Economic Performance And Current Situation Overview Economics Essay

The Hong Kong ‘s economic system is presently in an upward tendency. It is said to be the universe ‘s freest economic system, the 2nd largest beginning of foreign direct investing ( FDI ) in Asia, the universe ‘s 9th largest foreign exchange militias keeping, the universe ‘s 2nd highest per capita retention of foreign exchange militias and the universe ‘s more services-oriented economic system whereby the service sector accounts for more than 90 % of GDP. Hong Kong has successfully overcome the strict challenges from the planetary recession of 2009. It has been able to raise its existent Gross Domestic Product ( GDP ) from -2.7 % in 2009 to +6.8 % in 2010, therefore overcoming the economic recession of 2009. Hong Kong ‘s economic growing was achieved because of the robust rise in entire ware exports and service exports every bit good as the autumn in unemployment rate. However, the rising prices rate which is measured by the composite Consumer Price Index besides rise from 0.9 % in 2009 to 2.9 % in 2010, connoting that on norm the monetary values of all goods and services rose by 2.9 cents in every US $ over the twelvemonth. It is of import to observe that rising prices rate in Hong Kong, which refers to a general and sustained rise in the degree of monetary values of goods and services was chiefly due to imported rising prices, that is, addition in the monetary values of imported goods from overseas besides boosts up the monetary values of goods and services locally. The figure below shows the economic tendency of Hong Kong since 2000.

From the chart, it can be clearly seen that Hong Kong ‘s existent GDP has fell by 3.7 % ( 10.5 % in 2000 – 6.8 % in 2010 ) over the last 10 old ages. At the same clip, it can besides be observed that Hong Kong experienced a major diminution from 10.5 % in 2000 to 0.1 % in 2001 because of the deterioration of the external environment prompted by the downswing in the US economic system, and with the state of affairs aggravated by the tragic event in the United States on 11th September 2001 when two air hoses crashed into the Twin Towers of World Trade Center in New York City. Furthermore, with the recent economic growing in 2010, citizens of Hong Kong are better off as the existent GDP per capita, that is, income per caput besides increases over the last three old ages from 2008 to 2010.

Besides, it is every bit of import to advert that Hong Kong has four economic pillars: Trading and Logistics ( 24.1 % of GDP in footings of value-added in 2009 ) , Tourism ( 3.3 % ) , Financial Services ( 15.2 % ) , and Professional Services and other manufacturer services ( 13.1 % ) . On the other manus, there are six industries in which Hong Kong has clear advantages for farther development and which histories for 8 % of GDP in footings of value-added in 2009. The six industries comprises of Cultural and Creative Industry, Medical Services, Education Services, Innovation and Technology, Testing and Certification Services, and Environmental Services. Now, allow us analyze in deepness the different elements structuring the economic system of Hong Kong.

The Domestic Sector

The Domestic Sector contributed a batch on the economic growing of Hong Kong with the retail gross revenues holding a important recoil, reflecting a return of consumer assurance and strong influxs of tourers. The value of retail gross revenues increased by 18.3 % in 2010 compared to a 0.6 % rise in 2009. Furthermore, the touristry sector besides experienced a sustain growing with visitant reachings making 36.3 million, a 21.8 % addition in 2010 compared to 2009 with visitant reachings stand foring 29.6 million, a 0.3 % addition. The chart below shows how retail gross revenues and tourers reachings have fared strongly through to the twelvemonth terminal on a year-on-year footing since 2005 to 2010.

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The External Sector

Hong Kong ‘s external sector besides continued to do strongly in 2010 thanks to the vigorous economic public presentation of Asiatic economic systems, peculiarly the Mainland. The Mainland and other Asiatic markets, which accounts for around 70 % of Hong Kong ‘s entire exports of goods, remained the cardinal growing driver, registering a important rise of around 20 % in existent footings in 2010 compared to a autumn of 6.6 % in existent footings in 2009. It is of import to observe that the Asiatic markets particularly the Mainland continued to surpass the US and EU markets, mirroring the divergent form of planetary economic recovery across parts due to the addition in the petroleum oil monetary values in January 2011 to US $ 93 per barrel and besides due to the political agitation in Egypt. The diagram below illustrates how the Asiatic markets have surpassed the US and EU markets over the last five old ages.

Two-Speed Growth Continued

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Now allow us see the two different types of trade: seeable and unseeable.

Visible Trade

Visible Trade refers to the imports and exports of goods, such as oil, machines, nutrient, chemicals and so on. The major states to which Hong Kong exports its goods are Mainland of China, United States, European Union, Japan, Republic of Korea, Taiwan and Singapore. Though after the planetary recession in 2009, Hong Kong ‘s exports to these states have improved well like exports to Mainland in existent footings rose from -6.6 % in 2009 to 20 % in 2010 ; yet the European Union still lagged behind with merely a 6.6 % addition in existent footings in seeable exports in 2010 compared to the other major markets who have seen a double-digit addition in exports in the current twelvemonth. Similarly, the imports of goods in existent footings rose from -9.4 % in 2009 to 18.6 % in 2010. The maintained imports for most of the merchandises like consumer goods, groceries, natural stuffs and capital goods of Hong Kong climbed significantly in 2010 compared to 2009 whilst fuels retained imports fell by 9.3 % ( 23.2 % in 2009 – 13.9 % in 2010 ) . This was chiefly due to the recent rise in the petroleum oil monetary values.

The figure below shows how seeable imports and exports have fared since 2005.

It can be seen that both imports and exports of goods have increased since 2005 and have been able to excel the planetary recession in 2009.

