Hong Kong’s economic stability is facing serious headwinds, prompting concerns about a potential prolonged downturn. A recent move by New World Development Co., one of the city’s largest property developers, to defer coupon payments on its perpetual bonds due to liquidity issues has sent shockwaves through the market. This action, mirroring similar bond defaults that impacted mainland China’s property sector, highlights underlying vulnerabilities within Hong Kong’s real estate and financial systems.

The situation has led economists to issue stark warnings. Professor Yip Sau Leung of Nanyang Technological University predicts a potential decade-long economic slump for Hong Kong. He points to several key factors contributing to this pessimistic outlook: excessive leverage in the real estate market, a weakening of Hong Kong’s international neutrality, and a decline in its overall competitiveness.

This combination of factors paints a concerning picture for Hong Kong’s future economic trajectory. The implications for investors and the broader global economy remain significant, demanding close monitoring of the situation as it unfolds.