Hong Kong

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Hong Kong is a "special administrative region" of China.

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Free Market

Hong Kong is often used by free marketeers as an example of a region where lack of government interference (aka small government) has resulted in a more prosperous society.

While it certainly does have a number of "small government" characteristics --

  • There is no welfare system.
  • The income tax is very low (about 15% circa 1999-2000)
  • There are no smoking restrictions (other than those imposed by individual businesses).
  • There is no military whatsoever. (It is defended by China, of which it is formally a part.)
  • There are no freedom of speech guarantees.

-- it would be erroneous to assume that this has resulted in a prosperous and happy society, or even a free market:

  • The lack of welfare system means that if you make a serious mistake or get sick without rich family or friends to support you, you're screwed. There are a lot of street beggars there.
  • Pollution is very bad.
  • There are massively entrenched first-players with excellent political connections in pretty much every industry, making it very difficult to start new businesses.
    • Largely because of this, there is a virtual monopoly on real estate, making it one of the most expensive places in the world to live.

Furthermore, there is actually quite a lot of government regulation, especially for anything relating to business. Expensive permits are required for a wide variety of privileges. Success is by no means certain and may require political maneuvering.

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Notes

Hat-tip to God Emperor Lionel Lauer for a comment in this thread.