Hong Kong’s half-century reign as the world’s freest economy has ended, according to the most recent rankings compiled by a Canadian think tank that cited eroding judicial independence as one factor.
The Asian financial hub fell to second place in the Economic Freedom of the World Index for the first time since The Fraser Institute began compiling it in 1970. The organisation said the city’s ranking is expected to fall even further in the coming years.
“Hong Kong’s recent turn is an example of how economic freedom is intimately connected with civil and political freedom,” said Matthew Mitchell, senior fellow at the Fraser Institute, in a press release.
Singapore beat Hong Kong to top the list, while Switzerland, New Zealand and the United States rounded out the rest of the top five spots.
The Fraser Institute says the index measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately-owned property.
The survey of 165 jurisdictions assigned ratings for 2021, the most recent year for which comprehensive data are available. Thailand scored 7.07 out of 10 for a ranking of 64th place overall, an improvement from 72nd the year before and 79th in 2019 — but well below the peak of 34 seen in 1990.
Singapore was assigned a score of 8.56, barely edging out Hong Kong at 8.55. The Fraser Institute said the city-state came out on top thanks to improvements in the size of government and regulation components of the survey.
The Hong Kong government called the report’s claims about the city’s judiciary as “totally groundless and unsupported by objective evidence”, the South China Morning Post reported on Wednesday. A representative for the Hong Kong government did not immediately respond to a request for comment.
Hong Kong’s slip in the report signals its struggle to maintain its reputation as a global financial centre, after years of pandemic isolation and political instability.
Part of Hong Kong’s longstanding appeal to international business is the reputation of its judicial system. They city’s courts are distinct from those in China, which are opaque in their actions and effectively controlled by the ruling Communist Party.
Since President Xi Jinping imposed a national security law on Hong Kong in June 2020 their independence has been called into question. Last month, Chief Executive John Lee fanned those concerns again when he said judges should have followed his wishes and banned a controversial protest song from the internet, due to its perceived threat to national security.
The United Kingdom decided last year to withdraw top judges from Hong Kong’s highest appeals court, saying China is using the national security law to undermine fundamental rights and freedoms in the former British colony.
The United States in 2021 warned investors about the risks of doing business in Hong Kong, saying China’s push to exert more control over the financial hub threatens the rule of law and endangers employees and data.