Hong Kong has a free market economy, highly dependent on international trade and finance — the value of goods and services trade, including the sizable share of re-exports, is about four times GDP.
Hong Kong levies excise duties on only four commodities, namely: hard alcohol, tobacco, hydrocarbon oil, and methyl alcohol. There are no quotas or dumping laws.
Hong Kong's open economy left it exposed to the global economic slowdown that began in 2008. Although increasing integration with China, through trade, tourism, and financial links, helped it to make an initial recovery more quickly than many observers anticipated, it again faces a possible slowdown as exports to the Euro zone and US slump.
The Hong Kong government is promoting the Special Administrative Region (SAR) as the site for Chinese renminbi (RMB) internationalization. Hong Kong residents are allowed to establish RMB-denominated savings accounts; RMB-denominated corporate and Chinese government bonds have been issued in Hong Kong; and RMB trade settlement is allowed.
The territory far exceeded the RMB conversion quota set by Beijing for trade settlements in 2010 due to the growth of earnings from exports to the mainland. RMB deposits grew to roughly 9.1% of total system deposits in Hong Kong by the end of 2012, an increase of 59% from the previous year.
The government is pursuing efforts to introduce additional use of RMB in Hong Kong financial markets and is seeking to expand the RMB quota. The mainland has long been Hong Kong's largest trading partner, accounting for about half of Hong Kong's exports by value.
Hong Kong's natural resources are limited, and food and raw materials must be imported. As a result of China's easing of travel restrictions, the number of mainland tourists to the territory has surged from 4.5 million in 2001 to 34.9 million in 2012, outnumbering visitors from all other countries combined. Hong Kong has also established itself as the premier stock market for Chinese firms seeking to list abroad.
In 2012 mainland Chinese companies constituted about 46.6% of the firms listed on the Hong Kong Stock Exchange and accounted for about 57.4% of the Exchange's market capitalization.
During the past decade, as Hong Kong's manufacturing industry moved to the mainland, its service industry has grown rapidly.
Growth slowed to 5% in 2011, and less than 2% in 2012. Credit expansion and tight housing supply conditions caused Hong Kong property prices to rise rapidly and inflation to rise 4.1% in 2012.
Lower and middle income segments of the population are increasingly unable to afford adequate housing.
Hong Kong continues to link its currency closely to the US dollar, maintaining an arrangement established in 1983.