Essay on Hong Kong
In this paper I will present description of the economy of Hong Kong as well as explain why it is generally referred to as the center of economic life of Asia and is undividable part of the international economy. I will mention Hong Kong’s macroeconomic trends, history of the economic freedom, resource base, the process of the economical transformation, currency, real estate, stock market, and also present other economic indicators, including prospects for the future.
1. Introduction
“Hong Kong brims with energy, glitter, and excitement. From the heights of Victoria Peak, the cityscape of skyscrapers, apartment towers, forested hills, and harbor forms a spectacular panorama, and at night the sparkling light show of the soaring buildings is second to none in the world. This glamorous city houses an extraordinarily talented people that made this research project a sheer delight. The citizens on the street, the storeowners, clerks, taxi-drivers, and my tailor graciously offered assistance whenever requested, provided directions, and gave me their opinions on the economy and politics…” (Meyer 1)
“Hong Kong brims with energy, glitter, and excitement. From the heights of Victoria Peak, the cityscape of skyscrapers, apartment towers, forested hills, and harbor forms a spectacular panorama, and at night the sparkling light show of the soaring buildings is second to none in the world. This glamorous city houses an extraordinarily talented people that made this research project a sheer delight. The citizens on the street, the storeowners, clerks, taxi-drivers, and my tailor graciously offered assistance whenever requested, provided directions, and gave me their opinions on the economy and politics…” (Meyer 1)
Hong Kong is officially called the Hong Kong Special Administrative Region. The economy of Hong Kong is usually refereed as being the most free from the economic standpoint in the world, according to the Index of Economic Freedom for the last fourteen years, as well as to the Economic Freedom of the World report. But in regard to Hong Kong free doesn’t mean unregulated, as there are many paths by which the government is involved in economic life. Government participated in the creation of such economic institution as Hong Kong Stock Market and also participated in projects of public works and social welfare spending. All land in Hong Kong belongs to the state and private users rent it. Hong Kong in general has many positive cultural, geographical, political prerequisites to be called the center of East Asia economic life. The main sourced of profit for the government of Hong Kong is the revenues from taxation and the land leasing, as government institutions are not involved in the industry and commerce.
2. Hong Kong –Center of Asian Economy
It was so historically stipulated that government authorities stood away from owning and running business companies, and were predominantly engaged with the protection trade issues, imposing regulatory control. This is what Meyer writes regarding this issue (7): “To control the exchange of commodity and financial capital, intermediaries must acquire public and specialized business information about their international demand and supply. Because intermediary profitability often depends on being the first to make exchanges, delays in receipt and transmission of information are costly. Printed and electronic mass media, unrestricted spoken information, and official government sources provide public information, but all intermediaries have similar access to this information”.
It was so historically stipulated that government authorities stood away from owning and running business companies, and were predominantly engaged with the protection trade issues, imposing regulatory control. This is what Meyer writes regarding this issue (7): “To control the exchange of commodity and financial capital, intermediaries must acquire public and specialized business information about their international demand and supply. Because intermediary profitability often depends on being the first to make exchanges, delays in receipt and transmission of information are costly. Printed and electronic mass media, unrestricted spoken information, and official government sources provide public information, but all intermediaries have similar access to this information”.
For the last few decades, Hong Kong authorities had been very successful in running up substantial budget deficits by means of public borrowing restrains, expansion of credits and inflation control. The Hong Kong economy can be characterized by freedom, prosperity and constant growth. As Hong Kong has the free market economy, there is no political production planning and import price control. Hong Kong has a very valuable geographical location for trade, as it is the seventh biggest port in the world and the second largest in terms of container throughput. The container complex in Hong Kong is called the Kwai Chung, and it is the largest one in the whole Asia.
Along with the favorable geographic location, Hong Kong is also famous for having valuable human resources. The population of the area is more than seven million people and from year to year it is growing. Hong Kong labor force is very adaptable, skilled and hard-working and on practice it adopted the Western business models of work and uses all modern methods and opportunities for flourishing business. The most part of the Hong Kong population is the first and the second generation of the immigrants, and it becomes obvious that population is relatively new in the region.
Speaking about macro-economic trends of Hong Kong, it is necessary to mention that GDP was not officially measured by the government authorities until 1971. To find out the GDP before 1971, it is helpful to address the international trade statistics. In 2006 Hong Kong’s GDP level was the 38th largest in the world with the index of 263.1 billion of US dollars, and GDP per capita took the 6th place with the index of 38.127 US dollars.
In order to understand origins of the economy of Hong Kong, it is necessary to know its historical prerequisites. The economy of Hong Kong has been transformed during the different time periods. In the 19th century, before the World War I, he dominating sector of Hong Kong was trade, and the city was the 4th largest trading port in the world (1895) and the economy basically revolved around international trade. After the World War II, from early 1950s to 1970s, manufacturing became the dominating sector of economy and it was the largest part of the economy and city’s revenues, and was led by textiles. The second largest sector was business service, such as retailing, wholesaling, hotels and the foreign trade. For the decade started in 1980s, finance became the dominating sector of economy. And since 1997, business and financial services dominate the economy, and together they constitute the half of economic revenues of Hong Kong.
