Country Analysis Hongkong

8/12/2019 Country Analysis Hongkong

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Country Analysis

Hong Kong


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Vision

Article 5Basic Law

Article 5

The socialist system and policies shall not be

practised in the Hong Kong SpecialAdministrative Region, and the previous

capitalist system and way of life shall remain

unchanged for 50 years.

http://www.basiclaw.gov.hk/en/basiclawtext/index.html
http://www.basiclaw.gov.hk/en/basiclawtext/index.htmlhttp://www.basiclaw.gov.hk/en/basiclawtext/index.html


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Goals

Economic Economic Growth

Political Reunion with PRC

Social Societal StabilityNo significantslice of society losers. "Reform withoutLosers: An Interpretation of China's Dual-Track Approach to Transition" (with

Lawrence Lau and Grard Roland).Journal of Political Economy, February2000, 108(1), pp. 120-143.
http://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.htmlhttp://www-econ.stanford.edu/faculty/workp/swp99010.html


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Tax Policy

Article 108

The Hong Kong Special Administrative Region

shall practise an independent taxation system.

The Hong Kong Special Administrative Region

shall, taking the low tax policypreviously

pursued in Hong Kong as reference, enact laws

on its own concerning types of taxes, tax rates,tax reductions, allowances and exemptions, and

other matters of taxation.


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Fiscal Policy

Article 107

The Hong Kong Special Administrative

Region shall follow the principle of keeping

the expenditure within the limits ofrevenues in drawing up its budget, and

strive to achieve a fiscal balance, avoid

deficits and keep the budgetcommensurate with the growth rate of its

gross domestic product.


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Foreign Investment Policy

Article 112

No foreign exchange control policies shall

be applied in the Hong Kong Special

Administrative Region. The Hong Kongdollar shall be freely convertible. Markets

for foreign exchange, gold, securities,

futures and the like shall continue.


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Foreign Trade Policy

Article 114The Hong Kong Special Administrative Regionshall maintain the status of a free port and shallnot impose any tariff unless otherwise

prescribed by law.

Article 115The Hong Kong Special Administrative Regionshall pursue the policy of free trade and

safeguard the free movement of goods,intangible assets and capital.


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OECD

PWC HK HK Corporate

Tax

Assessable profits of

corporation are taxed at the

corporate tax rate of16.5%. There are some

tax incentives for special

business operations, such

as tax exemption for profits

derived by offshore fundsand profits derived from

operating ships in Hong

Kong.

PART II. Taxation of Corporate and Capita

Table II.1. Corporate income tax rate1

Country

Australiaa

30.0

Austria 25.0

Belgiumb

33.99 (33.0)

Canada 19.0

Czech Republic 20.0

Denmark 25.0

Finland 26.0

Francec

34.43

Germanyd

15,825 (15,0)

Greece 25.0

Hungarye

20.0 (16.0)Iceland 15.0

Ireland 12.5

Italyf

27.5

Japan (2008 data) 30.0

Korea 22.0

Luxembourg 21.84 (21.0)

Mexico 28.0

Netherlandsj

25.5

New Zealanda

30.0

Norway 28.0

Polandg 19.0Portugal (2008 data) 25.0

Slovak Republic 19.0

Spain 30.0

Sweden 26.3

Switzerlandh

8.5

Turkey 20.0

United Kingdoma

28.0

United Statesi

35.0

Central

government

corporate income

tax rate2

OECD Tax Database
http://www.pwchk.com/home/eng/tax_hk_corptax.htmlhttp://www.pwchk.com/home/eng/tax_hk_corptax.htmlhttp://www.oecd.org/document/60/0,2340,en_2649_34533_1942460_1_1_1_1,00.htmlhttp://www.oecd.org/document/60/0,2340,en_2649_34533_1942460_1_1_1_1,00.htmlhttp://www.pwchk.com/home/eng/tax_hk_corptax.htmlhttp://www.pwchk.com/home/eng/tax_hk_corptax.html


