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Hong Kong

Hong Kong. Flexible Middleman in Uncertain Times. Big Trends in HK. De-industrialization Economic reintegration with China Externally Oriented Economy. Big Picture. Basic Law says Capitalist way of life persist for another 40 years Basic Law Text

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Hong Kong

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  1. Hong Kong Flexible Middleman in Uncertain Times

  2. Big Trends in HK • De-industrialization • Economic reintegration with China • Externally Oriented Economy

  3. Big Picture • Basic Law says Capitalist way of life persist for another 40 years Basic Law Text • Government pursues policy of ‘positive non-intervention’ (Tsang, S, A Modern History of Hong Kong - Google ??). • Support the economy with infrastructure if cost-benefit is positive • Let market pick economic winners

  4. Government Policy and Investment Environment • Common law system with a generally independent judiciary Judicial Independence and the Rule of Law in Hong Kong • Overcome a history of public corruption Hong Kong Experience • Only tarriffs on alcohol and cigarettes • No capital controls • Corporate Tax Rates 16.5% EIU.com, OECD average 26.25% OECD Tax Database

  5. Human Capital Resources • Well educated population • Barro-Lee Database Harvard CIID http://www.cid.harvard.edu/ciddata/ciddata.html

  6. Pegged Exchange Rate • HK$ stable vs. US$ but against a trade weighted basket it is fairly volatile. IMF International Financial Statistics

  7. Exchange Rate • Standard Deviation of growth rate vs. various currencies. (95% of months, up and down movements will be within + or – 2 standard deviations)

  8. Exchange Rate Policy Keeps Inflation Stable

  9. ..and Interest Rates Lows

  10. De-Industrialization

  11. Hong Kong Census and Statistics

  12. Hong Kong Services Industries Finance and International Trade are the most important industries and growing more so. % of GDP

  13. Lending dominated by the banking sector. • Banking dominated by HSBC and its Hang Seng subsidiary.

  14. Banks Loans vs. Bonds in Hong Kong

  15. Direct vs. Indirect FinanceAsia 2004 Source: Eichengreen & Luengnaruemitchai

  16. Market Dominance • More than 2/3’s of deposits are held at top 4 banks including HSBC, Hang Seng, Bank of China and StanChart.

  17. Hong Kong ExchangeRed Chips and H -shares • Growing importance of Red Chips (Chinese companies incorporated outside PRC) & H-share (PRC incorporated shares traded in HK).

  18. Re-Export Industry • China re-exports by far the biggest element of trade

  19. Tourism Industry

  20. Market Dominance • More than 2/3’s of deposits are held at top 4 banks including HSBC, Hang Seng, Bank of China and StanChart.

  21. Investment Performance

  22. Volatile Financial Market • Healthy external Position • Troubled External Partners

  23. Property Price Index

  24. Large Swings in Stock Index

  25. Good Average Performance, this decade, But Volatile

  26. Not Reliant on Outside Financing

  27. China Trade Recovering but still troubled.

  28. Hong Kong Future • Long term Prospects are good but economy is reliant on China growth. • Free market enabled HK to fairly smoothly adjust to changing economic environment .. And should again.

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