ENG-2009 — Page 85

The Economy | 41

For 2009 as a whole, the underlying Composite Consumer Price Index rose by an average of 1 per cent, down markedly from 5.6 per cent in 2008. Headline inflation continued to be lower than its underlying counterpart, thanks to further one-off relief measures introduced by the Government in 2009. The headline Composite Consumer Price Index rose by 0.5 per cent in 2009, compared with the increase of 4.3 per cent in 2008.

Structure and Development of the Economy

Hong Kong is a global centre for world trade, finance, business and telecommunications, thanks to its strategic location on the doorstep of Mainland China, a vast booming economy. Hong Kong is currently the world's 11th largest trading entity. It operates one of the world's busiest container ports in terms of container throughput, as well as one of the world's busiest airports in terms of number of international passengers and volume of air cargo handled. Hong Kong is also the world's 15th largest banking centre in terms of gross external positions of banks, and the sixth largest foreign exchange trading centre. Its stock market is the third largest in Asia in terms of market capitalisation.

As an international business hub, Hong Kong has a business-friendly environment with the rule of law, free trade and free flow of information, open and fair competition, a well-established and comprehensive financial network, a superb transport and communications infrastructure, sophisticated support services, and efficient and innovative entrepreneurs complemented by a well-educated workforce.

Moreover, it has substantial foreign exchange reserves, a fully convertible and stable currency, prudent fiscal management and a simple tax system with low tax rates. In view of these virtues, Hong Kong has retained its rating by The Heritage Foundation as the freest economy in the world, a position it has held since 1995. Likewise, the Fraser Institute of Canada has also consistently ranked Hong Kong as the world's freest economy.

The Hong Kong economy more than doubled in the past two decades, with its GDP expanding at an average annual rate of 3.8 per cent in real terms, surpassing the world economy's growth of 3.2 per cent. Over the same period, Hong Kong's per capita GDP nearly doubled, posting an average annual growth rate of 2.7 per cent in real terms. At US$30,100, Hong Kong's per capita GDP was one of the highest in Asia in 2009 (Chart 2).

In the midst of the growing influence of globalisation, Hong Kong's degree of trade linkages has risen continuously. Its trade in goods expanded almost four times in real terms over the past two decades, and trade in services three times. In 2009, the total value of visible trade (comprising re-exports, domestic exports and imports of goods) reached $5,198 billion, equivalent to 318 per cent of GDP. This was considerably larger than the ratios of 209 per cent in 1989 and 215 per cent in 1999. If the value of exports and imports of services are also taken into account, the