Hong Kong vs. Mainland China: Differences Explained

Hong Kong vs. Mainland China: An Overview

“The Hong Kong Particular Administrative Area is an inalienable a part of the Folks’s Republic of China.” –Article 1, Primary Regulation

“The Nationwide Folks’s Congress authorizes the Hong Kong Particular Administrative Area to train a excessive diploma of autonomy and revel in govt, legislative and impartial judicial energy, together with that of ultimate adjudication, in accordance with the provisions of this Regulation.” –Article 2, Primary Regulation

Most individuals know Hong Kong as a global monetary hub, enterprise middle, buying paradise, and vacationer vacation spot. Nonetheless, the area’s identification disaster and resistance to Beijing’s interference are on the coronary heart of the civil unrest within the former British colony. Professional-democracy activists in Hong Kong would love the area to stay totally different from different Chinese language cities. So is Hong Kong a de facto nation or is it really part of China? As with many issues in Hong Kong, the reply isn’t clear-cut.

The connection between Hong Kong and mainland China is much extra advanced than most individuals notice. It includes politics, economics, commerce, legal guidelines, and, above all, the folks. “Hongkongers,” as they’re identified, who lived for years beneath the affect and methods of former ruler Nice Britain, are cautious about China’s intentions and indignant concerning the mainland’s meddling in its political affairs.

Mainland China and Hong Kong complement one another economically. Nonetheless, their political variations stay entrenched. The century-long separation between the Folks’s Republic of China and Hong Kong created gaps that can not be simply bridged even when the 2 are formally one nation. Earlier than Hong Kong and mainland China can really unify, they have to overcome vital variations.

Hong Kong

To grasp the foundation of Hong Kong’s separation from the mainland, one should return to the Opium Wars between Nice Britain and China (1839–1860). Throughout these army and commerce clashes, China was pressured to cede Hong Kong Island and part of Kowloon to Nice Britain in perpetuity. In 1898, Britain negotiated a significant land enlargement of the Hong Kong colony and signed a 99-year lease with China. The lease led to 1997, at which era Britain returned Hong Kong to China as a Particular Administrative Area (SAR) referred to as the Hong Kong Particular Administrative Area of the Folks’s Republic of China (HKSAR).

Underneath the doctrine of “one nation, two techniques,” China allowed the previous colony to proceed to manipulate itself and preserve many impartial techniques for a interval of fifty years. The Primary Regulation defines the restricted autonomy of Hong Kong. Owing to its colonial historical past, English is certainly one of Hong Kong’s official languages.

Mainland China

Formally often known as the Folks’s Republic of China, this East Asian nation is the world’s most populous, with a inhabitants of greater than 1.4 billion folks. China is ruled by the Chinese language Communist Get together, which has jurisdiction over 22 provinces, 5 autonomous areas, 4 direct-controlled municipalities, and the SARs of each Hong Kong and Macau.

Mainland China has the second-largest financial system on the planet, at $14.7 trillion, after america, at $21 trillion. China constructed its financial system on heavy trade improvement, ramping up the nation’s industrial and repair output over time. Of late, shopper demand has pushed progress. Nonetheless, after a harder 2018, by which the nation was embroiled in a commerce battle with america, the Chinese language financial system grew at its slowest tempo in 28 years.

Variations in Authorities

Maybe essentially the most vital distinction between mainland China and Hong Kong is that the mainland is communist and managed by a single occasion whereas Hong Kong has a restricted democracy. Each share the President of China as their chief of state. Nonetheless, every has its personal head of presidency: The premier is the top of mainland China, whereas the chief govt is the top of the Hong Kong Particular Administrative Area.

The chief govt is accountable to the Central Folks’s Authorities. The time period of the chief govt is for 5 years, and any individual can serve for a most of two consecutive phrases.

Regardless of the separation in techniques and rights assured by the Primary Regulation, the mainland Chinese language authorities does assert itself in native Hong Kong politics. In 2014, the area witnessed mass-scale protests and demonstrations in opposition to mainland China’s proposed reforms for electing the Chief Govt. Protesters complained that solely these candidates who aligned their pursuits with China could be allowed to run. The “Umbrella Protests,” as they had been identified, failed to realize any concessions from Beijing.

Hong Kong additionally has its personal authorized and judicial techniques (together with a proprietary police pressure), district organizations (with no political energy), and public servants, broadly based mostly on the British frequent legislation mannequin. Nonetheless, for land tenure and household issues, Hong Kong reverts to the Chinese language customary legislation mannequin.

In 2019, Hong Kongers protested in opposition to an extradition invoice that may have allowed residents to be despatched to mainland China. It was ultimately suspended and withdrawn by the chief govt. Critics feared the invoice would undermine the area’s judicial system. Amnesty Worldwide stated the invoice—if handed—would have prolonged the ability of the mainland authorities to focus on critics, human rights defenders, journalists, NGO staff, and anybody else in Hong Kong.

Army and Diplomacy

Hong Kong defers from mainland China in two major areas: army protection and worldwide relations. Hong Kong might not preserve its personal army; the mainland manages the army protection of Hong Kong.

In worldwide diplomacy, Hong Kong has no separate identification from mainland China. For instance, Hong Kong has no impartial illustration within the United Nations Safety Council, the United Nations Convention on Commerce and Improvement, the Group of 77 on the United Nations, or the Group of twenty-two (G22).

Nonetheless, Hong Kong might attend occasions of choose worldwide organizations just like the Asian Improvement Financial institution, the Worldwide Financial Fund, the World Well being Group, and the United Nations World Tourism Group, although as an affiliate member and never a member state. It could actually additionally take part in trade-related occasions and agreements beneath the identify “Hong Kong, China.”

