HONG KONG

GEOGRAPHY

Hong Kong is considered a special administrative region (SAR) of China.  Hong Kong is located in the South China Sea at the mouth of the Pearl River Delta.  There are three main territories in Hong Kong including Hong Kong Island, Kowloon Peninsula and the New Territories. Hong Kong Island is home to many historical sites as well as mountain ranges. The Kowloon Peninsula is located in the southern part of the main landmass of Hong Kong. Both Hong Kong Island and the Kowloon Peninsula have been expanded over the years due to reclaimed land.  The New Territories consist of the mainland north of the Kowloon Ranges as well as the Outlying Islands.  Despite the development of new towns in the 1970s, the New Territories have remained relatively rural with much of the area being designated parklands.

HISTORY

The first treaty in 1842 gave the British control of Hong Kong Island while the second Treaty of 1868 this boundary up to the Kowloon Peninsula and Stonecutters Island. The terms of the deal listed the land grants as a perpetual lease. This is to be contrasted with the Treaty of 1898, when the new territories and the surrounding islands were ceded to the British as a 99-year lease, meaning, unless further agreements were taken, the territory of Hong Kong was scheduled to be split up in the year 1997. For the time being, 1950’s Hong Kong would quickly rebound from its depressed state during the war years: the disruptions in mainland China drove many refugees with skills and capital to the British haven, while many firms from rich places like Shanghai relocated to avoid communist intervention. All of this meant that vast pools of cheap labour and investment poured into the territory. What had previously been an economy centered around trade now began to diversify. This was accelerated by cold war-era embargoes that greatly restricted the activity of merchants in the region.

In response industry and manufacturing exploded, starting with textiles and expanding to clothing, electronics, plastics and other labor-intensive exports. The colony became one of the pioneers of Eastern industrialization. Hong Kong’s economic miracle had begun as the economy of this colony transformed. So too did the people and the environment: by the mid 1950s the population reached 2.2 million and within a decade exceeded 3 million with even more immigrants pouring in every day. The area was quickly becoming one of the most densely populated in the world. The government attempted to deal with the overcrowding by launching ambitious land reclamation and public housing projects. New industrial towns were built to house immigrants, provide employment and aid industry. With little room to expand out Hong Kong began its ascent upwards: the skyline soon became filled with high-rises and skyscrapers some of which would completely engulf their historical foundations like the famous walled city in Kowloon. Elsewhere you’d see parks, cinemas, shopping centers and all kinds of hallmarks of a modern metropolis spring up. Schools were another major feature of the changing landscape, as new programs ensured that thousands were built throughout the 50s and 60s, which helped ensure that Hong Kong’s children continued to get a proper education in the British fashion once again. However a very dangerous to the British colony would be the rise of communism. This was of greatest concern in the 60s with the launching of Mao Zedong’s Cultural Revolution: the socio-political Movement stated the goal was to preserve Chinese communism by purging the remnants of capitalist and traditional elements.

From Chinese society across the country, millions were persecuted and hundreds of thousands were killed as clashes took place in factions of all walks of life. The student-led paramilitary group known as the Red Guards proved quite infectious and their ability to spread across the network of schools in China. The Cultural Revolution inevitably seeped into the Western colonies. In 1966 Portuguese Macau was brought to its knees by revolutionaries. Meanwhile Hong Kong was also dealing with growing tensions: these boiled over in 1967 with large-scale riots between pro communists and government forces. At the height of the violence, assassinations and waves of bombings spread across the city with over 8,000 devices diffused by British forces. Eventually, though the riots drew to a close as the violent protesters lost the sympathy of the people and the government finally announced it would reform. The unrest of the 60s coupled with the looming expiration of the territorial lease served as a catalyst for Hong Kong’s transformation in the last days of British rule.

The british crown realised that battle was underway for the heart and soul of the people, so if it were to maintain any influence in the region, steps had to be taken to ensure that a wedge was driven between the territory and the mainland; such that Hong Kongers found themselves aligned more with the free Western ideology. This would involve fostering Hong Kong’s self-identity and actually practicing what the supposedly democratic overlords preached: major initiatives took the form of massive social welfare programs. These included the announcement of governor Murray’s ten-year housing plan in 1973 whose objective was to provide accommodations for 1.8 million people. Many new public housing projects would be launched in the years to follow, legislation was also passed to require equal pay for equal work and injustice was further combated with reforms to the police and government which opened the doors to more local representation. A sense of regional community was further fostered by government hosted events like the “clean up Hong Kong campaign” and the “Hong Kong festival”. Furthermore, bureaucratic crime was tackled in 1974 with the founding of the Independent Commission Against Corruption. It would prove so successful that Hong Kong would eventually become one of the least corrupt society in the world. As a result of these measures, standards of living rose across the board. Adding to this upswing, Hong Kong’s economy boomed under the “non-interference policy“ introduced by the colonial government. The region’s economic worth peaked at 27 percent that of the entire People’s Republic of China. All this success certainly set Hong Kong apart as a “jewel of the East” and made people proud to call themselves Hong Kongers; thus the British had achieved their aims as they headed into the negotiations with China. In the mid-1980s British and Chinese delegations began to open serious discussions about the future of Hong Kong: the Chinese strongly held that all of Hong Kong be returned to them but recognized that much of the region’s value was owed to its current status quo; the British also realized that compromise was necessary as their permanently leased territories were inextricably linked to the rest of the region and that they could not realistically hope to hold on to them. By 1984 both sides came to an agreement that the whole of Hong Kong would pass into Chinese control if in return it would retain a high degree of autonomy and a preservation of its lifestyle. This sino-british joint declaration signed between premier Zhao Ziyang and Prime Minister Margaret Thatcher declared that upon the expiration of the Hong Kong lease on July 1st 1997 the region would become a special administrative region for a period of 50 years until 2047. The joint declaration of 1997 also outlined China’s policies towards Hong Kong.

