The Straw That Broke the Camel’s Back: Understanding the Rising Collection Risks in Hong Kong’s Food & Beverage Industry

​As Hong Kong approaches the end of 2025, businesses continue to face mounting pressures from multiple fronts. Beyond the lingering post-pandemic effects, the ongoing US-China tariff battle and rising operating costs have severely impacted many local enterprises—particularly those in traditional sectors. According to recent data, more than 300 companies have ceased operations so far this year, with the food and beverage (F&B) sector accounting for over 70% of total closures. 

At least 23 well-known restaurant chains and established brands—including Ocean Empire Food Shop, Taipan Bread & Cakes, and King Parrot Group—have closed their doors. Even more concerning are the alarming cases of restaurants announcing sudden closures and declaring their inability to pay staff wages or supplier invoices. While affected employees may seek limited support from the government’s Protection of Wages on Insolvency Fund, suppliers and service providers are typically left uncompensated. Meanwhile, the retail vacancy rate in prime neighborhoods—such as Tsim Sha Tsui, Mong Kok, and Causeway Bay—has exceeded 12%, with Central nearing 19%.

A Surge in Debt Collections: 2025 Trends Observed by RMS

​At RMS, requests for debt collection and risk assessments within the F&B sector have surged by 68% to 78% year-on-year. Many clients report that deteriorating sales and tighter cash flow have left their customers unable—or unwilling—to meet payment obligations.

Through our ongoing global risk monitoring, we have identified the following key contributors to rising delinquency in Hong Kong’s F&B industry:

1. Shrinking Market Demand – Reduced tourist arrivals and weaker local spending have particularly impacted high-end restaurants in traditional tourist districts.
2. Soaring Operating Costs – Rent levels remain high in core areas despite broader property market adjustments; labor and ingredient costs continue to climb due to inflation and supply disruptions.
3. Changing Consumption Patterns – Intense competition from delivery platforms, with commissions ranging between 15% and 30%, is eroding already thin margins.
4. Cross-Border Spending – In 2024, Hong Kong residents crossed into Shenzhen over 77 million times to shop and dine, draining domestic consumption power.
5. Demographic Shifts – Continued emigration and the outflow of the middle class have reduced the city’s core consumer base.
6. US–China Trade Volatility – The unpredictability of the trade conflict and tariff adjustments has disrupted both pricing and supply stability.
7. MPF Offset Abolition (Effective May 2025) – Employers must now directly fund severance and long-service payments without offsetting them via MPF contributions, increasing financial liabilities.
8. Bad Debt Escalation on Government Loan Guarantees – Over 5,000 default cases are under recovery, with the government reporting a bad debt rate exceeding 17% under the 100% Loan Guarantee Scheme.

Timeline of Industry Shocks: 2025 Overview

Date ​	Summary	Company/Brand Closures
February 2025	February 1 – The United States resumed its trade war with China, imposing a 10% tariff on all Chinese goods.    February 10 – China responded by levying a 15% tariff on selected U.S. products, including coal and liquefied natural gas.	Dao Cheng Taiwanese Restaurant (under Tai Hing Group) Eggslut, an international chain Hazukido A large number of small and medium-sized restaurants closing down
March 2025	March 4 – The United States introduced an additional 10% tariff on Chinese goods, citing concerns over fentanyl, bringing the cumulative rate to 20%.    March 10 – China countered by applying a 10% tariff on U.S. agricultural exports such as soybeans and pork.   ​	A large number of small and medium-sized restaurants closing down
April 2025	pril 8 – The United States launched a new “benchmark tariff” framework and expanded “reciprocal tariffs” to multiple countries, triggering market volatility worldwide. The reciprocal tariff rate on Chinese goods is raised to 84% (cumulative 104%).  April 9 – U.S. authorities announced a further increase from 104% to 125%, later clarifying that certain Chinese goods would face tariffs up to 145%.    April 10 – China imposed a 34% tariff on imported goods originating from the United States.  - April 11 – China raised tariffs on U.S. goods again to 125%.  - Mid-April – The United States temporarily suspended reciprocal tariffs for 90 days on selected countries but maintained a strict stance on China.    April 12 – China granted tariff exemptions for certain electronic products, including integrated circuits and smartphones.	After You Dessert Café Deliveroo Kam Kee Cafe A large number of small and medium-sized restaurants closing down
May 2025	May 1 – Hong Kong officially abolished the Mandatory Provident Fund (MPF) offsetting mechanism.    May 14 – The United States and China held economic and trade discussions in Geneva, reaching a temporary agreement to reduce tariffs:    - Within 90 days from May 14, U.S. tariffs on Chinese goods were reduced to 30% (including a 20% tariff on fentanyl-related products).    - China lowered tariffs on U.S. goods to 10% within the same period.	Ocean Empire Food Shop Daniel’s Restaurant A large number of small and medium-sized restaurants closing down
June 2025	.	Taipan Bread & Cakes King Parrot Group Kanda-Ya
July 2025	July 3 – The United States imposed a 20% tariff on goods from Vietnam.   July 6 – The United States announced an additional 10% tariff on countries adopting what it describes as “anti-American policies,” targeting some BRICS members.	Super Star Chinese Cuisine Xin Dau Ji
September 2025	Ongoing – The United States and China continue negotiations toward a broader trade agreement.	Metropol Restaurant Starry Terrace

​Between February and July, the convergence of tariff hikes, labor cost pressures, and financial reforms hit the industry hardest. When the MPF offset mechanism was officially abolished on May 1, 2025, businesses faced new payout obligations without offsetting relief.
 
This period saw a wave of closures, including several well-known brands such as Eggslut, Deliveroo Hong Kong, After You Dessert Café, and Super Star Chinese Cuisine. Although temporary tariff easing mid-year provided mild relief, overall confidence in the sector remained fragile.
 
Meanwhile, the government’s 100% Loan Guarantee Scheme recorded rising defaults, and insolvency cases continued to increase, with forced liquidations in 2025 already outpacing 2024 levels.
 

RMS’s Insights: Collection Realities and Risk Prevention

​Throughout our collection work, RMS has observed that many debtor companies quietly restructure or transfer assets before closure, thereby missing the critical recovery window for creditors. The age of receivables is directly correlated with the recovery rate—the longer the delay, the lower the chances of successful recovery.

We strongly advise suppliers and service partners to act early and monitor risks proactively. Here are some actionable steps:

1. Regularly review the MPF Authority’s employer default list to identify early warning signs.
2. Track media reports and peer feedback regarding customers' financial health.
3. Monitor legal actions—our data shows that 60% of restaurant debtors had ongoing or recent litigation (e.g., rent arrears, tax disputes) within one year of closure.
4. Investigate recurring payment irregularities or inquiries related to the same debtor.
5. Seek professional credit risk assessments early in the engagement process to avoid irreversible losses.