Hong Kong has for more than five decades existed perched on the event horizon generated by the geo-political angst of China and U.S. relations. During that time the territory has not only survived but thrived as it transitioned from a far flung Royal Crown colony of the United Kingdom to the present SAR (Special Administrative Region of the Peoples Republic of China via the 1997 handover). Under the slogan “One Country Two Systems,” Hong Kong enjoyed more economic freedom (according to the Heritage Foundation’s rankings Hong Kong was first for 25 straight years – see below) than any nation in the world. “Basic Law,” the framework by which Hong Kong was to be administered, gave the SAR a wide range of freedoms both individually and corporately largely unavailable in China.
The economy was resilient and managed to prosper through economic downturns like 1997 [Asian Financial Crisis] and 2008/09 [The Great Recession]. This isn’t to say Hong Kong didn’t suffer during the economic downturns – it did, especially in the real estate and financial sectors – but was able to weather the inclement times.
Hong Kong’s Evolving Role
Hong Kong’s position [figuratively and literally] as conduit for China trade and investment has been the foundational element of the economy: Being the ultimate “insider” but outside of the PRC (People’s Republic of China) has been the key to success for many Hong Kong businesses engaged directly and indirectly in the “China Trade”.
The Port of Hong Kong also reflected the “entrepot” dynamic, rising to become one of the largest container ports in world as a go-between for trade moving in and out of China. During the 1980s, it could have been argued that the Port of Hong Kong was defacto China’s largest port for handling foreign merchandise trade [excluding bulk oil and other dry bulk products]. A byproduct of the port activity was the development of an extensive logistics sector. This logistics sector’s activities piggy backed on an extensive sourcing network that linked China’s manufacturing to Western markets.
Since the handover from the United Kingdom to China in 1997 and with the rise of the Chinese economy, the role of Hong Kong has changed. While still a key entry point and staging area for businesses operating in the China market, the City’s pro-business approach has made it a desirable location for regional head offices – competing mainly with Singapore and to a lesser extent Bangkok, Kuala Lumpur and Jakarta. The City also provided a platform for China’s own entrepreneurial excursions with access to foreign markets and capital. And Hong Kong’s well-honed logistics sector provided exportable expertise not only to PRD (Pearl River Delta) companies and other Chinese enterprises but globally. And Hong Kong has been able to add a significant fin-tech and…
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