Hong Kong

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Hong Kong is a free market economy with a liberal regulatory framework, an efficient payment system and sound macroeconomic fundamentals. Hong Kong’s high degree of trade and financial openness makes it very reliant on world demand and global capital flows while its currency board system (the HKD is pegged to the USD) means its monetary policy is tied to that of the US Federal Reserve. At the same time, the Hong Kong economy is highly integrated with Mainland China, through trade, tourism and financial links.

Annual average real GDP growth slowed to 2.8% in 2014-2018 from 3.5% in 2007-2011. The Hong Kong economy fell in recession in 2019 due to slower world trade growth, slower Chinese growth, US-China tensions, social protests and weaker domestic confidence. The Covid-19 shock only added to the woes. Hong Kong’s medium-term economic outlook has been weakened by recent institutional and legal developments. At the same time it remains supported by its strong macroeconomic fundamentals, high-quality services sector serving as a gateway to Chinese markets and role as a key financial hub for Chinese firms.