Economic freedom of Hong Kong

Economic freedom has been a major determinant of a society’s living standards, their economic growth as well as other economic and social well-being indicators. Policies that reduce economic freedom are often determined by fights between their opponents and proponents in any given society; the result is often a political standoff and subsequent economic equilibrium levels. Therefore, the level of a country’s economic freedom is a product of their political leaders’ fights on policies relating to tax, subsidies, and other regulations. This paper provides an analysis of Hong Kong’s economic freedom through taking a look at the implications of the rule of law, government size, regulatory efficiency, and open market on the GDP, unemployment, inflation and foreign direct investment inflow.


Economic freedom of Hong Kong can be evaluated directly through four of its broad policy areas. They include the rule of law, regulatory efficiency, limited government and open markets. Te sum of these broad areas affects the GDP, employment rates, inflation and foreign direct investment as well as government spending in a country or territory.

Hong Kong has continued to exhibit the features of an economically free society. However, the waning uniqueness of the city is putting it at crossroads. It is due to the current failure by the government to deliver on the promised electoral reforms. The city has galvanized greater intense pro-democracy sentiments. This has been followed by greater dissent levels undermining the confidence of the public in the government. The fight between different political ideologies in a country is a sign of a well-functioning democracy. This should be encouraged and not deployed. As such, different parties engaging in this fights need to support their policy proposals as the media carries out its role of informing the public in the run-up to elections. For Hong Kong, the recent wake of dissents and mistrust by the public on the government has set the stage for policy changes. This is a stage towards determining countries economic freedom.

The interplay between different policies and legislations has in effect resulted in the following: Currently, the economic freedom score of Hong Kong is at 89.6 this is a decline of 0.5 from 2014 ( 1). This figure reflects a higher level of perceived corruption in government. The perceived corruption outweighs the small improvements that can be realized in business freedom. Further, it influences the labor freedom as well as fiscal freedom of Hong Kong. However, Hong Kong remains a top rated economy.

The rule of law in Hong Kong is not widely disrespected. Despite a perceived corruption, Hong Kong still scores an average 75 on freedom from corruption ranking 15th in the world. The property rights score is 90 ranking it 3rd.  The judiciary is efficient and remains independent with property rights well protected ( 1).

As of government size;, (1) outlines; the standard income tax in this territory is 15%. Hong Kong has an overall tax burden of 13.7% of the domestic income. It has a low public debt and with a maintained budget surplus. The GDP is $ 3.82 Billion and grows at 2.9%. It has a global port, and it continues to enjoy free flow of goods, capital, and services. The fiscal freedom stands at 93.2 ranking 17th worldwide with governments spending ranking 12th at 89.7.

The regulatory efficiency of Hong Kong is good. With a vibrant labor market, the country supports a dynamic business operation as well as formation. The wages and working hours are largely determined by the market forces. The green energy subsidies and cost housing provided by the government has kept inflation at 4.3%. Unemployment, on the other hand, is at 3.3 %. The country ranks 1st at 100 in business freedom, 4th at labor freedom at 95.2 and 28th at monetary freedom with a score of 81.8 ( 1).

Finally, Hong Kong remains one of the world’s most open economies with financial, investment and trade freedoms at a score of 90. The banking sector in Hong Kong is very resilient and dynamic. They have 0% average tariffs with a highly developed financial system. The open market has contributed to more foreign direct investment in the country giving it a net of $ 76.6 billion in 2014. With a population of 7.2million, the territory becomes a very economically free place. A GDP of $ 381.9 billion, inflation of 4.3%, and an unemployment rate of 3.3% and Foreign Direct investment of $ 76.6 billion, Hong Kong can be described as very economically free (1).

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