Front Matter Page
© 2007 International Monetary Fund
January 2007
IMF Country Report No. 07/4
People’s Republic of China—Hong Kong Special Administrative Region: Selected Issues
This Selected Issues paper on the People’s Republic of China—Hong Kong Special Administrative Region was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on November 30, 2006. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of People’s Republic of China—Hong Kong Special Administrative Region or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
PEOPLE’S REPUBLIC OF CHINA—HONG KONG SPECIAL ADMINISTRATIVE REGION
Selected Issues
Prepared by Nathan Porter, Murtaza Syed, Paul Gruenwald (all APD), and Cynthia Leung (IMF Resident Representative Sub-Office in Hong Kong SAR)
Approved by the Asia and Pacific Department
November 30, 2006
Contents
I. Medium-Term Fiscal Challenges and Policy—The Role of Fiscal Reserves
A. Introduction and Background
B. Anticipated Risks: Age-Related Fiscal Pressures
C. Unanticipated Risks: Revenue Volatility
D. Can Policy Choices Limit the Need to Hold Large Reserves?
E. Do Other Countries Hold Fiscal Reserves?
Box 1: Theoretical Aspects of Fiscal Policy
Figure 1: Cumulative Fiscal Value at Risk Estimates
Figure 2: Fiscal Value at Risk Density Functions
Appendix: Methodological Issues
References
II. Competitiveness: Trends and Prospects
A. Introduction
B. Trends and Patterns
C. Key Challenges
Figure 1: Tends in Price-Based Indicators of Competitiveness
Figure 2: Sectoral Trends in Productivity and Unit Labor Costs
Figure 3: Global Competitiveness Indices
Figure 4: Potential Weakness in Business Environment
Table 1: Prices and Earnings Rankings
Table 2: Growth Accounting: Sources of Growth in Labor Productivity
Table 3: Behind the Global Competitiveness Indices
References
III. The Evolving Financial Integration with Mainland China
A. Recent Trends: Three Examples
B. Challenges Facing Hong Kong SAR’s Position as a Financial Center
C. Assessment and Prospects
References