Economy and Policies of Hong Kong

These effective strategies helped Hong Kong overcome the financial crisis. All these facts fully demonstrated that China is a responsible big country. After the Asia financial crisis, the importance of China's economy has been brought into focus; China's neighboring countries have begun to recognize the influence of the Renminbi.

This document will examine how successful was the government and Central Bank of China during 2013 and 2014. The extent of this report only allows the analysis and explanation of some of the main macroeconomic policies implemented in those years in order for China to either continue or overcome its economic situation.

In today’s global market, China is one, if not the world’s most important player. When China’s economy is doing well, the majority of the world’s economies tend to do the same. When China’s economy is slow, the rest of the world usually follows.

The composite household expenditure component of the Hong Kong Consumer Price Index declined from ($4,500-$65,999) in 1999/2000 to ($4,200-60,400) in 2004. The expenditure levels of households change in response to factors such as changes in income level.

A hardworking, entrepreneurial and well-educated population of about seven million people serves as the foundation of Hong Kong’s productivity and creativity. Located at the southeastern tip of China, Hong Kong is ideally positioned at the center of East Asia. Not only is Hong Kong a large city on the mainland, but its territory extends to include small rural islands and the Kowloon Peninsula. Once a small port city, Hong Kong is now a world-class center for business, finance, and art culture.

Hong Kong (HK) began as a British colony in 1842 as a “spoil of victory from the Opium War” (Chan & Postiglione, p. 3). Its markets and ports were driven by regional trade and their strategic location. Hong Kong has since then become a cosmopolitan city-state of global significance and serves as the gateway to trade with mainland China. Further, HK acts as a catalyst for the economic development of southern China, where HK industries employ manufacturing labour force workers in the neighboring Guangdong province. Hong Kong is therefore dependent on China’s own economic growth and modernization, however, its successful free trade and market society are in contrast to its lack of a fully democratic form of government under British rule (Chan, Postiglione, p. 3).

Hong Kong, Special Administrative Region of China, is a well-known international financial center with more than 7.3 million populations in 2015 that has more than 1,000 square kilometers of land area, reported statistics from Census and Statistics Department (CSD) (2016). However, according to Tuberculosis and Chest Service, Department of Health (DH), tuberculosis (TB) is still threatening this tiny little place since the nineteenth century (2006). In 2015, Centre for Health Protection (CHP) reported around 5,000 notification cases and approximately 170 deaths in Hong Kong on TB, including Chinese immigrants (2016). One TB patient would be found in every 1,000 persons in Hong Kong, which is around 10 times higher than western developed countries such as the United States or United Kingdom (DH, 2006). When discussing the lifetime risk of developing TB, an individual is affected in every 13 persons during some points of their lifetime (DH, 2006). As a result, the World Health Organization (WHO) concludes Hong Kong bears an intermediate burden of TB within the Western Pacific Region’s area (DH, 2006).

In order to contend with the US Dollar, China’s central bank has devalued the Yuan nearly 2% in August 2015.This bank’ policy was seemed to be a wave to the Chinese market, even the economic market all around the world, which brought a series of fluctuation and impact to the economy. Why china took this monetary action to face with the problem from the US dollar (What are the factors)? What is the (Positive or negative) influence will be aroused in the short term by this Chinese Yuan depreciation? What will be happen if this devaluation last in the further and what will be affected by this monetary policy in the long term? The following text will answer and analyse these three questions.

As the financial crisis intensified the government sought to use a mix of monetary and fiscal policies in order to keep inflation around 2% and maintain positive economic growth. Monetary policy aims to control the money supply through the central bank interest rate. Fiscal policy is the way in which a government adjusts its spending levels and tax rates to change the level of output in an economy. Both policies effects can be shown using a IS-LM diagram.

Vibrant and colourful, Hong Kong is a metropolis situated in the crossroads of Asia. The city flourishes especially well at financial and service industries, and has a per capita GDP of HK$285,146 (2012), according to official data. Being the world’s 9th largest economy, Hong Kong has a real GDP growth at 1.4% (2012) and is backed up by its 3.79-million labour force. Undeniably, Hong Kong is one of the wealthiest cities in Asia.

“One country, two systems”, it is a unique system which is using between Hong Kong Special Administrative Region and the People 's Republic of China. According to the Sino-British Joint Declaration, the United Kingdom willing to return the power of governing Hong Kong back to China if the Chinese Government agrees to let Hong Kong’s life styles, political system remain unchanged for 50 years (). Not only remain unchanged for 50 years, The Chinese also made different promises to make sure the sovereignty will transferred probably. Those promises gave a certain level of confident to those people in Hong Kong that their freedom will not be deprived by the Chinese Government but living as same as the same standard that time.

Hong Kong,as one of the world's leading international financial centres,it has a major capitalist service economy characterized by low taxation and free trade. It is known of the world's most services-oriented economy, with services sectors accounting for more than 90% of GDP.

The Hong Kong economy can incur a lot of positive effects from the appreciation of the Renminbi. According to a study conducted by Kelvin Fan (2010), it was found that the appreciation of RMB can influence HK’s consumer price inflation. This finding is consistent with another study conducted by Lai (2007). Lai’s study is more comprehensive compared to Fan. In her paper, she discussed the forseen effects of the appreciation of RMB on the economic and financial systems of Hong Kong. Her findings are summarized as follows:

In terms acceleration of economic growth is based on the measurement of GDP, MALAYSIA HAS recorded a growth of 5.1% last year. Although it is lower than 7.2% in 2010, but it was so roaring in the context of a difficult global economic environment and uncertainty. In contrast, global economic growth has dropped from 5.2% in 2010 to 3.8% in 2011 while the economy of the developed countries like USA, Germany, UK, France and Japan also recorded weak growth of respectively 1.5%, 2.7%, 1.1 %, 1.7% and -0.5% in the same year; far lower than Malaysia's achievements. Following a satisfactory GDP growth was assisted by the Federal government revenue increased by RM13.2 billion in 2011 through increased collection of IRB estimate of RM109.7 billion compared with RM96.5 billion the government has managed to reduce its fiscal deficit to 5.0% compared projection of 5.4%. This means that the GOVERNMENT has successfully steered the nation's economy as well as the control and management of public funds wisely in the past 3 years in a row when managed to bring down the fiscal deficit from 7.0% in 2009 to 5.6% (2010) and 5.0% in the past year in a expanding economy.

Goods and services are relative with the international transaction representing from the current account balance of changed in the exports and imports. Through the stronger domestic demand, imports of 16% growth have increased since 2009; subsequently import of goods grew with an average of 13.4% over 2010 to 2012. The goods account excess to RM102.7 billion for the year 2013, but still decline of RM22.9 billion from RM 125.6 billion of 2012’s record. Meanwhile, there is the lower exports balance from RM703.1 billion of 2012 to RM690.9 billion this year and higher imports balance from RM577.5 billion of 2012 to RM588.2 billion this year.