Connect With Authors
*Your message will be sent straight to the team/individual responsible for the article.
Menu
7.292 million
359.84 billion
-3.5 %
48154 USD
1107 km²
0.87 Child
4.3 %
1.9 %
With the 1997 Sino-British Joint Declaration, Hong Kong became a Special Administrative Region of China and is composed of 230 small and large islands and is adjacent to the South China Sea. Its land area is only a bit larger than New York City, covering only 1,104 square kilometers and mostly consisting of steep hills and mountainous regions. Despite its small size, Hong Kong is home to 7.5 million residents of different nationalities, making it one of the world’s most densely populated places and also a major financial center and one of the world’s most developed cities.
The government practices non-interference in economic policies and heavily relies on international trade and finance, making Hong Kong a favorable place to start a business. According to a 2021 start-up survey conducted by InvestHK, despite the ongoing impact of the COVID-19 pandemic on the global economy, Hong Kong’s start-up ecosystem remains vibrant, with a 12% increase from 2020.
Hong Kong is a unique economy that was originally a sparsely populated fishing and farming village. In 1841, after the first Opium War, Hong Kong became a colony of the British Empire, was occupied by the Japanese Empire during World War II, and was regained by the British after Japan’s surrender. In 1949, when the Communist Party of China controlled the mainland, many refugees and skilled migrants crossed the border into Hong Kong to escape the Civil War, making Hong Kong one of the Four Asian Tigers. With the rapid increase in population after the war, the colonial government began to reform to improve infrastructure and public services.
However, due to limited natural resources, Hong Kong relies almost entirely on imports, including raw materials, food, consumer goods, capital goods, and fuel, and as labor and property costs rise, the competitiveness of the manufacturing sector is declining, and the economy is transitioning to a service-based economy. During the British colonial period, Hong Kong relied on its unique status as an international free port to mainly engage in re-exporting to China, and with the Chinese government’s more open diplomatic policies, trade between Hong Kong and China has also increased.
At the same time, due to the relative stability of the British government’s rule compared to other Asian regions, by the early 1990s, Hong Kong had become one of the world’s financial centers and maritime hubs, and was also the world’s tenth largest exporter and ninth largest importer. With a capitalistic service economy characterized by low taxes and free trade, the Hong Kong dollar is the world’s eighth most traded currency and legally issued by three major international commercial banks and pegged to the US dollar. The interest rate of the currency is determined by individual banks in Hong Kong to ensure that the exchange rate is market-driven.
Until 1997, Hong Kong was returned to China and became one of two Special Administrative Regions of China (the other being Macau) and began to implement a different administrative and economic system from mainland China, known as “One Country, Two Systems”. After this, even though Hong Kong became a Special Administrative Region of China, the Sino-British Joint Declaration maintained Hong Kong’s economic and administrative continuity through the transfer of sovereignty, and the region’s administrative system largely inherited that of the United Kingdom and still maintains independent economic and cultural relationships with other countries.
However, with China’s economic liberalization, Hong Kong’s industries are not only facing challenges from economic globalization, but also direct competition from mainland cities, particularly Shanghai, which has a geographical advantage. The opening of China’s financial market has led some of the world’s top leading companies to move to Shanghai.
Further more, since the implementation of the National Security Law in Hong Kong by the Chinese government in June 2020, it has resulted in the suspension of bilateral extradition treaties with the UK, Canada, Australia, New Zealand, Finland, and Ireland. The US also ended its economic and trade benefits for Hong Kong in July 2020, as the Hong Kong economy can no longer be separated from China as before. To make matters worse, investment in Hong Kong has plummeted in 2021, with more than 100 billion US dollars of capital outflow, according to government statistics, the second time since 1997.
OOSGA is a Taiwan-based company specializing in providing market strategy services for businesses. We are dedicated to offering our clients reliable market intelligence and insights and work alongside them through our project teams to enter & grow in new markets.
If you are considering entering a new market or thinking of expanding your business, please feel free to contact our team for a discussion at any time
The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.
The Hong Kong economy is expected to grow again in the coming years, following a contraction of 3.5% in 2022. Despite the recovery, the economy is projected to remain smaller than it was in 2019. This slow growth is due to the decline in population in 2021-22, which will not quickly bounce back even with the lifting of pandemic restrictions. Additionally, the slump in private investment, combined with the ongoing decline in business confidence in both the mainland and Hong Kong economies, will contribute to the slow recovery. It will take 2-3 years for the local property construction sector to recover.
Over the next five years, investment in Hong Kong by international non-financial firms is expected to suffer as a result of the political unrest in 2019-21. This will also be partly due to the difficulty in attracting international talent even with the lifting of pandemic restrictions. Despite this, Hong Kong will still maintain its position as one of the world’s leading international financial centers, as regional rivals such as Shanghai, Shenzhen, and Singapore are unable to fill this role as a hub for financial flows between China and the global economy.
