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THE ECONOMY
Economic Policy and Public Finance
Economic Policy
Under the 'one country, two systems' principle, the HKSAR shall continue to adopt social, economic and political systems distinct from those in the Mainland, following the reunification in July 1997. The Basic Law, as the constitutional law of the HKSAR, gives a firm protection to this principle. Hong Kong shall continue to uphold the rule of law, maintain an effective executive-led Government, sustain an efficient Civil Service, practise free enterprise and free trade, follow prudent financial management policies, and keep a simple and predictable tax system with a low tax
rate.
By adhering to the rule of 'maximum support and minimum intervention', the Government does not seek to influence the overall economic structure through regulations, tax policies or subsidies. Business decisions are left to investors and entrepreneurs, as they are deemed to have a better understanding of market needs. The Government will consider intervening only when the market fails to work efficiently. Thus the Government sees its primary roles as: first, to provide a business- friendly environment such that more high value-added activities will be developed; secondly, to provide quality education, training and retraining so as to enable the workforce to benefit from a knowledge-based economy; and thirdly, to provide a quality living environment in order to help retain local professionals and attract overseas talents to build their home and career in Hong Kong. This market-led approach has provided the Hong Kong economy with much vitality and flexibility over the years, which is a key factor underlying Hong Kong's continued economic success and resilience from external shocks.
The Government advocates free and 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 increased competition has not only brought in more participants, both local and foreign, but also stimulated businesses in Hong Kong to raise their stake both at home and abroad. Most of all, consumers benefit from better quality of service and lower prices.
The Basic Law stipulates that Hong Kong shall maintain its status as an international financial centre. The past decade saw remarkable growth in Hong Kong's financial services in banking, insurance, securities trading and fund management. The Government will strive to continuously enhance Hong Kong's position in this regard, by maintaining a world-class supervisory regime without over- regulation, by providing the most up-to-date financial infrastructure and a well- trained and highly adaptable workforce, and by sustaining an open and competitive financial market. Complementing these are a robust monetary regime, a stable currency and a sound banking sector.
The Government will continue to adhere to prudent fiscal practice, while maintaining a simple tax structure with low tax rate that will sustain workers' incentive to work and entrepreneurs' incentive to invest. The current corporate profits tax rate and standard tax rate, at 16 per cent and 15 per cent respectively, are low by international standards. Another crucial aspect of fiscal policy is to maintain. a slim and efficient government, so as not to crowd out an excessive amount of