The heart of the region’s economic freedom is based upon the government’s hand-off policy. This governmental model was developed also in Taiwan as the reaction to the effect of Cultural Revolution in China and its profound analysis. During the era of Mao, the government was attempting to forecast the steel production, and as it was not able to meet the prediction, the economy of China collapsed. Economic model of Hong Kong then and now allows renovation and flexibility for each industry. It is the main reason for the growth of GDP per capita rates of Hong Kong (for 6.5% in 25%), which is the remarkable event for the economic analysis. In the 1990s, that index finally appeared to be higher even that of the United Kingdom. The great influence upon the economy of Hong Kong had the Asian financial crisis of 1997, the IT bubble of the second half of the 2000, terrorist attacks upon the United States in 2001 and the SARS outbreak of 2003. Asian financial crisis had the great influence upon Hong Kong’s unemployment rate, which increases for about 4% in a year (from 2.2% to 6.3%).
There is no much cultivated land in Hong Kong and there is a shortage of natural resources, and therefore the region had to import most food and raw materials from other countries. But still Hong Kong remains on the largest trading entities of the world. There are 114 (as of 2006) countries that maintain consulates in Hong Kong, which is more than any other city in the world. The most export from Hong Kong is not the domestic goods, but re-export of the products that are manufactured outside the region, primarily in mainland China. Since the territory of Hong Kong is autonomous, this status allows the city to be the entry point for all investments and resources before they reach the mainland China.
Speaking about the differences between rich and poor population in Hong Kong, I must note that the gap between them continues to grow.
The currency that is used in Hong Kong is Hong Kong dollar and since 1983 it can be changed to United States dollar at the fixed rate (due to Black Saturday), the allowed range of exchange rate is between 7.75 and 7.85 the fiscal year of the government is from April, 1 to March, 31 of the next year.
Real estate in Hong Kong is very expensive, and has the 3rd place in the world, leaving far behind prices for real estate of London and Monaco. Anyone who has money is able to buy real estate in the city, and therefore real estate remains one of the greatest contributors to the city’s economy, as many foreigners prefer to invest in real estate.
Banking system in Hong Kong is three-tier, and includes deposit-taking institutions, restricted license banks, licensed banks, as well as deposit-taking companies. There is also Hong Kong Monetary Authority that is responsible for bank regulation. Hong Kong is obviously the financial center of East Asia, ad has one of the greatest concentration level o banking institutions in the world. There are 100 largest banks in the world and 71 of them have an operation in Hong Kong.
Hong Kong Stock Exchange is the main exchange in Hong Kong where shares of the listed companies are traded. It is the second largest stock exchange in Asia, left behind by Tokyo Stock Exchange. The holding company of the exchange is Hong Kong Exchanges and Clearing Company. The history of the securities exchange market began at the end of the 19th century and was established in 1891, but the securities trade was taking place since 1861. Established in 1981 exchange was called the Association of Stock brokers in Hong Kong, in 1914 it was renamed to Hong Kong Stock Exchange. The exchange system was computerized in 1986, which assisted in system modernization. In 1993, the “Automatic Order Matching and Execution System” was launched and later on it was replaces by the system of the third generation (2000).
General economic indices of Hong Kong are very high compared to other developed cities in Asia. Inflation rate in 2007 was 2%, unemployment rate- 3.6% for the same year, nominal GDP is 208. 7 billion of US dollars, real growth rate of GDP is 6.8%, GDP rate per capita is 30.157 US dollars. Export in 2007 was 344.9 billion US dollars. The main Hong Kong export partners are Mainland China, USA, Japan and Germany. The main products that are exported (and re-exported) are footwear, clothing, textiles, toys, plastics, watches, precious stones, etc. Import in 2007 was 368.4 billions of US dollars. The main import partners of Hong Kong are Mainland China, Japan, Taiwan and Singapore. The imported commodities are transport equipment, food, raw materials, petroleum, semi manufactures, etc.
The head of the Hong Kong Special Administrative Region (SAR) is the Chief Executive Donald Tsang from 2005. The Election Committee that votes on the Chief Executive (CE) contains about 800 Hong Kong residents from four constituency groups: industrial, commercial, and financial interests; professionals; social and labor services representatives, as well as religious authorities; and the legislature, the Chinese People’s Political Consultative Conference, and the P.R.C. National People’s Congress. In 2002, the Hong Kong Government institutions introduced the Principal Officials Accountability System that was created to make the government more responsive to the concerns of people. There are twelve policy bureaus that are run by twelve political appointees, which are directly responsible to the Chief Executive. In general, Hong Kong has the free and open society in which human rights are respected, courts are independent, and there is well-structures respect for the rule of law, residents still are limited in their ability to change their government, and the legislative authorities are limited in their power to influence government policies. On September 12, 2004 elections to Legislative Council were considered to be open, free, and widely contested, even though Hong Kong groups have claimed occurrences of voter manipulation, intimidation, and overall pressure.
3. Conclusion
Hong Kong is the very developed city from each standpoint of economic analysis. It remains to have the freest economy in the world. Government doesn’t own business enterprises in Hong Kong, preferring to exercise just regulatory function. It is one of the largest ports in the world and in general has all prerequisites to be called the center of economy of Asia and to have the great importance to the international economy.
Hong Kong is the very developed city from each standpoint of economic analysis. It remains to have the freest economy in the world. Government doesn’t own business enterprises in Hong Kong, preferring to exercise just regulatory function. It is one of the largest ports in the world and in general has all prerequisites to be called the center of economy of Asia and to have the great importance to the international economy.
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