Unit 2 Introduction to Hong Kong Economy

Characteristics of the Hong Kong economy

1 Lack of
primary industry
4 A free
market economy

2 Concentration on tertiary
industry

3 Dependence on external
trade 6 Free flow of information
 Recent development of the
Hong Kong economy

First Transformation: Second Transformation:

From a manufacturing centre
From an entrepôt to a
to an international financial
manufacturing centre
and service centre

1950 1978 1997

1. The transfer of sovereignty

China adopted economic over Hong Kong from the
reform and open-door policy United Kingdom to China
2. Asian Financial Crisis
 Recent development of the
Hong Kong economy

Third Transformation:
Evolving into a knowledge-based economy

1997 2001 2003 2008 2009

1. SARS epidemic Global financial crisis

1. 911 terrorist
(financial tsunami)
attacks in 2. The signing of CEPA
the US 3. The identification The announcement of
2. China joined of the Four Pillar the development of the
the WTO Industries Six Priority Industries
Recent development of the
Hong Kong economy

Closer economic relationship with the Mainland

 Closer economic relationship with the Mainland

 Hong Kong is a major source of foreign direct investment in

the Mainland. Many Hong Kong enterprises have set up
factories and businesses in the Mainland.
 Because of its good financial infrastructure and sound legal
system, Hong Kong serves as a major funding centre for the
Mainland.
 The flow of people between Hong Kong and the Mainland has
increased sharply since 1997.
With the introduction of and the extension to
the Individual Visit Scheme under CEPA,
it is easier for residents of some Mainland cities
to visit Hong Kong.
Role and importance of the business sector

1 Providing
employment opportunities

2 Serving the Mainland

3 Raising government revenue

 Factors affecting business decisions

1 Economic factors

5 Political and legal

factors
2 Physical factors Business
Environment

4 Social and cultural

3 Technological factors
factors
Factors affecting business decisions

5. Political and legal factors

If a country can provide a stable political environment
and a sound legal system with minimal government
intervention in business, the risk of investment will be
lower.