中华人民共和国香港特别行政区：选刊

SELECTED ISSUES This paperonthePeople’s Republic of China—Hong KongSpecial AdministrativeRegionwas prepared by a staff team of the International Monetary Fundas backgrounddocumentation for the periodic consultation with the member country.It is based on theinformation available at the time it was completed onMay 4,2026. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.orgPrice: $18.00per printed copy International Monetary FundWashington, D.C. PEOPLE’S REPUBLIC OFCHINA—HONG KONG SPECIALADMINISTRATIVE REGION SELECTED ISSUES ApprovedByAsia and PacificDepartment Prepared by a team led by Ivo Krznar with individualchapters authored by Narayanan Raman, Hamid RezaTabarraei, Yizhi Xu, and Ruihua Yang (all APD), Dan Devlin(FAD), and Ceara Hui, Zhang Wu, and Stella Tam (all HKMA). CONTENTS DIAGNOSIS OF DECREASING LABOR FORCE PARTICIPATION A. Introduction __________________________________________________________________________2B. Stylized Facts of Hong Kong SAR’s Labor Market _____________________________________4C. Shift-Share Analysis ___________________________________________________________________7D. Drivers of Declining Youth Labor Force Participation _______________________________ 11E. Conclusion and Policy Recommendations___________________________________________ 18References_____________________________________________________________________________ 20 DIVERSIFYING AND BROADENING REVENUE_______________________________________ 21 A. Introduction ________________________________________________________________________ 21B. Hong Kong SAR’s Main Revenue Sources ___________________________________________ 22C. Potential Reforms Consistent with the Current Revenue Framework ________________ 25D. Expanding Consumption Taxation __________________________________________________ 34E. Reform Directions and Fiscal Impacts _______________________________________________ 37F. Conclusion __________________________________________________________________________ 40References_____________________________________________________________________________ 42 TABLE 1. Policy Directions: Potential Revenue Impact of Reforms_____________________________ 38 DIAGNOSIS OF DECREASING LABOR FORCEPARTICIPATION IN HONG KONG SAR1 Hong Kong SAR is facing a sustained decline in labor force participation rate (LFPR), which acceleratedin recent years, driven mainly by population aging and further exacerbated by a drop in participationamong youth. While the decline in youth LFPR was partly attributable to the mechanical effect of risingshare of non-local students in Hong Kong SAR, it also points to postponed labor market entry amongthe youth which largely reflects continued education. The underlying motivations may suggest shiftingjob market landscape and labor skill requirements amid structural sectoral shifts, the emergence ofartificial intelligence, and more intense labor market competition with increasing labor forceeducational attainment. A.Introduction 1.Hong Kong SAR is facing a sustaineddecline in its labor force participation rate(LFPR), a trend that has accelerated in recentyears.The territory’s LFPR2fell from 61.1percent in 2015 to approximately 56.9 percentin 2025, representing a contraction in labormarket supply relative to the working-agepopulation. The decline has been mostpronounced among youth aged 20-24,particularly since 2021 (text chart), in sharpcontrast to the rising LFPR observed acrossseveral other older age groups. 2.The secular decline in Hong Kong SAR’s LFPR reflects two key factors: populationaging and falling youth labor force participation.As highlighted in the2024 Hong Kong SARArticle IV Consultation, population aging continues to exert downward pressure on labor forceparticipation, mainly through the extensive margin. For instance, the population share of oldercohort (aged 65 and above), who typically exhibit the lowest LFPR, has risen steadily from 15.6percent in 2015 to 24.2 percent in end-2025. Meanwhile, the LFPR of the 65 and above age grouprose from 9.4 percent in 2015 to 13.5 percent in 2025 (text chart), in part due to healthy aging andlonger working lives. However, it remains well below the levels of the younger cohorts, resulting innegative contribution to the overall LFPR. In addition, an increasing share of the youth cohort has opted to remain outside the labor force in recent years, weighing on the aggregate LFPR throughthe intensive margin. The trend of declining youth participation raises important questions aboutthe underlying drivers as well as implications for future labor market policies-- the focus of this note. 3.This Selected Issues Paper addresses the following three sets of key questions with afocus on youth labor force participation, while recognizing population aging as the maindriv