Economy of Hong Kong

Economy of Hong Kong Currency Hong Kong dollar (HKD) Fiscal year 1 July – 30 June Trade organisations APEC and WTO Statistics GDP (PPP) $293.311 billion (2008 est.) GDP ranking 9th per capital (at PPP) 31st per capita (at nominal) (2008[update]) GDP growth 6.8% (2007 est.) GDP per capita (real GDP) $44,413 (2008 est.) GDP by sector agriculture: (0.1%) industry: (9%) services: (90.9%) (2008 est.) Inflation 2.0% (2007 est.) Population below poverty line N/A Labour force 3.64 million (2007 est.) 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 4.1% (2008 est.) Main industries textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches, clocks Trading Partners Exports $365.2 billion (2008 est.) Main partners People's Republic of China (48.7%), United States (13.7%), Japan (4.5%) (2007) Imports $387.9 billion (2008 est.) Main Partners People's Republic of China (46.3%), Japan (10%), Republic of China (7.1%), Singapore (6.8%), United States (4.9%), South Korea (4.2%) (2007) Public finances Public debt 14.5% of GDP (2008 est.) External debt $78.84 billion (31 December 2008 est.) Revenues $36.62 billion (2008 est) Expenses $38.89 billion (2008 est.) Economic aid N/A Main source All values, unless otherwise stated, are in US dollars

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Hong Kong's highly favorable geographical position and entrepot trading opportunities are wealth-generating assets. Hong Kong's gross domestic product, between 1961 and 1997, has grown 180 times larger than the former while per capita GDP rose by 87 times.^[1]Prior to mid 19th century, this had made Hong Kong a major haven for pirates before it became a British colony in 1841. Under British administration, it soon developed into a thriving legitimate international port. 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. 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 addition to geographical position, another major natural industrial-commercial asset of Hong Kong has been human resources. The population of the territory was less than six million in the late 20th century. However, there was an abundance of labour close by in the region that could be readily tapped through direct external investment and outsourcing. In Hong Kong itself, a skilled, adaptable, and hard-working 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.

Since the 1970s, the economy of Hong Kong has been governed both under British and Chinese rule under an economic policy dubbed Positive non-interventionism espoused by former financial secretary John James Cowperthwaite.

Traditionally, the Hong Kong government has raised revenue from the sale and taxation of land but not engaged in industry and commerce for profit. From its revenues, the government has built roads, schools, hospitals, and other public infrastructure facilities and services. It has also operated a welfare insurance scheme. However, the authorities have generally avoided owning and running business enterprises, engaging in trade protectionism, or imposing regulatory controls. There has been relatively little popular pressure for higher government spending. Over the decades, successive political administrations have managed to avoid running up large budget deficits; and by restraining public borrowing, credit expansion and inflation have been held in check.

Measuring discrepancies between the rich and poor with the Gini Coefficient indicates that the wealth gap continues to widen in Hong Kong since the new millennium. As of 2006 Hong Kong's measurement is at 53.3, which means the difference between the rich and poor is far greater than that of the People's Republic of China.^[2] Many of the financial tycoons also oppose universal suffrage, since the large number of poor would vote for populists who promise costly social programs.^[3].

Hong Kong seems likely to remain a highly free market-enterprise society. Such things as political production planning and price and import controls are fundamentally incompatible with the kind of globally open, competitive economic environment in which Hong Kong firms and industries operate. Currently, Hong Kong is ranking at the third place of the Global Financial Centres Index, right behind London and New York.

Stock exchange

The Hong Kong Stock Exchange is the 6th largest in the world, with a market capitalisation of about US$2.97 trillion. In 2006, the value of initial public offerings conducted in Hong Kong was second highest in the world after London^[4]. 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.^[4]

Economic predictions

Since the 1997 handover Hong Kong's economic future became far more exposed to the challenges of economic globalisation competition directly from mainland China. Shanghai claimed in particular to have a geographical advantage, and a municipal government that dreams of turning the city into China's main economic center by as early as 2010. The target is to allow Shanghai to catch up to New York by 2040-2050^[5], with the eventual projection that China will be Asia's most prosperous economy by 2040^[6]. Hong Kong, on the other hand, continue to have a more positive and realistic approach. It will sustainably be the international financial center in China. Until then, Hong Kong is expected to have higher overall economic figures yearly. Hong Kong's principal trading partners remain to be China, United States, Japan, Taiwan, Germany, Singapore, and South Korea.

