Country Analysis Hongkong
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Transcript of 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