Characteristics of the Hong Kong economy
- A free market with a simple and low tax system.
- The rule of law and an independent judiciary.
- Free flow of capital, goods and information; a free port.
- An international financial, trading and logistics centre.
- A service-based economy: most output and employment are in the tertiary sector.
- Challenges: high land costs and rents, an ageing population, and competition from nearby cities.
Recent developments
- Closer economic relationships with the Mainland: e.g. CEPA, the Guangdong-Hong Kong-Macao Greater Bay Area, the Belt and Road Initiative.
- Globalisation: wider markets and sources of supply, but stronger competition.
- International trade cooperation: e.g. free trade agreements.
Factors affecting business decisions
| Factor | Example |
|---|---|
| Physical | Location, climate, natural resources |
| Economic | Interest rates, inflation, unemployment, consumer income |
| Technological | E-commerce, automation, mobile payment |
| Social and cultural | Ageing population, lifestyle and values |
| Political | Government policies, political stability |
| Legal | Employment Ordinance, Competition Ordinance, consumer protection laws |
Forms of business ownership
| Sole proprietorship | Partnership | Limited company | |
|---|---|---|---|
| Owners | 1 | 2 to 20 | Shareholders (a private company has at most 50 members) |
| Liability | Unlimited | Unlimited (general partners) | Limited |
| Legal entity | No | No | Yes |
| Continuity | Ends with the owner's death or retirement | Affected when a partner leaves | Perpetual succession |
| Raising capital | Owner's savings and loans | Partners' contributions | Issue shares; a public company can offer shares to the public |
| Disclosure | Accounts not published | Accounts not published | A public company must publish its accounts |
A multinational corporation (MNC) operates in more than one country. Many MNCs set up regional headquarters in Hong Kong.
Business ethics and social responsibilities
Stakeholders are groups affected by a business: owners/shareholders, employees, customers, suppliers, creditors, competitors, the government and the community.
Social responsibility means the business takes care of the interests of all its stakeholders, not only profit, e.g. fair wages and a safe workplace, honest advertising and safe products, paying suppliers on time, protecting the environment.
Business ethics are moral principles that guide business behaviour, e.g. not making false claims about products.