Hong Kong's economy: a trading city that makes almost nothing it ships

Why Hong Kong ships what it does not make

Hong Kong stopped being a manufacturing economy without its exports shrinking. As the government's yearbook tells it, Hong Kong's industrialists moved their production across the boundary into the Pearl River Delta, where land and labour were plentiful, and kept their headquarters, buyers and financiers in Hong Kong. Goods made in Guangdong then left through Hong Kong as re-exports. By 2021 domestic merchandise exports were less than 2% of total exports.

The Trade and Industry Department's figures show the scale of the difference.

What is re-exported is mostly electronics. In 2025 electrical machinery and parts made up 49.4% of re-exports, office and data-processing machines 13.1% and telecommunications and sound equipment 12.2%. The mainland took 60.0% of them, the United States 6.2% and Viet Nam 4.2%. The small domestic export trade is a different list: jewellery and goldsmiths' wares made up 25.5% of it in 2025, non-ferrous metals 19.9% and ores and metal scrap 10.9%.

Inside the territory the factories are a small share of anything. In 2023 manufacturing and the utilities each produced about 1% of GDP and construction 4%, and in 2024 manufacturing employed about 2% of workers. Agriculture, fishing and quarrying are described by the yearbook as tiny on both counts.

Total trade in goods reached HK$10,927.1 billion in 2025, up 15.5% on 2024. Measured another way, the yearbook puts goods trade at 311% of GDP in 2024 and goods and services together at 359%, against 273% and 327% in 2004.

The services side is smaller in value and runs a surplus. Trade in services came to HK$1,626.8 billion in 2025, up 6.1% on the year, and Hong Kong exported HK$898.4 billion of services, equal to 27.0% of GDP; the Trade and Industry Department notes that Hong Kong has consistently been a net exporter of services. Hong Kong in Brief, published in 2021, names travel, transport and financial services as its main components.

How the currency is tied to the US dollar

Since October 1983 the Linked Exchange Rate System has held the Hong Kong dollar at around HK$7.80 to one US dollar. It is a currency board. The monetary base, meaning notes and coins, the balances banks keep with the Hong Kong Monetary Authority and the Exchange Fund's own bills and notes, must be at least fully backed by US dollar reserves at that rate, and any change in it must be matched by a change in the reserves. The Authority undertakes to buy US dollars from licensed banks at HK$7.75 and to sell them at HK$7.85. When money flows in or out, the base expands or contracts and local interest rates fall or rise until the flow reverses.

The consequence is that Hong Kong imports its interest rates. In 2024, as the US Federal Reserve cut its target range, the Authority lowered its base rate three times, from 5.75% to 4.75%, and the average rate on new mortgages fell from 4.13% in 2023 to 3.59% in 2024. The Exchange Fund behind the peg had total assets of HK$4,081 billion at the end of 2024.

Most of the paper money is not issued by the government. Three commercial banks, Bank of China (Hong Kong), the Hongkong and Shanghai Banking Corporation and Standard Chartered Bank (Hong Kong), issue the HK$20, HK$50, HK$100, HK$500 and HK$1,000 notes, and each may do so only by handing the Exchange Fund the equivalent in US dollars at HK$7.80. The government issues the HK$10 note and the coins. The International Monetary Fund's board described the system in May 2026 as continuing to operate smoothly as a credible anchor for stability.

What the financial centre does

Financing and insurance produced 26.2% of GDP in 2024, and financing, insurance, real estate, professional and business services together 33.4% in 2023. At the end of 2024, 141 of Hong Kong's 150 licensed banks were owned by parties outside Hong Kong.

At the end of 2024, 2,631 companies were listed and their market capitalisation came to about HK$35.32 trillion, around 11 times Hong Kong's GDP. The Hang Seng Index ended 2024 at 20,060, up 17.7% on the year. Insurers collected HK$637.8 billion in gross premiums in 2024. Equity funds raised on the exchange came to about HK$192 billion that year, and securities turnover was HK$32,429 billion.

The mainland's money passes through as well. The People's Bank of China issues renminbi bills in Hong Kong, and the Stock Connect, Bond Connect, Swap Connect and a cross-boundary wealth management scheme link Hong Kong's markets with the mainland's; Stock Connect marked its tenth year in 2024. The yearbook's own figures for external positions show the result: at the end of 2024 Hong Kong's external financial assets were HK$52,514 billion and its liabilities HK$36,641 billion, leaving net assets of HK$15,873 billion, 500% of GDP.

How the port and the airport carry the trade

The harbour that brought the British still carries the goods. Hong Kong handled 13.7 million twenty-foot equivalent units of containers in 2024, about 10.4 million of them at the Kwai Tsing terminals and about 3.3 million at mid-stream sites and other wharves. Port cargo throughput came to about 177 million tonnes that year.

