Evaluation of the trade policy review for Hong Kong China

• Date: 01 December 2019
• DOI: http://doi.org/10.1111/twec.12874
• Author: Eden S. H. Yu,Kenneth S. Chan
• Published date: 01 December 2019

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wileyonlinelibrary.com/journal/twec World Econ. 2019;42:3478–3487.

© 2019 John Wiley & Sons Ltd

DOI: 10.1111/twec.12874

SPECIAL ISSUE ARTICLE

Evaluation of the trade policy review for Hong Kong

China

Eden S. H.Yu1

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Kenneth S.Chan1,2

1Chu Hai College of Higher Education, Tuen Mun, Hong Kong

2McMaster University, Hamilton, ON, Canada

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OVERVIEW

From the Trade Policy Review (TPR), the economy of Hong Kong (HKC) has remained competi-

tive, healthy and with a substantial fiscal surplus. The macroeconomic fundamentals are sound. The

pegged exchange rate of Hong Kong (HKC) to the US$ works reasonably well for the Hong Kong's

economy during the stormy global financial cycles. The financial sector in HKC remains dominant

and flourishing.

Since the last WTO review in 2014, the bulk of the work of the HKC government was in improving

trade‐related legislations, such as refining the system of taxation, in safety, health and environmen-

tal standards, and accounting rules and regulations. There were numerous trade treaties and signed

agreement with Asian countries and with the rest of the world. Overall, domestic exports have been

diversified to more countries since the last Review. It is interesting to note that domestic exports of

services have gone flat and slightly down, the manufacturing domestic exports have gone down, while

the exports of precious stones and jewellery have gone up. Shares of domestic exports to China, re‐ex-

ports to the rest of the world and re‐exports to China, have gone up tremendously.

There is shortage of details in the TPR and a lack of ‘vision plans’ on the future integration of

HKC with the Greater Bay Area, the Belt and Road Initiatives, etc. Industrial policies (and subsidies)

are rarely used. The TPR also mentions the Competition Commission, established in 2015 from the

Competition Ordinance, had come into full effect in this Review. This is a big step forward for a small

economy facing direct investments from global multinational enterprises.

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EVALUATION

The current Evaluation of the TPR concentrates on two ‘deep’ and related issues, not apparent from

reading the TPR:

1. The institution comparative advantage of HKC: The strength of the institution in HKC is its

ability to enforcing law and order. A clean transparent and effective legal system has worked

well, benefiting international trade and the citizens in HKC. HKC consistently ranks as the