"Within one month our revenues had jumped over 50%."

Hong Kong Economy Facts

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When people think of Hong Kong they usually think of a major city in China. But in fact, Hong Kong is quite different from the Chinese mainland. For example, Hong Kong has its own government and legal system that strongly differentiates it from the People’s Republic of China. Which is why I felt it was necessary to have a completely whole new section on doing business in Hong Kong, especially since it is an important gateway into the Chinese market and the rest of Asia. As one of the world’s leading international financial centres, Hong Kong has a major capitalist service economy characterised by low taxation and free trade, and the currency, Hong Kong dollar, is the eighth most traded currency in the world, according to the Bank of International Settlements. Hong Kong also has one of the highest per capita income in the world, with a nominal GDP per capita of $31,590 as estimated by the IMF in 2010.

Hong Kong has numerous high international rankings in various aspects. For instance, its economic freedom, financial and economic competitiveness, quality of life, corruption perception, Human Development Index, etc., are all ranked highly. According to both UN and WHO estimates, Hong Kong also has the second longest life expectancy of any country in the world. Hong Kong was once described by Milton Friedman as the world’s greatest experiment in laissez-faire capitalism.  It maintains a highly developed capitalist economy, ranked the freest in the world by the Index of Economic Freedom for 15 consecutive years. It is an important centre for international finance and trade, with one of the greatest concentrations of corporate headquarters in the Asia-Pacific region. The Hong Kong Government has traditionally played a mostly passive role in the economy, with little by way of industrial policy and almost no import or export controls. Market forces and the private sector were allowed to determine practical development. The territory has little arable land and few natural resources, so it imports most of its food and raw materials. Agricultural activity—relatively unimportant to Hong Kong’s economy and contributing just 0.1% of its GDP—primarily consists of growing premium food and flower varieties, according to Thomas White International.

Hong Kong is the world’s eleventh largest trading entity, with the total value of imports and exports exceeding its gross domestic product, according to the Hong Kong government. Hong Kong imports nearly $433.5 billion with the main import markets being mainland China (45.4%), Japan (9.1%),Singapore (7.0%), and Taiwan (6.7%). Hong Kong’s exports also account for nearly $390.4 billion, with its top export markets being mainland China (52.7%), United States(10.9%), and Japan (4.2%). Hong Kong has also had an abundant supply of labour from the region 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 maximized. Despite being one of the world’s richest economies, the Gini Coefficient indicates that the wealth gap continues to widen in Hong Kong. Hong Kong’s main industries are textiles, clothing, tourism, banking,shipping, electronics, plastics, toys, watches, and clocks. Hong Kong is a major financial center, and many foreign financial institutions have their Asian headquarters in Hong Kong. The Hong Kong Stock Exchange is the 6th largest in the world, with a market capitalisation of about US$2.97 trillion, with many mainland Chinese companies using the stock exchange as a way to reaching out to more foreign investors.

Overall, Hong Kong is a great market to do business or trade in. The World Bank ranked it as the 2nd Easiest Country to Do Business In. In the same ranking, Hong Kong came in 2nd place for Trading Across Borders, 5th for Enforcing Contracts, and 3rd for Protecting Investors. Hong Kong is a major port for shipping, and is in the upper echelon for container traffic along with other major ports like Shanghai, Los Angeles, Singapore, and Rotterdam. There are some problems with doing business in Hong Kong. Due to the high concentration of people, Hong Kong has a population of 7,061,200 according to a 2010 government census, the cost of real estate is quite high as well as the population density. In addition, despite being one of the world’s richest economies, the Gini Coefficient indicates that the wealth gap continues to widen in Hong Kong. According to MSNBC, the difference between the rich and poor is far greater than that of the mainland China. So clearly while Hong Kong continues to be a powerhouse in international trade, domestic problems could have an impact in the future.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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