It was no surprise when, in January 2017, for the 23rd year running, Hong Kong was acclaimed as the freest economy in the world. China has actively endorsed the region’s longstanding ‘market driven with minimal government interference’ policy. The result is an environment that enables businesses to flourish, in which 92.8% of GDP is driven by services and just 7.2% by industry. GDP is projected to grow at 1.07% in 2017, which complements consumer spending of USD 54,132 million in the last quarter for the year 2016-17.

Ever since the British transferred sovereignty of Hong Kong to China in 1997, it has been governed under the principle of “one country, two systems”. As part of the terms of the handover, China committed to giving the region large autonomy in social and economic terms for 50 years. Although the Hong Kong Special Administrative Region is to a meaningful degree self-governing, it is not independent from Chinese politics.

The region was the second largest recipient of foreign direct investment (FDI) in the world in 2015, attracting USD 175 billion. This was an unusual 53% rise from 2014, owed partly to the restructuring of two large conglomerates.

Hong Kong is not only the fourth most densely populated region in the world, with 6,845 people per square kilometre, but is also rapidly ageing. The median age is 44 years, significantly higher than the world median of 29.6 years.

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Hong Kong’s Fact File

World Giving Index Rank

2015
20
  • 63%giving money
  • 15%volunteering time
  • 56%helping a stranger

Population

2016
7.17 million

GDP (PPP)

2016
USD 429.65 billion World Rank 44

Poverty

2015
19.7%

Per capita GDP (PPP)

2016
USD 58,322

Global Competitiveness Index

2015
9 7 in 2015

Number of Millionaires

2016
107,000 1.49% of population

Source: CIA, Charities Aid Foundation (CAF, 2016), Credit Suisse (2016), OECD (2016), World Economic Forum (WEF, 2016), World Bank (2017)

Economic Context for Investors

  • Favourable
  • Moderately favourable
  • Unfavourable
Factors Index Score/Rank Description
GDP Growth 2016
Index Score/Rank
1.4%
The economy advanced 1.4% in 2016, slower than the 2.4% growth in 2015. In 2017, GDP growth is projected to be between 1.5 and 2%.
Governance 2015
Index Score/Rank
1.5
Hong Kong ranked above 93% of all the countries in the 2015 World Bank’s Worldwide Governance Indicators.
Consumer Market 2015
Index Score/Rank
USD 249 billion
Consumer spending increased by 3% from 2014 to 2015, and disposable incomes and spending have risen overall.
Labour Force 2016
Index Score/Rank
4 million
The national workforce decreased by 0.3% from 2015 to 2016. Hong Kong’s labour force is expected to shrink further due to the ageing population.
Infrastructure 2016
Index Score/Rank
6.7
Hong Kong ranked first among 138 countries in terms of infrastructure in the 2015 WEF’s Global Competitiveness Ranking. The region’s logistics, utilities and telecommunications infrastructure, are of superior quality, while mobile and internet telecommunications systems are among the most advanced in the world.
Financial Access 2014
Index Score/Rank
96% of the population
Access to finance increased by 8% from 2011 to 2014. The Hong Kong government is focusing on resolving difficulties faced by ethnic minorities in opening bank accounts.
Digital Access 2015
Index Score/Rank
85% of the population
Internet penetration increased by 3% from 2014 to 2015. Mobile cellular subscription rate is also extremely high that is, 229 subscriptions per 100 inhabitants.
Ease of Doing Business 2016
Index Score/Rank
4/190
Hong Kong’s Ease of Doing Business rank improved from 5 in 2015 to 4 in 2016. Government investment incentives, a strong communications infrastructure and good business support services make Hong Kong an attractive destination for business.
  • Favourable
  • Moderately favourable
  • Unfavourable

SDG Dashboard

In a similar vein to other developed nations, Hong Kong is grappling with the issue of an ageing population with the 10th highest median age in the world. Unemployment is expected to increase, having already risen to 3.42% of the total labour force in 2016 from 3.28% in 2015. Air pollution is another cause for concern for Hong Kong. In 2013, the government recognised air pollution as being the “greatest daily health risk to the people of Hong Kong.” Cancer-causing pollutants in the air have increased to unacceptable standards continuously over the last 15 years.

In an effort to address the issues surrounding Hong Kong’s demographics, high population density, and vulnerability to climate risks, the government has developed the “Hong Kong 2030+: Towards a Planning Vision and Strategy Transcending 2030”, a strategic plan for inclusive development which focuses on: (i) providing a quality living environment, (ii) conserving the natural landscape, (iii) enhancing economic competitiveness, (iv) meeting housing and community needs, (v) providing a safe and environmentally friendly transport system, (vi) promoting art, culture and tourism, and (vii) strengthening links with Mainland China.

