Hong Kong: Economy

Hong Kong is one of the world's most open and dynamic economies. In 2010 Hong Kong’s real economic growth rate rose to 6.8%, recovering from the global financial turmoil. Inflation rose gradually to 2.4% in 2010 from 0.5% in 2009. The government introduced several rounds of measures to forestall the risk of a housing market bubble arising from the low interest rates and ample liquidity in the global financial system.

Hong Kong’s economic strengths, including a sound banking system, virtually no public debt, a strong legal system, ample foreign exchange reserves, and an able and rigorously enforced anti-corruption regime, enable it to quickly respond to changing circumstances. The government promotes measures designed to improve its attractiveness as a commercial and trading center and is continually refining its financial architecture. The government is deepening its economic interaction with the Pearl River Delta in an effort to maintain Hong Kong's position as a gateway to China. These efforts include the conclusion of a free trade agreement with China, known as the “Closer Economic Partnership Arrangement” (CEPA), which applies zero tariffs to all Hong Kong-origin goods, gives preferential treatment in 44 service sectors, and increases the scope for using the Chinese yuan or renminbi (RMB) in Hong Kong as a trade settlement currency, in savings deposits, and to purchase RMB-denominated bonds. Hong Kong, along with the Macau SAR, is also participating in a new pan-Pearl River Delta trade bloc with nine Chinese provinces, which aims to lower trade barriers among members, standardize regulations, and improve infrastructure.

Hong Kong’s exports of goods and services rebounded strongly in 2010, by 17.3% and 15.0% respectively in real terms, fueled by quicker than expected recovery of the global economy and a massive Chinese fiscal and monetary stimulus program. The unemployment rate in 2010 dropped to 4.3%, the lowest since the fourth quarter of 2008. The Hong Kong Government predicts GDP growth will reach 4% to 5% in 2011.

U.S. companies have a generally favorable view of Hong Kong's business environment, including its legal system and the free flow of information, low taxation, and infrastructure.

Sources:

CIA World Factbook (October 2011)
U.S. Dept. of State Country Background Notes ( October 2011)

Glossary