BizAims

The economy of Hong Kong is 90.3% free and thus the region may be proud to be the one with the world's freest economy. The total score of Hong Kong is just 0.3% lower than the previous year, mostly showing a lower monetary freedom score. In the region of Asia Pacific Hong Kong hold the first place out of 30 countries. The region registered very good results in almost all areas. It is worth noting that income and corporate tax rates are highly competitive and the total taxation is comparatively small as a percentage of GDP. Business regulation in Hong Kong is quite simple and its labor market is very flexible. The region holds no restrictions on foreign capital and investment is highly motivated. Hong Kong is one of the top financial centers. The regulation of banking as well as financial services is both transparent and non-disturbing. Property rights are guarded by an independent judiciary, which is also free from all sorts of corruption.

Overview
The full name of Hong Kong is Special Administrative Region (SAR) of Hong Kong. It is officially a part of People's Republic of China, but holds a separate political governance structure as well as economic system. It was a British colony for over 150 years until 1997, when the sovereignty of Hong Kong was transferred to China. Since then Hong Kong preserves the rule of law, simple practices for enterprises, free entry of foreign capital and financial transparency. The key industries in the region include: financial services and shipping.

Business Freedom

Trade Freedom

In 2005 the average tariff rate in the region was zero percent. Besides liquor, tobacco, hydrocarbon oil and methyl alcohol, trade in Hong Kong is basically duty-free. The management of restrictive pharmaceuticals along with problems featuring intellectual property rights put in to the cost of trade.

Fiscal Freedom

Hong Kong holds one of the world's lowest tax rates. Progressive taxes are between 2% and 17% on income adjusted for deductions and allowances. Individuals may also be taxed at a flat rate of 16% on gross income; this relies on which liability is lower. There's a 17.5% corporate income tax in the region. The most recent year registered total tax revenue of 12.7% of GDP.

Freedom from Government

The overall government expenditures are quite low. These expenditures include consumption and transfer payments. Government expenditures registered in the most recent year accounted 15.2% of GDP. Hong Kong government made certain efforts in order to keep a balanced budget.

Monetary Freedom

Inflation in the region is low; its average percentage in the period between 2004 and 2006 was 1.5%. Monetary freedom is in most part explained by stable prices in Hong Kong. The prices of public transport, electricity as well as some residential rents are controlled by the government. An extra 5 percentage points is subtracted from the total score of monetary freedom in the region to adjust for measures that alter domestic prices.

Investment Freedom

It is worth mentioning that foreign capital obtains domestic treatment, and there is a strong motivation for foreign investment. Hong Kong has no limits on foreign ownership and there is no need for special approval practices in order to establish a foreign firm. This, however, excludes broadcasting, where entities are allowed to own no more than 49% of the local stations, and particular legal services. Government is the owner of all lands and both foreign and domestic landlords are treated equally. Hong Kong currency is dollar, and it is freely convertible.

Financial Freedom

Hong Kong represents a global financial center. The region's legal environment aims towards cautious minimum standards and transparency. At the end of 2006 there were registered 137 licensed banks, 31 restricted license banks and 33 "deposit-taking companies" in Hong Kong. The independent Hong Kong Monetary Authority is the one to supervise all banks in the region. No restrictions have been set on foreign banks. These banks are treated just like domestic ones. Hong Kong's stock exchange holds the 8^th place in the world in terms of capitalization. However, the regulation and transparency of the stock exchange have been previously criticized. Back in 1998 the government of Hong Kong intervened in the stock market by acquiring $15.2 billion in private stocks but since then it got rid of all but $410 million of these holdings.

Property Rights

Contracts made in the region are highly protected. The legal system of Hong Kong is transparent and is based on common law. In addition its constitution highly supports both private property and freedom of exchange. Although government made certain steps towards the protection of intellectual property, some counterfeit products, such as DVDs, CDs and software are still sold openly.

Freedom from Corruption

According to statistics, the level of corruption in Hong Kong is minimal. The Corruption Perceptions Index for 2006, made by Transparency International, ranks the region 15^th among 163 countries. In addition foreign companies do not perceive corruption as an investment barrier.

Labor Freedom

Due to a high flexibility of employment regulations, employment opportunities along with productivity growth register a high improvement. The labor code is rigorously enforced, but it is not oppressive. Hong Kong has a low non-salary cost of employing an individual; however, the process of dismissing a redundant worker might be quite costly. The rules regarding the expansion and contraction of the number of working hours are very flexible. Hong Kong holds one of the highest freedoms of labor in the world.