2017 Index of Economic Freedom

Hong Kong

overall score89.8
world rank1
Rule of Law

Property Rights93.7

Government Integrity80.3

Judicial Effectiveness84.0

Government Size

Government Spending90.0

Tax Burden93.0

Fiscal Health100.0

Regulatory Efficiency

Business Freedom94.6

Labor Freedom89.1

Monetary Freedom83.2

Open Markets

Trade Freedom90.0

Investment Freedom90.0

Financial Freedom90.0

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Quick Facts
  • Population:
    • 7.3 million
  • GDP (PPP):
    • $414.6 billion
    • 2.4% growth
    • 2.9% 5-year compound annual growth
    • $56,701 per capita
  • Unemployment:
    • 3.3%
  • Inflation (CPI):
    • 3.0%
  • FDI Inflow:
    • $174.9 billion
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Hong Kong has demonstrated a high degree of economic resilience and remains one of the world’s most competitive financial and business hubs. The high-quality legal framework, which provides effective protection of property rights and strong support for the rule of law, continues to be a cornerstone of strength for this dynamic city. There is little tolerance for corruption, and government integrity is buttressed by a high degree of transparency.

Regulatory efficiency and openness to global commerce strongly support entrepreneurial activity. Interaction with China has become more intense through strengthened financial and other noneconomic linkages, and Hong Kong is by far the most significant transit point for exports and imports to and from China.

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Background

Hong Kong became part of the People’s Republic of China (PRC) in 1997. Under the “one country, two systems” agreement, China promised not to impose its socialist policies on Hong Kong and to allow Hong Kong a high degree of autonomy in all matters except foreign and defense policy for 50 years. This autonomy policy has been stressed by political interference from the PRC in recent years. Major industries include financial services and shipping; manufacturing has largely migrated to Mainland China and other Southeast Asian economies.

Rule of LawView Methodology

Property Rights 93.7 Create a Graph using this measurement

Government Integrity 80.3 Create a Graph using this measurement

Judicial Effectiveness 84.0 Create a Graph using this measurement

Private ownership of property is enshrined in the Basic Law, which is Hong Kong’s constitution. Commercial and company laws provide for effective enforcement of contracts and protection of corporate rights. The judiciary is independent, but Beijing reserves the right to make final interpretations of the Basic Law, effectively limiting the power of Hong Kong’s Court of Final Appeal. Hong Kong has an excellent track record in combating corruption.

Government SizeView 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. The overall tax burden equals 14.4 percent of total domestic income. Government spending has amounted to 18.3 percent of total output (GDP) over the past three years, and budget surpluses have averaged 2.0 percent of GDP. Public debt is equivalent to 0.1 percent of GDP.

Regulatory EfficiencyView Methodology

Business freedom is well protected within an efficient regulatory framework. Transparency encourages entrepreneurship, and the overall environment is conducive to the formation and operation of start-up businesses. The labor code is strictly enforced but not burdensome. Hong Kong has very few price controls, but it does fund some subsidies and regulates residential rents and prices for telecommunications, public transport, and electricity.

Open MarketsView Methodology

Trade is extremely important to Hong Kong’s economy; the value of exports and imports taken together equals 400 percent of GDP. The average applied tariff rate is zero percent. Hong Kong is very open to global trade and investment. The financial regulatory and legal environment focuses on ensuring transparency and enforcing prudent minimum standards. There are no restrictions on foreign banks, which are treated the same as domestic institutions.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong89.81.2
2Singapore88.60.8
3New Zealand83.72.1
4Australia810.7
5Taiwan76.51.8
6South Korea74.32.6
7Malaysia 73.82.3
8Macau70.70.6
9Brunei Darussalam69.82.5
10Japan69.6-3.5
11Kazakhstan695.4
12Vanuatu67.46.6
13Thailand 66.22.3
14Philippines65.62.5
15Azerbaijan63.63.4
16Fiji63.44.6
17Tonga633.4
18Indonesia61.92.5
19Kyrgyz Republic 61.11.5
20Cambodia59.51.6
21Bhutan58.4-1.1
22Samoa58.4-5.1
23Tajikistan58.26.9
24China57.45.4
25Sri Lanka57.4-2.5
26Nepal55.14.2
27Solomon Islands558.0
28Bangladesh 551.7
29Mongolia54.8-4.6
30Micronesia54.12.3
31Laos544.2
32Pakistan 52.8-3.1
33India52.6-3.6
34Burma52.53.8
35Vietnam52.4-1.6
36Uzbekistan52.36.3
37Papua New Guinea50.9-2.3
38Kiribati50.94.7
39Maldives50.3-3.6
40Afghanistan48.9N/A
41Turkmenistan47.45.5
42Timor-Leste46.30.5
43North Korea4.92.6
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