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Hong Kong Monetary Policy

Convertibility Undertaking - Anundertaking by a central bank or CurrencyBoard to convert domestic currency into

foreign currency and vice versa at a fixedexchange rate. Under the strong-sideConvertibility Undertaking, the HKMAundertakes to buy US dollars from

licensed banksat 7.75. Under the weak-side Convertibility Undertaking, the HKMAundertakes to sell US dollars at 7.85.

http://www.info.gov.hk/hkma/gdbook/eng/c/convertibility_undertak.htm
http://www.info.gov.hk/hkma/gdbook/eng/l/licensed_bank.htmhttp://www.info.gov.hk/hkma/gdbook/eng/c/convertibility_undertak.htmhttp://www.info.gov.hk/hkma/gdbook/eng/c/convertibility_undertak.htmhttp://www.info.gov.hk/hkma/gdbook/eng/l/licensed_bank.htm


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Hong Kong Industrial Policy

Logistics Hub

Airport

Port

Roads

Bridge to Zhuhai


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Human Capital Policy

Education 3-4-4

Immigration


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Context


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Resources

Geographic

Deep Water Port

Pearl River Delta

Little arable or developable land [Constraint]


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Financial

Exchange Fund


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Foreign vs. Domestic Currency

Assets

Sep-1999 Sep-2000 Sep-2001 Sep-2002 Sep-2003 Sep-2004

1000000

900000

800000

700000

600000

500000

400000

300000

200000

100000

0

HK: Exchange Fund: Assets

HKD mn

Foreign Currency Assets Hong Kong Dollar Assets


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Human Capital Resources

Well educated population

Barro-Lee Database Harvard CIID

http://www.cid.harvard.edu/ciddata/ciddata.html

Educational Attainment of the Total Population Aged 25 and Over

Population Highest level attained Average

Country Year over No First level Second Level Post-Secondar Yearsage 25 choolin Total Complete Total omplet Total omplet of

(1000s) (Percentage of the population aged 25 and over) School

Hiong Kong 2000 4137 10.7 26.6 13.9 47.4 28.7 15.3 8.7 9.47

Singapore 2000 1923 12.7 28.3 16.8 48.5 13.2 10.6 7.2 8.12
http://www.cid.harvard.edu/ciddata/ciddata.htmlhttp://www.cid.harvard.edu/ciddata/ciddata.html


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Rules of the Game

Formal

Formal

Common Law Judiciary

Executive Led System

CE selected by Election Committee, Legco

represents Geographical and Functional

Constituencies.

Informal


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Rules of the Game:

Informal

Elimination of Legal and Civil Service

Corruption

Positive Non-Intervention

Rule of Law

Triangle of Influence between Central Govt,

HK Govt and Tycoons


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Players of the Game:

Governmental

Land System

Govt owns all land in HK

Govt makes new land available and

negotiates terms of rezoning.

Regulating Financial System Regulating

Financial System

HK Exchange

SFC

HKMA


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Players of the Game

Private Sector

Tycoons and Taipans: Conglomeratesbased around real estate developmentcompanies own many domestically

oriented consumer companies. Hong Kong Bank

PRC CompaniesRed Chips &

Roundtripping Multinational Financial Industry

SMEFocus on China


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External Dimension

Regional Foreign Trade Hub

Integrating with China


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Performance


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Inflation

-7.00%

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

2000 2001 2002 2003 2004 2005 2006 2007 2008

Inflation


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ICOR: Incremental Capital Output

Ratio

1

11

1

1

1

;Y

t t tt t

tt

t

t tt

t

g Y YICOR g

I Y

Y

Y Y

ICOR I


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Incremental

Output Capital ICOR

2000 $85,354 $258,398 0.3303199

2001 $5,761 $278,835 0.020661

2002 $21,440 $286,223 0.07490662003 $35,651 $272,799 0.130686

2004 $103,432 $275,329 0.3756669

2005 $93,844 $282,173 0.3325761

2006 $99,606 $293,610 0.3392459

2007 $96,890 $314,534 0.308043

2008 $38,205 $325,349 0.1174277


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GDP


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Effective Exchange Rate


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Singapore vs. HK Exchange Rat


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US vs HK Interest Rates

10 Year

Country Analysis Hongkong

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