Economy and Policies of Hong Kong

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This paper analyses the economy of Hong Kong mainly through the perspective of GDP, and then analyses its fiscal and monetary policies which are implemented by Hong Kong government and its Monetary Authority. Hong Kong is one of the world’s leading financial centers and it is an efficiency service-oriented free market economy. Hong Kong’s economic freedom score is 90.1 on a 100-point scale, making it the top-rated economy in the Index for the 20th consecutive year (Heritage.org, 2014). Hong Kong’s economy is normally characterized by its low taxation, light regulation and well established international trading environment. Current Position of Economy Diagram 1. The Hong Kong economy picked up to moderate growth in 2013 As the diagram above reveals, in the past 5 years, Hong Kong’s economic performance experienced two major declines. The worse one was during the Subprime Mortgage Crisis started from 2007, Hong Kong’s rate of change in real terms decreased significantly compared to its growth trend in the previous years. However, compared to the other countries, such as the US and UK, it was less cyclical affected and the recovery in Hong Kong economy had a better performance. Another decline occurred in the year of 2012, after few years of the recession, and the reasons of that down-slope will be provided below. According to Diagram 1, Hong Kong’s economic performance has kept a gradual growth in the year of 2013, with real GDP expanding moderately by 2.9%, up from 1.5% in 2012, keeping the labour market in a state of full employment (Hong Kong Economy Report, 2014). As a whole, in year 2013 both the external and internal sector of Hong Kong performed better than the year of 2012. With regards to the overseas sector, total ex... ... middle of paper ... ...ion of RMB. Under the situation of RMB continuous gains value and HKD loses value, people in Hong Kong lose their confidence in HKD. Thus, stabilization the exchange rate of HKD/RMB is needed, for example, adjustable peg policy, which would help relief the pressure on HKD. Conclusion To sum up, Hong Kong unloaded the recession quickly and its economy maintained a positive trend after 2012. The latest fiscal and monetary policies carried out by Hong Kong government and Monetary Authority promoted its economic development through stimulating the investment and consumption as well as stabilising the price level. It is suggested that Hong Kong should increase the tax from the rich to reduce the gap of wealth and distinguish the rich and the poor in expansion and contraction of the fiscal policies and adjust the peg policy of monetary policy to achieve maximum results.

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