Finance and related professional services are expected to remain dominant in Hong Kong’s economy in the future. Trade flows will continue to be high in relation to the size of the economy, reflecting Hong Kong’s status as a shipping hub, but with limited links to the local industry. Public policy is unlikely to make much progress in diversifying the economy towards high-tech industries such as advanced computing and biotechnology, due to the small size of local specialized labor pools and high real estate costs.
The government’s efforts to increase housing supply will eventually lead to faster growth in overall fixed investment, with construction typically accounting for half of investment expenditure. However, this trend is expected to emerge only in the latter part of the forecast period, due to the lengthy acquisition and planning processes.
7.292 million
1107 km²
359.84 billion
48154 USD
4.3 %
1.9 %
100 %
0.87 Child
The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.
-1 k people
42 k people
62 k people
20 k people
-2.8 ‰
2.7 ‰
19.1 %
27.8 %
Hong Kong was under British control in the 19th century and returned to Chinese sovereignty in 1997 as a Special Administrative Region (SAR) of China, as per the Sino-British Joint Declaration signed in 1984. The territory was promised “a high degree of autonomy” for at least 50 years, and is governed by the Basic Law of the Hong Kong SAR, which acts as a mini-constitution. However, after the passing of the National Security Law on 30 June 2020 by the Standing Committee of the National People’s Congress, a controversial law that takes away the “full” autonomy of Hong Kong, the government is not perceived by many as self-ruled any more.
John Lee took office as the chief executive of Hong Kong in July 2022, succeeding Carrie Lam. The chief executive is selected by the 1,200-member Election Committee and advised by the Executive Council (the cabinet). The Legislative Council (Legco) is composed of a combination of direct vote, registered industry-body polls, and appointment by the Election Committee, with the first component accounting for about a fifth of the seats. The standing committee of China’s National People’s Congress, which is controlled by the Chinese Communist Party (CCP), has ultimate authority over the interpretation of the Basic Law.
As the Chinese government increases its authority through the national security law and closer guidance of the local government, Hong Kong’s autonomy will be totally diminished in the coming years. However, the judiciary’s ability to independently rule on commercial cases is unlikely to be affected by the national security law. Despite progress in securing new land for residential development, public dissatisfaction over the high cost of housing will remain a pressing issue in coming years.
In December 2022, as mainland China shifted from its zero-covid strategy, Hong Kong lifted nearly all its remaining pandemic-related restrictions. The public mask mandate is expected to be lifted in March-April. Most of the financial support for businesses and households affected by the pandemic will end by early 2023, including unemployment benefits, unconditional e-cash transfers to households, and government-backed loans for businesses. However, it is anticipated that additional personal income tax deductions will be offered in the next year.
The central government’s belief that low standards of living can lead to widespread public discontent has led to a push to increase the housing supply. In the short to medium term, local authorities will hasten the development of new projects on existing land, many of which will be located on brownfield sites in the New Territories. Two new areas have been announced as part of the Northern Metropolis initiative, which is now the government’s primary focus. More construction will take place near country parks and protected “special areas,” which make up about 40% of Hong Kong’s total land area.
Despite increased policy reform and political commitment, the lengthy planning, approval, and construction processes, as well as conflicting local interests (including commercial developers and small leaseholder associations), will limit the significant expansion of the housing supply in 2023-27. This will help prevent local property prices from falling significantly (by more than 25% from any given peak) in the next decade. The construction of the long-discussed land reclamation project, Lantau Tomorrow Vision, will not commence until after the forecast period. The project aims to provide housing for 700,000 to 1.1 million people over the next 30 years and will play a crucial role in supporting the growth of the housing supply from the 2030s onwards.
Economic ties between Hong Kong and mainland China will strengthen, driven by the Closer Economic Partnership Arrangement (CEPA) for two-way trade and investment, the “Connect” programs with Shanghai and Shenzhen for two-way securities trading, and the Chinese government’s Greater Bay Area (GBA) initiative aimed at integrating municipal economies in the Pearl River Delta (PRD). However, mainland capital controls, customs bureaucracy, and migration restrictions will prevent the GBA initiative from having a significant impact on Hong Kong in the next decade.
38.02 Billion
- %
-6.6 %
4.3 %
We have consolidated data on Hong Kong’s e-commerce, social media, and insights relate to how customers in Hong Kong make decisions and spend.
Social Media Development, User Demographics, Platforms, and Trends in Japan
Social Media Development, User Demographics, Platforms, and Trends in Japan
We track the latest economic developments from spending, retail, real estate to demographics in major economics around the world.
