section_path: Economy
section_name: Economy
paragraph_text: Economy
  
  One of the world's most significant financial centres and commercial ports, Hong Kong has a market economy focused on services, characterised by low taxation, minimal government market intervention, and an established international financial market. It is the world's 38th-largest economy, with a nominal GDP of approximately US$407 billion. Hong Kong's economy ranked at the top of the Heritage Foundation 's economic freedom index between 1995 and 2021. However, Hong Kong was removed from the index by the Heritage Foundation in 2021, with the Foundation citing a "loss of political freedom and autonomy... almost indistinguishable in many respects from other major Chinese commercial centers like Shanghai and Beijing". Hong Kong is highly developed, and ranks fourth on the UN Human Development Index. The Hong Kong Stock Exchange is the seventh-largest in the world, with a market capitalisation of HK$30.4 trillion (US$3.87 trillion) as of December 2018. Hong Kong is ranked as the 17th most innovative territory in the Global Innovation Index in 2023, and 3rd in the Global Financial Centres Index. The city is sometimes referred to as "Silicon Harbor", a nickname derived from Silicon Valley in California. Hong Kong hosts several high tech and innovation companies, including several multinational companies.
  
  Hong Kong is the ninth largest trading entity in exports and eighth largest in imports (2021), trading more goods in value than its gross domestic product. Over half of its cargo throughput consists of transshipments (goods travelling through Hong Kong). Products from mainland China account for about 40% of that traffic. The city's location allowed it to establish a transportation and logistics infrastructure which includes the world's seventh-busiest container port and the busiest airport for international cargo. The territory's largest export markets are mainland China and the United States. Hong Kong is a key part of the 21st Century Maritime Silk Road. It has little arable land and few natural resources, importing most of its food and raw materials. More than 90% of Hong Kong's food is imported, including nearly all of its meat and rice. Agricultural activity is 0.1% of GDP and consists of growing premium food and flower varieties.
  
  Although the territory had one of Asia's largest manufacturing economies during the latter half of the colonial era, Hong Kong's economy is now dominated by the service sector. The sector generates 92.7% of economic output, with the public sector accounting for about 10%. Between 1961 and 1997 Hong Kong's gross domestic product increased by a factor of 180, and per capita GDP increased by a factor of 87. The territory's GDP relative to mainland China's peaked at 27% in 1993; it fell to less than 3% in 2017, as the mainland developed and liberalised its economy. Economic and infrastructure integration with China has increased significantly since the 1978 start of market liberalisation on the mainland. Since resumption of cross-boundary train service in 1979, many rail and road links have been improved and constructed, facilitating trade between regions. The Closer Economic Partnership Arrangement formalised a policy of free trade between the two areas, with each jurisdiction pledging to remove remaining obstacles to trade and cross-boundary investment. A similar economic partnership with Macau details the liberalisation of trade between the special administrative regions. Chinese companies have expanded their economic presence in the territory since the handover. Mainland firms represent over half of the Hang Seng Index value, up from 5% in 1997.
  
  As the mainland liberalised its economy, Hong Kong's shipping industry faced intense competition from other Chinese ports. Half of China's trade goods were routed through Hong Kong in 1997, dropping to about 13% by 2015. The territory's minimal taxation, common law system, and civil service attract overseas corporations wishing to establish a presence in Asia. The city has the second-highest number of corporate headquarters in the Asia-Pacific region. Hong Kong is a gateway for foreign direct investment in China, giving investors open access to mainland Chinese markets through direct links with the Shanghai and Shenzhen stock exchanges. The territory was the first market outside mainland China for renminbi-denominated bonds, and is one of the largest hubs for offshore renminbi trading. In November 2020, Hong Kong's Financial Services and the Treasury Bureau proposed a new law that will restrict cryptocurrency trading to professional investors only, leaving amateur traders (93% of Hong Kong's trading population) out of the market. The Hong Kong dollar, the local currency, is the eighth most traded currency in the world. Due to extremely compact house sizes and the extremely high housing density, the city has the most expensive housing market in the world.
  
  The government has had a passive role in the economy. Colonial governments had little industrial policy and implemented almost no trade controls. Under the doctrine of " positive non-interventionism ", post-war administrations deliberately avoided the direct allocation of resources; active intervention was considered detrimental to economic growth. While the economy transitioned to a service basis during the 1980s, late colonial governments introduced interventionist policies. Post-handover administrations continued and expanded these programmes, including export-credit guarantees, a compulsory pension scheme, a minimum wage, anti-discrimination laws, and a state mortgage backer.
  
  Tourism is a major part of the economy, accounting for 5% of GDP. In 2016, 26.6 million visitors contributed HK$258 billion (US$32.9 billion) to the territory, making Hong Kong the 14th most popular destination for international tourists. It is the most popular Chinese city for tourists, receiving over 70% more visitors than its closest competitor (Macau). The city is ranked as one of the most expensive cities for expatriates. However, since 2020, there has been a sharp decline in incoming visitors due to tight COVID-19 travel restrictions. Additionally, due to the closure of the Russian airspace in 2022, multiple airlines decided to cease their operations in Hong Kong. In an attempt to attract tourists back to Hong Kong, the Hong Kong government announced plans to give away 500,000 free airline tickets in 2023. Hong Kong was the most visited city internationally in the Asia-Pacific in 2023, with over 2 million more international visitors than its closest competitor, Bangkok.