The Hong Kong Particular Administrative Area might not preserve any separate diplomatic ties with international nations. The Workplace of the Commissioner of the Ministry of International Affairs of the Folks’s Republic of China within the Hong Kong Particular Administrative Area conducts all international affairs. International nations might have consulate workplaces in Hong Kong, however find their most important Chinese language embassies on the mainland. The residents of Hong Kong carry a special passport from the residents of mainland China. Each should receive permission earlier than visiting the opposite area. Even international vacationers who go to Hong Kong should receive a separate visa earlier than getting into China.

Variations in Taxes and Cash

The precept of “one nation, two techniques” permits for the coexistence of socialism and capitalism beneath “one nation,” which is mainland China. This precept has given Hong Kong the liberty to proceed with its free-enterprise system, quite than merging into the communistic construction in China. Hong Kong has impartial funds and the Folks’s Republic of China (PRC) doesn’t intrude in its tax legal guidelines or levy any taxes on Hong Kong.

The area has its personal insurance policies associated to cash, finance, commerce, customs, and international change. Hong Kong and mainland China even use totally different currencies. Hong Kong continues to make use of the Hong Kong greenback, which is pegged beneath the Linked Alternate Price System to the U.S. greenback. The mainland makes use of the Chinese language yuan as authorized tender. Retailers in Hong Kong don’t freely settle for the yuan.

Variations in Economics

As of 2020, Hong Kong has the second freest and thirty sixth largest financial system on the planet with a GDP of $346.59 billion. The financial system of Hong Kong has witnessed an amazing transition prior to now decade as providers took a lead within the area at a whopping 93.4% of GDP in 2020; the service sector consists of providers associated to journey, commerce, monetary, and transportation.

As manufacturing has shifted base to the mainland, its contribution to general GDP in 2020 has shrunk over time (1.1%), whereas agriculture barely contributes to the GDP (0.1%), as Hong Kong isn’t wealthy in pure assets and is determined by imports for meals and uncooked supplies. Building contributes round 4.1%. Total, the Hong Kong financial system is characterised by low tax charges, free commerce, and fewer authorities interference.

The financial system of mainland China is extra depending on manufacturing, though, in recent times, the service sector has began to select up. Nonetheless, the share of providers within the GDP is way lower than that of developed nations like america and Japan and in addition lower than that of growing nations like Brazil and India. Agriculture constitutes round 8% of China’s GDP, whereas it’s negligible in Hong Kong’s.

Hong Kong’s GDP per capita is vastly larger than that of mainland China’s, though the latter is quickly climbing. China’s GDP progress fee is over 6%, whereas Hong Kong’s was 2% in 2018, the newest numbers out there.

Variations in Inventory Markets

The Hong Kong Inventory Alternate has been the popular vacation spot alternative for many Chinese language firms seeking to increase capital, because the mainland Chinese language inventory markets are extra restrictive and have larger monetary necessities. Hong Kong’s inventory market additionally attracts extra abroad traders.

“Hong Kong has a number of benefits which might be lacking in China. First, a registration-based IPO system, which permits itemizing to be comparatively quicker and simpler than within the mainland. Second, the absence of capital controls and higher worldwide publicity, which permits Hong Kong to function an anchor level for world enlargement. Third, a sound monetary infrastructure, which mitigates operational prices. Fourth, an efficient regulatory framework, which focuses on transparency and prudent minimal requirements,” wrote Tianlei Huang analysis analyst on the Peterson Institute for Worldwide Economics. “Neither Shanghai nor Shenzhen is more likely to win this competitors with Hong Kong, no less than over the brief time period.”

In mid-November 2014, a program titled “Shanghai-Hong Kong Inventory Join” was launched, which established a cross-border channel for entry to inventory markets and funding. This association permits traders in these areas to commerce specified firms listed on one another’s inventory change by means of their native securities agency. There was no direct entry for particular person traders in Hong Kong (or abroad) to Chinese language shares earlier than this. In December 2016, the same “Shenzhen-Hong Kong Inventory Join” was launched.

As of the tip of 2021, the Hong Kong Inventory Alternate listed 1,368 mainland Chinese language firms, barely over 50% of the entire quantity on the change. By way of market capitalization, these firms accounted for nearly 79% of the inventory market in Hong Kong.

By the tip of 2021, Hong Kong’s inventory market was the fourth-largest in Asia and seventh-largest on the planet by market capitalization at $5.4 trillion.

Financial Interdependence

Even in instances of twisted diplomatic relations, the financial ties have remained robust between the mainland and its SAR. Hong Kong and mainland China enhance one another’s economies, and the 2 have good financial relations with annual bilateral commerce valued at over $562.5 billion in 2021.

Hong Kong in lots of respects is seen as a gateway to China for individuals who are focused on doing enterprise on the mainland or accessing Chinese language shares or investments. As of June 2021, 32 of the 160 licensed banks in Hong Kong had been of Mainland pursuits.

Mainland China is Hong Kong’s largest buying and selling associate and its second-largest supply of inward direct funding. The mainland’s non-financial direct funding in Hong Kong was $501.9 billion in 2020, accounting for 27.1%, based on Hong Kong’s Commerce and Trade Division.

Based on Hong Kong’s Commerce and Trade Division, mainland China is Hong Kong’s most important vacation spot for home exports (39%). It’s also the most important provider of imports for Hong Kong (45.8%).

Hong Kong is a significant provider of entrepôt providers to China. In 2021, the worth of products re-exported by means of Hong Kong from and to the Mainland was $562.5 billion and accounted for 89.5% of Hong Kong’s whole re-export commerce worth.

Nonetheless, some argue Hong Kong’s financial significance and relevance to China’s progress story is quickly falling.