Bankruptcy filings in Hong Kong escalate by 21% in March, reaching a new high since last November

Derek Lai

19th April 2024 – (Hong Kong) Hong Kong has witnessed a significant increase in bankruptcy filings, with March seeing a near 21% rise month-on-month and a 2.8% increase year-on-year, culminating in 783 cases, the highest since November of the previous year. This uptick brings the first quarter’s total to 2,184 filings, marking an almost 20% increase compared to the same period last year, as reported by the Official Receiver’s Office.

The economic landscape in Hong Kong has been considerably affected by a high-interest environment and a subdued investment climate, contributing to a continued downturn in property prices for approximately ten months. This has prompted banks to accelerate their loan collection processes, commonly known as “Call Loans.” Despite these challenges, experts believe that potential regulatory relaxations in the property market could invigorate trading activities, facilitating asset liquidation and enhancing cash flow opportunities for property owners.

Furthermore, the territory recorded a stark increase in compulsory corporate liquidations, with 69 requests noted in March alone – a 30% rise from the previous month and a nearly 41% increase year-on-year. The issuance of receivership or bankruptcy orders also saw a substantial climb, with 641 cases noted last month, reflecting a near 16% monthly and 28% annual increase.

Derek Lai, Vice Chair of Deloitte China, highlighted the surge in bankruptcy cases as a reflection of the prevailing economic pressures. Lai underscored the impact of the deteriorating conditions in sectors such as real estate, automotive, and import-export trades within Mainland China, which are likely to see concentrated cases of compulsory liquidations.

Lai further cautioned that the current “cash is king” era necessitates maintaining adequate cash flows to seize future investment opportunities and avoid high-interest loans. He expressed concerns that without positive external and local market stimuli, the financial conditions could worsen, potentially leading to an escalation in bankruptcy and liquidation cases.