Economy

Hong Kong maintains a highly capitalist economy built on a policy of free market, low taxation and government non-intervention. It is an important centre for international finance and trade, with the greatest concentration of corporate headquarters in the Asia-Pacific region. In terms of gross domestic product per capita and gross metropolitan product, Hong Kong is the wealthiest urban centre in the People's Republic of China. The GDP per capita (PPP) of Hong Kong even exceeded the four big economies in Western Europe (UK, France, Germany, Italy) and Japan in Asia.

Continuing the practice established under the British administration, the Government of Hong Kong mostly leaves the direction of the economy to market forces and the private sector. Since 1980, the government has generally played a passive role under the official policy of positive non-interventionism. Hong Kong has often been cited as a prime example of laissez-faire capitalism in practice, most notably by economist Milton Friedman. It has ranked as the world's freest economy in the Index of Economic Freedom for 13 consecutive years, since the inception of the index in 1995.[23][24] It also places first in the Economic Freedom of the World Report.

Hong Kong has little arable land and few natural resources within its borders, and must therefore import most of its food and raw materials. Hong Kong is the world's eleventh largest trading entity,[25] with the total value of imports and exports exceeding its gross domestic product. As of 2006, there are 114 countries that maintain consulates in Hong Kong, more than any other city in the world. Much of Hong Kong's exports consists of re-exports, which are products made outside of the territory, especially in mainland China, and distributed through Hong Kong. Even before the transfer of sovereignty to the People's Republic of China, Hong Kong has established extensive trade and investment ties with mainland China. The territory's autonomous status enables it to serve as a point of entry for investments and resources flowing into the mainland. It is also a connecting point for flights from the Republic of China on Taiwan destined for the mainland.

Hong Kong banknotes
Hong Kong coinsThe currency used in Hong Kong is the Hong Kong dollar. Since 1983, it has been pegged at a fixed exchange rate to the United States dollar. The currency is allowed to trade within a range between 7.75 and 7.85 Hong Kong dollars to one United States dollar. The Hong Kong Stock Exchange is the seventh largest in the world, with a market capitalization of about US$1.69 trillion as of February 2007. In 2006, the value of initial public offerings conducted in Hong Kong was second highest in the world after London.[26] The City of London Corporation's Global Financial Centres Index (GFCI) 2007, which evaluates the competitiveness of 46 financial centres worldwide, ranks Hong Kong as the third-best financial centre globally and the strongest centre in Asia.

Hong Kong's economy is dominated by services, which accounts for over 90 percent of its gross domestic product. In the past, manufacturing had been the most important sector of the economy, as Hong Kong industrialized following the Second World War. Driven by exports, the economy grew at an average annual rate of 8.9 percent in the 1970s. Hong Kong underwent a rapid transition to a service-based economy in the 1980s, when growth averaged 7.2 percent annually. Much of the manufacturing operations moved to mainland China during this period, and industry now constitutes just 9 percent of the economy. As Hong Kong matured to become a financial centre, growth slowed to an average of 2.7 percent annually in the 1990s. Together with Singapore, South Korea, and Taiwan, Hong Kong is known as one of the Four Asian Tigers for its high growth rates and rapid industrialisation between the 1960s and the 1990s.

Hong Kong Disneyland during a fireworks displayThe economy suffered a 5.3 percent decline during 1998, in the aftermath of the Asian financial crisis. A period of recovery followed, with growth rate reaching 10 percent in 2000, although deflation persisted. In 2003, the economy was greatly affected by the outbreak of Severe Acute Respiratory Syndrome (SARS), which reduced economic growth to 2.3 percent that year. A revival of external and domestic demand led to a strong recovery the following year, as cost declines strengthened Hong Kong export competitiveness. The 68-month-long deflationary period ended in mid-2004, with consumer price inflation hovering at near zero levels.[29] Beginning in 2003, the Individual Visit Scheme has allowed travellers from some cities in mainland China to visit Hong Kong without an accompanying tour group. As a result, the tourism industry of Hong Kong has benefitted from an increase in mainland visitors, further aided by the opening of Hong Kong Disneyland Resort in 2005. The economy continues to grow strongly with the return of consumer confidence and rising trade. Hong Kong has set low rates in both personal and corporate taxation.

In 2006, Hong Kong's per-capita GDP ranked as the 6th highest in the world at US$38,127, ahead of countries such as Switzerland, Denmark, and Japan.[30] Its GDP ranked as the 40th highest at US$253.1 billion.


from http://en.wikipedia.org