Hong Kong - Country Commercial Guide
Market Overview-Hong Kong & Macau

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2021-03-03

Hong Kong’s economy contracted by 1.2 percent in 2019, the first annual decline since 2009. The contraction was driven by the softening of global economic growth, U.S.-China trade tensions, and local social unrest that battered consumption and tourism-related activities.  The economic deceleration in Hong Kong has continued in 2020 as the Covid-19 pandemic dramatically affected economic activity, with real GDP falling by 9% year-on-year in the second quarter.  The implementation of the National Security Law by Beijing in July of 2020, furthermore, has created a level of uncertainty in the territory not seen since Hong Kong’s handover to China in 1997.  As such, Hong Kong’s short- and medium-term economic outlook remains unclear.

According to Hong Kong Government statistics, there are 1,344 subsidiaries of U.S. parent companies in Hong Kong, making the United States the third-largest source of subsidiaries in Hong Kong. Among those U.S. subsidiaries, 735 are regional headquarters or regional offices.

Hong Kong’s key characteristics include its open trade and investment climate, its geographic proximity to Asian markets, and its attraction as a tourism destination.

  • Population: 7.5 million (end-year 2019)
  • Visitors: 55.9 million (2019)
  • Total GDP: US$367.7 billion (2019)
  • GDP Per Capita: US$48,980 (2019)
  • GDP Growth: -1.2 percent (2019)
  • Trade to GDP Ratio: 293 percent (2019)
  • U.S. Exports: US$30.8 billion (2019)

Major Trading Partners:  Mainland China, United States, EU, Japan, South Korea, Taiwan, India, and ASEAN.

Key Characteristics:

Hong Kong is a Special Administrative Region of China. There are numerous business opportunities given Hong Kong’s expertise in finance and marketing, sophisticated infrastructure, and access to mainland China’s manufacturing base. A majority of Hong Kong manufacturers has moved production to South China’s Pearl River Delta (PRD), with Hong Kong functioning as the region’s services and trade hub. Mainland China is Hong Kong’s largest trading partner. The city is also known for its world-class infrastructure; no restrictions on inward or outward investment; no foreign exchange controls; no nationality restrictions on corporate or sectoral ownership; simple, low-tax regime; and as a global financial hub.

Hong Kong’s economy is increasingly tied to the mainland. The Closer Economic Partnership Arrangement (CEPA) offers Hong Kong’s products and firms preferential access to the mainland market. CEPA goes beyond China’s World Trade Organization (WTO) commitments, eliminating tariffs and allowing earlier or preferential access to some services sectors. Overseas companies can also benefit from CEPA. For trade in goods, foreign investors can set up production lines in Hong Kong to produce goods that meet the CEPA rules of origin requirements. For trade in services, companies incorporated in Hong Kong by foreign investors can make use of CEPA as long as they satisfy eligibility criteria of a “Hong Kong Service Supplier” (for example, they must be engaged in business operation in Hong Kong for three to five years) or by partnering with or acquiring a CEPA-qualified company.

Macau is also a Special Administrative Region of China that shares many structural similarities with its close neighbor Hong Kong, yet it offers U.S. suppliers a market with distinct characteristics and opportunities. In this guide, Macau is treated under each chapter following Hong Kong, with emphasis placed on those areas where the business climate diverges.

Formerly a Portuguese colony, Macau became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) upon reversion to China on December 20, 1999. Macau maintains a high degree of autonomy except in foreign affairs and defense, and retains its own currency, laws, and border controls. Macau does not use common law, but rather code law patterned on the Portuguese system.

Macau’s GDP shrank by 4.7 percent in 2019. The economic setback was mainly driven by downturns in the gaming and tourism sectors.  The economic effects of the Covid-19 pandemic have been severe in Macau in 2020, with the economy shrinking 8.1% in the first quarter followed by a 48.7% contraction in the second quarter. 

Like Hong Kong, Macau is a free port with low taxation. Since liberalizing the gaming industry in 2002, industry experts calculate that Macau has received US$23.8 billion in U.S. foreign direct investment in the gaming industry (through 2016), spurring visitors and consumption. Other growth areas have typically included finance, insurance, construction, real estate, and retail. Macau’s exports include textiles, garments, machines and apparatus, footwear, tobacco, and wine. The main export markets are Hong Kong, mainland China, EU, United States, and Japan, while imports originate primarily from mainland China, Hong Kong, EU, Japan, United States, and Switzerland.

Macau’s huge gaming sector dominates the economy. Taxes on gaming revenues accounted for over 84 percent of the Government of Macau’s (GOM) revenues in 2019, generating a budget surplus of 2 percent of GDP.

Macau’s key characteristics are its tourism potential and inbound investment.

  • Population: 679,600 (end-2019)
  • Visitors: 39.4 million (2019)
  • Total GDP: US$54.3 billion (2019)
  • GDP Per Capita: US$79,977 (2019)
  • U.S. Exports: US$572.2 million, 5.1 percent of Macau’s imports (2019)

Trading Partners: Mainland China, Hong Kong, Japan, EU, Switzerland, and United States.

Macau also enjoys a Closer Economic Partnership Arrangement (CEPA) with mainland China. Macau’s 2003 agreement with mainland China – largely parallel to the arrangement Hong Kong enjoys with the mainland – has enhanced its economic integration with the PRC.  In October 2017, Macau and Hong Kong signed a CEPA to strengthen economic and commercial relations between the two cities. On January 1 2018, the CEPA between Macau and Hong Kong became effective.