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Hong Kong SAR, China

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

As the tenth largest trading power and the fifth largest financial centre in the world, Hong Kong is often cited as a model of liberal economics. However, the economy has been experiencing a slowdown in recent years, with a GDP growth of -6.1% in 2020, against -1.2% in 2019. This slowdown results largely from the impact of the COVID-19 pandemic, but also from the cooling Chinese economy, trade tensions with the United States, decreased FDI, and tighter credit conditions forcing the Hong Kong Monetary Authority (HKMA) to imitate rate increases. According to Financial Times, Hong Kong’s economy has also suffered from the many protests in 2019 and 2020. Positive GDP growth came back in 2021 with + 6.4% (IMF, October 2021). According to the latest IMF forecasts growth is expected to reach +3.5% in 2022 and remain at 3.1% in 2023, subject to the post-pandemic global economic recovery.

Due to the impact of the global economic context of 2020, the Hong Kong Government closed the year 2020 with a -10.6% budget deficit from -3.3% in 2019. It was back to -3.9% in 2021 (Hong-Komg Government, 2022). The protests and the export pressure from the US-China trade war also affect the government balance. Hong Kong continues to have solid public finances despite a public debt increasing from 1% of GDP in 2020 to 2.1% in 2021. According to the IMF, the inflation rate dropped from 2.9% in 2019 to 0.3% in 2020 before reaching 1.9% in 2021. Inflation rate should increase to 2.1% in 2022 and 2.3% in 2023 according to the latest World Economic Outlook of the IMF (October 2021). Credit expansion and a tight housing supply have caused Hong Kong property prices to rise rapidly in recent years. Lower and middle-income segments of the population are increasingly unable to afford adequate housing. Tourism is largely affected by the ongoing protests and pandemic and tourism from China (75% of total visitors) is also expected to remain weak because of slower economic growth in mainland China and the depreciation of the RMB in relation to the HKD.

In 2022, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic.The unemployment rate increased from 2.9% in 2019 to 5.8% in 2020 and 5.6% in 2021. The IMF expects a reduction in the unemployment rate, with 4.6% in 2022 and 4.2% in 2023. Challenges also include pro-China vs anti-China sentiment, rising income inequality, and lack of economic innovation (Coface, 2022).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 363.02346.58369.72389.98409.95
GDP (Constant Prices, Annual % Change) -1.7-6.16.43.53.1
GDP per Capita (USD) 48,26846,657e49,48551,89554,238
General Government Balance (in % of GDP) 0.3-5.8e-2.9-1.5-1.3
General Government Gross Debt (in % of GDP) 0.31.02.13.24.1
Inflation Rate (%) 2.90.31.92.12.3
Unemployment Rate (% of the Labour Force) 2.95.8e5.64.64.2
Current Account (billions USD) 21.3622.6622.2621.9120.67
Current Account (in % of GDP) 5.96.56.05.65.0

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Hong Kong relies heavily on financial services, production of electronics, and tourism as its main industries. The agricultural sector is almost non-existent since Hong Kong possesses no natural resources and is completely reliant on raw material and energy imports. The contribution of agriculture to the economy was practically null at 0.1% of GDP in 2021 and 0.2% of the workforce employed (World Bank, 2022). Hi-tech vertical farming is being adopted as an alternative to traditional farming (South China Morning Post). Concerns over food safety from Chinese products, have also been a factor in the boom of local farming initiatives (EcoWatch).

The manufacturing industry represents a larger, albeit still small share of GDP (6.3% in 2021) and employment with 11.5% of the workforce (World Bank, 2022). Main industries include electronics, electrical appliances, informatics and telecommunications. In 2021, the industrial sector stagnated.

The tertiary sector is the heart of Hong Kong's economy. Financial services, trading and logistics, tourism, import/export, air transport, professional and producer services are traditional key industries in Hong Kong. The services sector contributes around 89% of GDP and employed 88.3% of the workforce in 2021 (World Bank, 2022). Hong Kong acts as a service centre for Asian companies, particularly for those trading with China. According to figures published by the Commercial Register, there are over 900 thousand companies registered in Hong Kong.

