Hong Kong is often said to be among the most highly capitalistic and economically free geographic entities in the world. Hong Kong’s entire economic policy, in fact, has been built on the concepts of free markets, low taxation, and governmental non-intervention. The Wall Street Journal’s Index of Economic Freedom has ranked Hong Kong’s economy as one of the most free for 14 consecutive years, while the Economic Freedom of the World Report set up by the Fraser Institute has ranked it as the freest in the world.

Hong Kong not only serves as one of the world’s major centers for international finance and trade, it also holds the highest concentration of corporate headquarters in the entire Asian Pacific region. For this reason, as well as the rapid industrialization and massive economic growth the region saw between the 1960s and the 1990s, Hong Kong established itself as one of the much-discussed “Four Asian Tigers” (alongside Taiwan, Singapore, and South Korea), and is often cited as a prime example of the promises of positive non-interventionism and laissez-faire capitalism.

No official measures of Hong Kong’s gross domestic product (GDP) were taken until 1971, but, as seen in the chart below, measurements taken over the past two decades by the International Monetary Fund (IMF) show a strong rate of growth, with a particularly large economic boom taking place in the late 1980s.

Official 2006 figures put Hong Kong’s GDP at US$263.1 billion, ranking it 38th in the world (in terms of purchasing power parity). Per capita, however, Hong Kong’s purchasing power party GDP is the 6th highest in the world, at U$38,127.

Hong Kong’s enormous economic success can be viewed in light of the government’s hands-off policy, as well as the history that brought it about. Despite various economic collapses during the Maoist era, Hong Kong’s contemporary model is one that allows for both flexibility and the ability to renovate any industry very quickly. In 1994, the World Bank reported that Hong Kong’s per capita GDP grew at an annual rate of 6.5% from the years 1965 to 1989—a remarkably strong and consistent rate of growth—and that Hong Kong’s per capita income had surpassed that of the (ruling) United Kingdom by 1990.

Throughout the 1990s, Hong Kong matured into a major financial center, but was severely affected by the Asian financial crises of 1998 and 2003 (the latter caused by a breakout of the SARS virus). Hong Kong’s economy did recover in the following year, however, with costs decreasing and exports increasing in terms of international competitiveness. During this period of the early 2000s, consumer price inflation was close to zero. As of the end of 2007, unemployment in Hong Kong was estimated at 4.1% (marking a 4th straight year of decline), with approximately 3.46 million people employed full-time in the workforce.

The government of Hong Kong has traditionally stayed away from industry and commerce for profit, but does raise revenue from taxation and the sale of land, primarily for the purposes of infrastructure improvements (roads, schools, hospitals, and public facilities and services). The government, however, does not engage in trade protectionism or impose the regulatory controls over industry—the kind of controls that have recently resulted in crippling inefficiency and high prices in other countries. In sum, Hong Kong is well-expected to maintain this degree of free market activity (and thus its economic growth and stability) in the coming years.