Hong Kong finally began booming once again after a wretched, posthandover slump that saw property prices and the stock market tank and everyone from rich to poor become uncharacteristically bearish. The talk was that Shanghai was the new Asian world city and Hong Kong was doomed to remain a mere backwater.
It took several unexpected body blows to create this gloomy mood – a 1997 run on Asian currencies, September 11 2001 and the deadly SARS epidemic that virtually shut the place down.
You can’t keep the irrepressible and hard-working citizens of Hong Kong down forever, though. As China’s epoch-making rise continues, entrepreneurial Hong Kong rides its surging wave. It is once again Asia’s preeminent city state, taking a fat tithe from its mainland trade in goods and finance. Its container port is busier than ever and its booming stock market continues to underwrite a historic series of mainland public flotations, its unique status and clear rule of law attracting significant deals and, increasingly, investment from the mainland away from Shanghai’s exchange.
Hong Kong’s Stock Exchange is the seventh largest in the world, with a market capitalisation of about US$1.71 trillion. In 2006, the value of initial public offerings handled here was second highest in the world after London. The easing of travel restrictions from China to Hong Kong hasn’t hurt either. Visitor numbers from the mainland have surged by half.
The fact remains, however, that while Hong Kong proudly trumpets its laissez faire economic policies, considerable sections of the economy, including transport and power generation, are dominated by a handful of cartels and monopolistic franchises. Nonetheless, Hong Kong’s economy is by far the freest in Asia, enjoying low taxes, a modern and efficient port and airport, excellent worldwide communications and strict anticorruption laws.
Critics would say that while Hong Kong’s
annual per capita GDP of US$38,000 – the highest in Asia, ranking fifth worldwide (compared to $7600 in China) according to IMF figures – is less impressive than it looks. The distribution of such wealth is far from even. Hong Kong has more billionaires than most other countries, but many more people who struggle to meet much more than fairly basic levels of subsistence.
Hong Kong has moved from labour – to capital-intensive industries in recent decades – service industries employ about 85% of Hong Kong’s workforce and make up more than 88% of its GDP. Telecommunications, banking, insurance, tourism and retail sales have pushed manufacturing into the background, and almost all manual labour is now performed across the border in southern China. The shift from manufacturing to services has not been without problems.
The change may have seen a dramatic increase in wages, but there has not been a corresponding expansion of the welfare state. On the other hand generous personal tax allowances mean only a little more than 40% of the working population of 3.54 million pays any salaries tax at all and a mere 0.3% pays the full 16%.
Hong Kong has traditionally suffered from a labour shortage. Most of the manual work (domestic, construction etc) is performed by imported labour, chiefly from Southeast Asia. The labour shortage is most acute in the high-tech and financial fields, prompting the government to consider further relaxing restrictions on importing talent from the mainland, a move deeply unpopular with Hong Kong’s working class.
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