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The Economy

the World Trade Organisation, Hong Kong was the world's seventh largest merchandise trading entity in 2018. It operates one of the world's busiest airports in terms of the number of international passengers and volume of international air cargo handled, as well as one of the busiest container ports by container throughput.

Hong Kong was also the world's sixth largest banking centre in terms of external positions as at end-2018, and the fourth largest foreign exchange trading centre according to a triennial survey conducted by the Bank for International Settlements in 2016. Its stock market was the third largest in Asia by market capitalisation as at end-2018 and ranked first globally in terms of initial public offering (IPO) equity funds raised during the year.

As an international business hub, Hong Kong offers 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, superb transport and communications infrastructure, sophisticated support services, and a flexible labour market with a well-educated workforce and a pool of efficient and innovative entrepreneurs. The city has sizeable foreign exchange reserves, a fully convertible and stable currency, prudent fiscal management and a simple tax system with low tax rates. Thanks to these virtues, Hong Kong has been ranked persistently by the Heritage Foundation and the Fraser Institute as the world's freest economy.

Hong Kong was also ranked the world's second most competitive economy by the International Institute for Management Development and seventh by the World Economic Forum in 2018, and the fourth easiest place to do business globally according to the World Bank's Doing Business 2019 report, published in October 2018.

The Hong Kong economy has doubled in size over the past two decades, expanding at an average annual rate of 3.7 per cent, faster than most high-income economies. Over the same period, per capita GDP rose about 83 per cent in real terms, posting an average annual growth rate of 3.1 per cent. Per capita GDP at current market prices reached US$48,700 in 2018 (chart 2), comparable to many advanced economies.

Trade links with other parts of the world have grown appreciably. Trade in goods and services has more than tripled in real terms over the past two decades. The total value of the goods trade, compiled under the GDP accounting framework based on the change of ownership principle and comprising re-exports, domestic exports and imports of goods, reached $9,177 billion in 2018, equivalent to 323 per cent of GDP. This was higher than the ratio of 180 per cent in 1998. Including the value of exports and imports of services, the ratio of total trade to GDP was even higher, at 377 per cent in 2018, up from 221 per cent in 1998.

The stock of direct investment liabilities in Hong Kong was enormous, at $17,465 billion in market value at the end of 2018, equivalent to 614 per cent of GDP. It served as another manifestation of Hong Kong being one of the most preferred destinations for inward direct investment, ranked second in the world by the United Nations' World Investment Report 2019 based on inward stock.

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