Comparison of the economies of Hong Kong and Taiwan

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Many people were curious about the economy between Hong Kong and Taiwan although Taiwan is "Republic of China" but many people were wondering to know why Hong Kong and Taiwan's economy can name as the Four Asian Tigers without rely China? This term paper will talk about why these two countries can have an outstanding and success of the economy in this world.

Hong Kong is one of the most densely populated countries in the world with land population density of 6 410 persons per square kilometer. (Hong Kong Population by District Board District: 1999). Hong Kong total population is 7,055,071 in 2009.( Flag counter: Hong Kong) Hong Kong was colonization by The United Kingdom so their official languages are both Cantonese and English; Hong Kong has several of the ethnic groups include 95% of Cantonese and 5% of others (Hong Kong Indian, Chinese Immigrants and British). There are around 22,894,384 of people in Taiwan and it is the eighth most densely of populated country in the world with the land population density of 635 persons per square kilometer, (Nartjai). Although Taiwan had got colonized by Holland and Japan but their official language is still Chinese and Taiwanese (Hokkien); the ethnic groups in Taiwan are 98% of Han Chinese, those settlers were most from the south of China. Chart 1 show the GDP of purchasing power parity between Taiwan and Hong Kong.

Chart 2 shows the GDP of real growth rate between Taiwan and Hong Kong.

Chart 3 shows the GDP per capita between Taiwan and Hong Kong.

(Hong Kong GDP Growth Rate.) (Taiwan`s GDP Growth Forecast Reduced to 4.27% for 2008: TIER.)

As we see upon of the chart 1, Taiwan's GDP of purchasing power parity are higher than Hong Kong but it is not mean Taiwan is rich than Hong Kong because it have to indicate other part such as the environment, public services, and pollution etc,. In 2009 because of US financial crisis Taiwan and Hong Kong GDP real growth Rate were both got decrease from the crisis especially Hong Kong, Hong Kong is one of the business metropolis of Asia and Pacific so the US financial crisis did affect the economy in Hong Kong a lot. In Chart 3, the GDP per capita between Taiwan and Hong Kong were remain stably didn't grow too high or too low, from the chart we can see Hong Kong had high GDP per capita than Taiwan around 10000 US dollars.

In 2009, the unemployed rate in Hong Kong is 5.2 %,( Unemployment Rate in Hong Kong) 5.85 in Taiwan. Taiwan was the highest unemployed rate among the Four Asian Tigers. The unemployed rate in Taiwan was growing by each year because the changes of Taiwan's industry structure was affect Taiwan's unemployed a lot since 1980. The changes of Taiwan's industry structure were changing rapidly so many companies were move to other country that can pay the lower salaries for the worker such as China so therefore many high education people in Taiwan couldn't find the job and so the unemployed rate in Taiwan are higher by each year. The unemployed rate in Hong Kong is the second highest among the Four Asian Tigers. The reason why Hong Kong unemployed rate is high because if Cantonese want to make a factory, they won't made it in Hong Kong because they know the rental fee and the salaries have to pay higher than China so they are rather to build the company in China and send the goods from China to Hong Kong everyday, although it sounds cost a lot but the cost of transportation fee is still cheaper compare if the company just build the factory in Hong Kong. No matter it is in Hong Kong or Taiwan, they both got the same problem with the changes of their' countries' industry structure. The governments really have to concern this serious problem.

As you know Hong Kong and Taiwan is the member of Four Tigers. However their economic development path is completely different. Now I will tell you about CPI, economic freedoms of Hong Kong and Taiwan, and the ECFA and CEPA which were signed by two sides.

CPI (Consumer Price Index)

Consumer Price Index (abbreviated CPI) , in economics, is a reflection of the residents living related products and services price index statistics out of the price changes to percentage change in the expression. It is one of the key indicators to measure inflation. General definition of more than 3% for inflation, more than 5% is more serious inflation.

The CPI can be performed as CPI= Update cost/ Base period cost *100. The "updated cost" is divided by the initial year, then multiplied by one hundred. ( Education 2020 Homeschool Console, subject Economics, lecture "Inflation". Formula described within.

Hong Kong: In 2010, the RMB appreciation, the global oil prices soaring no doubt the suppression of the Hong Kong economy. The second half of last year, the Chinese property prices rose sharply, driving property prices in Hong Kong also rose. Raise prices a few people take advantage of this to make money, resulting in the Hong Kong CPI rose. To this end, the Government raises a series of measures to control prices and suppress the property market such as Including building welfare, and social convenience measures to avoid a recession. However, because of the global economy leading, the effects of Government's measures are not valid.

Taiwan: Different from Hong Kong, Taiwan's government has direct control over the economy. Thus, the global economy changes can directly affect Taiwan's economy. Affected by abnormal weather, reduction of the global production like wheat and other agricultural and mineral raw materials, in food prices rising to the performance of the food price increases directly above. Taiwan's inflation directly is in terms of performance of rising food prices. However, because not many foreign-funded enterprises in Taiwan, so Taiwan's inflation is less serious than Hong Kong. If the percentage of foreign-funded enterprises in Taiwan can as long as be controlled, and the government is able to prevent of NTD appreciation, then inflation in Taiwan is completely avoidable.

Economic Freedoms:

Economic freedom is a term used in economic and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom. The free market viewpoint understands economic liberty as the freedom to produce trade and consume any goods and services acquired without the use of force, fraud or theft. This is embodied in the rule of law, property rights and freedom of contract, and characterized by external and internal openness of the markets, the protection of property rights and freedom of economic initiative.m by HongKong



As you can see the chart which was shown below, Hong Kong has a highest and stable economic freedom. And these 5 years, Taiwan was been given more freedom of economy, which led the development of economic market.

ECFA (Economic Cooperation Framework Agreement): The Economic Cooperation Framework Agreement (abbreviated ECFA) is a preferential trade agreement between the governments of the People's Republic of China (mainland China) and the Republic of China (Taiwan) that aims to reduce tariffs and commercial barriers between the two sides. It will boost the current US$ 110 billion bilateral trade between both sides. The deal is thought to be structured to benefit Taiwan far more than mainland China. The advantage to Taiwan would amount to US$13.8 billion, while mainland China would receive benefits estimated at US$2.86 billion . Mainland China will also open markets in 11 service sectors such as banking, securities, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies.

CEPA (Closer Economic Partnership Arrangement): is an economic agreement between the Government of the Hong Kong Special Administrative Region and the Central People's Government of the People's Republic of China, signed on 29 June 2003.The agreements and additional supplements were signed in the Chinese language; the Chinese text is therefore the authoritative text. The Hong Kong government generally provides a courtesy English translation, as English is one of the official languages of Hong Kong.

To strengthen trade and investment cooperation between Mainland China and Hong Kong and promote joint development of the two sides, through the implementation of the following measures:

1 progressively reduces or eliminates tariffs and non-tariff barrier on substantially all the trade in goods between the two sides;

2 progressively achieve liberalization of trade in services through reduction or elimination of substantially all discriminatory measures;

3 promote trade and investment facilitation.


If we compare the economy with Hong Kong and Taiwan 3 years ago, we may feel Hong Kong has a larger and stronger market. The recent global economic recession, Hong Kong's economy is affected. Taiwan began to open the mainland market economy and foreign economic markets. Although Hong Kong's economy among the best in the Asia Pacific region, but global economic recession in Taiwan have not been greatly affected. Although Taiwan's economy in the short term can not be more than Hong Kong, Taiwan's economic development potential, we still must not be ignored.