Asia’s Largest Free Market Overview of Hong Kong’s Economy

Hong Kong has a free market economy that is highly dependent on international trade, such that the value of goods and services, including a high share of re-exports, is four times that of the country’s GDP.

Hong Kong does not charge taxes on imported products, and there is no special excise tax on any product, except hard alcohol (with or without local production), tobacco, hydrocarbon and methyl alcohol. Hong Kong is also a country without quota and discount laws. The country’s currency, the Hong Kong Dollar (HKD), is closely linked to the US dollar in accordance with a 1983 agreement.

The surplus of liquidity, low interest rates and low housing supply brought the housing prices in the island country up. Low and middle-income residents of the country complain about housing prices.

The fact that Hong Kong has a free market economy is the main reason why the country is affected by global economic tides. The dependence of the market on foreign trade and investment renders the country’s economy vulnerable to losses from rising global market fluctuations and economic slowdowns worldwide.

Hong Kong – GDP Growth Rate (Trading Economics)

Hong Kong’s largest trading partner is the People’s Republic of China, which accounts for nearly half of the country’s trade volume. Hong Kong is a country with limited natural resources; food and raw materials are imported.

As a result of China’s easing of tourism bans, the total amount of money left by Chinese tourists visiting Hong Kong in 2001 increased from 4.5 million to 47.3 million in 2014, more than the sum of the money left by other world tourists. Tourism revenue peaked in 2014, declined by 2.5 percent in 2015 and 4.5 percent in 2016.

Hong Kong’s tourism sector has started to rise again in 2017 and the number of tourists has increased by 3.2 percent and tourism revenue has increased to 58.47 million. With 44.5 million in tourism revenue (76 percent of the total value), it attracts Chinese tourists.

The country’s government is taking steps to make the Special Administrative Region (SRA) renminbin (RMB, China’s official currency, unit of yuan) a trade center that will be the foot of the world. Residents of Hong Kong can open an account with a weight of RMB, corporate bonds or Chinese government bonds denominated in RMB are issued in Hong Kong, and trade agreements can be made over RMB.

In addition, the Renminbi Certified Foreign Institutional Investor Program (RQFII) also began in Hong Kong. However, offshore RMB activity declined as the Bank of China changed the way it calculates interest rate parity. RMB reserves in Hong Kong decreased from 1 trillion at the end of 2014 to 559 billion at the end of 2017; The share purchase and sales volume in Hong Kong banks also decreased from 6.8 trillion to 3.9 trillion.

Hong Kong – Unemployment Rate (Trading Economics)

Hong Kong also serves as the number one stock market for Chinese companies that want to open up. As of 2015, 50 percent of the Hong Kong Stock Exchange is composed of Chinese companies.

Over the past decade, the country’s manufacturing industry has largely shifted to China, and the service sector has filled the gap. In 2014, Hong Kong and China reached a new agreement on the service trade clauses released within Guangdong Province under the Close Economic Partnership Agreement (CEPA) signed in 2003 to tighten relations between China and Hong Kong.

With the Trade Agreement of November 2015, which was signed on the basis of the Guangdong Agreement, the liberalization of the freedoms, especially in the Guangdong pilot free trade zone, was expanded throughout the country, the restrictive measures on the negative list were reduced, and the positive list for cross-border services, cultural services and telecommunications services was expanded. In June 2017, on the basis of CEPA, an Agreement on Investment, Economic and Technical Matters (Ectoech Aggreement) was signed.

Hong Kong – Inflation Rate (Trading Economics)

Hong Kong’s economic integration with China is most evident in the banking and financial sectors. The Hong Kong-Shanghai Stock Exchange Partnership and the Hong Kong-Shenzen Stock Exchange Partnership have contributed significantly to the opening of China’s major markets to the world and to make Hong Kong the largest offshore RMB market in China.

The ETF partnership for stock exchange mutual funds and products has also been the subject of discovery by Hong Kong authorities. Hong Kong President Carrie Lam, R & D, education and technological innovation in 2017 to allocate more government resources and increase the diversity of the sector said it is aimed at achieving economic growth.