Hong Kong: One Country, Two Economies?

Abstract

Since its colonial days, Hong Kong has been the port through which China has traded with the world, causing the city to now be the most important "financial entrepôt" in Asia.
Hong Kong’s rapid growth over the last century occurred mainly due to geographical reasons, as Hong Kong’s Victoria Bay naturally forms a port. However, the key to Hong Kong’s
success has been its stability, as investors looked to Hong Kong to provide safety from political risk that Shanghai was not able to guarantee. However, Hong Kong has seen
rapid changes during the last decade—both political and economic—that leave the city’s future an educated guess at best. The new era, brought in by the 1997 return of the
colony to the People’s Republic of China (PRC) government, left local and foreign businessmen unsure of the political risks. The Asian Financial Crisis of the same year left
the crippled local economy more reliant on the mainland than ever before. Now governed by the “One Country, Two Systems” philosophy, economic ties between Hong Kong and China
are growing even stronger, specifically in the Pearl River Delta region. While closer economic times with the mainland are no doubt beneficial to the local Hong Kong economy,
the involvement of the PRC government on Hong Kong’s financial industry stand to threaten the city’s status as a safe haven for investments and operations in Asia. Today,
there are still many financial, political, and social issues waiting to be resolved. The Hong Kong population—both native and ex-patriot communities—continues to have concerns
about its city’s future.