The COVID-19 pandemic has had a powerful impact on the global economy since 2020. Nevertheless, the global recovery continues, even if the momentum has weakened towards the end of 2021 and uncertainty has increased as the pandemic resurged, leaving lasting imprints on medium-term performance. The surge in global inflation has investors fretting about future growth, but many economists say price surges will subside, making way for 4.7% global GDP growth in 2022 (International Monetary Fund - IMF, 2022 & Morgan Stanley, 2021). The impact of the pandemic appears to have affected both sides of most sectors and markets in Hong Kong for the second year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for industry and service sectors.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.2 11.1 88.8
Value Added (in % of GDP) 0.1 6.3 90.0
Value Added (Annual % Change) 4.9 n/a -6.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20152016201820192020
Hong Kong Dollar (HKD) - Average Annual Exchange Rate For 1 USD 7.757.767.847.807.76

Source: World Bank - Latest available data.

 

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Foreign Trade

Hong Kong's economy is considered a model of capitalism due to its commitment to free trade, with foreign trade representing 351.7% of its GDP (World Bank, 2022). Top exports include Electrical and electronic equipment (56% of all export) as well as gold, business services, travel, transportation and financial services. Main imports include electronic equipment (53%), transportation and business services (WTO). The International Monetary Fund (IMF) is forecasting a rebound of 4.4% in the volume of exports of goods and services of the territory in 2021, after a fall of 11.5% in 2020 due to the COVID-19 pandemic, and an increase of 5% of its imports, after a fall of 13.2% in 2020.

Export destinations include China (57% of all export in 2021), the U.S. (7.5%), India, Japan and Thailand while imports come from China (49%), Singapore (7%), Japan (7%), South Korea and the US (Comtrade, 2021). Hong Kong was the world's 6th exporters and 8th importers in 2020 (WTO, 2021). The greatest threat to Hong Kong's trade involves tensions and tariffs between the U.S. and China (Nikkei Asian Review). The effects of the COVID-19 pandemic and protests in Hong Kong may be affecting the economy (Fitch) in particular through tourism and air traffic.

In 2020, the total value of exported goods and services reached 176.7% of GDP while imports of goods and services closed at 174.9% of GDP. The trade balance, including services, was positive in 2020, reaching 6,32 million USD a 12.02% increase from 2019. The trade balance including only goods is largely negative (43.855 billion USD). Hong Kong is an externally oriented economy. In 2020, the value of Hong Kong’s total exports of goods amounted to HKD 3,927.5 billion (503.21 billion USD), while that of imports of goods was HKD 4,269.8 billion (636.60 billion USD). With regards to services, Hong Kong registered for the same year 63.78 billion USD for export and 51.02 billion USD for import. Foreign trade has slowed down in 2020 with a decrease of -0.95% for imports but an increase of +2.95% for exports. Hong Kong has no tariffs on imported goods. It levies excise duties on only four commodities which are imported or produced locally: hard alcohol, tobacco, hydrocarbon oil and methyl alcohol. There are no quotas or dumping laws.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 547,336588,913626,616577,834569,769
Exports of Goods (million USD) 516,734549,864568,456534,887548,773
Imports of Services (million USD) 74,46177,51681,48080,77350,921
Exports of Services (million USD) 98,432104,216113,049101,86463,731

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 371.8376.8376.9353.8351.7
Trade Balance (million USD) -16,704-22,927-32,272-16,066-6,018
Trade Balance (Including Service) (million USD) 7,3273,430-7656,2226,750
Imports of Goods and Services (Annual % Change) 0.96.64.5-7.3-6.2
Exports of Goods and Services (Annual % Change) 0.75.83.7-6.1-5.9
Imports of Goods and Services (in % of GDP) 184.7187.9188.6176.1174.9
Exports of Goods and Services (in % of GDP) 187.0188.9188.4177.7176.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 15.24.84.03.43.4
Volume of imports of goods and services (Annual % change) 14.35.84.53.83.8

