Hong Kong no longer 'world's freest economy'

Curbs on the city's political freedoms blamed for the loss of its economic crown.
By Jojo Man and Simon Lee for RFA Cantonese, Chen Zifei for RFA Mandarin
Hong Kong no longer 'world's freest economy' Chinese and Hong Kong flags are hung during celebrations of the 25th anniversary of the handover of Hong Kong to China, in Hong Kong, June 17, 2022.
Credit: Kin Cheung/AP

Hong Kong has lost its status as the world's freest economy due to ongoing curbs on its civil and political freedoms, according to the Fraser Institute, a Canadian think tank, while its container ships are bypassing the once-bustling port in favor of neighboring Shenzhen.

Hong Kong fell from the top spot in the Fraser Institute's annual Economic Freedom of the World report, a status it had held since 1975, to be replaced by Singapore. The city is expected to drop even further down the list in future years, according to the report's authors.

“This is the first year Hong Kong has not ranked number one on the index since its inception, and the expectation is that its score will only fall further as the Chinese Communist Party continues to suppress freedom of all sorts,” the Institute's Resident Fellow Fred McMahon said in a statement.

The report found new regulatory barriers to entry, limits on the hiring of foreign nationals and rising business costs had impacted economic freedom in Hong Kong, while "increased military interference in the rule of law and eroding confidence in judicial independence and the impartiality of courts" had impacted its legal system and property rights.

“Hong Kong’s recent turn is an example of how economic freedom is intimately connected with civil and political freedom," Fraser Institute Senior Fellow Matthew Mitchell said. "[The] Chinese government’s aim was to crack down on political and civil dissent. These repressions, combined with the government’s efforts to control the private sector, inevitably led to diminished economic freedom."

"Hong Kong's prosperity will likely suffer as a result," Mitchell warned.

‘One country, two systems’

Economic commentator Simon Lee said Hong Kong’s fall from top ranking showed that the Chinese government’s claim that the city is being run as a separate jurisdiction under the “one country, two systems” framework agreed before the 1997 handover wasn’t true.

“So the current decline in ranking tells the world that 'one country, two systems' is in retreat,” Lee said. “And without it, can it even keep being a financial hub? At the very least, its ability to serve China’s financial needs is gone.”

People walk on a promenade in front of the skyline of the Singapore financial business district. Singapore’s economy has been ranked as the freesest in the world for the first time. Credit: Rosland Rahman/AFP file photo

The Hong Kong government on Tuesday issued a strongly worded statement about the report, hitting out at its comments on the city’s political freedoms and the rule of law.

“The allegation against the independence and impartiality of our judiciary is totally groundless and unsupported by objective evidence,” a spokesperson said.

It said the national security law had “enabled Hong Kong people to enjoy the rights and freedoms which were impaired during the period of serious violence” during the 2019 protest movement.

Financial commentator Si Ling said the 2020 National Security Law had dented investor confidence, however.

“The provisions of the National Security Law have made it impossible for foreign investors to believe in the Chinese government's commitment to economic freedom,” Si said, adding that the report would in turn likely impact Hong Kong’s long-term sovereign debt rating.

“This won’t be conducive to China's ability to meet its financial needs via Hong Kong," he said, in a reference to the current liquidity problems in the Chinese economy.

Si said the lower ranking showed that Beijing has misjudged the attitudes of foreign investors.

‘New low’

Commentator Joseph Ngan told Radio Free Asia’s “Financial Freedom” program on Wednesday that the ranking was a “new low” for Hong Kong.

He said a city’s competitiveness doesn’t just rely on economic indicators.

“Our overall economic direction has caused us to lose competitiveness due to changes in the political environment,” Ngan said. “This is about our long-term development.”

Tourists take photos in front of the financial Central district and Victoria Harbour in Hong Kong, May 9, 2023. Credit: Tyrone Siu/Reuters

The report comes as Hong Kong’s status as a global transshipment center is also being called into question, according to the latest government figures.

Container traffic at the Kwai Tsing Container Terminal fell to 9th place in global rankings for entrepot trade, where goods are brought into a port to be shipped out elsewhere rather than imported into the local economy.

Hong Kong's container throughput fell by nearly 16% year-on-year, compared with a decline of only 4% at Shenzhen Port in the Pearl River Delta, the Ming Pao newspaper quoted government figures as saying.

Improvements in port layout in Guangzhou and Shenzhen mean that goods no longer need to be shipped via Hong Kong, while competing container ports in China benefit from favorable government policies, giving them an unfair advantage, the report said.

Container traffic through Hong Kong fell by 17.9% year-on-year to approximately 1.2 million 20-foot equivalent units, or TEU, in July, and showed a cumulative decline of 15.8% year-on-year in the first seven months of this year, to approximately 8.32 million TEU.

Containers and ships are seen at the Kwai Chung Container Terminal in Hong Kong, June 7, 2021. Container traffic through Hong Kong has fallen by 17.9% year-on-year. Credit: Aleksander Solum/Reuters

By contrast, Shenzhen’s container throughput increased by 7.6% year-on-year to 2.82 million TEU in July, while throughput saw a decrease of just 4% year-on-year in the first seven months of this year.

Meanwhile, more Hong Kongers are living in poverty, according to a recent report by the charity Oxfam. The overall poverty rate reached 20% in the first quarter of 2023, with over 1.36 million people living in poverty, the report said, citing government statistics.

“Despite society returning to normal, the problem of wealth inequality has become increasingly serious, and the slow recovery among poor families has sounded alarm bells for society,” Oxfam Hong Kong director general Kalina Tsang said, calling for job creation schemes and a boost in the minimum wage.

The median monthly household income of the poorest 10% of households was just HK$2,300, compared with HK$132,000 yuan among the richest 10%.

The gap between rich and poor has expanded from 34.3 times in 2019 to 57.7 times at the beginning of this year, the largest gap in history, Oxfam said.

Translated by Luisetta Mudie. Edited by Malcolm Foster.


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