Economic Fact Files: Hong Kong
In this series, we’ll be looking at countries and regions around the world to provide a short breakdown of their economies and key facts.
Officially known as the Hong Kong Special Administrative Region of the People’s Republic of China, Hong Kong is situated at the mouth of the Pearl River Delta on the coast of southern China.
This location is part of the reason that the region has become such an important centre of international trade, thanks to its position as a gateway between the East and the West.
Hong Kong is officially part of China, although it is considered to be separate and operates, to a certain extent, as an independent country. It has its own government, currency and economic systems which are all separate from China.
The government in Hong Kong tries to keep the region business-friendly, with no restrictions or barriers when it comes to foreign business and no restrictions on capital flows.
As you would imagine, this has helped the region to prosper. According to the Economist Intelligence Unit’s Worldwide Cost of Living Survey, Hong Kong is one of the wealthiest cities in the world and also one of the most expensive.
Let’s take a look at some of the economic factors that contribute to this.
In 2018 Hong Kong’s GDP was over 360 billion USD, giving a real GDP growth rate of 3%. This gives a GDP per capita of almost 49,000 USD.
Hong Kong has an export-oriented economy, with its main international trading partners being China, U.S., UK, Japan and Taiwan.
Its most valuable exports are in the category of electronic circuits and micro-assemblies, which account for over 20% of the total, followed by mobile phones at over 13%.
The financial sector is a huge earner for the region, contributing around 18% to the overall GDP of Hong Kong and employing around 7% of the workforce.
The Global Financial Centres Index ranks Hong Kong as third in terms of the world’s leading financial centres, coming behind New York and London respectively.
According to figures in 2016, Hong Kong is also the fourth largest forex market in the world and in 2018 it had the fifth largest stock market in the world. The largest stocks include Tencent, ICBC and PetroChina.
Some of the reasons for Hong Kong’s importance as a financial centre include its location, its well-regulated markets and transparency, the fact that it has the benefits of being part of China but also being separate, and the Hong Kong dollar being pegged with the US dollar.
It should also be mentioned that Hong Kong has a unique situation due to its history as a British colony. It was under British rule that it became a centre for international trade. However, in 1997 Britain handed the city over to China to begin the ‘one country, two systems’ approach that is now used.
Hong Kong is known for its skyscrapers. It has more than any other city in the world, even trumping the Big Apple, with almost double the number of skyscrapers as New York.
Unsurprisingly, with this in mind, Hong Kong is one of the most densely populated places in the world, with a population of over 7.4 million people living in 426 square miles.
At the time of releasing this video, the unemployment rate stands at the extremely low level of 2.8%. Over 50% of the labour force works in the services sector and nearly 20% in manufacturing.
According to the 2019 Index of Economic Freedom by the Heritage Foundation, Hong Kong gained an overall score of 90.2 out of 100 which means it is ranked as the world’s freest economy. This was Hong Kong’s 25th year in a row of getting the top spot.
The ranking is made up of scores for 12 different factors under the categories Rule of Law, Regulatory Efficiency, Government Size and Open Markets.
In the report it said:
“Moderately looser fiscal policy encouraged economic growth in 2018, but U.S.–China trade frictions could have significant negative repercussions. An exceptionally competitive financial and business hub, Hong Kong remains one of the world’s most resilient economies. A high-quality legal framework provides effective protection of property rights and strongly supports the rule of law. There is little tolerance for corruption, and a high degree of transparency enhances government integrity. Regulatory efficiency and openness to global commerceunder-gird a vibrant entrepreneurial climate.”
Hong Kong is a very impressive city and a critical part of the global financial system. However, particularly in Western countries, it is much less well known than some of the world’s other bustling financial centres. Hopefully, this short economic fact file shed some light on this important region.
