Structure and Development of the Economy
The Hong Kong Special Administrative Region is strategically
located at the doorway to the Mainland. It is also in the
international time zone that bridges the time gap between Asia
and Europe. Both attributes have reinforced Hong Kong's
position as a global centre for finance, business and
communications. Hong Kong is ranked the seventh-largest
trading entity in the world. It operates the busiest container
port in the world in terms of throughput, and the busiest
airport in the volume of international cargo handled. It is the
world's fourth-largest banking centre in terms of external
banking transactions, and the fifth-largest foreign exchange
market by turnover. Its stock market has Asia's second-largest
market capitalisation.
Hong Kong owes its strength to sound economic
fundamentals, a large fiscal surplus and strong foreign
exchange reserves, business-friendly government policies, a
competent workforce complemented by a pool of efficient and
enterprising entrepreneurs, a superb network of transport and
communications infrastructure, a high degree of
internationalisation, and open financial markets. Adding to
these are a low taxation system, free and fair market
competition, a fully convertible and stable currency, tight
fiscal discipline, a well-supervised banking sector, sound
monetary system and a comprehensive legal framework. The
World Economic Forum ranks Hong Kong as the world's
second most-competitive economy, while the US Heritage
Foundation and Fraser Institute of Canada rank it the freest
economy in the world.
Hong Kong once again showed its resilience amid the financial
turmoil that swept though the region in the latter part of 1997.
The Hong Kong dollar has remained remarkably stable under
the anchor of the linked exchange rate, while many other
currencies in the region have all suffered sharp depreciation.
Local interest rates have risen as the financial situation in the
region remains unsettled, but those in the affected economies
elsewhere in the region have risen higher with greater
volatility. Stock markets in the region have all registered heavy
declines, but the fall in the Hong Kong stock market was still
smaller than in most of the region's other stock markets. Over
the past 15 years, Hong Kong has weathered a number of
shocks including the 1987 world stock market crash, the June
1989 incident in the Mainland, the Gulf War in 1990 and the
Mexican currency crisis in 1994.
Over the past two decades, the Hong Kong economy has more
than tripled. GDP in Hong Kong has been growing at an
average annual rate of about 7 per cent in real terms, twice as
fast as the world economy and outperformed the Organisation
for Economic Co-operation and Development (OECD)
economies. Per capita GDP in Hong Kong has more than
doubled in real terms, equivalent to an average annual real
growth rate of about 5 per cent. In 1997, it reached
US$26,400. The latest comparison showed that per capita
GDP in Hong Kong was next only to those of Japan and
Singapore in Asia. It has also surpassed some of the OECD
economies, such as Canada, the United Kingdom, and
Australia. Benefiting from this remarkable economic
performance, the local workforce has enjoyed a continued rise
in income both in money terms and in real terms.
Chart 1 Gross
Domestic Product (year-on-year growth rate in
real terms) Over the past two decades, the Hong Kong economy
has been expanding rapidly, with GDP growing by 7% per annum
and per capita GDP by 5% per annum in real terms.
Trade in goods and services expanded by about 13 times and
four times respectively over the past two decades. Reflecting
the highly externally-oriented nature of the Hong Kong
economy, the total value of visible trade (comprising
re-exports, domestic exports and imports) amounted to $3,075
billion in 1997, representing 232 per cent of the GDP. This
compared with corresponding ratios of 143 per cent in 1970,
148 per cent in 1980, and 221 per cent in 1990. Taking into
account the value of exports and imports of services, the ratio
increased even further, to 267 per cent in 1997. The
respective ratios in 1970, 1980, and 1990 were 181 per cent,
181 per cent and 260 per cent.
External investment has played an important role in Hong
Kong's economic development. At the end of 1995, the total
stock of inward direct investment in Hong Kong rose by
6.6 per cent over a year earlier to reach $532.6 billion, of
which 91 per cent went to the non-manufacturing sectors.
The UK remained the largest major source, with a share of
27 per cent in the total stock of inward direct investment in
the manufacturing and non-manufacturing sectors combined.
This was followed by the Mainland (20 per cent), Japan
(16 per cent) and the United States (13 per cent).
In 1995, the Gross National Product (GNP), comprising GDP
and net external factor income flows, amounted to $1,092
billion at current prices. This was 1.3 per cent higher than
Hong Kong's GDP in the same year. Both the inflows and
outflows of external factor income were very substantial,
estimated to be $387 billion and $373 billion respectively,
amounting to over two-thirds of GNP. This reflects the
significant role of Hong Kong as an international financial
centre.
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