Why Hong Kong Can and Will Bounce Back

Author: Steven Clay

Published:

A recent Businessweek Ranking listed Hong Kong as No. 9 of the "World’s Gloomiest Countries" with respect to economic outlook, with exports, profitability margins, investments, turnovers, and selling margins all expected to fall in a negative manner. Despite the hard hits that Hong Kong and the other Asian markets have taken in the financial crisis, Hong Kong can and will bounce back.

Although Hong Kong's economic outlook through the rest of 2009 looks gloomy, it still maintains its ranking as the #1 Freest Economy in the World. Furthermore, Hong Kong has consistently ranked #1 on globalEDGE's Market Potential Index. This is important because one may recall that one of the major reasons for the financial crisis was a lack of oversight in the financial industry. Hong Kong is one of the world’s leading financial centers, and the government of Hong Kong maintains an efficient and transparent banking system. Trust in the banking system is one of the key factors in recovering from an economic recession/depression, as evidenced in the Great Depression, and Hong Kong maintains one of the most regulated financial industries in the world while still maintaining a relatively small government.

Another reason Hong Kong will recover is the freedom of trade it offers. On the whole Hong Kong’s tariff rates are some of the lowest in the world, and taxation is only a very small percentage of its GDP. Additionally, Hong Kong is one of the easiest places in the world to start a business. The average time required to start a business in Hong Kong is significantly less than the world average, which is 38 days, and the world average to obtain necessary licenses for such a business, which is 225 days.

Part of the reason for Hong Kong’s downturn is simply the fact that the entire world is experiencing an economic downturn. Investments are down because people don’t have money to invest. Exports are down because people aren’t buying as much because they don’t have money. The reason Hong Kong’s fall is so drastic is because at the cusp of the financial crisis it was such a strong market. The same factors that made Hong Kong into one of the strongest markets in the world haven’t simply disappeared. And it will be because of these factors that Hong Kong will rebound stronger than ever on the global business playing field.