Economy of Hong Kong
Template:Short description Template:Use Hong Kong English Template:Use dmy dates Template:Infobox economy The economy of Hong Kong is a highly developed free-market economy. It is characterised by low taxation, almost free port trade and a well-established international financial market.<ref>Template:Cite book</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Its currency, called the Hong Kong dollar, is legally issued by three major international commercial banks,<ref>Legal Tender Notes Issue Ordinance Template:Webarchive. Legislation.gov.hk (30 June 1997)</ref> and is pegged to the US dollar.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>Template:Cite journal</ref> Interest rates are determined by the individual banks in Hong Kong to ensure that they are market driven.<ref>Template:Cite news</ref> There is no officially recognised central banking system, although the Hong Kong Monetary Authority functions as a financial regulatory authority.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>Template:Cite journal</ref>
Its economy is governed under positive non-interventionism, and is highly dependent on international trade and finance. For this reason it is regarded as among the most favorable places to start a company. In fact, a recent study shows that Hong Kong has come from 998 registered start-ups in 2014 to over 2800 in 2018, with eCommerce (22%), Fintech (12%), Software (12%) and Advertising (11%) companies comprising the majority.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The Economic Freedom of the World Index lists Hong Kong as the freest economy, with a score of 8.58 based on data from 2022.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong's economic strengths include a sound banking system, virtually no public debt, a strong legal system, ample foreign exchange reserves with assets of US$481.6 billion represent over six times the currency in circulation or about 46 per cent of Hong Kong dollar M3 as at the end of March 2022,<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> rigorous anti-corruption measures and close ties with mainland China.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The Hong Kong Stock Exchange is a favourable destination for international firms and firms from mainland China to be listed, due to Hong Kong's highly internationalised and modernised financial industry. Additional advantages include the city's capital market in Asia, its size, regulations and available financial tools, which are comparable to London and New York City.<ref>Template:Cite news</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong's gross domestic product had grown 180 times between 1961 and 1997. Also, the GDP per capita rose by 87 times within the same time frame.<ref>Template:Cite book</ref> Its economy is slightly larger than Chile's or Romania's<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref name=wbpdf>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>Field listing – GDP (official exchange rate) Template:Webarchive, The World Factbook</ref> and its GDP per capita at purchasing power parity was the twelfth highest globally in 2023. By the latter measure, its GDP per capita was higher than those of the Netherlands, and slightly lower than Brunei. In 2009, Hong Kong's real economic growth fell by 2.8% as a result of the Great Recession.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
By the late 20th century, Hong Kong was the seventh largest port in the world and second only to New York City and Rotterdam in terms of container throughput. Hong Kong is a full Member of the World Trade Organization.<ref>Hong Kong, China – Member information Template:Webarchive. WTO. Retrieved 1 November 2012.</ref> The Kwai Chung container complex wasTemplate:When the largest in Asia, while Hong Kong shipping owners wereTemplate:When second only to those of Greece in terms of total tonnage holdings in the world. The Hong Kong Stock Exchange is the sixth largest in the world, with a market capitalisation of about US$3.732 trillion.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong has also had an abundant supply of labour from the regions nearby. A skilled labour force coupled with the adoption of modern British/Western business methods and technology ensured that opportunities for external trade, investment, and recruitment were maximised. Prices and wages in Hong Kong are relatively flexible, depending on the performance and stability of the economy of Hong Kong.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong raises revenues from the sale and taxation of land and through attracting international businesses to provide capital for its public finance, due to its low tax policy. According to Healy Consultants, Hong Kong has the most attractive business environment within East Asia, in terms of attracting foreign direct investment (FDI).<ref name="Healy Consultants">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> In 2013, Hong Kong was the third largest recipient of FDI in the world.<ref name="World Investment Report 2013">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong ranked fourth on the Tax Justice Network's 2011 Financial Secrecy Index.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The Hong Kong Government was the fourth highest ranked Asian government<ref>After Singapore, S. Korea and Taiwan</ref> in the World Economic Forum's Network Readiness Index (NRI), a measure of a government's information and communication technologies in 2016, and ranked 13th globally.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Hong Kong is ranked as the 18th most innovative territory in the Global Innovation Index in 2024, and 3rd in the Global Financial Centres Index.
According to the Economic Freedom of the World 2024 report, Hong Kong emerged as the top-ranked region, excelling particularly in the domains of Freedom to Trade Internationally and Regulation.