Positive non-interventionism

This policy has often been cited by economists such as Milton Friedman and the Cato Institute as an example of the benefits of laissez-faire capitalism. However others have argued that the economic strategy was inadequately characterised by the term lassez-faire.^[7] They point out that there are still many ways in which the government is involved in the economy. The government has intervened to create economic institutions such as the Hong Kong Stock Market and has been involved in public works projects and social welfare spending. All land in Hong Kong is owned by the government and leased to private users. By restricting the sale of land leases, the Hong Kong government keeps the price of land at what some would say are artificially high prices and this allows the government to support public spending with a low tax rate.^[8]

Economic freedom

Hong Kong has ranked as the world's freest economy in the Wall Street Journal and Heritage Foundation's Index of Economic Freedom for 15 consecutive years, since the inception of the index in 1995^[9]. 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.

Economic indicators

The economy functions well into the night

Population

• Inflation rate (consumer prices): +4.3% (2008)
• Unemployment rate: 3.4% (2008)
• Labour Force Participation Rate by sex (Sep-Nov 2007)^[10]
  • Male: 71.2%
  • Female: 53.0%
• Labour Force Participation Rate by age group (Sep-Nov 2007)^[11]
  • Age 15-24: 42.4%
  • Age 25-44: 85.5%
  • Age 45-64: 64.6%
  • Age 65 and over: 5.3%

GDP

• GDP (nominal) - US$208.7 billion (2007)
• GDP - real growth rate: -5.8% (Jan-Jun 2009)
• GDP - per capita: US$30,157 (2007))
• GDP - composition by sector: (2006)
  • Agriculture: 0.1%
  • Industry: 11.9% (of which: manufacturing 3.1%)
  • Services: 88.0% (of which: trade and retailing: 25.7%)

Labour

• Average Work Week: 47 hours per week^[12]

• Labour force - by sector: (2006 est)^[13]
  • Agriculture and fishing: 0.3%
  • Mining and quarrying: 0.05%
  • Manufacturing: 5.1%
  • Electricity, gas and water: 0.4%
  • Construction: 8.0%
  • Wholesale and retail trades: 10.5%
  • Import and export trade: 16.4%
  • Restaurants and hotels: 7.1%
  • Transport and storage: 9.4%
  • Communications: 1.1%
  • Financial services: 5.3%
  • Real estate and business services: 10.1%
  • Public administration: 3.7%
  • Education and health services: 7.6%
  • Personal services: 9.0%
  • Recreational, other community and social services: 5.9%

FY 2007-08 budget

• Operating Revenues: HK$248.3 billion (US$$31.8 billion)
  • of which, direct taxes: HK$130.9 billion
  • of which, other recurrent revenue: HK$117.4 billion
• Capital Revenue: HK$76.7 billion
• = Government Revenue HK$346.9 billion
• Operating Expenditures: HK$206.4 billion (US$$26.5 billion)
• Capital Expenditures: HK$30.1 billion
• = Government Expenditures: HK$237.2 billion
• Subventions and other public sector spending: HK$19.4 billion
• = Public Expenditure: HK$255.8 billion
• Fiscal reserves less government debt: HK$460.3 billion (end-March 2008)

Trade and investment (2007)

• Exports: $344.9 billion f.o.b., including re-exports^[14]
  • Exports - partners: Mainland China 48.7%, USA 13.7%, Japan 4.5%, Germany 3.0%
  • Exports - commodities: clothing, textiles, footwear, electrical appliances, watches and clocks, toys, plastics, precious stones

• Imports: $368.4 billion (2007)
  • Imports - partners: Mainland China 46.3%, Japan 10.0%, Taiwan 7.1%, Singapore 6.8%
  • Imports - commodities: foodstuffs, transport equipment, raw materials, semimanufactures, petroleum; a large share is re-exported

See also

Hong Kong portal

• Mainland and HK Closer Economic Partnership Arrangement (CEPA)
• Mainland and Macau Closer Economic Partnership Arrangement (CEPA)
• Economy of the People's Republic 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, 10-01-2007. Retrieved 24-02-2007.
• The Hong Kong Experiment by Milton Friedman
• Global Investment in Hong Kong Markets - Nicholas Vardy October 27, 2006
• Economic History of Hong Kong Catherine R. Schenk, University of Glasgow
• Key Economic and Social Indicators - Hong Kong Census and Statistics Department

References

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