Source: sdgindex.org (2016)

Government Focus on Development Gaps

Focus Area SDG Goals Gap Government Focus
Climate action
SDG Goals
Gap
Hong Kong tops Asia as the city with the highest natural disasters risk, according to the 2015 Sustainable Cities Index from Arcadis, Hong Kong’s total greenhouse gas emissions increased by 57% between 1990-2012.
Government Focus
The Hong Kong 2030+ Plan includes urban design and feasible green infrastructure. Hong Kong has agreed to reduce carbon intensity by 50-60% from 2005 levels by 2020.
Education
SDG Goals
Gap
The region slipped from rank 2 to 9 according to the 2015 Programme for International Student Assessment (PISA) ranking. Schools with the highest and lowest socio-economic status in Hong Kong show a 4½-year learning difference with other school students of the same age.
Government Focus
The Hong Kong government has launched free vocational education-oriented programmes for secondary school children and professional development training programmes for teachers and principals. The government also provides student scholarships and subsidised after-school activities.
Small and medium-sized enterprise (SME) growth
SDG Goals
Gap
92% of the region’s GDP comes from the services sector, and 98.4% of service business units are SMEs in Hong Kong. However, one-in-five SMEs were dissatisfied with the availability of finance as of 2016.
Government Focus
The government provides several loans and funding schemes to support SMEs. The Support and Consultation Centre for SMEs (SUCCESS) provides free business information and consultation services.
Social security
SDG Goals
Gap
The proportion of elderly people aged 65 and above is expected to rise markedly from 15% in 2014 to 28% in 2034.
Government Focus
The government introduced a minimum wage of USD 3.61/hour in 2011, which was subsequently increased to USD 3.87/hour in 2014. The government also puts aside HKD 220 billion in the government’s land fund and a third of budget surpluses as down payment for future expenses related to the elderly. Elderly Health Centres provide health assessment, physical checkup, counselling, curative treatment and health education services to the elderly. Senior citizens are financed through the Social Security Allowance Scheme.

Social Economy

The social economy in Hong Kong is rapidly growing with strong government support, long-standing domestic philanthropy and a vibrant enabler ecosystem.

There are 574 SEs in Hong Kong.

Category Factor Rating Description
SPOs
Factor
Legislative environment
three-quarter The process of registering SEs and non-profits is fast and hasslefree.
SPOs
Factor
Government support for SEs
full The process of registering legal entities for SEs and non-profits is clearly defined by the Companies Registry. Application for Approved Charity status with the Inland Revenue Department is also a clear process.
SPOs
Factor
SEs across sectors
three-quarter SEs can be found across an array of sectors including: ageing, health, education, housing, sustainable living and environment.
SPOs
Factor
Presence, size, and maturity of SEs
three-quarter There were 574 SEs recordedin 2015. The majority of SEs need mentorship and seed capital to become investment-ready.
Investors
Factor
Philanthropic contributions
full Significant philanthropic giving amounting to USD 2.67 billion in 2014 came from private foundations, high net worth individuals (HNWIs) and family offices. 59% of this funding went to overseas organisations.
Investors
Factor
Presence of social investors
half Notwithstanding the presence of multiple international and local social investors, current investing volumes are low.
Investors
Factor
Corporate sector
three-quarter While responsible business thinking has started to take root, the 2015 Sustainable Business Index shows a lag in CSR performance in Hong Kong. The total number of SMEs in Hong Kong exceeds 320,000, yet the number of SMEs active in CSR is still limited. The top CSR and business sustainability performers are still confined to a small pool of large companies such as HSBC Holdings, MTR Corporation and Swire Pacific Ltd.
Enablers
Factor
Incubators, accelerators, and capacity-builders
three-quarter Examples of enablers in Hong Kong include: Incubators & Accelerators - UnLtd Hong Kong, SVhk, HSBC Social Enterprise Business Centre, Leping Social Entrepreneur Foundation; Competitions - Hong Kong Social Enterprise Challenge, DBS-NUS Social Enterprise Awards; Corporate pro-bono programmes - SVhk, SOW Asia. Partnership Opportunity
Enablers
Factor
Networks and platforms
half ANDE, AVPN, SVhk, British Council, Hong Kong Venture Capital Association, Asia Value Advisors are notable networks and platforms. Partnership Opportunity
Enablers
Factor
Knowledge and research
half Universities and colleges such as the Chinese University of Hong Kong (CUHK) are taking the lead in conducting courses and undertaking research on social issues and social entrepreneurship. Partnership Opportunity
Enablers
Factor
Partnerships
quarter Notable partnerships between corporates, foundations and impact investors include SVhk, which collaborates with the RS Group and the Bai Xian Asia Institute. Partnership Opportunity

partnership Partnership Opportunity

Demand, Supply and Support Ecosystem in Hong Kong

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Social Investment Landscape in Asia

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