is characterised by its high degree of internationalisation, business-friendly environment, rule of law, free trade and free flow of information, open and fair competition, well-established and comprehensive financial networks, superb transport and communications infrastructure, sophisticated support services, and a well-educated workforce complemented by a pool of efficient and energetic entrepreneurs. Added to these are substantial foreign exchange reserves, a fully convertible and stable currency, and a simple tax system with low tax rates.
A Free Economy
Hong Kong has retained its rating as the freest economy in the world in the 2004 Index of Economic Freedom released by The Heritage Foundation, for the 10th consecutive year. The Cato Institute in the United States, in conjunction with more than 50 economic institutes worldwide, also ranks Hong Kong as the world's freest economy. The International Monetary Fund classifies Hong Kong as an advanced economy. Other highly regarded institutions—like the World Economic Forum, the International Institute of Management Development and the Economist Intelligence Unit—also identify Hong Kong as one of the world's most competitive business environments. And Hong Kong is the best-performing host economy for foreign direct investment (FDI) in Asia, according to the World Investment Report 2002 published by the United Nations Conference on Trade and Development (UNCTAD).
Gross Domestic Product (GDP) Growth
Over the past two decades, the Hong Kong economy has more than doubled in size, with GDP growing at an average annual rate of 4.9 per cent in real terms. This means Hong Kong has outperformed the growth of the world economy as well as that of the Organisation for Economic Co-operation and Development economies. Per capita GDP in Hong Kong has also more than doubled over the same period, equivalent to an average annual growth rate of about 3.7 per cent in real terms. In 2003, it reached US$23,027, second only to Japan in Asia and higher than many Western countries.
Hong Kong has long been wellknown for its market-led economic policies. Market-led means that the Government does not seek to direct or plan the course that the economy or the markets should take, as investors and entrepreneurs are deemed to understand markets far better than officials. Private sector initiatives are a surer way to build Hong Kong's prosperity than the bureaucrat's blueprints. Economic vitality is thus the key to maintaining competitiveness and engendering prosperity for all people in Hong Kong.
Maximum Support, Minimum Intervention
The Government firmly believes in 'maximum support and minimum intervention'. Its primary role is to provide the most business-friendly conditions possible, including the fundamental 'software' of personal liberty, the rule of law, a clean and efficient administration, and a level playing field for all businesses, as well as the land and infrastructural 'hardware' such as schools and roads that Hong Kong needs for growth.
In addition, the Government has a special responsibility for removing market restrictions and promoting fair competition. It has made considerable strides in liberalising the securities, futures and banking industries, and opening up the telecommunications, information technology and broadcasting markets.
The Government protects and promotes Hong Kong's commercial interests in the international arena through representation in such international forums as the World Trade Organisation and the Asia-Pacific Economic Co-operation group, and by negotiating and entering into bilateral arrangements such as those for air services.
Prudent Fiscal Practice
The Government adheres to prudent fiscal practice, whilst maintaining a simple tax structure with low tax rates that sustain workers incentive to work and entrepreneurs incentive to invest. The corporate profits tax rate and salaries tax rate, at 17.5 per cent and 16 per cent respectively, are low by international standards.
International Financial Centre
Hong Kong is an international financial centre with an integrated network of financial institutions and markets. The Government's policy is to maintain and develop a sound legal, regulatory, infrastructural and administrative framework with the aims of providing a level playing field for all market participants, maintaining the stability of the financial and monetary systems and enabling Hong Kong to compete effectively with other major financial centres.
A favourable geographical position, which bridges the time gap between North America and Europe, strong links with the Mainland and other economies in South-east Asia and excellent communications with the rest of the world have helped Hong Kong to develop into an important international financial centre. The absence of any restrictions on capital flows into and out of Hong Kong is another important factor.
Hong Kong's financial markets are characterised by a high degree of liquidity. They operate under effective and transparent regulations, which meet international standards. A highly-educated workforce and ease of entry for professional staff from overseas further contribute to the development of the financial markets.
The Banking Sector
The international financial community has a strong presence. At the end of 2003, Hong Kong had 134 licensed banks, of which 121 were foreign-owned banks. Of the world's top 100 banks, 75 have operations in the HKSAR, while 81 subsidiaries or related companies of foreign banks operate as restricted licence banks and deposit-taking companies. A further 87 foreign banks have local representative offices. The banking sector's external assets are among the highest in the world.
