Economically, Hong Kong packs a mighty punch for such a tiny place: Asia’s leading global financial center is also its busiest air-cargo hub and seventh-biggest container port, and has the region’s largest asset-management industry.
The factors behind Hong Kong’s success include:
- a world-class IT and communications infrastructure
- a highly skilled international workforce
- a largely pro-business government with low taxes and minimal regulations and import/export restrictions
- access to a diverse, global investor base
- a sophisticated legal system in the only common law jurisdiction in China
- unbeatable proximity to mainland China and other emerging economies in Asia
Hong Kong was ranked the World’s Freest Economy by the Heritage Foundation for 25 years in a row, and second in 2020, a drop attributed in part to the social unrest in 2019. However, Hong Kong still maintained top ratings in the categories of fiscal health, business freedom, trade freedom and financial freedom, factors that continue to make the city an attractive base for international businesses.
The Hong Kong government is also investing heavily in attracting startup talent to Hong Kong — notably in the areas of fintech, e-commerce, and logistics technology and information.
There were 1,504 companies with regional headquarters in the city in 2020, up from 1,413 in 2017, according to government data. The top five contingents were mainland China, Japan, the US, the UK and Singapore.
With the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) poised to develop into one of the world’s leading hubs for innovation and technology, the Hong Kong government is also investing heavily in attracting startup talent to Hong Kong — notably in the areas of fintech, e-commerce, and logistics technology and information.
Speaking of government investment, Hong Kong has ample public finances and boasts nearly zero public debt (although the pandemic has taken its toll on the territory’s fiscal reserves — as it has in just about every other economy). Hong Kong’s GDP per capita stood at USD$48,756 in 2019, and just over USD$62,000 when calculated by purchasing power parity, according to the latest government and World Bank data. While less than Macau’s — a much smaller population sharing the bonanza of gaming — it sees the territory nicely nestled between Austria and Finland.
On the other hand, housing prices continue to be high due to credit expansion and tight supply. Over the past decade or so lower- and middle-income segments of the population have found it increasingly difficult to afford adequate housing. Although prices started to drop after the protests in the second half of 2019, a trend compounded by an economic slowdown and the coronavirus pandemic, homeownership remains out of reach for many Hong Kong residents.
Hong Kong’s economy, once reliant on manufacturing, has since the 1980s become dominated by the services sector: financial services, trading and logistics, tourism and professional services being the four key industry “pillars.” Together, these pillars account for over 57 percent of value added in Hong Kong’s GDP and employ nearly 47 percent of the working population.
The government has also identified six additional industries that are ripe for development in Hong Kong: cultural and creative industries, medical services, education services, innovation and technology, testing and certification services, and environmental industries.