Hong Kong government officials covet the territory’s status as “the world’s freest economy”, an honour bestowed on it for 16 years running by the conservative, Washington-based Heritage Foundation.
That designation tells only half the story. Hong Kong’s admirers like the fact the former British colony and free port, which reverted to Chinese sovereignty as a “special administrative region” in 1997, taxes very rich people at very low rates. Tax rates on salaries and company profits are set in the mid-teens, with capital gains and inheritances exempt entirely.
Hong Kong’s capital-friendly regime is just the tip of a much larger and more complicated social compact that, from another perspective, belies its reputation as a model free economy. The territory is much poorer than its impressive per capita GDP figure, $42,800 last year, implies. Half of all workers earn less than HK$9,750 per month – an amount equivalent to, in US dollar terms, just $15,000 per annum. In 2009 the average annual wage of Hong Kong’s 550,000 cleaners, who account for 15 per cent of the workforce, was a mere $7,960. As Leung Chun-ying, a member of the pro-Beijing establishment and a potential future Hong Kong chief executive, put it in a presentation to the Oxford & Cambridge Society earlier this year: “The trickle-down effect has not happened.”