Economy of Hong Kong

Economy of Hong Kong

Central and Victoria Harbour of Hong Kong
Currency	Hong Kong dollar (HKD)
Fiscal year	1 April – 31 March
Trade organisations	APEC and WTO
Statistics
GDP	PPP: $400.4 billion (2014 est.) PPP per capita rank: 8th Nominal per capita rank: 25th (2010)
GDP growth	7.2% (2011 Q1)
GDP per capita	HK$246,733; 2010 (US$50,936 PPP; 2012)
GDP by sector	agriculture: (0.1%) industry: (9%) services: (90.9%) (2008 est.)
line-height:1.1em	3.6% (2014)
Population below poverty line	N/A
Gini coefficient	53.3 (2007)
Labour force	3.2343 million (end-2010)
Labour force by occupation	manufacturing (6.5%), construction (2.1%), wholesale and retail trade, restaurants, and hotels (43.3%), financing, insurance, and real estate (20.7%), transport and communications (7.8%), community and social services (19.5%)
Unemployment	3.2% (1/2011 – 3/2011)
Main industries	textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches, clocks
Ease-of-doing-business rank	2nd
External
Exports	$528.2 billion (2014 est.)
Main export partners	China 54.8% United States 9.3% United Kingdom 7.2% European Union 5.0% (2014 est.)
Imports	$560.2 billion (2014 est.)
Main import partners	China 48.2% European Union 10.4% Japan 8.1% Singapore 6.6% (2014 est.)
Public finances
Public debt	HK$1.5 billion (2014)
Revenues	$59.33 billion (2013 est)
Expenses	$54.23 billion (2013 est.)
Economic aid	N/A
Credit rating	Standard & Poor's: AAA (Domestic) AAA (Foreign) AAA (T&C Assessment) Outlook: Stable Moody's: Aa1 Outlook: Stable Fitch: AA+ Outlook: Stable
Foreign reserves	US$311.2 billion (2013)
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As one of the world's leading international financial centres, Hong Kong's service-oriented economy is characterised by its low taxation, almost free port trade and well established international financial market. Its currency, called the Hong Kong dollar, is legally issued by three major international commercial banks, and pegged to the US Dollar. Interest rates are determined by the individual banks in Hong Kong to ensure it is fully market-driven. There is no officially recognised central banking system, although Hong Kong Monetary Authority functions as a financial regulatory authority. When destabilising factors are hitting the financial market of Hong Kong, they will be monitored and inspected by the Hong Kong Monetary Authority, the financial regulatory agency in Hong Kong. Electronic finance trading is evolutionarily impacting the financial market of Hong Kong.

According to Index of Economic Freedom, Hong Kong has had the highest degree of economic freedom in the world since the inception of the Index in 1995. Its economy is governed under positive non-interventionism, and is highly dependent on international trade and finance. In 2009, Hong Kong's real economic growth fell by 2.8% as a result of the global financial turmoil.

Hong Kong's economic strengths include a sound banking system, virtually no public debt, a strong legal system, ample foreign exchange reserves, rigorous anti-corruption measures and close ties with the mainland China. Despite the downturn, these strengths enable it to quickly respond to changing circumstances. It has the most efficient and a corruption-free application procedure, the lowest income tax, the lowest corporate tax as well as an abundant and sustainable government finance. The government of Hong Kong consistently upheld the policy of encouraging and supporting activities of private businesses. Examples include the Cyberport and the Hong Kong Disneyland. This has a positive impact on the overall economic performance by removing unnecessary barriers for the private enterprises in the Special Administrative Region. The Hong Kong Stock Exchange is a favourable destination for international firms and firms from the mainland China to be listed on due to Hong Kong's highly internationalised and modernised financial industry along with its capital market in Asia, its size, regulations and available financial tools, which are comparable to London and New York.

Humorous comment on the business of Hong Kong life

Hong Kong's gross domestic product has grown 180 times between 1961 and 1997. Also, the GDP per capita rose by 87 times within the same time frame. Its economy size is slightly bigger than Israel and Ireland and its GDP per capita at purchasing power parity is the sixth highest globally in 2011, higher than the United States and the Netherlands and slightly lower than the Brunei.

By the late 20th century, Hong Kong was the seventh largest port in the world and second only to New York and Rotterdam in terms of container throughput. Hong Kong is a full Member of World Trade Organization. The Kwai Chung container complex was the largest in Asia; while Hong Kong shipping owners were second only to those of Greece in terms of total tonnage holdings in the world. The Hong Kong Stock Exchange is the fifth largest in the world, with a market capitalisation of about US$2.63 trillion.

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.

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 most attractive business environment within East Asia, in terms of attracting foreign direct investment (FDI). This has led to Hong Kong being the third largest recipient of FDI in the world. From its revenues, the government has built roads, schools, hospitals, and other public infrastructure facilities and services. Low levels of spending relative to GDP by having no spending on armed forces, minimal outlays for foreign affairs and modest recurrent social welfare spending have allowed the accumulation of very large fiscal reserves with minimal foreign debt.

