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Hong Kong has one of the least restricted economies in the world and is basically duty-free. It is the world's 11th largest trading entity and 13th largest banking center. The Index of Economic Freedom states that Hong Kong essentially has the freest economy on earth. Hong Kong is also China's richest city. The dominant presence of international trade is reflected in the number of consulates in the territory: at June 2005, it had 107 consulates and consulates-general, more than any other city in the world. (Even New York City, host of the United Nations, has only 93 consulates.) The objective of Hong Kong's monetary policy is to maintain currency stability. Given the highly externally-oriented nature of the economy, this objective was further defined as a stable external value for the Hong Kong dollar in terms of a linked exchange rate against the US dollar at the rate of HK$7.80 to one United States dollar until 2005, when it was allowed to trade within a band of HK$7.75–$7.85. Hong Kong has limited natural resources, and most food and raw materials must be imported. In fact, imports and exports (including re-exports) exceed the GDP of Hong Kong. Hong Kong has extensive trade and investment ties with the People's Republic of China which existed even before the handover on 1 July 1997. These ties and its autonomous status enable it to be the middleman between the Republic of China on Taiwan and the mainland. Flights, investment, and trade from Taiwan go through Hong Kong to get to the mainland. The service sector represented 86.5% of the GDP in 2001. The territory, with a highly sophisticated banking sector and good communication links, hosts the Asian headquarters of many multinational corporations. At USD $37,400 in 2006, the real per capita GDP of Hong Kong is somewhat higher than that of the four big economies of western Europe which is around USD $30,000. Growth averaged a strong 8.9% per annum in real terms in the 1970s and 7.2% p.a. in the 1980s. As the economy shifted to services (manufacturing currently accounts for just 4% of GDP), growth slowed to 2.7% p.a. in the 1990s, including a 5.3% decline in 1998, due to the Asian financial crisis' impact on demand in the region. Growth since 2000 has averaged 5.2% p.a. amid strong deflation. The economy rebounded rapidly, growing by 10% in 2000. A world-wide global downturn and the Severe Acute Respiratory Syndrome (SARS) outbreak reduced economic growth to 2.3% in 2002. Thereafter, a boom in tourism from the mainland because of China's easing of travel restrictions, a return of consumer confidence, and a solid rise in exports resulted in the resumption of strong growth in late 2003 and 2004, with growth averaging 6.5% in the first half of 2005. To further increase economic co-operation between Hong Kong and the mainland, the Individual Visit Scheme was started on 28 July 2003, which allows travelers from some cities in mainland China to visit Hong Kong without an accompanying tour group. As a result, the tourism industry in Hong Kong is booming due to an exponential increase in the number of visitors from mainland China. The upsurge is also boosted by the recent opening of Hong Kong Disneyland Resort. A revival in both external and domestic demand led to a strong upswing in growth in 2004, surging to 8.2% for the year. The domestic sector completely shrugged off its earlier sluggishness, and the general weakness of the Hong Kong dollar, when included with the still modest cost and price pressures in Hong Kong, has resulted in a strengthening in Hong Kong's external price competitiveness. In addition, Hong Kong's 68-month-long deflationary spiral, the longest and highest deflation according to Guinness World Records, ended in mid-2004, with consumer price inflation hovering at near zero levels. Along with Singapore, South Korea and Taiwan, ROC, Hong Kong's fast-paced industrialization earned it a place as one of the four original East Asian Tigers. |
Hong Kong Information: Inside
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