Hong Kong has a mature and active foreign exchange market, which forms an integral part of the global market. Links with centres overseas enable foreign exchange dealing to continue 24 hours a day around the world. Hong Kong was the world's 6th largest centre for foreign exchange trading, according to the 2004 triennial global survey conducted by the Bank for International Settlements.
The stock market is one of the world's largest in terms of market capitalisation. At the end of May 2004, 1 057 public companies were listed on the Hong Kong Exchanges and Clearing Limited with a total market capitalisation of $5,484.4 billion (US$703.1 billion).
The stock market is the 2nd largest in Asia, behind Tokyo's. The Growth Enterprise Market (GEM), a NASDAQ-style second board of the stock exchange, was launched in November 1999 to provide 'start-up' companies, in particular those involved in high-tech business, with access to equity market financing. As at May 2004, 195 companies were listed on GEM with a total market capitalisation of $74.5 billion (US$9.55 billion). In a pilot programme launched in May 2000, Hong Kong became the first city in Asia to offer 'live' trading on the Asian time-zone of seven leading US NASDAQ stocks.
Economic Links with the Mainland
Hong Kong is the premier gateway for trade with and investment into and out of the Chinese Mainland. Since the Mainland adopted its economic reform and open-door policy in 1978, economic links with Hong Kong have gone from strength to strength.
Trade with the Mainland
The Mainland is Hong Kong's largest trading partner, accounting for 43 per cent of Hong Kong's total trade value in 2003. About 90 per cent of Hong Kong's re-export trade is related to the Mainland, making it both the largest market and the largest source for Hong Kong's re-exports.
Hong Kong is a major service centre for the Mainland generally and South China in particular, providing a wide range of financial and other support business services like banking and finance, insurance, transport, accounting and sales promotion.
Investments between Hong Kong and the Mainland
Hong Kong companies are the largest external investors in the Mainland, with cumulative investments of more than US$218 billion accounting for about half of the total value of inward direct investment. Hong Kong's closest economic links are with Guangdong Province. Some 10 million workers in Guangdong are employed by industrial ventures with Hong Kong interests. Implementation of the Closer Economic Partnership Arrangement (CEPA) in 2004 and various policy initiatives to enhance economic co-operation between Guangdong and Hong Kong serve to expand business opportunities.
The Mainland is also a major investor in Hong Kong's economy. There are more than 2 000 Mainland enterprises operating in Hong Kong with a total investment of US$220 billion, making it one of the largest sources of external direct investment.
China's Accession to the WTO
With continuing reform and liberalisation of the Mainland economy, particularly after China's entry into the World Trade Organisation (WTO), Hong Kong's service hub role for the Mainland will continue to strengthen. Hong Kong possesses a strong niche in partnering with and providing business support services for foreign enterprises seeking to enter the Mainland market. In the other direction, as more Mainland enterprises seek to extend their business outward, Hong Kong can help them to gain access to overseas markets.
Gateway to the MainlandHONG KONG
Hong Kong is a key gateway to the Mainland both for business and for tourism. In 2003, some 52.6 million trips were made by Hong Kong residents to the Mainland. The number of trips made by foreign visitors to the Mainland through Hong Kong totalled 2.71 million. Every day there are 116 sailings, about 170 flights, more than 400 train connections and 35 400 vehicle crossings between Hong Kong and the Mainland.
At the start of the 21st century, the HKSAR Government has undertaken a review of Hong Kong's long-term development strategies, partly to cope with the changes and capitalise on the opportunities arising from the reunification with the Mainland, and partly in response to the many challenges in the face of globalisation and the emergence of a knowledge-based economy. The review follows a two-year study by the Commission on Strategic Development which encompasses a vision and a strategic framework for Hong Kong to become, not only a major city in China, but also Asia's world city. [ Brand Hong Kong ]
Asia's Cyber City for the Cyber Century
Hong Kong has set itself on course to become the centre for innovation and technology in East Asia—a cyber city in the cyber century. Much is being done to realise this goal and to capitalise on the enormous opportunities thrown up by the information revolution.
