnum & Mason, a supplier to the British Royal Family, closed its James Jardine store. The landmark H&M flagship in Causeway Bay also shut down. The century-old department store Sincere closed its branch at Dragon Center early in the year and recently announced a closure of its central branch. The DFS duty-free store at Lipo Sun Plaza on Canton Road also closed. The well-known Hot Stone yoga chain officially shut down on October 1st. Video showing Hong Kong's downturn continues to circulate on social media. A mainland vlogger recently said, Hong Kong has changed so much. I've mixed feelings about it. Many commenters wrote, Hong Kong has become just another mainland city. When I visited, it felt like a city that has lost its roots. I couldn't find any trace of the old Hong Kong. It had become a museum. One person commenting from abroad said, The Hong Kong we knew disappeared after 2019. What took a century to build was lost overnight. A Hong Kong vlogger said some people blame the entire downturn on resident shopping across the border. But people throughout the city are joining an unprecedented wave of precautionary saving, often without realizing it. That includes young workers in their 20s, people in their 30s carrying mortgages worth millions of dollars, and people in their 50s and 60s preparing to retire. Everyone is trying to save and watching what they spend. Hong Kong resident Mr. Ding told a reporter, People spend less at night. Hong Kong doesn't have the nightlife it used to. People didn't cook at home much before. They ate out a lot, which kept restaurants going. The main change came after the anti-extradition protests. The government wouldn't let people stay out at night. People had to come home by 9pm. If they went out again, they could be detained or have their IDs checked. There were all kinds of problems. The streets already felt quieter at night then. And then the pandemic came. The anti-extradition movement began in Hong Kong in June 2019. A million people marched against a proposed change to extradition laws. In the second half of the year, it developed into mass street protests and intense clashes before ending under a forcible crackdown. Beijing imposed the Hong Kong national security law on June 30, 2020. Local resident Xiao Lan told a reporter, A lot of shops have closed because local owners couldn't keep going. But as soon as they shut down, mainland business people spot the location and open a new shop. On the surface, it can still look busy. But the people running the shops have changed. They're no longer local Hong Kongers. She said Hong Kong residents used to spend weekends in Shenzhen because goods were expensive back home. But prices in Shenzhen have recently become comparable to those in Hong Kong, and interest in shopping on the mainland is gradually fading. Xiaolan added, the nighttime economy has slowed since the national security law took effect. On this visit to Hong Kong, friends invited me to dinner, and I noticed that the tables around us weren't full. Before, it was so busy that getting a reservation would be difficult. A lot of people have left Hong Kong, including many middle-class residents and young families with children. The government hoped mainland visitors would come and spend money, but many come for the day and travel on very tight budgets, so Hong Kong hasn't benefited. During interviews, reporters found that major changes in Hong Kong's political environment has made many residents reluctant to speak openly. Others would only say they had not felt much economic impact. Yet the figures show growing unemployment and a continued rise in personal bankruptcy petitions. Hong Kong's unemployment rate was 3.7% in the first quarter of this year and rose to 3.8% in the second quarter, a nearly five-month high. About 154,000 people were unemployed. Youth unemployment jumped to 9.1%, more than twice the overall rate and the highest in seven months. Ms. C, a 36-year-old unemployed single mother in Hong Kong, is raising two children. She told the media. She lost her job in September and has not found another. The company she worked for was owned by local Hong Kong residents. Ms. C said, Hong Kong's economy is struggling. People have enough to survive, but not enough to live comfortably. Things are difficult everywhere. I earned more than HK$10,000 a month at a clothing company. It closed because business was bad. Now, there are clothes shops everywhere, and more people are out of work. But it's not that I can't find a job. I have children to look after, so I won't take work that doesn't fit. One commenter wrote, Ordinary office workers in Hong Kong were already earning more than HK$10,000 in the 1980s, Prices are incredibly high now, but pay is still at levels from more than 30 years ago. Ms. C may feel that she can still find work, or accept a salary of a little over HK$10,000, Hong Kong dollars. but she's comparing it with a smaller mainland city. That's far below what people should expect in Hong Kong, but it's the reality now. Official figures show 5,388 personal bankruptcy petitions in Hong Kong this year, including 835 in July, a four-month high. At the same time, real gross domestic product, or GDP, grew 5.9% from a year earlier in the first quarter of 2024, and 4.3% in the second. Growth for the first half totaled 5.1%. That growth stands alongside company liquidation petitions at a 22-year high and rising unemployment, raising doubts about how widely the recovery is being felt. U.S.-based economist David J. Wong said, Growth in Hong Kong's financial trading, trade, and large corporate businesses can lift GDP, but that growth is disconnected from daily life. The figures show expansion, while ordinary people don't see matching opportunities. Some commentators describe the gap between rising official GDP figures and residents' bleak economic experience as ghost GDP. They say communist China extensively falsifies economic data and uses massive infrastructure spending to boost GDP without raising ordinary people's incomes. They say Hong Kong is gradually moving in the same direction. In their view, both mainland China and Hong Kong are in an economic downturn driven by geopolitics. The Chinese Communist Party's confrontation with the United States has drawn Hong Kong into the fallout. They say the loss of many valuable Western clients and investors has driven a rapid economic decline and severely damaged the market. To improve headline figures and align politically with the mainland, Hong Kong has adopted a socialist approach based on five-year plans. Some Hong Kong residents also say that government policy reports increasingly resemble those of the Chinese Communist Party. They say Beijing wants to repackage mainland products and businesses through Hong Kong before taking them to international markets because mainland standards fall short. In their view, that's the only role Hong Kong has left.