The economics of Hong Kong and the Chinese mainland are quite different in scope and the presence of economic freedom. Hong Kong’s economy is considered as one of the most liberal because of low taxation and free markets.
Today China is the largest producer of most industrial products and the world’s largest exporter. For many years China is known as the largest supplier of textiles, clothing, and footwear, watches, bicycles, and other labor-intensive products.
Nowadays, Hong Kong and the Chinese mainland are in the framework of “one country, two systems.” According to this approach, the Central People’s Government of China is responsible for foreign policy and defense of the territory of Hong Kong, and Hong Kong has all the powers of legislative self-control, monetary system, taxes, duties.
Meanwhile, the Chinese mainland also contributes to a variety of integrative processes between it and Hong Kong. Till today the most significant achievement in this area was the signing of CEPA parties in 2003, which became the main instrument of intensification of the integration process between Hong Kong and mainland China.
CEPA’s policy of applying zero tariffs reduces the costs of goods import from Hong Kong to the mainland, thereby enhancing the competitiveness of these products and stimulating the growth of exports of Hong Kong to the mainland.
CEPA also contributes to the process of the production division between Hong Kong and mainland China. CEPA will support the development of high-tech industries in Hong Kong, while mainland China will use its advantage in labor-intensive manufacturing. The Parties will cooperate in the fields of labor-intensive production, especially in those that are subject to market changes. For example, if some enterprises of Mainland China will transfer part of its manufacturing process to Hong Kong, they can avoid the policy of discrimination and safeguard the West against Chinese goods.
Both sides can combine their advantages, so that Hong Kong companies will provide high-quality services for the manufacturing sector in mainland China, thereby enhancing the overall competitiveness of the Chinese economy.