Invisible Trade

Invisible Trade refers to the exchange of services, that is, imports and exports of services like fiscal and concern services, travel services, trade-related services and transit services. Exports of services sustained a strong growing throughout 2010, jumping by 15.0 % in existent footings for the twelvemonth as a whole, following the 0.3 % growing in 2009. Among the major service constituents of Hong Kong, the exports of travel services showed the strongest public presentation thanks to the ample inflow of visitants from te regional every bit good as long-haul markets. Likewise, exports of trade-related services besides grew aggressively in 2010 benefiting from the improved trading environment in Asia. On the other manus, imports of services experienced a rise up to 10.9 % in existent footings in 2010, in contrast to the 4.9 % contraction in 2009. The imports of services grew solidly in line with improvong the economic conditions.

Hong Kong Trade Balance

Although Hong Kong is sing important addition in its exports and imports of both good and services, the seeable trade shortage in 2010 has widened compared to 2009. But this seeable trade shortage was overcomed by the high unseeable trade excess ; therefore assisting the economic system of Hong Kong to give a trade balance excess of $ 104.6 billion equivalent to 2.8 % of entire value of imports of goods and services in 2010 compared to merchandise excess of $ 121.3 billion stand foring 4 % of the entire value of imports of goods and services in 2009. The figure below depicts Hong Kong trade public presentation over the last five old ages.

It can clearly be seen that Hong Kong has been sing seeable trade shortage since 2005 its imports exceeded its exports. However, due to its high invible trade excess over the last five old ages, Hong Kong continues to hold a favorable trade balance which underlines the state ‘s strong external fight.

The Financial Sector

The heavy market concerns over lifting financial shortages and public debts in a few European economic systems have made the stock market more volatile recently. As a consequence, the Hong Kong dollar topographic point exchange rate moved withing a narrow scope of 7.749 to 7.805 per US dollar in 2010. Despite a brief weakening around the center of the twelvemonth amid possible capital escapes induced by heightened concerns about the European debt crisis, the Hong Kong spot exchange rate showed renewed strength thenceforth on the dorsum of strong demand associated with the vivacious Initial Public Offerings ( IPOs ) activities. Furthermore, under the Linked Exchange Rate system, motions in the Hong Kong dollar exchange rates against other currencies closely follow those of the US dollar. In 2010, the US dollar strengthened against the Euro and the British Pound amid concerns about the European debt job but weakened further against most other currencies, particularly the Australian dollar and the Nipponese Yen. Consequently, in December 2010 the trade-weighted Hong Kong dollar Nominal and Real Effective Exchange Rate Indexs declined by 2.2 % and 2.1 % severally from 2009. Hence, Hong Kong dollar weakened against most major currencies as shown in the figure below for the twelvemonth 2010.

Hong Kong dollar weakened slightly recently in 2010/11

In add-on, Hong Kong is a extremely attractive market for foreign direct investing. Harmonizing to the UNCTAD World Investment Report 2010, Hong Kong was the universe ‘s 4th largest FDI receiver, pulling US $ 48 billion in 2009. This marks the first clip that Hong Kong has gained 4th topographic point in the planetary rankings and represents a leap from its 9th place in 2008. For the 12th back-to-back twelvemonth, Hong Kong continues to be the 2nd largest FDI receiver in Asia, after the Chinese mainland. On the other manus, Hong Kong was the 2nd largest beginning of FDI in Asia, draging Japan, with FDI escapes amounting to US $ 52 billion in 2009. Further, imparting to all major economic sectors grew at a alert gait as Hong Kong has a low involvement rate. In other footings, involvement rates on both sweeping and retail foreparts continued to remain at historically low degrees in 2010.

The Labour Sector

Labour market conditions improved further on a wide forepart as a consequence of the strong choice up of economic activities and substancial occupation creative activity. Entire employment rose to an all-time high by end-2010, forcing the seasonally adjusted unemployment rate down farther to 4.0 % in the 4th one-fourth of 2010. Underemployment rate likewise dropped to 1.8 % . Labour income continued besides to lift. It is of import to observe that the new occupations created were non merely adequate for absorbing the bing umemployed individuals but besides the new entrants joing the labour force. The line chart below shows the tendency in unemployment rates since 2006.

Unemployment rate declined for most in 2010, led by the important upturn in labour demand

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Monetary values

Inflation force per unit areas in Hong Kong went up bit by bit over the class of 2010 chiefly due to higher imported rising prices. Monetary values of nutrient and other trade goods rose strongly in the international markets in 2010 along with the continued planetary economic recovery and the really accommodating pecuniary environment worldwide. For 2010 as a whole, the Composite Consumer Price Index rose by 2.4 % following the 0.5 % addition in 2009 when the economic system was in deflation for several months in the twelvemonth. As mentioned antecedently, rising prices was besides caused by imported rising prices. In other footings, import monetary values augmented notably in 2010, due to the strong recoils in planetary trade good monetary values, higher rising prices in supply beginnings and to a lesser extent the somewhat weaker Hong Kong dollar alongside the US dollar ; accordingly, these increase the imported rising prices in Hong Kong.

Inflation in Hong Kong

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Key: CCPI stands for Composite Consumer Price Index

( * ) The underlying CCPI has netted out the effects of all relevant one-off steps introduced since 2007, including the release and Government ‘s payment of public lodging leases, rates concession, suspension of Employee Retraining Levy, and subsidies for family electricity charges.

However, it is critical to indicate out that Hong Kong was non the alone state to be sing lifting rising prices on 2010. Many Asiatic economic systems with vivacious growing in activities besides saw higher inflationary force per unit areas throughout the twelvemonth.