Here is proof that Hong Kong has a freer economy than any of its doomsday prophets. In fact, it is the freest economy in the world.
Canada’s Fraser Institute ranks Hong Kong the leader among 165 jurisdiction in the world for having the freest economy at 8.53 points out of 10 despite the brickbats thrown at us by the naysayers. Switzerland knocked out Singapore for second place at 8.45 points, and Singapore third at 8.43 points. Hong Kong’s strongest critics, USA was 5th at 8.21, Australia 8th at 8.06 points and the UK 10th at 7.96 points.
The ratings evaluates countries across dozens of data points that are distilled into five core metrics: size of government, legal system and property rights, sound money (how well citizens protect their wealth from inflation), freedom to trade internationally, and regulations.
Of course, international trade and an absolute absence of capital control are the city’s key strengths, thus highlighting its structural resilience as a leading international financial hub.
The city’s regulatory framework minimises bureaucratic friction for corporate structuring, employment, and licensing, striking a stable balance between investor protection and market flexibility.
A hallmark of Hong Kong's institutional framework is its simple and low tax regime. Corporate tax is capped at an attractive 16.5 per cent, and personal income tax tops out at 15 per cent on the first $5 million and 16 per cent on the remainder. And, the system does not impose capital gains tax, withholding tax on dividends, or value-added taxes (VAT). This fiscal predictability offers an unmatched operating landscape for both multinational corporations and agile start ups.
A cornerstone of Hong Kong's financial ecosystem is the absolute absence of capital controls. Funds can be moved seamlessly into and out of the city. This liquidity is crucial for the foreign exchange, asset management, and equity markets that rely on instantaneous capital reallocation. Backed by the robust linked exchange rate system tying the Hong Kong dollar to the US dollar, the currency remains a stable bedrock for global trade settlement.
Furthermore, the territory remains highly receptive to global human capital. The free flow of information and international talent enables the city to consistently plug into global innovation networks. In the first eight months of 2026 alone, the government investment agency, Invest Hong Kong (InvestHK), successfully assisted 520 mainland and overseas enterprises to set up or scale their operations in the city, underscoring strong commercial confidence.
While the 2026 report reaffirms Hong Kong's top position, it also reflects longer-term challenges. Analysts point out that Hong Kong's total economic freedom score has experienced a slight decline since 2018, primarily due to shifting perceptions of its legal and judicial independence alongside tightening governance controls.
Nevertheless, the data—compiled primarily from trailing comprehensive baselines up to 2024—shows that the underlying commercial mechanics remain exceptionally open compared to global peers. While some argue that evolving national security laws alter the broader political environment, the business landscape operates with distinct legal continuity under the "One Country, Two Systems" framework. The city retains its common law system, distinct from mainland China’s civil law structure, which ensures contract enforcement remains highly efficient and legally predictable for international investors.
Hong Kong's economic model functions uniquely as a hyper-efficient bridge between the mainland and the global market. Through initiatives like the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) development, the city functions as a launch pad for overseas companies targeting the massive mainland consumer base, as well as a capital conduit for Chinese firms expanding internationally.
Amidst an international backdrop of intensifying trade protectionism and fracturing supply chains, Hong Kong’s commitment to multilateral open trade functions as an institutional competitive advantage. Its highly developed logistical infrastructure, elite maritime ports, and world-class international airport seamlessly complement its financial architecture to reinforce this gateway status.
Doomsday prophet Stephen Roach, former chairman of Morgan Stanley Asia and who should know better, has predicted the end of Hong Kong and that it is too dependent on China. As an example, he cites: “Beijing’s hostile takeover following the pro-democracy demonstrations of 2019–20 has transformed Hong Kong into just another big Chinese city. Today, its Mandarin name is Xianggang”. His ignorance shows. Ever since China introduced pinyin as the romanization of its language in the 1950s, Hong Kong has always been known as Xianggang in the official Mandarin language. For international and everyday use, Hong Kong is still Hong Kong. Moreover, Hong Kong was returned to Beijing in 1997, not 2020!
Hong Kong’s top ranking in the 2026 Fraser Institute report underscores the structural durability of its almost laissez-faire economic model. By fiercely preserving its core policies of unrestricted capital movement, low tariffs, a minimal tax burden, and business-friendly regulations, the special administrative region continues to counter macroeconomic headwinds. While navigating a complex geopolitical and legal transition, Hong Kong remains an elite, highly competitive arena for international business, proving that its foundational free-market design is built to endure.
Mark Pinkstone
** 博客文章文責自負,不代表本公司立場 **
Hong Kong is well positioned to be the driving vehicle for the internationalization of the Renminbi (RMB) as the city ranks third globally and first in the Asia-Pacific region in the Global Financial Centres Index in 2026.
