Hong Kong - 2023 Political Outlook & Policy Trends

Last Updated: February 13, 2023


Political and Economic Changes Ahead in Hong Kong

Hong Kong was under British control in the 19th century and returned to Chinese sovereignty in 1997 as a Special Administrative Region (SAR) of China, as per the Sino-British Joint Declaration signed in 1984. The territory was promised “a high degree of autonomy” for at least 50 years, and is governed by the Basic Law of the Hong Kong SAR, which acts as a mini-constitution. However, after the passing of the National Security Law on 30 June 2020 by the Standing Committee of the National People’s Congress, a controversial law that takes away the “full” autonomy of Hong Kong, the government is not perceived by many as self-ruled any more.

John Lee took office as the chief executive of Hong Kong in July 2022, succeeding Carrie Lam. The chief executive is selected by the 1,200-member Election Committee and advised by the Executive Council (the cabinet). The Legislative Council (Legco) is composed of a combination of direct vote, registered industry-body polls, and appointment by the Election Committee, with the first component accounting for about a fifth of the seats. The standing committee of China’s National People’s Congress, which is controlled by the Chinese Communist Party (CCP), has ultimate authority over the interpretation of the Basic Law.

As the Chinese government increases its authority through the national security law and closer guidance of the local government, Hong Kong’s autonomy will be totally diminished in the coming years. However, the judiciary’s ability to independently rule on commercial cases is unlikely to be affected by the national security law. Despite progress in securing new land for residential development, public dissatisfaction over the high cost of housing will remain a pressing issue in coming years.

In December 2022, as mainland China shifted from its zero-covid strategy, Hong Kong lifted nearly all its remaining pandemic-related restrictions. The public mask mandate is expected to be lifted in March-April. Most of the financial support for businesses and households affected by the pandemic will end by early 2023, including unemployment benefits, unconditional e-cash transfers to households, and government-backed loans for businesses. However, it is anticipated that additional personal income tax deductions will be offered in the next year.

The central government’s belief that low standards of living can lead to widespread public discontent has led to a push to increase the housing supply. In the short to medium term, local authorities will hasten the development of new projects on existing land, many of which will be located on brownfield sites in the New Territories. Two new areas have been announced as part of the Northern Metropolis initiative, which is now the government’s primary focus. More construction will take place near country parks and protected “special areas,” which make up about 40% of Hong Kong’s total land area.

Despite increased policy reform and political commitment, the lengthy planning, approval, and construction processes, as well as conflicting local interests (including commercial developers and small leaseholder associations), will limit the significant expansion of the housing supply in 2023-27. This will help prevent local property prices from falling significantly (by more than 25% from any given peak) in the next decade. The construction of the long-discussed land reclamation project, Lantau Tomorrow Vision, will not commence until after the forecast period. The project aims to provide housing for 700,000 to 1.1 million people over the next 30 years and will play a crucial role in supporting the growth of the housing supply from the 2030s onwards.

Economic ties between Hong Kong and mainland China will strengthen, driven by the Closer Economic Partnership Arrangement (CEPA) for two-way trade and investment, the “Connect” programs with Shanghai and Shenzhen for two-way securities trading, and the Chinese government’s Greater Bay Area (GBA) initiative aimed at integrating municipal economies in the Pearl River Delta (PRD). However, mainland capital controls, customs bureaucracy, and migration restrictions will prevent the GBA initiative from having a significant impact on Hong Kong in the next decade.

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Beijing-Backed Candidates Win Controversial Hong Kong LegCo Election

Pro-Beijing candidates have won the Hong Kong Legislative Council (LegCo) election, which saw the lowest voter turnout in the city’s history. The election was the first since China made sweeping changes to Hong Kong’s electoral system, which the government says were needed to ensure stability but critics say weakened democracy. A group of Western nations expressed “grave concern over the erosion of democratic elements” in Hong Kong’s electoral system. In a white paper released after the election, China said Hong Kong was now entering a new stage of “restored order” due to the changes introduced by Beijing.

