Can it regain its luster?

Executive Summary

Hong Kong provided much of the economic muscle that has transformed China into a global financial powerhouse over the past three decades. The city of 7.3 million, which has been a special administrative region of China since the United Kingdom relinquished control in 1997, is increasingly intertwined with the mainland. But while Hong Kong remains relatively prosperous and is still a regional financial center, its recent growth rate is well below that of the People’s Republic. The territory has failed to diversify to mitigate its reliance on trade services and finance and faces a host of problems that will be difficult to overcome, according to economic experts. “Hong Kong has gone sideways,” says one.

Key takeaways include:

  • Hong Kong’s economic growth rate has fallen from more than 7 percent in the 1980s to about half of that late last year, while China has expanded to become the world’s second largest economy.

  • China now accounts for more than half of Hong Kong’s goods exports and 40 percent of its service exports.

  • Hong Kong was the world’s busiest port in 2004; it has since slipped to number five while Shanghai has moved into the top spot.

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Resources for Further Study



Bush, Richard C., “Hong Kong in the Shadow of China: Living With the Leviathan,” Brookings Institution Press, 2016. The director of the Brookings Institution’s Center on East Asia Policy Studies examines the roots of Hong Kong’s 2014 pro-democracy protest.

Carroll, John M., “A Concise History of Hong Kong,” Rowman & Littlefield Publishers, 2007. An associate professor of history at St. Louis University says Hong Kong is at a crossroads where Chinese, British colonial and global histories collide.

Cartledge, Simon, “A System Apart: Hong Kong’s Political Economy From 1997 Until Now,” Penguin Books, 2017. A Hong Kong-based editor examines the city’s economy, history, politics and policies, and the fiscal and political challenges they created.

Goodstadt, Leo F., “Poverty in the Midst of Affluence: How Hong Kong Mismanaged Its Prosperity,” Hong Kong University Press, 2014. The government’s policy leader during the colonial era argues that misguided policies under both British and Chinese leadership created a “new poverty.”


Bland, Ben, “Hong Kong: One country, two economies,” Financial Times, July 19, 2016, A journalist explores the city’s problems 20 years after the handover.

Bradsher, Keith, “Once a Model City, Hong Kong Is in Trouble,” The New York Times, June 29, 2017, An Asia-based journalist summarizes the tensions and frustrations that plague Hong Kong’s people and policies two decades after China assumed control.

Cheung, Alvin Y.H., “Beijing Is Weakening Hong Kong’s Rule of Law. How Far Will It Go?” ChinaFile, May 9, 2017, A Hong Kong lawyer, now based in the United States, argues that Hong Kong operates under a “dual state,” with one legal system protecting commercial interests and a more restrictive one that governs politically sensitive matters.

Lian, Yi-Zheng, “Red Capital in Hong Kong,” The New York Times, June 1, 2017, A former Hong Kong editor says that capital from mainland China now dominates Hong Kong’s markets.

Reports and Studies

“13th Annual Demographia International Housing Affordability Survey: 2017,” Demographia, last accessed on Dec. 10, 2017, A report on the world’s major housing markets finds Hong Kong the least affordable.

“UBS Global Real Estate Bubble Index 2016,” UBS, last accessed on Dec. 10, 2017, A global bank finds that Hong Kong is at risk of a housing bubble, defined as a market that is severely overvalued.

Schenk, Catherine R., “Economic History of Hong Kong,” EH.Net Encyclopedia, March 16, 2008, An Oxford University professor traces Hong Kong’s economic and financial history.

The Next Step

Housing Crisis

Chen, Laurie, “Crisis veteran helps Hong Kong tackle acute housing shortage, one renovated home at a time,” South China Morning Post, Dec. 16, 2017, An experienced Habitat for Humanity worker has started a nonprofit housing project in Hong Kong dedicated to renovating apartments in dilapidated public housing estates.

Kwok, Donny, and James Pomfret, “Between rampant inequality and tensions with China, Hong Kong’s new chief executive paints a ‘grave’ picture,” Reuters/Business Insider, Oct. 11, 2017, Hong Kong Chief Executive Carrie Lam pledged to increase land supply and start a subsidized “starter homes” initiative, but also said that the government had no magic fix for the housing crisis.

Mahrotri, Pooja Thakur, “Hong Kong Home Prices Are Unsustainable, $2.6 Billion Fund Says,” Bloomberg, Jan. 4, 2018, A real estate private equity firm warns that Hong Kong’s astronomical housing prices cannot continue and adds the government’s “cooling” efforts have done little to improve the situation.

Income Inequality

Ewing, Kent, “As Christmas decorations highlight inequality, what are Hong Kong’s officials doing about the poor?” Hong Kong Free Press, Dec. 18, 2017, Despite a thriving economy and strong fiscal reserves, Hong Kong’s government has done little to combat the extreme poverty in the city, asserts a teacher and writer.

Ho, Prudence, and Matthew Campbell, “Life in Hong Kong Is Harder Than Ever – Unless You’re a Tycoon,” Bloomberg, June 13, 2017, Economists view Hong Kong as the closest thing to a regulation-free economy, but the laissez-faire approach has led to the biggest income disparity rate in Asia.

Yau, Cannix, and Viola Zhou, “What hope for the poorest? Hong Kong wealth gap hits record high,” South China Morning Post, June 9, 2017, Hong Kong’s Census and Statistics Department commissioner cites an aging population and an increase in smaller households as contributing factors to the city’s extreme income inequality.


American Chamber of Commerce in Hong Kong
Bank of America Tower, Room 1904, 12 Harcourt Road, Central, Hong Kong
A membership organization that promotes American business interests in Hong Kong.

Brookings Institution
1775 Massachusetts Ave., N.W., Washington, DC 20036
A public policy research organization with a sister center in Beijing.

Hong Kong Democratic Foundation
Unit 7, 5/F, Eastern Harbour Centre, 28 Hoi Chak St., Quarry Bay, Hong Kong
A think tank that disseminates information on public policy issues, including the democratic development of Hong Kong.

Hong Kong Institute of Economics and Business Strategy
University of Hong Kong, Pokfulam Road, Hong Kong
A research center that focuses on the study of economic policy and business strategy.

Lau Chor Tak Institute of Global Economics and Finance
Chinese University of Hong Kong, 13/F Cheng Yu Tung Building, 12 Chak Cheung St., Shatin, New Territories, Hong Kong
A research institute at one of Hong Kong’s leading universities that aims to make the Chinese monetary and financial system more transparent.

New York University Center for Global Economy and Business
NYU Stern, Henry Kaufman Management Center, 44 W. Fourth St., New York, NY 10012
A division of the Stern School of Business that promotes faculty research on global aspects of modern economies and business. Its China initiative offers specialized information on that country.

RAND Corp.
1776 Main St., Santa Monica, CA 90401
A think tank that conducts research and analysis on international affairs and other issues.

DOI: 10.1177/237455680403.n1