Since the 1997 handoverEdit
Since the 1997 handover, Hong Kong's economic future became far more exposed to the challenges of economic globalisation and the direct competition from cities in mainland China. In particular, Shanghai claimed to have a geographical advantage. The Shanghai municipal government dreamt of turning the city into China's main economic centre by as early as 2010.<ref>Richardson, Harry W. Bae, Chang-Hee C. (2005) Globalization and Urban Development: Advances in Spatial Science Template:ISBN</ref>
Since the 1997 handover, Hong Kong's share of China's GDP has dropped from 18.4% to 2.1% in 2021. In 2021, the Housing Price Index was double of what it was in 1997, while the Real Wage Index was almost unchanged.<ref>Template:Cite news</ref>
Positive non-interventionismEdit
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Hong Kong's economic policy has often been cited by economists such as Milton Friedman and the Cato Institute as an example of laissez-faire capitalism, attributing the city's success to the government having a relatively low level of involvement in the economy. However, others have argued that the economic strategy is not at all adequately characterised by the term laissez-faire.<ref>Journal of Contemporary China (2000), 9(24) 291–308 {{#invoke:citation/CS1|citation |CitationClass=web }}</ref> They point out that there are still many ways in which the government is involved in the economy, some of which exceed the degree of involvement in other capitalist countries. For example, the government is involved in public works projects, healthcare, education, and social welfare spending. Further, although rates of taxation on personal and corporate income are low by international standards, unlike most other countries Hong Kong's government raises a significant portion of its revenues from land leases and land taxation. All land in Hong Kong is owned by the government and is leased to private developers and users on fixed terms, for fees which are paid to the state treasury. By restricting the sale of land leases, the Hong Kong government keeps the price of land at what some consider as artificially high prices and this allows the government to support public spending with a low tax rate on income and profit.<ref>Geocities. {{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Moreover, as demonstrated in the regulation of finance companies in the 1970s and 1980s, the principle of positive non-interventionism in practice involved the government intervening in markets, albeit often hesitantly and belatedly, when the public interest was perceived to be threatened. The concept evolved towards a policy of "when in doubt, do nothing" during this period of financial instability.<ref>Template:Cite journal</ref>
Economic freedomEdit
Template:Further In 2020, Hong Kong was ranked as the world's second-freest economy after Singapore in the Index of Economic Freedom, published by The Heritage Foundation.<ref name="Index of Economic Freedom">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>Template:Cite news</ref> The index measures restrictions on business, trade, investment, finance, property rights and labour, and considers the impact of corruption, government size and monetary controls in 183 economies. Hong Kong is the only economy to have scored 90 points or above on the 100-point scale, achieved in 2014 and 2018.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
In 2021, The Heritage Foundation removed Hong Kong as a separate entity from China from its list of freest economics of the world, citing increasing interference from the Chinese government in Hong Kong's governmental system and democratic process. With this, Hong Kong, along with Macao, lost a position they had held in the index since the index's inception in 1995. At the time of the removal from the index, the founder of the Heritage Foundation indicated that while the SARs "offer their citizens more economic freedom than is available to the average citizen of China", these economic policies are still "ultimately controlled from Beijing".<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> On the other hand, the Canadian-based Fraser Institute continues to rank Hong Kong as the freest territory as late as 2024 (based on data from 2022).