These policies were listed in the agreement with a final condition: that they serve as a basis for the constitutional document known as the “basic law” that would govern the special administrative region. Shortly thereafter the National People’s Congress of China issued a draft which would pass through a committee, which had representatives from Hong Kong’s government, business and industrial sectors, before being finalised in 1990. Thus the mechanisms were set for the handover of 1997. In the intervening years, there would be quite a bit of maneuvering amongst the government and business entities, in order to best secure their position in a post transfer world. For instance, in 1994 the British government pushed through electoral reforms to quicken the pace of democratization in the face of China’s efforts to stamp them out in the mainland; as was evidenced by the Tiananmen Square massacre. These constitutional changes aimed at broadening Hong Kong’s Democratic base, however they were taken by China as a violation of the previous joint declaration. Tensions would continue to rise until the deadline of June 1st 1997.

SOCIAL CULTURE AND RELIGION

Hong Kong culture is a mixture of traditional Han Cantonese ethnic culture of southeastern China and British and Western culture in general. Hong Kongers are being increasingly influenced by the culture of the Mainland Chinese. Their culture is sophisticated and mixes Confucian and British ethics, and they are international savvy. Local Hong Kongers are proud of their region and their accomplishments, and they want to preserve their culture. Understanding their culture involves understanding their history and present circumstances and becoming familiar with their language, customs, ideals, ethics, diet, and business practices. Their culture is a fusion of East and West. It is a unique culture and the world’s most successful culture in several ways. Hong Kong people often call themselves “Hong Kongers” in English. In a recent poll, about 67% self identified themselves as Hong Kongers.

In Hong Kong, about 8 percent of the permanent residents are not of Chinese descent. Depending on how long they have lived in Hong Kong or whether they are first, second, or third generation Hong Kongers, they may share the same basic core values and ways of thinking, basically the same culture, as the ethnically Chinese Hong Kongers, and of course they also retain a lot of the culture of their ancestral countries too.

Hong Kong culture is basically the culture of the native Chinese who were born there during the period of British rule or in the 22 years since the reversion to Chinese rule. Under British rule, through foreign media influence and their everyday contact with foreigners both in Hong Kong and abroad because many traveled for business, work, and education, during the last century and a half, their distinctive Western/Eastern fusion culture has emerged. Their culture is a fusion of the cultures of China, Britain and other Western countries. 

Their everyday behavior, demeaner and attitudes are noticeably different even to tourists and travelers who have interacted with Mainlanders and local Hong Kongers just a short time. It is not just their Cantonese language that makes them different. They often smile more, seem happier, and are more polite and circumspect in public. English and Cantonese are their official languages. They speak Cantonese in everyday discourse though they might also speak other Chinese languages and dialects. About 54% speak English. About 95 percent of the Hong Kong people speak Cantonese, and about 49 percent can speak Mandarin that is the official language of China. About 90 percent of the Hong Kong people speak Cantonese at home.

POLITICS

Hong Kong maintains a high degree of autonomy from China, but is not independent from Chinese politics. As such, there are no governing political parties. Legislative matters are largely carried out through the business or professional sectors; political parties will often officially register under the auspices of a company or business corporation. Hong Kong is a Special Administrative Region (SAR) of the People’s Republic of China. Its status is defined by the basic law (adopted in 1990 by the National People’s Assembly of China), which serves as the “constitution” of the Territory, and which confers its scope to the “one country, two systems” principle.

ECONOMY

As the tenth largest trading power and the fifth largest financial centre in the world, Hong Kong is often cited as a model of liberal economics. However, the economy is currently in a slowdown, and the GDP grew -7.5% in 2020, against -1.2% in 2019. This slowdown results largely from the impact of the COVID-19 pandemic, but also from the cooling Chinese economy, trade tensions with the United States, decreased FDI, and tighter credit conditions forcing the Hong Kong Monetary Authority (HKMA) to imitate rate increases. According to Financial Times, Hong Kong’s economy has also suffered from the many protests in 2019 and 2020. According to the latest IMF forecasts growth is expected to bounce back to +3.7% in 2021 and remain at 3.4% in 2022, subject to the post-pandemic global economic recovery.

