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Editorial | Banishment from index is politically driven

  • The decision by The Heritage Foundation to include Hong Kong under China for the first time on its index of the world’s freest economy is a disservice to investors and does nothing for its own credibility

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Financial Secretary Paul Chan said the decision by the Heritage Foundation, in its index of the world’s freest economies, to include Hong Kong under China, which ranks 107th, was ‘clouded by political bias’. Photo: SCMP

For 25 years Hong Kong ranked No 1 in an annual index of the world’s freest economies. Last year it slipped to second place behind Singapore after months of social and political unrest led to a fall in the city’s rating for freedom of investment.

The Heritage Foundation, a conservative American think tank that compiles the index, said the turmoil had dampened investment flows.

It was a sobering reminder of how quickly social and political instability can change the perception of risk. But nothing prepared the city for being excluded from this year’s edition of the index because recent developments demonstrated Beijing “ultimately controls” the policies offering greater economic freedom.

Hong Kong and Macau are now included under China, which ranks 107th. Financial Secretary Paul Chan Mo-po said the decision was “clouded by political bias”. It is hard to disagree.

Even when awarding economies high ratings, it is customary for the foundation to flag factors that might undermine principles and perceptions of economic freedom. Last year, for example, Hong Kong rated lower for its tax burden, fiscal health, and business, labour, monetary and investment freedom, but higher for property rights, government integrity and judicial effectiveness.

The foundation summed up: “The territory remains a dynamic global financial centre with a high degree of competitiveness and openness, but the sense of risk is heightened.”

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Hong Kong Financial Secretary Paul Chan hits out at the Heritage Foundation

Hong Kong Financial Secretary Paul Chan hits out at the Heritage Foundation

This year the foundation might have been expected to flag concerns about Beijing’s imposition of a national security law, and about reform of the electoral process that has prevailed for all of the time the city has topped the index. But it would have been surprising if it could have cited any solid evidence for them.

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