Economic overview

The Economy

In General

Hong Kong is one of the most open and externally oriented economies in the world. The city prospers as a trading hub and service centre, where an understanding of international markets as well as the Mainland give it a unique and versatile economic role as the Mainland opens up.

The economy is robust enough to have weathered the economic shockwaves and recover to new heights. Over the past two decades, the Hong Kong economy has more than doubled in size with GDP growing at an average annual rate of 5% in real terms.

Since land supply is tightly controlled, the property market is often regarded as an indicator of the economy's health. With increases on the horizon, this is a widely regarded as an economic positive. Unemployment has stabilised at around 5% and the composite price index is now hovering around positive.

Hong Kong is the 11th largest trading economy in the world.

Business Environment and Culture

Hong Kong prides itself in the "little government, big market" approach, where the comparatively light hand of regulatory bodies ensures Hong Kong remains of world-class standard while providing the pro-business framework that creates a just and level playing field. The government lives by the mantra "œmarket leads, government facilitates".

With next to know natural assets, the primary economic sector is negligible in terms of contribution to GDP and employment. In the last 20 or so years, GDP constituents have changed from 69% services and 30% manufacturing to 90% services and around 10% manufacturing. This testifies to Hong Kong and its inhabitants being widely renowned for their ability to adapt and reinvent. Now that manufacturing has largely moved over the border to the Mainland, Hong Kong is embracing its role of manager, financier, marketer, logistics organiser, trader and in tourism, the key industries which now comprise the majority of GDP and employment.

That said, the manufacturing that excels in Hong Kong today tends to be of a high end nature and the whole sector enjoys the support of the Federation of Hong Kong Industries.

Trade

Trade in goods and services expanded by around eight times and three times respectively in the last 20 years. Looking at the total value of the trade of goods and services, it amounts to more than 300% of GDP!

In approximate terms, Hong Kong's total trade comprises roughly half imports and half exports, of the latter, re-exports form the lion's share. Key markets for Hong Kong are the US and the Mainland.

Since the economic reforms introduced by the Mainland in 1978, business between Hong Kong and the Mainland has increased significantly, with Hong Kong handling more than 20% of the Mainland's foreign trade.

There are various bodies such as the Hong Kong Trade Development Council and Hong Kong Productivity Council that help Hong Kong businesses trade and stay competitive in the world market. The Hong Kong General Chamber of Commerce also plays a key role in this. It is one of the largest voluntary chambers in the world.

Investment

According to the latest World Investment Report 2006 (from the United Nations), Hong Kong was the second largest recipient of foreign investment in Asia (Mainland was the first) and was the 6th largest recipient in the world.

In the same report Hong Kong was recognised as one of the leading locations in the "Inward FDI Performance Index" (ranked 3rd in the global rankings); 15th in the global rankings for "Inward FDI Potential Index" and was classified as a "front-runner" economy, meaning the city out performed its investment potential, by attracting high FDI inflows relative to its economic size.

Like trade, Hong Kong and the Mainland are key to one another's success. Hong Kong is the largest investor in the Mainland, and Mainland investment in Hong Kong amounts to some 2,000 enterprises and over 25% of the total stock.

Other Aspects of Commerce