Hong Kong has lost its status as the world's freest economy after holding the title for half a century, according to the latest rankings compiled by the Fraser Institute, a Canadian think tank. According to the report released on Tuesday (Sept. 20), one of the main factors cited for this loss was a decline in judicial independence.
This is a significant change, as Hong Kong has been ranked first since the inception of the World Index of Economic Freedom in 1970, but now has to settle for second place, with projections that its ranking will continue to decline.
Hong Kong's decline in the report highlights its challenge to maintain its image as a global financial center, especially after years of isolation due to the pandemic and political instability.
Some of the criteria used to calculate the Economic Freedom Index include ease of international trade, freedom to enter and compete in markets, and business regulation, among other assessment factors.
The 2023 report is based on data from 2021, the most recent year for which comparable statistics are available for 165 countries. The report assesses the level of economic freedom of individuals, or the extent to which they are able to make independent economic decisions.
Fraser Institute Senior Research Fellow Matthew Mitchell revealed that the recent changes in Hong Kong are an example of how economic freedom is closely linked to civil and political liberties, as stated in a press release.
The report found that Hong Kong's downgrade was due to a number of factors, including new regulations that created barriers to entry, increased the cost of doing business, and restricted the hiring of foreign workers. According to Mitchell, the combination of these restrictive measures, backed by the government's efforts to control the private sector, naturally leads to a decline in economic freedom, which may negatively affect Hong Kong's well-being.
Over the years, one of Hong Kong's long-standing attractions for international business has been the reputation of its respected legal system. The city's legal system differs from that of China, which is often perceived as opaque and effectively controlled by the ruling Communist Party.
However, the independence of Hong Kong's judiciary has been called into question since President Xi Jinping imposed a national security law on the city in June 2020. The law is seen as a restriction on the city's autonomy and has been criticized by many.
Under the new law, crimes such as secession and sedition could carry sentences of up to life in prison. Concerns were heightened when Chief Executive John Lee declared last month that judges should defer to his decision and even banned the dissemination of controversial protest songs on the Internet, citing threats to national security.
In response to the changes, Singapore moved up to the top spot in the report from second place last year, with Switzerland, New Zealand, and the United States among the other top five countries.