Hong Kong was once again crowned as the world’s freest economy in the annual Economic Freedom report released by the Canadian think tank Fraser Institute. Hong Kong has topped the freest-economy ranking for more than 20 years. This outstanding achievement alone attests to the successful practice of “one country, two systems” in Hong Kong.
This economic laurel is a slap in the face to doomsayers in the West who have repeatedly portended the decline or the “demise” of Hong Kong, as well as disproving the misgivings of pessimistic investors and local residents who chose to leave the city before the reunification in 1997. Not only did Hong Kong survive the pre-1997 exodus of capital and manpower, it has continually scaled new heights over the years.
Thanks to the institutional advantages of “one country, two systems”, Hong Kong has maintained four major strengths. The first one is its free-trade and investment environment, which facilitates the settlement of foreign exchange and currency conversion in the absence of foreign-exchange controls. The second one relates to its simple and low taxation, of which only the profits tax, salaries tax and property tax are applied on income and profits. The third one invariably points to the city’s distinguished rule of law and judicial independence, which allows its common law system to stay connected with the legal systems of the world’s major economies. Besides, the city’s international arbitration, which is recognized by more than 140 countries around the world, can afford investors high-quality legal services. Last but not least, the efficient, lawful and corruption-free governance offers the greatest assurance for investing in Hong Kong.
Hong Kong’s advantages come in multifold, but they all boil down to the institutional advantages of “one country, two systems”. Hong Kong is given the power to manage its internal affairs, allowing it to maintain the practices that are conducive to the development of a market economy. At the same time, whenever Hong Kong encounters challenges it cannot surmount all alone, the country will come to its rescue. In this way, Hong Kong’s traditional advantages are constantly fortified and have expanded while new competitive edges are being developed. The country provides its staunch backing whenever Hong Kong is in need, and that ensures Hong Kong is steadily progressing in socioeconomic development.
The fifth wave of the COVID-19 outbreak that caused a surging number of daily infections earlier this year was undoubtedly the most difficult time for Hong Kong. The healthcare system was on the verge of collapse, and the shortage of daily necessities left the whole city in panic. President Xi Jinping promptly issued directives to mainland authorities to launch a campaign to assist Hong Kong in its pandemic fight. Xia Baolong, director of the Hong Kong and Macao Affairs of the State Council, went to Shenzhen to mobilize manpower and resources from central government departments, Guangdong province, Shenzhen municipality, and other parts of the mainland, and dispatch medical personnel, resources and equipment to Hong Kong in batches. This was the latest example of the country going all-out to support Hong Kong. Beijing also came to Hong Kong’s assistance during the Asian financial crisis in 1997-98, the global financial tsunami in 2008-09, the SARS outbreak in 2003, and the “black-clad” insurrection in 2019. Thanks to the assistance from the central government, Hong Kong managed to survive all the daunting challenges.
Staunch backing from the country not only manifested in the centralized initiatives to support Hong Kong during crises but also in the follow-up relief work. The national 13th Five-Year Plan (2016-20) and 14th Five-Year Plan (2021-25) devoted chapters to Hong Kong and Macao; both the Guangdong-Hong Kong-Macao Greater Bay Area and the Belt and Road Initiative have reserved a seat for Hong Kong to take the “express train” of national development. The “Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone”, unveiled by the central authorities in September 2021, declares its purpose of bolstering the socioeconomic development of Hong Kong and enhancing the level of collaboration between Guangdong, Hong Kong, and Macao.
With the aid of the country, Hong Kong has elevated its international stature and expanded its global presence. To date, Hong Kong has joined more than 220 international organizations in the name of “Hong Kong, China”, and 119 countries have set up a consulate in Hong Kong.
Finance as a modern service industry relies on the demand of the real economy to drive its growth. China has surpassed Japan to become the world’s second-largest economy over the past decade, and is gradually catching up with the United States’ economic prowess, and Hong Kong has ridden the waves of the mainland’s economic upsurges.
The economic upswing on the mainland has made direct and indirect contributions to the growth of Hong Kong’s financial sector. As of April this year, 1,370 mainland companies have listed on the Hong Kong Stock Exchange, accounting for 53.3 percent of the total number, with a market value amounting to HK$37.6 trillion ($4.79 trillion), which is 77.7 percent of the total market capitalization. A plethora of multinational companies use Hong Kong as a “springboard” to access the mainland market. They set up regional headquarters in Hong Kong and keep their funds in the city’s financial institutions while operating their production lines on the mainland. Hong Kong’s financial sector has received a further boost from the successful development of the world’s largest offshore renminbi business hub in the city with the support of the central government.
The financial sector is not the only one that has greatly benefited from the mainland’s economic boom. Over the past decade, the influx of mainland visitors has led the city’s retail, tourism, catering, hotel, transportation and other related sectors to prosperity. Markets for legal services, accounting and cultural activities have also expanded colossally, thanks to the strong demand of mainland companies. Hong Kong companies investing in the mainland are both contributors and beneficiaries of the mainland’s economic flourishment.
Looking back helps us to have a stronger vision for the future. The historic achievements in the practice of “one country, two systems” in Hong Kong since the 18th National Congress of the Communist Party of China have revealed the underlying factors of Hong Kong’s stability and prosperity. It is logical to reckon that the upcoming 20th Party Congress, which is expected to adopt major national strategies on national development in the next five years and beyond, will not only reaffirm but enhance those factors, designating a bigger role for Hong Kong in national development.
The author is a Hong Kong member of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.
The views do not necessarily reflect those of China Daily.
HONG KONG NEWS