On September 29, the Hong Kong Monetary Authority released its Half-Yearly Monetary and Financial Stability Report (September 2026).

The report showed that the Hong Kong economy grew robustly in the first half of 2026, with real gross domestic product rising 5.9% year-on-year in the first quarter and 4.3% in the second quarter.

After seasonal adjustment, real GDP rose notably by 2.9% quarter-on-quarter in the first quarter, but edged down 0.6% in the second quarter.

The report expects the Hong Kong economy to remain firm and continue expanding for the rest of 2026.

Taking into account the latest economic situation, the Hong Kong government revised its 2026 real GDP growth forecast upward from 2.5%-3.5% to 3.5%-4.5%.

Economic growth was supported by strong export performance and solid domestic demand.

Externally, goods exports expanded markedly, buoyed by strong global demand for artificial intelligence-related electronic products.

Driven by continued growth in inbound tourism and vibrant cross-border financial activity, services output remained buoyant.

Domestically, private consumption strengthened further, supported by firm consumer confidence and stable asset markets.

Meanwhile, investment expenditure continued to expand in the first half, partly driven by brisk property transactions and strong private-sector capital spending.

During the review period, Hong Kong's monetary environment remained accommodative.

As of end-August 2026, the Hong Kong dollar monetary base remained large and broadly stable at HK$2,080.3 billion.

In the first seven months of 2026, total deposits with authorized institutions increased by 5.8%. Among them, Hong Kong dollar deposits and foreign currency deposits rose by 6.2% and 5.5% respectively.

Since monetary statistics may be affected by various short-term factors such as seasonal funding demand and business- and investment-related activities, it is appropriate to observe longer-term trends.

Overall, interbank market trading in Hong Kong continued to operate smoothly and in an orderly manner.

As expected and designed under the linked exchange rate system, Hong Kong interbank rates generally tracked U.S. interest rates, while short-term rates were also influenced by local Hong Kong dollar funding supply and demand conditions.

Short-term Hong Kong interbank rates fell in early March 2026 and then generally rebounded, reflecting changes in seasonal and capital-market-related funding demand.

During the review period, the offshore renminbi interbank market continued to operate normally.

In the first seven months of 2026, Hong Kong's offshore renminbi liquidity pool expanded.

At end-July 2026, renminbi customer deposits and certificates of deposit balances increased by 22.7% to RMB1,345.2 billion.

Among them, mainly driven by an increase in corporate customer deposits, total renminbi customer deposits rose by 17.2%.

Renminbi certificates of deposit balances increased by 60.8% over the same period.

As for other renminbi businesses, the overall renminbi loan balance grew by 15.3% in the first seven months of 2026.

In the first seven months of 2026, renminbi trade settlement amounts handled by Hong Kong banks reached RMB8,178.5 billion, down 4.5% from RMB8,568.0 billion in the same period of 2025.

Nevertheless, Hong Kong has a large renminbi liquidity pool, and the Hong Kong banking sector has strong capabilities and extensive networks to continue supporting a large volume of renminbi payment and financing transactions.

In the first seven months of 2026, the average daily turnover of the renminbi Real Time Gross Settlement system remained at a high level of RMB2,471.4 billion, compared with RMB2,759.7 billion in the same period of 2025.

The report noted that the HKMA will study the introduction of a 7-day offshore renminbi liquidity bidding mechanism to add a new channel to support banks' short-term renminbi funding needs.

The HKMA will also study the feasibility of issuing offshore renminbi short-term debt instruments to further improve the offshore renminbi interest rate curve, and advance the establishment of a bilateral currency trading framework between offshore renminbi and the Indonesian rupiah.

On banking sector performance, the overall pre-tax operating profit of Hong Kong retail banks grew by 20.4% in the first half of 2026 compared with the same period in 2025.

Growth was mainly driven by increases in net interest income, fee and commission income, and income from investments held for trading, with part of the increase offset by a decline in income from foreign exchange and derivatives business.

Overall, the return on assets of banks rose from 1.27% in the same period of 2025 to 1.40% in the first half of 2026.

Asset quality risks in Hong Kong's banking sector remained controllable and showed signs of improvement in the first half of 2026.

The total specific classified loan ratio of authorized institutions fell from 2.01% at end-2025 to 1.82% in the second quarter of 2026.

At the same time, the overdue and restructured loan ratio of authorized institutions also declined modestly from 1.54% at end-2025 to 1.47% in the second quarter of 2026.