Hong Kong - Overview
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Hong Kong is the world's tenth largest trading power and the third largest financial center in the world. Hong Kong's economy is often cited as the model of capitalism. Its ultra-liberal operating system was heavily exposed to the global financial crisis but ultimately proved to be resilient. In 2012, its growth rate was weak due to the slowdown of the Chinese economy and the recession in Europe. According to estimations, the country's growth must have slightly increased in 2013 (about 3%) and inflation was 4.6%.
Household consumption has increased and the country retains huge fiscal reserves. The government rarely intervenes in the economic sphere, but due to political pressure, it has been asked to adopt a number of measures. In the current ambiguous international environment, the budget proposal for 2013-2014 focuses on growth and employment. It includes an increase of more than 30% in welfare spending, as well as tax cuts and energy subsidies. In order to encourage long-term growth, the government seeks to strengthen Hong Kong's role as a global warehouse and to support the development of the industries of logistics and funds management. The fight against environmental pollution and senior citizens welfare support are also among the priorities. In 2014, the government will continue to center its control in a budgetary discipline. Tourism is an important sector, in 2013 about 54 million visitors, mainly from continental China, visited Hong Kong. This year, the government has applied new measures in order to reduce the price of real estate which could eventually weaken the growth perspectives of Hong Kong. Lastly, the country's attractive fiscal policy, which is one of its major advantages, could be threatened by the competitiveness of the emerging regional countries. In 2014 a constitutional reform should be passed, but at the moment there is not a consensus regarding this subject.
The economic crisis had led to a demotion on the labor market, particularly in the financial services. However, the unemployment rate has decreased again and remains at a historical minimum (slightly above 3%). Nevertheless, Hong Kong must deal with high levels of social inequality.
Since the agricultural sector is almost non-existent, Hong Kong has to import 80% of its food supplies. Hong Kong does not have any natural resources and depends entirely on its imports of raw materials and energy. Agriculture, practically does not contribute at all to the country's economy.
The manufacturing industry's contribution to the GDP is also very low. The country's main industrial sectors are textiles, electronic components and household appliances, computer technology and telecommunications.
The tertiary sector, particularly financial services, is the heart of the country's economic activity. It contributes to around 90% of the GDP and employs more than 85% of the active population. Hong Kong acts as a service center for Asian companies, especially those that trade with China. According to the figures published by the Commercial Register, there are over 900,000 companies registered in Hong Kong. The tourism industry is booming, mainly due to an exponential increase in the number of visitors from mainland China.
Foreign trade overview
Hong Kong's economy is considered a model of capitalism because of its dedication to free trade. Trade represents nearly 430% of the GDP (2009-2011 average). Hong Kong is one of the top fifteen exporters of trade services and it is also among the top fifteen largest trade-based economies in the world.
Foreign trade was pursued intensively during these past years, supported by the growth of the Chinese economy. Structurally in deficit, the trade balance of Hong Kong has a tendency to deteriorate due to the unfavorable international context, which is harming imports. In 2013, this deficit became larger, imports progressed a little faster than exports.
The island's main trade partners are China, Southeast Asia and Japan.
According to the “World Investment Report 2013" published by the UNCTAD, Hong Kong was the 3rd largest recipient of FDI in the world in 2012, and it has kept its second place in Asia after China. It is also the the third supplier of FDI outflows from Asia.
The flows of FDI, which had slowed down due to the global recession, began to increase again since 2010. In 2012, FDI influx to Hong Kong more than doubled compared to 2011, reaching USD 6.12 billion. Therefore, Hong Kong surpassed Singapore in the ranking of FDI recipients. This trend will continue due to the key role which the Asian region will play in global growth. According to the classification Doing Business 2014 issued by the World Bank, Hong Kong ranks second for its business climate.
Hong Kong's attraction is due to its several assets: its strategic position which makes the island the access gate to the Chinese market, its status as a free port, its simple and very incentive tax regime, its efficient infrastructures and its legal security.