GDP and Economy Overview

GDP is the total monetary value of goods and services produced by a country or territory in a specific time period.
Production describes how raw materials are transformed into goods and services.
Consumption describes how people buy and use goods and services.
An economy encompasses a country's or region's production and consumption of goods and services, along with the money supply.
Key features of an economy include production of goods and services, consumption of goods and services, and the use of money as a medium of exchange.

Before money, people exchanged goods and services through bartering.
The double coincidence of wants was a problem with bartering, leading to the development of money.

Hong Kong initially relied on entrepot trade.
Now, it's a knowledge-based economy, relying on information, creativity, and technology, as vital growth sources.
Key pillars of Hong Kong's economy include trading, logistics (e.g., trucks, airplanes), financial services (e.g., banking, insurance, investment), and producer-based and professional service industries (e.g., accounting, legal, medical, tourism).

High-quality, improving pillar industries attract much of Hong Kong's money and talented people.
This fosters expertise, trains talent, and enhances the quality of these industries.
The industries generate substantial income and purchasing power, enabling the development of the consumer market (e.g., retailing, entertainment).
The high income allows people to advance in social standing.

An over-reliance can lead to a monotonous economic structure.
Economic risks increase if one pillar experiences a downturn; an economic recession can affect the overall economy.
Limited opportunities for new industry development due to higher wages, increased rents, and difficulties for newer businesses.
Marginalization of workers with lower skills and education due to the high demand for those in the pillar industries, hindering their ability to earn a living.

Unemployment rate is the proportion of unemployed individuals in the labor force (aged 15 and above).
A strong economy usually results in a low unemployment rate, while a weak economy usually results in a high unemployment rate.
When the economy is strong, most people have jobs and more to spend, growing business profits and investment. This leads to increased GDP.
When the economy is weak, unemployment rises due to reduced business profits and investment, decreasing GDP.

Inflation refers to the prolonged increase in the prices of most goods and services.
The rate of inflation indicates the speed at which prices are growing.
The quality and quantity of goods and services indicate the standard of living.
The quality of life in Hong Kong goes beyond just the standard of living to include intangibles like freedom, human rights, and a clean environment.
Inflation that outpaces wage increases reduces the quality of life even if wages increase.

Hong Kong's small size and lack of natural resources make it reliant on capital flow.
Hong Kong allows for capital flow, attracting foreign investors.
Hong Kong's economy depends on producing goods and services and selling them to overseas markets.

Hong Kong's export-oriented economy is vulnerable to events occurring in other parts of the world (e.g., SARS, the 2008 global financial crisis, the 2020-2022 COVID-19 pandemic, and the US-China trade war).
These events can significantly impact Hong Kong's tourism, retail, and other industries, making investors hesitant.

Hong Kong's markets are better at allocating resources efficiently without government interference when they work correctly.
A well-functioning market keeps production costs and service delivery fast for those who can afford them.
Government intervention is needed in specific cases to prevent market chaos, reduce monopolies exploitation, and regulate income disparities.
Government intervention is also needed for supporting the underprivileged and creating jobs to achieve socioeconomic stability.