Though not conventionally regarded as a tax haven, Hong Kong ranked fourth on the Tax Justice Network's 2011 Financial Secrecy Index.

Acting as a government of the Special Administrative Region, Hong Kong is the second highest ranked Asian government in the World Economic Forum's Network Readiness Index (NRI) – an indicator for determining the development level of a government's information and communication technologies. Hong Kong ranked eighth overall in the 2014 NRI ranking, up from 14 in 2013.

Stock exchange

Main article: Hong Kong Stock Exchange

The Hong Kong Stock Exchange is the sixth largest in the world, with a market capitalisation of about US$2.97 trillion. In 2006, the value of initial public offerings (IPO) conducted in Hong Kong was second highest in the world after London. In 2009, Hong Kong raised 22 percent of IPO capital, becoming the largest centre of IPOs in the world. The rival stock exchange of the future is expected to be the Shanghai Stock Exchange. As of 2006, Hong Kong Exchanges and Clearing (HKEX) has an average daily turnover of 33.4 billion dollars, which is 12 times that of Shanghai.

Economic predictions

Cathay Pacific City, the headquarters of Cathay Pacific

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 the 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. The target is to allow Shanghai to catch up to New York by 2040–2050. Hong Kong, on the other hand, continues to have a more positive and realistic approach, and remains the principal international financial centre in China. Until then, Hong Kong is expected to have higher overall economic figures yearly. Hong Kong's main trading partners are China, the United States, Japan, Taiwan, Germany, Singapore, and South Korea.

Positive non-interventionism

Main article: Positive non-interventionism

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 policy. However, others have argued that the economic strategy is not adequately characterised by the term laissez-faire. 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 has intervened to create economic institutions such as the Hong Kong Stock Market, and 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 relatively high public spending with a low tax rate on income and profit.

The economy functions well into the night.

Economic freedom

Main article: Economic freedom

Hong Kong has been ranked as the world's freest economy in the Index of Economic Freedom of Heritage Foundation for 20 consecutive years, since its inception in 1995. 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 one to have ever scored 90 points or above on the 100-point scale in 2014 Index.

Economic indicators

GDP

• GDP (nominal, 2009) – HK$1,633.5 billion (US$210.7 billion)
• GDP – real growth rate: -2.7% (2009)
• GDP – per capita: US$30,087 (2009)
• GDP – composition by sector: (2008)
  • Manufacturing: 2.3%
  • Finance: 25.0%
  • Trade: 26.4%
  • Other Services: 34.7%
  • Other Sectors: 11.6%

Population

• Population: – 7.03 million (end-2009), +0.6% p.a. (2000–09)
• Unemployment rate: 5.2% (2009)
• Labour Force Participation Rate(2009)
  • Overall: 60.3%
  • Male: 68.9%
  • Female: 52.9%
  • Age 15–24: 8.5%
  • Age 25–39: 36.8%
  • Age 39+: 43.7%

Labour

• Labour force: 3.7 million (end-2010)
• Employed: 3.56 million (96.2%, end-2010)
  • Public administration, social and personal services 24.8%
  • Finance, insurance and real estate 18.3%
  • Retail, accommodation and food services 15.7%
  • Import/export trade 14.9%
  • Transport, communications and logistics 12.6%
  • Other services 10.6%
  • Other sectors 3.1%

• Average Work Week: 45 hours
• Unemployed: 136,000 (4%, end-2010)
• Underemployed: 67,000 (1.8%, end-2010)

FY 2010–11 budget

• Operating Revenues: HK$247.6 billion
• Operating Expenditures: $251.4 billion
• Balance: -$3.8 billion
• Government debt HK$11,227.5 million (US$1.44 billion; 30 June 2011)

Trade (2010)

• Two-way Trade: US$823.9 billion, +23.6% (2010), +11.1% p.a. (1986–2010)
  • With China:' $402.6 billion, +24.2% (2010), 48.9% share
• Exports: $390.4 billion, +22.7% (2010), +10.8% p.a. (1986–2010)
  • To China:' $205.7 billion, +26.5% (2010), 52.7% share
• Re-exports: $381.2 billion, +22.8% (2010), +14.3% p.a. (1986–2010)
  • To China:' $201.7 billion, +26.7% (2010), 52.9% share
• Imports: $433.5 billion, +25.0% (2010), +11.3% p.a. (1986–2010)
  • From China:' $196.9 billion, +22.4% (2010), 45.4% share

Poverty

At least 100,000 persons live in cage homes in the poor districts of Hong Kong.

See also

• Mainland and HK Closer Economic Partnership Arrangement (CEPA)
• Mainland and Macau Closer Economic Partnership Arrangement (CEPA)
• Economy of China
• Economy of East Asia
• Individual Visit Scheme
• Positive non-interventionism
• The Hongs
• Taiwan Miracle
• Poverty Campaign: Speak Up
• Seamen's strike of 1922

External links

• 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
• Key Economic and Social Indicators – 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