THE ECONOMY
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The residential property market was hard hit for most of the year, but staged a noticeable rebound towards the year-end, as more end-user buying interest returned to the market. Trading activity recovered somewhat in the fourth quarter. Flat prices also picked up from their recent trough. Yet both flat prices and trading activity were still substantially below their peak in 1997.
In the labour market, adjustment through corporate downsizing gave rise to more lay-offs thereby lifting unemployment. Continued rapid growth in the labour force aggravated the situation. The seasonally adjusted unemployment rate rose over the course of 1998, reaching 5.7 per cent by the fourth quarter of 1998, from 2.5 per cent in the same quarter a year earlier. The underemployment rate likewise leaped. Earning and wages both moderated as labour market conditions continued to slacken.
Structure and Development of the Economy
With its strategic location at the doorway to the Mainland and on the international time zone that bridges the time gap between Asia and Europe, the Hong Kong Special Administrative Region (HKSAR) has been serving as a global centre for trade, finance, business and communications. Hong Kong is ranked the eighth-largest trading entity in the world. It operates one of the busiest container ports in the world in terms of throughput, and also one of the busiest airports both in terms of the number of passenger and volume of international cargo handled. It is the world's eighth-largest banking centre in terms of external banking transactions, and the seventh-largest foreign exchange market in terms of turnover. Its stock market is Asia's second-largest in terms of market capitalisation.
Hong Kong 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 network, superb network of transport and communications infrastructure, sophisticated support services, and a well-educated workforce complemented by a pool of efficient and enterprising entrepreneurs. Added to these are the substantial amount of fiscal reserves and foreign exchange reserves, a fully convertible and stable currency, and a simple tax system with low tax rate.
On these virtues, Hong Kong is widely regarded as among the freest and most competitive economies in the world. In 1998, for the fifth year in a row, the Heritage Foundation of the USA ranked Hong Kong as the world's freest economy. The Cato Institute in the USA in conjunction with 53 independent research institutes in other countries also named Hong Kong the freest economy in the world. The World Economic Forum ranks Hong Kong as the world's second most-competitive economy.
Over the past two decades, the Hong Kong economy has more than tripled. GDP in Hong Kong has been growing at an average annual rate of about 6 per cent in real terms, to $789 billion in 1998. This growth was twice as fast as for the world economy and outperformed the Organisation for Economic Co-operation and Development (OECD) economies. Per capita GDP in Hong Kong has more than doubled in real terms, equivalent to an average annual real growth rate of about 4 per cent. In 1998, it reached US$24,900. The latest comparison showed that per capita GDP in Hong Kong was among the highest in Asia, next only to Japan.