Cyberport — Hong Kong's IT flagship — is a HK$15.8 billion (US$2 billion) landmark project managed by Hong Kong Cyberport Management Company Limited and owned by the HKSAR Government. It is creating an interactive environment that will be home to a strategic cluster of more than 100 information technology (IT) companies and more than 10 000 IT professionals. This clustering of local and overseas companies and professional talent is envisioned as a catalyst and hub for the growth of local and regional IT industries, with particular emphasis on IT applications, information services and multimedia content creation. Cyberport will also provide IT education for the broader community.
Cyberport represents a commitment on the part of the Government of the HKSAR to facilitate Hong Kong's development as a leading digital city in the region. The project is being developed on a 24-hectare site at Telegraph Bay in the southern district of Hong Kong Island. Cyberport is being completed in phases extending through 2004, and when complete will feature 100 000 square metres of 'intelligent' office space.
The Science Park aims to establish and nurture a world-class technology community dedicated to applied research and development. It is being developed along a clustering concept, with four clusters of electronics, IT and telecommunications, biotechnology and precision engineering. The first phase of the Science Park opened in June 2002. Phase II of the Science Park is to be completed by the end of 2007.
Infrastructure Projects for the 21st Century
An efficient and reliable infrastructure has played a key role in maintaining Hong Kong as a leading trade, finance, business and tourism centre in the region. Infrastructure development enables us to meet demands arising from population growth and help support our economic and trade development.
The HKSAR Government continues to invest heavily in capital works projects. It plans to spend under the Capital Works Programme an average of $29 billion (US$3.7 billion) per year for the next 5 years.
Further to the commissioning of West Rail in December 2003, four new railways are scheduled for completion between 2004 and 2007. Both the Tsim Sha Tsui Extension, which will provide a second rail interchange between the KCR and the MTR systems, and the Ma On Shan Rail, which will connect new towns in the eastern parts of Hong Kong with the urban areas, will be completed by 2004. The Penny's Bay Rail Link connecting Sunny Bay with Disneyland on Lantau Island is expected to be completed in 2005. A new rail passenger boundary crossing at Lok Ma Chau connecting Huanggang in Shenzhen is expected to be completed before mid-2007.
The 'Railway Development Strategy 2000' provides a blueprint for Hong Kong's rail network expansion up to 2016 or so. This involves a total investment of some $100 billion to complete five new passenger rail projects (the Kowloon Southern Link (KSL), Shatin to Central Link (SCL), Island Line Extensions (ILE), Northern Link (NOL), and Regional Express Line (REL)) and a Port Rail Line for freight. Upon their completion, Hong Kong's rail network will expand by some 40 per cent to over 250 kilometres. The railways' share of the public transport system will be boosted from 30 per cent to about 40 per cent.
New Urban Development
The West Kowloon Reclamation project was completed in 2003. The reclamation has provided about 340 hectares of land to house a planned population of about 190 000. At the southern tip of the reclamation, another major development proposal is the West Kowloon Cultural District (WKCD), which is currently under active planning. The intention is to develop the area into an arts, cultural, commercial and entertainment district with a distintive identity. The Government has invited proposals internationally for development of the WKCD.
The Outline Zoning Plan to guide redevelopment of the former Kai Tak Airport site was approved in June 2002. In view of a recent court ruling on reclamation in Victoria Harbour, a comprehensive review of the current development scheme will be carried out to ensure its compliance with the legal requirements. The review which covers the planning and engineering aspects, is expected to take two years. It will include extensive public involvement to gauge the community's wishes for this major waterfront site and to help build public consensus on revising the development scheme.
New strategic roads will alleviate urban congestion and provide vital new links into the New Territories and beyond. Among the major road projects are the Hong Kong-Shenzhen Western Corridor, Deep Bay Link and Route 8 including the Stonecutters Bridge.
The 1 596-metre Stonecutters Bridge, with a main span of 1 018m, will be the longest cable-stayed bridge in the world. It is the first long-span bridge located in an urban environment in Hong Kong and will be highly visible from Hong Kong Island and Kowloon Peninsula. The bridge design was adopted from the winning design of an international competition in 2000 which elicited participation from the best design and engineering firms in the world.
This bridge is an important part of Route 8 between Tsing Yi and Sha Tin. On completion of the works in mid-2008, Hong Kong will be adding an east-west strategic route linking the eastern part of the New Territories to the airport. This new highway will provide direct access to Container Terminals No 8 and No 9 in Kwai Chung, which will further enhance Hong Kong as an important international logistics and transportation hub.