Many countries are now trading in the Chinese yuan (RMB), accounting for more than a quarter of China's cross-border trade settlements. China uses bilateral swap lines, offshore clearing hubs, and direct trade agreements to promote the RMB globally.
Major countries and regions trading or settling transactions in RMB includes Russia, uses the RMB extensively for bilateral trade and energy payments following Western sanctions; ASEAN nations use the RMB for regional trade; the Gulf and Middle Eastern nations use local and yuan settlements, particularly for the oil trade; and other emerging and Asian partners such as Bangladesh, Pakistan, Sri Lanka and Mongolia use the RMB for specific bilateral projects, trade financing and debt settlement.
And, of course, the Belt and Road Initiative countries increasingly use the RMB for specific bilateral projects, trade financing, but it still remains secondary to the US dollar. It is only natural that China actively promotes RMB trade settlements with partner nations to bypass third party currency risks.
The role of Hong Kong’s internationalizing of the RMB was a key point in the Chief Executive John Lee’s first five-year plan and policy address to the Legislative Council last month.
This endeavor is not merely about currency exchange, he said. It encompasses a multi-faceted strategy to enhance the RMB's liquidity, deepen its offshore market, and solidify its position as a global trade and investment currency.
Hong Kong's unique "One Country, Two Systems" framework, coupled with its robust financial infrastructure and legal system, provides an ideal platform for these initiatives.
One of Hong Kong's most significant contributions is its position as the largest offshore RMB liquidity pool. This is achieved through a comprehensive ecosystem of RMB-denominated financial products and services. The city actively encourages the issuance and trading of RMB bonds (Dim Sum bonds), providing international investors with diverse investment opportunities in the currency. Furthermore, Hong Kong facilitates RMB trade settlement, making it easier for businesses globally to conduct cross-border transactions in RMB, thereby reducing foreign exchange risks and transaction costs. The expansion of RMB financing activities, including syndicated loans and private equity funds denominated in RMB and further broadens the currency's utility for international businesses.
Hong Kong continually innovates its financial market infrastructure to support RMB internationalization. The RMB Real -Time Gross Settlement (RTGS) system in Hong Kong is a cornerstone, offering a highly efficient and secure platform for interbank RMB payments and settlements. This system connects banks globally, enabling seamless RMB transfers and enhancing the currency's liquidity. The city has also been at the forefront of exploring digital RMB initiatives, with trials and pilot programs aimed at integrating the digital yuan into its financial landscape, potentially offering new avenues for cross-border RMB flows and enhancing transaction efficiency.
To deepen the offshore RMB market, Hong Kong actively promotes the listing and trading of RMB-denominated securities. The government's efforts to facilitate the inclusion of RMB trading counters in the Stock Connect schemes (connecting Hong Kong with Shanghai and Shenzhen stock exchanges) are pivotal. This allows international investors to trade mainland A-shares directly using offshore RMB, significantly boosting demand for the currency and enhancing its investment appeal. Similarly, the ongoing work to enable the inclusion of REITs (Real Estate Investment Trust) in mutual market access schemes and to streamline procedures for dual listing further diversifies RMB investment options.
Beyond direct financial mechanisms, Hong Kong fosters RMB promotion through strategic collaborations and policy alignments with mainland China. The city's active participation in the Greater Bay Area (GBA) development provides a natural extension for RMB usage. Initiatives like enhancing cross-border data interchange (e.g., Commercial Data Interchange connecting with the Trade Single Window) and promoting cross-border payment systems (linking with UnionPay) aim to facilitate RMB flows and integration within the GBA, creating a larger economic sphere where RMB is the preferred currency for trade and investment.
Hong Kong's role as a risk management center is crucial for RMB internationalization. By offering sophisticated hedging instruments and risk management solutions for RMB-denominated assets and liabilities, Hong Kong enhances confidence among international investors and businesses in using the currency. The city's robust regulatory framework and legal certainty provide a secure environment for RMB financial activities, distinguishing it as a trusted platform for the currency's global expansion.
According the Chief Executive of the Hong Kong Monetary Authority, Eddie Yue, to consolidate Hong Kong’s role as the global offshore RMB hub, we need an enabling ecosystem that is characterised by easy access, “stickiness” and growth opportunities for international capital.
With the joint efforts of the banking sector, Hong Kong will continue to strengthen its offshore RMB hub function in support of the real economy, unlocking greater potential to drive RMB internationalisation.
In essence, Hong Kong's promotion of the RMB is a strategic, multi-pronged approach that leverages its strengths as an international financial center, its advanced infrastructure, and its close ties with the mainland. By continually enhancing liquidity, broadening product offerings, and fostering seamless cross-border flows, Hong Kong remains indispensable in the journey towards the RMB's greater global prominence.
