This year marks the 20th anniversary of the transfer of sovereignty over Hong Kong from the United Kingdom to China, referred to as “the Handover” internationally or “the Return” in China, which took place on 1 July 1997. As one of the world’s leading international financial centres, Hong Kong has developed into a modern, vibrant and cosmopolitan services economy, underpinning the role of the city as a global business hub. Hong Kong’s economic strengths include a robust banking system, a strong legal system, rigorous anti-corruption measures and close ties with mainland China.
Hong Kong is an important banking and financial centre in Asia Pacific. According to the Bank for International Settlements, Hong Kong is the second largest foreign exchange market in Asia and the fourth largest in the world in 2016, with the net daily average turnover of forex transactions reaching US$437 billion.
At end of last year, there were 195 authorised institutions and 54 representative offices in Hong Kong. Total loans provided by the authorised institutions to finance international trade and other loans for use outside Hong Kong totalled US$58.3 billion and US$305.5 billion respectively. The Hong Kong Stock Exchange is the seventh largest in the world and has a market capitalisation of US$3.2 trillion as of December 2016.
The four economic pillars of Hong Kong are: trading and logistics (22.3% of GDP in terms of value added in 2015), tourism (5%), financial services (17.6%), and professional services and producer services (12.3%).
Additionally, there are six key industries where Hong Kong has opportunities for further development. These industries are cultural and creative, medical services, education, innovation and technology, testing and certification services and environmental industries. Combined, these accounted for 8.9% of GDP in 2015.
Small and medium sized enterprises (SMEs) are a vital part of the local economy. As of March 2017, there were approximately 320,000 SMEs in Hong Kong accounting for over 98% of businesses and nearly 1.3 million jobs – almost half (46%) of total employment (excluding civil service roles).
The majority of SMEs operate in import/export sectors and wholesale industries, followed by the professional and business services industry. Such businesses account for about 50% of SMEs in Hong Kong and represent the same proportion of SME employment.
In the first half of 2017, Hong Kong’s economic growth accelerated by 4% year-on-year in real terms, from 2% in 2016. Additionally, the growth of private consumption expenditure quickened to 4.6% year-on-year for the first half of 2017, from 1.8% for 2016.
Investment expenditure increased by 8% year-on-year for the second quarter of 2017, after a marginal decline of 0.3% in 2016.
The growth of exports of goods accelerated considerably to 11.1% year-on-year with total export volume reaching HK$3.257 billion. This growth was predominantly due to significant growth in exports to China and other major Asian countries, especially India, where exports increased by 38% year-on-year.
For the rest of 2017, the business environment is expected to improve further. In August 2017, the government maintained the forecast of Hong Kong’s economic growth for 2017 at 3-4% according to the Census and Statistics Department, Hong Kong’s Special Administrative Region.