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Hong Kong vs. Mainland China

Resource • ~20 min

A small territory with few natural resources adopted a light-touch, market-based economy and became one of the wealthiest places on earth, while the centrally planned mainland stayed poor until it began adopting market reforms.

A Taste of Chocolate

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Key takeaway

Shared people and culture, different economic rules. The freer economy generated far more prosperity, and the mainland gained as it moved toward markets.

Hong Kong and mainland China share language, heritage, and history, but for decades they ran on opposite economic systems. Under a famously light-touch approach, Hong Kong protected property rights, kept taxes low, and let prices and trade work with little central direction. With almost no natural resources, it grew into a major global center for finance and commerce, with one of the highest standards of living in Asia. The mainland, under central planning, controlled production from the top. Living standards stayed low and the economy stagnated, with episodes of severe shortage and hardship. Beginning in 1978, the mainland started opening to markets, allowing private enterprise and foreign trade in special economic zones. Growth followed, and hundreds of millions of people rose out of poverty. The lesson pointed the same direction either way: where markets and property rights expanded, prosperity followed.

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