The Major Changes That Impacted the Hong Kong Economy

Subject: Economics
Pages: 2
Words: 416
Reading time:
2 min

The world has changed a lot since the fall of the Berlin Wall. Many changes have been political but they have had an economical impact also. The first major change was the fall of communism in Eastern Europe. This meant that even the state programmed model of economy was over. There were more than a dozen new countries that opened up to international trade according to the free market rules. This opened major opportunities for international trade. Hong Kong benefited because at this time the flow of goods and capital from east to west and vice versa began to flourish.

A second change would be the change in attitude of the Chinese leadership toward the economic system in their country. The nineties were the years when China became a semi-opened market economy and its manufacturing become to boom. Since HK is the window from which the goods flow to other western countries, it benefited from this. The manufacture based provinces of Fujian and Guangdong are near HK. The goods produced there flow from the port of HK to the rest of the world.

A third event in the world economy is the boom in markets during the same period within the United States. These are the Clinton administration years where the financial sector and service sector of the US economy flourished. This flourishing resonated to HK economy as a partner by the rise in flow of goods and capital.

A fourth even would be the events of September 11th, 2001 and the consequences of the “war on terror”. This event has brought a security increase around the world and impacted the financial markets and government spending. Hong Kong had to step up with his security measures that sometimes made the flow of capital and goods more difficult. Also, the increases in government spending for security reason and the fear associated with the terrorist attacks have affected the economy in the flow of goods and, especially that of capital.

The fifth is the financial crisis of last year. Its impact on the real economy will undoubtedly impact HK. This is because Hong Kong economy is interrelated with that of major western countries, like the United States and China. If the customer demand goes down in western countries, it is likely that the export of goods from China, through Hong Kong, and HK itself, to western countries will go down with it.