2014 Index of Economic Freedom

Hong Kong

overall score90.1
world rank1
Rule of Law

Property Rights90.0

Freedom From Corruption82.3

Limited Government

Government Spending89.7

Fiscal Freedom93.0

Regulatory Efficiency

Business Freedom98.9

Labor Freedom95.5

Monetary Freedom82.0

Open Markets

Trade Freedom90.0

Investment Freedom90.0

Financial Freedom90.0

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Quick Facts
  • Population:
    • 7.2 million
  • GDP (PPP):
    • $369.4 billion
    • 1.4% growth
    • 2.5% 5-year compound annual growth
    • $51,494 per capita
  • Unemployment:
    • 3.3%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $74.6 billion
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Hong Kong’s economic freedom score is 90.1, making it the top-rated economy in the Index for the 20th consecutive year. Its overall score is slightly better than last year due to improvements in government size and regulatory efficiency that offset a decline in freedom from corruption. Hong Kong is ranked 1st out of 42 countries in the Asia–Pacific region and 1st in the world.

Throughout the 20-year history of the Index, Hong Kong has been rated the world’s freest economy, but its strong commitment to economic freedom has become somewhat less exceptional as average world economic freedom has advanced. This year, Hong Kong recorded its second highest economic freedom score ever. In recent years, populist policies that increase spending and empower the administrative bureaucracy, as well as an increasing level of perceived corruption, have held back Hong Kong’s overall rating.

Yet the territory has effectively navigated global booms and busts, recording an overall score improvement of 1.6 points over the past two decades. A high degree of market openness, as measured by trade freedom, investment freedom, and financial freedom, has been complemented by a transparent regulatory environment and competitive tax regime. A highly motivated workforce and a high level of labor freedom have added to Hong Kong’s economic dynamism and resilience.

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Background

The Special Administrative Region of Hong Kong is part of the People’s Republic of China but self-governing on a day-to-day basis, and its people enjoy a wide range of freedoms under its Basic Law. Implementation of promised democratic reforms, including universal suffrage, has been slow. Chief Executive Leung Chun-ying, who took office in 2012, was chosen by a 1,200-member Election Committee and formally appointed by the mainland government. Hong Kong has one of the world’s most prosperous economies, thanks to a commitment to small government, low taxes, and light regulation. Major industries include financial services and shipping; manufacturing has largely migrated to the mainland. Current concerns include cronyism in policymaking, state control of land, and restrictions on information flows.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 82.3 Create a Graph using this measurement

Hong Kong enjoys low rates of corruption, although business interests exercise a strong influence in the unicameral legislature and executive branch. The judiciary is efficient and independent, and the rule of law is respected. Property rights are well protected, and the government devotes significant attention and resources to enforcement of intellectual property laws.

Limited GovernmentView Methodology

The standard individual income tax rate is 15 percent, and the top corporate tax rate is 16.5 percent. The tax system is simple and efficient, and the overall tax burden is around 14 percent of GDP. Government spending remains equivalent to slightly under one-fifth of the domestic economy. Public debt is virtually nonexistent, and a budget surplus has been maintained even in light of increased government spending and tax rebates.

Regulatory EfficiencyView Methodology

The competitive regulatory regime aids business formation and innovation. The process for launching a business is straightforward, and no minimum capital is required. The impact of the recently introduced statutory minimum wage on the labor market has been relatively subdued. Monetary stability is maintained through the exchange-rate peg to the U.S. dollar. The government partially subsidizes small and medium enterprises.

Open MarketsView Methodology

Hong Kong is very open to international commerce, with a 0 percent average tariff rate and few barriers to foreign investment. A robust and transparent investment framework, in place for many years, continues to attract foreign investment. The financial sector remains highly competitive and well capitalized, serving as a leading global hub. There are no restrictions on foreign banks, which are treated the same as domestic banks.

Country's Score Over Time

Bar Graph of Hong Kong Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Hong Kong to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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