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Hong Kong is a member of the following international economic organisations: IMF, Asia-Pacific Economic Cooperation (APEC), ICC,  World Customs Organization (WCO), WTO, among others. For the full list of economic and other international organisations in which participates Hong Kong click here. International organisation membership of Hong Kong is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Hong Kong can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2020
China 55.2%
United States 7.2%
United Kingdom 3.3%
Switzerland 2.7%
Japan 2.6%
See More Countries 28.9%
Main Suppliers
(% of Imports)
2020
China 43.8%
Singapore 7.2%
Japan 5.8%
South Korea 5.7%
United States 4.0%
See More Countries 33.4%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Head of State: President of China, Xi Jinping (since 14 March 2013) - Chinese Communist Party
Chief Executive: Carrie Lam (since 1 July 2017)
Next Election Dates
President: March 2023
Chief Executive: 2022
Legislative Council: 2021
Current Political Context
Since the national security law took force in 2020, the culmination of years long efforts, Beijing has deployed a series of actions to bring Hong Kong into political lockstep with the Chinese Communist Party, a move reinforced in 2021.
An overhaul of Hong Kong's electoral system, including the Legislative Council, is imminent after the National People's Assembly of China passed a resolution on Hong Kong electoral reforms in March 2021. The reform plans to increase the number of seats (70 to 90), but to reduce the number of those who are directly elected (35 to 20), without any coming from the local council. The electoral committee will elect 40 seats, while 30 will remain functional trade-based constituencies. There will also be a new process for examining potential candidates for parliamentary elections.
Main Political Parties
Hong Kong is not independent from Chinese politics. As such, there are no governing political parties. Legislative matters are largely carried out through the business or professional sectors; political parties will often officially register under the auspices of a company or business corporation. The main parties:

- Democratic Alliance for Betterment and Progress of Hong Kong (DAB): centre to centre-right, conservative, pro-government
- Business and Professional Alliance for Hong Kong (BPA): conservative,liberal
- The Democratic Party: centre-left, pro-democracy
- Liberal Party (LP): centre-right, pro-business
- Hong Kong Federation of Trade Unions (HKCTU): liberal, pro-government
- Civic Party (CP): social-liberal , constitutionalist.
- New People's Party (NPP): Conservatist
- Professional Commons (PC): Liberal
- Labour Party
: Environmentalist, Social Democracy
- New Territories Association of Societies (NTAS): Chinese Nationalist, Conservatist
Executive Power
The territory is governed by a Chief Executive, elected for five years by a college of 1,200 large voters including parliamentarians, eminent personalities and representatives of the professional sectors. Chief Executive represents Hong Kong to the authorities of the People's Republic of China.

The government answers to the Chief Executive and is composed of 12 ministers (Secretaries) who are assisted by 17 senior functionaries who hold the title of "Permanent Secretaries". In hierarchical order, the three main government posts are the Chief Secretary (who is second to the Chief Executive), the Financial Secretary and the Secretary for Justice. If the Chief Executive is unable to conduct his functions temporarily, they will be conducted in this order of precedence by the title holders of the main posts.

In addition, the Chief Executive is assisted by an Executive Council or Exco which includes the government ministers and 15 non-official members who are parliamentarians nominated by the Chief Executive; personalities from the business world or from civil companies. The Exco serves as the Council of Ministers by being the venue for formulation of government's policies. This council is consulted for all important political decisions. It meets once a week, under the chairmanship of the Chief Executive who should specially justify his decisions in case of disagreement with the majority of its members.

Legislative Power
The unicameral legislative power is conferred to a Legislative Council. The Legislative Council is composed of 70 members elected for 4 years, with 35 Members returned by geographical constituencies through direct elections, and 35 Members by functional constituencies. The President of the Legislative Council is elected by and from among Members of the Legislative Council.

The council votes for and amends laws and can also introduce any new proposal. It examines and approves the budget, taxes and public expenditure, appoints the judges for the Court of Final Appeal and the President of the High Court. It is also responsible for monitoring the conduct of the Chief Executive and ensuring the Government appropriately applies its policy. The absence of political responsibility of the ministers can make the Legislative Council limit the control exercised by this assembly on the executive power.

Members are on the Council for four years. The Government is dependent on parliament's support, which is often given through a vote of confidence. The Chief Executive does not have the power to dissolve the parliament. He cannot refuse to sign a bill which has been voted in by two-thirds of the parliament.

 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Hong Kong please visit website of the Centre for Health Protection, which provides a complete list of all known cases in Hong Kong with the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Hong Kong and the current sanitary measures in vigour, please visit the Hong Kong government’s portal Coronavirus.gov.hk, as well as the document "Preparedness and Response Plan for Novel Infectious Disease of Public Health Significance" and the daily "Updates on Infection Situation".

Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Trade and Industry Department.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Hong-Kong on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Hong Kong government to address the impact of the COVID-19 pandemic on the economy, refer to the portal of the Hong Kong Monetary Authority.
Support plan for businesses
For information on the local business support scheme established by the Hong Kong government to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, the Hong Kong General Chamber of Commerce provides extensive resources and information about government programs.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in Hong Kong, if applicable, please consult the website of the Trade and Industry Department. The Hong Kong General Chamber of Commerce provides extensive resources and information about government programs.
 

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