In the white paper, China accused “anti-China agitators” of causing “damaging social unrest” in Hong Kong and said the recent electoral reforms and national security law introduced by Beijing had addressed “the symptoms and root causes of the unrest” and “restored order” to the city. The UK, along with rights groups, has accused Beijing of reneging on the “one country, two systems” principle, which promises Hong Kong certain democratic freedoms that no other part of mainland China has. The white paper repeated that the Communist Party of China “designed, created, safeguarded and advanced Hong Kong’s system of democracy.”

The next elections for the Legislative Council (Legco) and the post of chief executive in Hong Kong will take place in 2025 and 2027 respectively. The recent changes made by the central government to the election rules are expected to result in a negligible opposition representation in the government after the next Legco election. The total number of seats in Legco has increased from 70 to 90, but the share of directly elected representatives has decreased from 50% to just over 20%. Some legislators are now selected by the Election Committee, a pro-Beijing body, while others facing popular vote have to go through a stronger vetting process. The December 2021 Legco election resulted in an almost entirely pro-establishment legislature, with only one opposition legislator elected through direct elections and a record low voter turnout of 30.2%. John Lee, a former police officer and security official, was elected as the chief executive in May 2022 through a restricted-franchise poll, as he was the only nominated candidate.

Note: No Left–Right Categorization

Business Environment

Business Environment Overview

Doing Business Score | World Bank 2021
Business Environment Score | EIU 2022

On Free Market & Competition

Gov Expenditure (% of GDP)
Domestic credit to private sector (% of GDP)
Ease of Starting A Business (Best=100)
Ease of Getting Credit (Best=100)
Enforcing Contracts (Best=100)
Insolvency and Debt Resolution (Best=100)

On Foreign Investment

Foreign Direct Investment (Million Dollar | Nominal)
‱ The World | Ten thousandth

On Labour

Unemployment Rate (%)
Minimum Hourly Wage, Nominal $
Avg Manufacturing Hourly Wage, Nominal $
Avg Monthly Salary, Nominal $
Ten Year Wage Growth (%)

On Tax

Time it Takes to Do Taxes (Hours)
Total Tax and Contribution Rate (% of Profit)
Profit Tax (% of Commercial Profits)
Labor Tax & Contribution (% of Commercial Profits)
Other Taxes (% of Commercial Profits)
Personal Income Tax (Highest %)

On Infrastructure

Internet Speed(Mbps)
Cellular Subscription (%)
Internet Penetration (%)
Logistics Score (2018)
Railroad Infrastructure
Air Infrastructure

Foreign Policy

Close relationship with the mainland sustain its from most sanctions

Defense and foreign affairs are the responsibility of the central Chinese government, while the Hong Kong administration has jurisdiction over local issues and international trade-related matters. As a result of the national security law, the United States now considers Hong Kong and mainland China to be the same in terms of customs and travel, and has imposed sanctions on some local officials, including John Lee, who was appointed as Chief Executive. However, these sanctions are unlikely to have a significant impact on Hong Kong’s status as a financial center due to its close ties with the mainland. Since 2020, the governments of the UK, US, Canada, and Australia have made it easier for Hong Kong residents to stay in their countries and even become citizens. This has led to an increase in emigration, but the number of people leaving will likely only be in the hundreds of thousands, not millions.

Human Capital


  • Economic Data: OECD, World Bank, IMF、Government Statistics Bureau
  • Currency Exchange: Based on IMF data in 2023/1
  • GDP Growth Projection: OECD、IMF, OECD, EIU、Government Bureau
  • Unemployment Rate Projection: ILO, UNECE
  • Doing Business Report: World Bank 2020 (It was discontinued in 2021)
  • Trade: UN Comtrade, UNCTD
  • ICT Infrastructure: ITU
  • Taxation: World Bank, Statistics Bureau
  • Minimum Wage: Statistics Bureau
  • Analysis: OOSGA Analytics

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