General Information » Economy » Hong Kong Overview

Hong Kong’s economy has grown strongly in recent years, after suffering a deep recession in the late 1990s, and yet another slow-down in 2003 during the SARS epidemic. In 2005, Hong Kong’s per-capita GDP was estimated at US$37,400.

Trade

Throughout the first hundred years of British rule, trade with China was the bedrock of the local economy. Hong Kong’s sheltered harbour and proximity to Canton (Guangzhou) placed it perfectly for handling the sea-bound trade between China and the rest of the world.

Trade is still an important part of the local economy: in 2005, Hong Kong was the world’s second busiest container port (first place went to Singapore). The real threat to Hong Kong’s trade, however, is the nearby mainland city of Shenzhen, currently the world number four. Its combination of good location and lower handling fees have increased its container traffic at a rate of around 20% per year, compared to single-digit increases for Hong Kong.

Manufacturing

In the 1960s and 70s, manufacturing grew in importance, and the label ‘Made in Hong Kong’ was seen around the world. An unlikely combination of events triggered this rapid growth. First, large numbers of people from China streamed into Hong Kong. A small number of wealthy immigrants (mainly Shanghainese) brought the capital and experience needed to set up new manufacturing businesses. The penniless majority (many from Guangdong province) became cheap labour in the factories. At the same time, China’s involvement in the Korean war put it under embargoes from both the US and United Nations, stifling Hong Kong’s trading role.

This manufacturing boom soon faded, starting in late 1978, when China opened its doors to foreign investment. Hong Kong’s manufacturers seized the chance to relocate their factories to Southern China, benefiting from lower-cost land and labour. In 1991, manufacturing still accounted for 14.4% of Hong Kong’s GDP, but by 2004 its share was just 4.1%.

Services

As manufacturing left Hong Kong, so the service sector (especially financial services) grew to take its place. The rapid growth in the 1980s and 90s means that today services make up over 90% of Hong Kong’s GDP. The main components of these services are civil aviation, shipping, travel and tourism, trade-related services, and financial and banking services.

Continued Integration with China

Each stage of Hong Kong’s economic development can be linked to events in mainland China, and this will continue to be the pattern for the future. Hong Kong’s role as the provider of value-added services will be challenged as China develops, with Shanghai a worthy competitor....