Montreal, Tuesday, November 19, 2013 – In just a few decades, Hong Kong has hoisted itself up among the wealthiest economies in the world. A veritable doorway to China and the rest of Asia for foreign investors, it owes its success to the application of the basic principles of capitalism, says the Montreal Economic Institute (MEI) in a new Economic Note published today.
“To extricate themselves from debt, leaders all around the world are desperately trying to stimulate growth. To do so, they should take inspiration from the example of Hong Kong, which has steadfastly relied on economic freedom for 50 years,” suggests Jean-François Minardi, public policy analyst at the MEI and author of the Note entitled “Hong Kong: The Ongoing Economic Miracle.”
The freest economy in the world since 1970 according to the Fraser Institute, Hong Kong clearly distinguishes itself from other markets with a low flat income tax rate of 15%, a low level of government spending at just 19.2% (compared to 42.9% for Canada) and the absence of a sales tax, dividend tax or capital gains tax. In addition, Hong Kong levies no customs duties and imposes no quotas. There are no restrictions on the inflow or repatriation of capital, on the conversion or transfer of profits or dividends from direct investment, or on foreign ownership.
“By applying the broad classical principles of the free market—economic freedom, a non-interventionist state and openness to trade—Hong Kong has clearly shown not only that capitalism works, but that it remains far and away the best formula for creating wealth,” explains Mr. Minardi.
Hong Kong has achieved remarkable economic successes. Although completely devastated following the Japanese occupation that ended in 1945, Hong Kong lifted itself back up from 1950 to 1970 by betting on exports and, starting in the 1980s, on services, commerce with mainland China helping. Between 1961 and 2009, GDP per capita was multiplied by nine, reaching 13th place in the world. Hong Kong has also become the third largest financial centre in the world after New York and London.
According to MEI President Michel Kelly-Gagnon, “Hong Kong is a model to emulate, and without necessarily expecting our political leaders to go as far in liberalizing the economy, they should at least strive toward this ideal. As for Canadian exporters and investors, the good news is that Hong Kong remains a first rate doorway to developing the Asian market.”
The Economic Note entitled “Hong Kong: The Ongoing Economic Miracle” was prepared by Jean-François Minardi, public policy analyst at the MEI. This publication is available on our website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications and conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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