On March 19, 2024, the Basic Law Article 23 (Article 23 law) was officially promulgated and took effect on March 23, 2024. The central and local government believe that this law, which safeguards national security as Article 23 states, will enable Hong Kong to transition from stability to prosperity. Zheng Yanxiong, Director of the Central Government's Liaison Office, stated that the city can now fully commit to developing the economy and improving the livelihoods of residents, thanks to the "iron wall" of its domestic national security law.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
Economic dataEdit
The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2022–2027). Inflation below 5% is in green.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
GDPEdit
- GDP – nominal (2022): HK$2,818,046 million
- GDP – nominal in US$ (2022): $359,812 million
- GDP – real growth rate (2022): −3.5%
- GDP – per capita (2022): HK$383,611
- GDP – per capita US$ (2022): $48,980
- GDP – composition by sector (2022):
- Financing and insurance: 21.3%
- Import/export, wholesale and retail trades: 19.4%
- Real estate, professional and business services: 9.1%
- Public administration, social and personal services: 20.5%
- Ownership of premises: 10.8%
- Other Sectors: 18.9%
Source:<ref name="C&SD">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Template:Economy of Hong Kong
LabourEdit
- Labour force (2022): 3.78 million -2.4% year-on-year
- Persons Engaged in various sectors (Dec 2022):
- Social and personal services: 544,279
- Import/export trade and wholesale: 679,161
- Professional and business services: 384,439
- Accommodation and food services: 258,304
- Retail: 246,424
- Finance and insurance: 233,440
- Human health and social work services: 217,867
- Education: 209,448
- Unemployed (2022): 163,100 4.3%
- Underemployed (2022): 88,100 2.3%
Source:<ref name="C&SD"/>
2022–2023 fiscal year budgetEdit
- Total Revenues: HK$715.9 billion
- Total Expenditures: HK$807.3 billion
- Deficit: HK$91.4 billion
- Government debt at 31 March 2022: HK$56.68 billion
Sources:<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
TradeEdit
- Selective data in HK$ for Main Countries/Territories (2022)
- Total Trade: $9,459.1 billion −7.9% year-on-year, trade balance −$347.1 billion
- With mainland China: $4,648.4 billion (49.1% share), −13.7% year-on-year
- With Taiwan: $741.6 billion (7.8% share), +7.3% year-on-year
- With the United States: $502.1 billion (5.3% share), −2.8% year-on-year
- With Singapore: $481.2 billion (5.1% share), −0.5% year-on-year
- With South Korea: $371.2 billion (3.9% share), −7.0% year-on-year
- With Japan: $345.3 billion (3.7% share), −11.4% year-on-year
- With Vietnam: $256.3 billion (2.7% share), +16.0% year-on-year
- With India: $252.4 billion (2.7% share), +17.7% year-on-year
- Imports: $4,927.5 billion −7.2% year-on-year
- From mainland China: $2,077.7 billion (42.2% share), −14.6% year-on-year
- From Taiwan: $587.4 billion (11.9% share), +7.3% year-on-year
- From Singapore: $398.5 billion (8.1% share), −3.7% year-on-year
- From South Korea: $289.8 billion (5.9% share), −10.7% year-on-year
- From Japan: $242.8 billion (4.9% share), −10.4% year-on-year
- From the United States: $209.4 billion (4.3% share), +1.3% year-on-year
- From Malaysia: $176.9 billion (3.6% share), +6.1% year-on-year
- From Vietnam: $143.9 billion (2.9% share), +22.3% year-on-year
- Exports: $4,531.7 billion −8.6% year-on-year
- To mainland China: $2,570.8 billion (56.7% share), −12.9% year-on-year
- To the United States: $292.7 billion (6.5% share), −5.5% year-on-year
- To India: $171.7 billion (3.8% share), +29.0% year-on-year
- To Taiwan: $154.2 billion (3.4% share), +7.2% year-on-year
- To Vietnam: $112.4 billion (2.5% share), +8.9% year-on-year
- To Japan: $102.5 billion (2.3% share), −13.8% year-on-year
- To the United Arab Emirates : $95.0 billion (2.1% share), +35.3% year-on-year
- To Singapore: $82.9 billion (1.8% share), +18.6% year-on-year
Source:<ref name="C&SD"/>
Trade with MacauEdit
As at 2015, Macau is Hong Kong's second largest export destination, occupying 6.1% of Hong Kong's total exports.<ref>Where does Hong Kong export to? (2015)</ref> The amount of export totaled US$8.4B, with broadcasting equipment, jewelry, and precious metal watches as the major products.<ref>What does Hong Kong export to Macao? (2015)</ref> On the other hand, Hong Kong is Macau's largest export destination.<ref>Where does Macau export to? (2015)</ref> Totaled USD 774M, with precious metal watches, jewelry, trunks and cases as the major trading products, the exports to the Hong Kong forms 53% of Macau's total exports.<ref>What does Macau export to Hong Kong? (2015)</ref> Since 2018, Hong Kong and Macau have been connected via road by the Hong Kong–Zhuhai–Macau Bridge.
PovertyEdit
The international poverty line is a monetary threshold under which an individual is considered to be living in poverty. This threshold is calculated using Purchasing Power Parity.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> According to the World Bank, the international poverty line was most recently updated in October 2015, in which it was increased from $1.25 per day to $1.90 per day using the value of 2011 dollars.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Raising this threshold helps account for changes in costs of living, which directly effects individuals ability to obtain basic necessities across countries.