Hong Kong International Airport handled 4.9 million tonnes of cargo and 53 million passengers in 2024, the passenger count up 34% on 2023, and its Three-runway System opened in November 2024 to raise capacity to around 120 million passengers and 10 million tonnes a year.

How land and low taxes pay for the government

The Basic Law requires the region to keep its own finances, use its revenue only for itself, follow the low tax policy it had before 1997 and aim to keep spending within revenue. There is no tariff on imports, and excise duty falls on only four kinds of goods: strong liquor, tobacco, hydrocarbon oil and methyl alcohol. Profits tax is 8.25% on a corporation's first HK$2 million of profit and 16.5% above that. Salaries tax runs on a sliding scale from 2% to 17%, capped at a standard rate of 15%, or 16% on net income above HK$5 million from the 2024/25 year of assessment.

Land does part of the work taxes would do elsewhere. Article 7 of the Basic Law makes land in Hong Kong state property, managed, leased and granted by the regional government, which keeps the revenue. Land transactions, property rates and stamp duty all appear among its revenue sources, which ties the budget to the property market. In 2025-26 revenue came to HK$697.5 billion and expenditure HK$790.3 billion; with HK$104 billion of net bond proceeds the government recorded a surplus of HK$11.2 billion, and fiscal reserves stood at HK$665.5 billion at the end of March 2026. Public expenditure, which adds the trading funds and the Housing Authority to government spending, totalled HK$801.2 billion in 2024-25, 72.8% of it recurrent.

The IMF's assessment of May 2026 called the near-term stance appropriate and asked for broader revenue reforms to reduce reliance on cyclical sources and rebuild reserves, given the spending that an ageing population, social protection and large infrastructure projects will need. It named commercial real estate, where values have fallen, as the principal near-term risk to banks.

How growth has moved since the pandemic

The yearbook gives growth of 3.2% in 2023 and 2.5% in 2024; the Census and Statistics Department's advance estimate for 2025, published on 30 January 2026, was 3.5%, with private consumption up 1.6%. The government's fact page, revised in July 2026, gives 3.6% for 2025 and nominal GDP of HK$3,329.8 billion. According to the IMF, real GDP passed its pre-pandemic peak in 2025, but activity stays below its pre-pandemic trend, private investment is weak and fewer people of working age are in the labour force.

The labour market stayed tight in 2024, and the government has leaned on migration to fill it. Between mid-2024 and mid-2025, deaths outnumbered births by 14,800, while a net 18,200 Hong Kong residents moved in, which left the population virtually unchanged at a provisional 7,527,500 in mid-2025; a government spokesman credited talent-attraction and labour-import schemes with offsetting the natural decrease. At the end of 2024 the labour force was 3,832,400 and the participation rate had fallen to 56.9%, which the yearbook attributes mainly to ageing. Unemployment was 3.1% in the fourth quarter of 2024, and median monthly earnings of full-time employees, excluding foreign domestic helpers, were HK$24,000. The IMF projects potential growth of around 2.25% over the medium term.

Property is the other half of the domestic economy. In the first quarter of 2024 the government cancelled all the demand-side measures it had used to cool home buying, and the market rose briefly, eased through the middle of the year and steadied after the United States began cutting interest rates in September, helped by looser limits on loan-to-value and debt-servicing ratios. The Land Registry received 53,099 agreements for the sale of homes in 2024, 23% more than in 2023. About 2.13 million people, about 30% of the population, lived in public rental flats in the first quarter of 2025. The IMF's 2026 assessment said demand for public housing remains high and delivery has lagged its targets.

What ties the economy to the mainland

Hong Kong has a free trade agreement with the rest of its own country. Under the Closer Economic Partnership Arrangement, products made in Hong Kong that meet its rules of origin enter the mainland free of tariff; it is one of four subsidiary agreements, and the one on services gives Hong Kong suppliers preferential access in most service sectors on the mainland. Visible trade between Hong Kong and the mainland in 2024 was nearly three times its level of 20 years before, growth of around 5% a year in value, and about two thirds of Hong Kong's exports to the mainland, mostly re-exports, were raw materials and semi-manufactures, which the yearbook reads as the mainland's role as a production hinterland.

Visitors are part of the same link. The Tourism Board counted 49.9 million arrivals in 2025, 37.8 million of them from the mainland, and exports of travel services are counted in the services trade alongside finance and transport. The central government's planning documents name Hong Kong's role in them. The 14th Five-Year Plan supports its development as an international financial, transport, trade and aviation centre among eight hubs, and the Hong Kong government frames its own strategy as being a "super connector" between the mainland and the rest of the world. The IMF names long-term investment in the Northern Metropolis, in the north of the territory, as the authorities' main effort to build innovation and technology. What those visitors come to see is the subject of Hong Kong: travel.