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Hong Kong City Term Paper

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Updated: May 25th, 2019

Hong Kong city is located in southern side of China. Economically, it is one of world’s successful cities. Its economic success can be attributed to its geographical location. Historically, it was first occupied by British in 1840s. The British did not stay there for long; after they had moved out, Chinese occupied the land.

The natives of Hong Kong are believed to live there for over 6,000 years. Hong Kong’s natives had been fishermen until 1800 when other communities invaded the region and settle down there. Nowadays, it is colorful city occupied predominantly by Chinese communities.

Hong Kong is a famous hub for Chinese culture and foods. It is also recognized for its Chinese theatre, art and music which are conservative in nature. Hong Kong is a favourite destination for tourists from all parts of the world. Hong Kong receives more than ten million visitors annually (Blake & Li, 2007). Western district is a part of the city. It is recognized for being one of the zones occupied by many craft men.

It also borders with Chinese herbalists. Hong Kong’s oldest buildings are found in Ladder Street. To date, it is one of the busiest cities in the world. Its central business district is located in northern side of the island facing mainland. In addition, Hong Kong’s port is among one of the most eventful ports in the world. Hong Kong has the biggest Chinese restaurants. It is also eminent for being exporter of fashion jewelries, watches and clothes (Bramall, 2005).

In comparison, Beijing is the capital city of China. It is located in the northern side of the country while Hong Kong is located in the southern side of China’s mainland. Its economic success can be attributed to its geographical location.

Hong Kong city is strategically positioned at Asian cross border and serves as an entrance to China’s mainland through the port. These are some other factors which greatly boost its commercial operations. Compared to Hong Kong, Beijing does not have more conducive business environment than it has (Knowles, 2000).

Since 1997, Hong Kong and Beijing began to embrace the policy of one country and two systems. Both parts signed Special autonomous region policy which has contributed to Hong Kong’s economic development. This was after the reunion of Hong Kong with China after the years of British colonial rule. Economies of Beijing and Hong Kong cities are interrelated. This is evidenced by the way their monetary policies are run.

Both cities have two different currencies operating under different legal tender and socio economic systems. These different monetary policies are dependent and share equal significance. In elaboration, both cities take asset from each other as foreign assets. Beijing uses RMB as a currency, while Hong Kong has a Hong Kong dollar. Beijing RMB is not fully convertible to the US dollars unlike the Hong Kong dollar, which is easily convertible at ratio of 7.8:1.

Beijing city fully supports Hong Kong’s currency. Despite its small population, Hong Kong’s currency percentage is 40 percent higher as compared to that of Beijing city. Hong Kong has almost 80 percent of foreign exchanges which is more than Beijing can have. This percentage translates to almost US $60 billion.

Law indicates that all Hong Kong’s funds from exchange are fully managed by Hong Kong’s authorities. Also, it states that financial revenue from Hong Kong city should benefit the Beijing’s outcomes. Chinese authorities do not collect any taxes from Hong Kong in comparison to Beijing that pays taxes to the state powers. Hong Kong and Beijing cities have close economic ties.

Beijing’s biggest investment partner is Hong Kong despite they have different monetary authorities. Hong Kong’s monetary authority imposes international regulations to keep in check all the city’s financial institutions. These regulations also guide financial institution from China’s Mainland. In comparison, Beijing allows foreign banks to enter and play in its banking market. These banks have different regulations and policies (Lester, 1965).

Hong Kong’s banking system is one of the best in the world. It is the ninth largest international banking sector as well as the ninth word’s largest foreign exchange center. Its daily turn over is approximately US $80 million. Banking sector in Hong Kong is externally oriented unlike it is in Beijing city. In 2005, Hong Kong had banking system external assets evaluated at US $450 while Beijing city had external assets worthy US $142.6 billion. In comparison, both Beijing and Hong Kong cities’ economies continue to grow annually.

These two cities were brought closer by Hong Kong and Mainland China reunification in 1997. Reunification principle consolidated two systems within one country. Hong Kong serves as the main port transport channel for the Beijing city and China’s mainland. Hong Kong’s city port handles about thirty percent of Beijing’s foreign trade.

Statistics done by Chinese customs indicate that Hong Kong is the third biggest trading partner of Beijing city and China’s Mainland. This reflects to eleven percent of Beijing’s total trade. In 2002, Hong Kong’s city overseas funded projects belonging to Beijing city and China’s Mainland totaled to 389, 549. Half of these projects were divided between these two cities.

Most of investors in Hong Kong city are from Beijing and China’s Mainland. In 2001, Beijing’s and mainland’s cumulative direct investment was US $123 million. This reflected to twenty nine percent of Hong Kong‘s stock inward direct investment. Officials from China indicated that 1800 enterprises based in Beijing were registered in Hong Kong city. These enterprises recorded total asserts’ value of more than US $205 billion.

Hong Kong is a crucial centre in funding activities of Beijing city and China’s Mainland. This funding comes from Hong Kong’s city insurance of shares and syndicated shares. For instance, in 1993, shares were allocated in Hong Kong’s city stock exchange market by increasing China’s large state owned enterprises. Most of Beijing’s city companies are shareholders in Hong Kong’s stock exchange market (Bachman, 2008).

Both Beijing’s and Hong Kong’s economies have faced many challenges just like any other Asian economies. These challenges and problems include financial crisis, SARS outbreak in 2003 and bursting of dot.com bubble. In 2001, Hong Kong city’s economy experienced slow growth, but the following year, 2002, it revived after stimuli from the external sector.

