Study Of Changes In HK's Economic System And Its Impact On Economic Development

Hong Kong, being one of China's unusual political areas, has insisted in its Economic Freeport policy for more than a century. For many years, it has been crowned with the world's most competitive region. Though with limitations in city size and absence of natural resources, utilizing its mother country as strong supporting base, Hong Kong has successfully compete with major economic compound in other parts of the world and has obtained remarkable achievements in economic growth. Nowadays, the world's economic environment has been changing rapidly with economic globalization. Hong Kong, with its highly open economy, needs to coordinate its pace of change to take good care of those challenges and opportunities so as to maintain stable economic development in the long run.Economic system is represented by rules and regulations that been recognized or constructed by ruling class of a country. The ruling class of a country would adopt the economic system that can reflect and be beneficial to development of dominant production relations in the society. Furthermore, it would establish and maintain economic order that be beneficial to its ruling. The efficiency of a country's economic system would determine the pace of its economic development. In other words, the economic system of a country is the dominant factor affecting the economic growth of the country. Due to historical reasons, Hong Kong has transplanted its free economic system from the United Kingdom. And for centuries, Hong Kong has implemented one of the world's most open Freeport policies. Hong Kong's free economic system, one of the basic features of its economy, ensures sufficient source of energy for Hong Kong's economic development. The core of Hong Kong's free economic system is represented by the efficient allocation of resources through self-regulation of price, supply and demand, and competition mechanism. With high degree of economic freedom and open economic system, Hong Kong has developed a well market mechanism. Compared with other regions, in Hong Kong, the "invisible hand" has worked relatively well in allocation of resources and automatic adjustment in economic cycle. Despite the rise of international economic intervention in the capitalist world, Hong Kong has passed the testing of time and has stood strongly with its free economic system. Nowadays, Hong Kong is still famous with its high degree of economic freedom. As major policy decision basis, the Hong Kong Government has strong belief in open competition, private ownership, free flow of capital, and relief of government intervention.To cope with changes in global economic environment, the Hong Kong Government has turned its free economic policy to "positive non-intervention" policy. In other words, despite the practicing of free economic policy as the mainstream policy, the Hong Kong Government would intervene and play an active role in situation of market failure for the benefit of economic development.In order to figure out the specific understanding in the changes in Hong Kong's economic system, the background of this paper relies on the theory of institutional economics. With the use of local and foreign literature, this paper provides description and explanation on the changes and development in Hong Kong's economic system. Through learning the experience of institutional innovation in Hong Kong's economic development, this paper offers reference and inspiration for future policy formulation. This paper is divided into five parts:The first part is the introduction. The background and reasons of research are placed in this part. With the use of local and foreign literature, there is general description of the evolution and formulation of Hong Kong's economic system. Furthermore, the innovation and shortcomings of such are also provided.The chapter one is in second part. There is description of Hong Kong's Freeport policy. As the fundamental economic system of Hong Kong, the free economic system has been used as the basis of government's economic and administrative decisions. In this part, there are the reasons of development of Hong Kong as a Freeport. Major contents and functions of Hong Kong's Freeport policy are described also. Last but not least, in the construction and development of Freeport, Hong Kong has obtained plenty of valuable experiences. The content in this part can be regarded as introduction of other Hong Kong's institutional changes in the coming chapters.The third part includes chapter two to chapter six. In this part, there are descriptions on land supply, education and employment, economic regulation, social welfare, and capital market systems of Hong Kong. Through the study of development and changes of these systems, the research content is confined and enriched. Therefore, this part of paper can formulate a better understanding on the change in Hong Kong's economic system.This forth part contains chapter seven. Based on studies of the above chapters, the change in Hong Kong's economic system is explored in depth. From the experience of Hong Kong's institutional innovation during economic development, there are reference and inspiration. As the core part of paper, the research topic is materialized here and the research contents are greatly deepened. During change in Hong Kong's economic system, there are contradictions in government policies. With the application of innovative institutional theory, these are studied through different points of view. For future practical applications, the actual situation of Hong Kong and Mainland are compared. The main theme is to conduct the cause and effect study on contradiction on policy implementation and these are explained with the introduction of innovative institutional variables.The fifth part is the conclusion part and is the summary of the full paper.In 1997, Hong Kong has returned to China's sovereignty. The Hong Kong SAR Government has been practicing "one country two systems" for more than a decade. Facing with complexity in global economic environment and uncertainties in system change, Hong Kong has put forward various institutional innovations. These system changes have their own problems and limitations. According to theories of new institutional economics and system innovation, this paper has analyzed thoroughly on the changes in Hong Kong's economic system and would have future reference on policy formulation.