Due to the impact of the global economic context of 2020, the Hong Kong Government closed the year with a -12.8% budget deficit from -5.8% in 2019. The protests and the export pressure from the US-China trade war also affect the government balance. Hong Kong continues to have solid public finances with almost non-existent public debt (0.3% of GDP in 2021). According to the IMF, the inflation rate dropped from 2.9% in 2019 to 0.3% in 2020. Inflation rate should remain low at 0.3% in 2021 and 2022 according to the latest World Economic Outlook of the IMF (2021). Credit expansion and a tight housing supply have caused Hong Kong property prices to rise rapidly in recent years. Lower and middle-income segments of the population are increasingly unable to afford adequate housing. Tourism is largely affected by the ongoing protests and pandemic and tourism from China (75% of total visitors) is also expected to remain weak because of slower economic growth in mainland China and the depreciation of the RMB in relation to the HKD. 

In 2021, the country’s most immediate challenge is related to the economic, social and public health impacts of the COVID-19 pandemic.The unemployment rate increased from 3% to 5.2% in 2020; the IMF expects this trend to remain, the rate being currently estimated to stabilise at 4.4% in 2021 and 4% in 2022. Challenges also include pro-China vs anti-China sentiment, rising income inequality, and lack of economic innovation (Coface). 

Hong Kong relies heavily on financial services, production of electronics, and tourism as its main industries. The agricultural sector is almost non-existent since Hong Kong possesses no natural resources and is completely reliant on raw material and energy imports. The contribution of agriculture to the economy was practically null at 0.1% of GDP in 2020 and 0.2% of the workforce employed (World Bank, 2020). Hi-tech vertical farming is being adopted as an alternative to traditional farming (South China Morning Post). Concerns over food safety from Chinese products have also been a factor in the boom of local farming initiatives (EcoWatch). The manufacturing industry represents a larger, albeit still small share of GDP (6.5%) and employment with 11.5% of the workforce (World Bank, 2020). Main industries include electronics, electrical appliances, informatics and telecommunications. In 2018, the industrial sector stagnated. The tertiary sector is the heart of Hong Kong’s economy. Financial services, trading and logistics, tourism, import/export, air transport, professional and producer services are traditional key industries in Hong Kong. The services sector contributes around 88.6% of GDP and employed 88.3% of the workforce in 2020 (World Bank, 2020). Hong Kong acts as a service centre for Asian companies, particularly for those trading with China. According to figures published by the Commercial Register, there are over 900 thousand companies registered in Hong Kong. The COVID-19 pandemic has had a powerful impact on the global economy in 2020. The International Monetary Fund is currently forecasting a 4.9% contraction in global economic activity for the year 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast, and a level worse than the global financial crisis (IMF, 2020). The impact of the pandemic appears to have affected both sides of most sectors and markets in Hong Kong – demand disruptions having run up against supply problems – making the short-term outlook uncertain for industry and service sectors.

INTERNATIONAL RELATIONS

Hong Kong’s economy is considered a model of capitalism due to its commitment to free trade, with foreign trade representing 352.8% of its GDP (World Bank, 2020). Top exports include integrated circuits, gold, radio-telephony transmission tools, electrical apparatus for line telephony, business services, travel, transportation and financial services. Main imports include integrated circuits, telephones, automatic data processing machines, travel, transportation and business services (WTO). The International Monetary Fund (IMF) is forecasting a rebound of 4.4% in the volume of exports of goods and services of the territory in 2021, after a fall of 11.5% in 2020 due to the COVID pandemic, and an increase of 5% of its imports, after a fall of 13.2% in 2020. Export destinations include China (55.3% of export), the U.S., India, Japan and Thailand while imports come from China (45.7%), Singapore, South Korea, Japan and the US (Comtrade, 2020). Hong Kong was the world’s 8th exporters and 8th importers in 2019 (WTO, 2020). The greatest threat to Hong Kong’s trade involves tensions and tariffs between the U.S. and China (Nikkei Asian Review). The effects of the COVID pandemic and protests in Hong Kong may be affecting the economy (Fitch) in particular through tourism and air traffic. In 2019, the total value of exported goods and services reached 177.3% of GDP while imports of goods and services closed at 175.5% of GDP. The trade balance, including services, was positive in 2019, reaching 6,494 million USD. The trade balance including only goods is negative (-15 805 million USD, and far lower deficit than the year before with 32 272 million USD). According to WTO data, Hong-Kong exported 534,88 billion USD worth of goods in 2019, while its imports amounted to 577.83 billion USD. With regards to services, Hong Kong registered for the same year 101.22 billion USD for export and 78,84 billion USD for import. Foreign trade has slowed down in 2019 with a decrease of 6.8% for imports and 5.8% for exports.Hong Kong has no tariffs on imported goods. It levies excise duties on only four commodities which are imported or produced locally: hard alcohol, tobacco, hydrocarbon oil and methyl alcohol. There are no quotas or dumping laws.


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