A Successful Free Market Experiment For East and West AlikeHong Kong, in my opinion, is the only practical example in the world of a major city that has been developed from scratch and run as something of an offshore, free market experiment – first by the British, then by the Chinese.The main Island (and later Kowloon and the New Territories, parts of the mainland) was a British colony for most of the nineteenth and twentieth centuries. During this time it grew from a fishing village and opium trading hub, into a city-state of seven million people. It became known as a free-wheeling, free market paradise for capitalists, with an economy characterized by low taxation, free trade and no government interference in business.
In 1997 the British returned sovereignty over Hong Kong to China. The former colony became one of China’s two Special Administrative Regions (SARs), the other being Macau. Many people were 澳門澳覓 initially doubtful about one of the world’s capitalist bastions being run by a communist power, and at the time a lot of investors pulled out, many taking their dynamic business acumen heading to places like Singapore and Vancouver.
However, the “one country, two systems” model adopted by Beijing to coincide with free market reforms and the growth of China into an economic superpower has proven very successful. The Basic Law of Hong Kong, the equivalent of the constitution, stipulates that the SAR maintains a “high degree of autonomy” in all matters except foreign relations and defence. The SAR today operates as a major offshore finance center, discreetly oiling the wheels of commerce between East and West.
These days, rather than being put off by the Chinese influence, most international investors who are attracted to Hong Kong are coming precisely because of this Chinese connection. Hong Kong is the point of access to Chinese trade, without the legal and cultural difficulties of doing business in mainland China.
Those who do not trust their own governments are reassured by the fact that under the Basic Law, Hong Kong’s foreign relations are run from Beijing. While most offshore jurisdictions humbly submit to demands from the USA and other western countries, in the case of China, the relationship is definitely reversed. Hong Kong does have a number of Tax Information Exchange Agreements (see below) but these are sensibly policed and do not allow for fishing expeditions.