Recent figures show that 1.37 million people are living below the poverty line and struggling to survive on HK$4,000 (US$510) per month for a one-person household, HK$9,800 for a two-person household earning, and HK$15,000 or a three-person household.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The poverty rate in Hong Kong hit a high of 20.1%, but recent efforts by government programs have lowered this number to 14.7%.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>
In December 2012, the Commission on Poverty (CoP) was reinstated to prevent and alleviate poverty with three primary functions; analyze the poverty situation, assist policy formulation and to assess policy effectiveness. Cash handouts have been credited with alleviating much of the poverty, but the extent in which poverty has been alleviated is still questionable. Although cash handouts raise households above the poverty line, they are still struggling to meet certain standards as the cost of living in Hong Kong steadily increases.
Coupled with these cash payments, statutory minimum wage is set to increase for a second time in the past 10 years. Statutory Minimum Wage (SMW) came into existence on 1 May 2011 and the SMW rate has been HK$34.5 per hour since May 2017. The Legislative Council in Hong Kong most recently approved the revision on the SMW rate to increase to HK$37.5 per hour, effective 1 May 2019.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Although the total statistics for Hong Kong show declining poverty, child poverty increased .3 percentage points from 2017 to 2018, up to a total of 23.1%, as a result of larger households due to children staying with their elderly parents.<ref name=":0">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> With economic growth projected to slow in the coming years, poverty becomes an increasingly pressing issue.<ref name=":0" />
Beyond benefiting the younger generation through cash handouts and minimum wage increases, expanded elderly allowances have been implemented to increase disposable incomes of the elderly population that can no longer work. As of 1 February 2019 the amount payable per month for eligible elderly population became HK$1,385 in an effort to raise households incomes living with elderly tenants. Although Hong Kong has become one of the largest growing cities in the world, much of the population is struggling to keep up with the rising costs of living.
One of the largest issues affecting low income families is the availability of affordable housing. Over the past decade, residential Hong Kong property prices have increased close to 242%, with growth finally starting to decelerate in 2019.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Considering housing is a basic necessity, prices have continuously increased while disposable incomes remain virtually unchanged. As the amount of affordable housing diminishes, it has become much harder for families to find homes in their home country. Public housing programs have been implemented by the government, but delayed construction and growing waitlists have not helped to the extent they planned for. Recent results from a Hong Kong think tank show that by 2022, the average citizen could wait up to 6 years for public housing.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Evidence shows that the availability of affordable housing has declined, forcing households to spend more on shelter and less on other necessities. These issues can lead to worse living conditions and imbalanced diets, both of which pose problems beyond just financial well-being.
Financial marketsEdit
Stock exchangeEdit
{{#invoke:Labelled list hatnote|labelledList|Main article|Main articles|Main page|Main pages}} The Hong Kong Stock Exchange is the sixth largest in the world, with a market capitalisation of about US$3.732 trillion as of mid-2017. In 2006, the value of initial public offerings (IPO) conducted in Hong Kong was second highest in the world after London.<ref name="Iht">Hong Kong surpasses New York in IPOs Template:Webarchive, International Herald Tribune, 25 December 2006. Retrieved 20 January 2007.</ref> In 2009, Hong Kong raised 22 percent of IPO capital, becoming the largest centre of IPOs in the world.<ref>Template:Cite news</ref> The exchange is the world's 10th largest by turnover and third largest in China.Template:EfnTemplate:Citation needed
Bond marketEdit
Exchange ratesEdit
See alsoEdit
Template:Portal Template:Div col
- Mainland and HK Closer Economic Partnership Arrangement (CEPA)
- Mainland and Macau Closer Economic Partnership Arrangement (CEPA)
- Economy of China
- Manufacturing in Hong Kong
- Economy of East Asia
- Individual Visit Scheme
- John James Cowperthwaite
- Positive non-interventionism
- The Hongs
- Nylonkong
- Taiwan Miracle
- Poverty Campaign: Speak Up
- Seamen's strike of 1922
- Vietnamese businesses in Hong Kong
- Free market
NotesEdit
ReferencesEdit
External linksEdit
- Hong Kong Economy
- Hong Kong Government
- Hong Kong Economic Structure, The Economist, 10 January 2007. Retrieved 24 February 2007.
- The Hong Kong Experiment by Milton Friedman
- Economic History of Hong Kong Catherine R. Schenk, University of Glasgow
- Hong Kong Census and Statistics Department
- Hong Kong Forex Nows (IBTimes HK)
- World Bank Summary Trade Statistics Hong Kong
- Tariffs applied by Hong Kong as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements
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