In the following year, which was 2003, it received another blow due to out break of SARS. This led to decline in economy by 0.5 percent from earlier hike of 4.5 percent during the first quarter of 2003. The outbreak of SARS negatively affected Hong Kong’s economy. Retail trade, transport, hotel and entertainment industries were among the affected sectors. There was reduction in consumer price due to decrease in the consumer demand.

In 2001, Hong Kong’s city economy declined by 1.6 percent. In 2002, it reduced by three percent, while in 2003, it declined by 2.6 percent in the first eight months. In 2003, unemployment in Hong Kong was at 8.6 percent for three months ending in August 2003. Since 2001, local interest has increased to almost thirteen times, but asserts market has still remained subdued. In 2001, residential property worthy drastically declined by 12.5 percent and 13 percent in 2002 (Jao & Chi, 2007).

Unlike Beijing city, Hong Kong is one of the world’s top trade centers. Its success can be attributed to early trade with Britain which dates back to 1800. Trade is a major factor which has contributed to growth of Hong Kong city to its current state. Hong Kong city has no major land suitable for farming neither resources like raw materials or minerals.

It is evident that Hong Kong’s success is not derived from rich natural resources. Over the years, it has developed to world’s famous commercial centre. Secondly, the population of Hong Kong city has history of efficiency. Chinese are known to be very hard working and innovative. Most people who describe Chinese say that they are addicted to commerce.

Beijing city has low per capita gross income as compared to Hong Kong’s one. Hong Kong city has the third highest per capita gross national product in the world. It is a city-state with lots of wealth and considered to be one of the areas with the largest gold reserves in the Asia.

Globally, Hong Kong city is the greatest importer of cognac and leading consumer of proteins. It is one of the cities with the highest restaurants’ per capita ratio. For every eight hundred people in Hong Kong, there is one restaurant. Almost every food in the world is available in Hong Kong city unlike Beijing city (Woolf, 2004).

To compare both cities’ trading entity, Beijing’s one is lower in ranking in terms of world’s trading entity, while Hong Kong city is ranked tenth biggest trading entity in the world. Also, it is the tenth biggest commercial services exporter. In 2002, Hong Kong experienced 5.4 percent reduction in total export.

In 2001, Hong Kong’s total export declined by 5.8 percent. This was due to slow improvement in market which had been adversely affected by information technology problems and the terrorist attacks in the United States in September 11, 2001.

Most of Asian enterprises use Hong Kong city as a crucial financial and banking centre. In 2001, Hong Kong city was the third in Asian foreign exchange market. Globally, it was ranked as the seventh. It recorded US$ 71 million daily turnover in its derivatives transaction and foreign exchange (Development Research Center of the State Council, 2005).

Beijing city has population of approximately 15.8 million people, while Hong Kong’s population is approximately seven million people. In 2009, Beijing city’s gross domestic product was US $772 billion, while Hong Kong city’s one was US $ 210 billion. Due to various changes in the financial market, Beijing city has experienced social and economic growth. Since 2002, Beijing’s economic growth went up by 12.1 percent in five consecutive years and by 1.3 between the years 1997 and 2001.

Scientific and technological innovations are some of key driving factors influencing growth of Beijing city’s economy. Hong Kong has a well established international financial centre. In the past years, it has prospered due to its capitalist economy nature. In addition, the Chinese government decided to lower taxation on the goods’ trade between Hong Kong and main land allowing for free trade in the market (Zhang & Kun, 2007).

To conclude, Hong Kong city’s economy growth is faster as compared to that of Beijing city. In past few years, optimism has increased in regard to Hong Kong’s city economy. This has been backed up by stabilizing of Hong Kong city’s stock exchange market, recovery in tourism, retail trade and property sectors.

Picking up of Hong Kong’s city economy is greatly attributed to recovery of the United States’ economy. Also, supportive policies from the Chinese government like CEPA (closer economic partnership arrangement) and reduced rules on travel of the Mainland tourists have contributed to the growth of Hong Kong’s economy.

Under this agreement, its products were exempted from duty in Beijing city and Mainland. In addition, Chinese government allowed people to travel freely to Hong Kong city unlike it had been before. These changes in rules created confidence in economic turnaround. Due to these policies, there have been capital inflows into Hong Kong city.

Trade is also a major factor which has contributed to the growth of Hong Kong city to its current state. Beijing has experienced social and economic growth due to various changes in the financial market. To sum everything up, both Beijing and Hong Kong cities have experienced challenges in their economies just like any other Asian economies. Some of these challenges include financial crisis, and bursting of dot.com bubble.


Bachman, D. (2008). Bureaucracy, economy and leadership in China: The institutional origins of the great leap forward. New York: Cambridge University Press.

Blake, A., & Li, S. (2007). The economic impacts of international tourism on the Chinese economy. Conference of the International Association for Tourism Economics, 25-35.

Bramall, C. (2005). Sources of Chinese economic growth, 1978-2001: Studies on contemporary China. New York: Oxford University Press.

Development Research Center of the State Council (2005). The effects of infrastructure development on poverty reduction in China. China developmental journal, 3 (14), 68-123.

Jao, Y., & Chi, K. (2007). China’s special economic zones: problems and prospects. New York: Oxford University Press.

Knowles, C. (2000). Hong Kong: migrant lives, landscapes, and journeys. Chicago, IL: University Of Chicago Press.

Lester, W. (1965). China’s economy. Chicago: Rand McNally.

Woolf, L. (2004). Economic imperialism. New York: H. Fertig

Zhang, Y., & Kun, Z. (2007). The outline of the five year program for the national economic and social development in Hong Kong. Asian economic Journal, 21(3), 261–282.

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