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- GDP (PPP):
- $397.5 billion
- 2.3% growth
- 3.7% 5-year compound annual growth
- $54,722 per capita
- Inflation (CPI):
- FDI Inflow:
The implementation of prudent economic policy within a stable and transparent legal environment has been the cornerstone of Hong Kong’s continuing achievement in maintaining the world’s freest economy. Well-secured property rights ensure vibrant commercial interactions and entrepreneurial growth. With a high level of market openness and fiscal discipline, Hong Kong continues to be a leading global business and financial hub.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 88.6 (down 1 point)
- Economic Freedom Status: Free
- Global Ranking: 1st
- Regional Ranking: 1st in the Asia–Pacific Region
- Notable Successes: Open Markets and Regulatory Efficiency
- Concerns: Rule of Law
- Overall Score Change since 2012: –1.3
The highly competitive regulatory, tax, and spending policies that facilitate the dynamic engagement of the well-motivated and skilled workforce in world markets have come under pressure from those who favor more government involvement in the economy. The outcome of ongoing debates about the proper scope and reach of government will shape Hong Kong’s future success.
Hong Kong became part of the People’s Republic of China 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. The shape and form of the “universal suffrage” promised for 2017 by Chinese authorities is not clear. Major industries include financial services and shipping; manufacturing has largely migrated to the mainland and other Southeast Asian economies. Hong Kong’s economy has become increasingly integrated with the mainland economy through trade, tourism, and financial links.
The sensational anti-corruption prosecution of a high-profile property developer for bribery in late 2014 illustrated why corruption rates remain low. Beijing’s ongoing efforts to erode the power of Hong Kong’s judiciary and Legislative Council and to intervene in the economy could undermine the rule of law. At least for now, however, the efficient and capable judiciary remains independent, and private property rights are well protected.
The standard 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 low at 15.7 percent of GDP. Government spending amounts to 17.6 percent of GDP. Public debt is virtually nonexistent, and a budget surplus has been consistently maintained. In recent years, greater spending on social programs has increased fiscal pressures.
The overall entrepreneurial environment remains one of the world’s most transparent and efficient. The business start-up process is straightforward, with no minimum capital required. The labor market is vibrant, and the labor force participation rate has gradually increased since 2010. The peg between the Hong Kong dollar and its U.S. counterpart has served the territory well since 1983, ensuring monetary stability and facilitating international commerce.
Hong Kong has a 0 percent average tariff rate. The country remains one of the most open economies in the world for international trade and investment. There is no general screening of foreign investment, and in most cases, foreign investors can maintain 100 percent ownership. The financial sector remains highly competitive and well capitalized, serving as a leading global hub.