For centuries, Hong Kong has been the most pulsating and lively city in the world. Many people who have been wishing to live cheap but high quality lives have preferred Hong Kong to other cities. This explains its rich history as a prestigious international tourists’ destination. Hong Kong drew its prestige from its ability to provide unique life opportunities in the Asian region. Most people who have been working in Hong Kong have been earning high salaries that are low-taxed. Hong Kong harbors numerous international firms, which creates numerous employment opportunities for local citizens.
However, in the recent past this lavish and luxurious life has surprisingly changed. This is due to the increasing cost of living that has hit Hong Kong. Today, the cost of living in Hong Kong has become conspicuously higher as compared to other Asian cities such as Singapore and Dubai. In 2009 Hong Kong was ranked the third most expensive city in the world (Wright 71).
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This high cost of living in Hong Kong has been caused by global economic crisis, high rates of unemployment, increase in prices for basic products, high costs of housing as well as the decrease in revenue generated from tourism. Data from the Hong Kong Department of Labor indicates that many people today are unemployed. This led to decrease in disposable income of households. Today, most households in Hong Kong live on less than a dollar per day (Szczepanik 138). Hong Kong has experienced a steady increase of inflation rates since 2005. According to Szczepanik, inflation rates hit four pecent in 2009 (166). The prices for commodity goods have also tremendously increased.
Additionally, the government of Hong Kong raised income taxes to approximately 17 percent. This implies that households have to contribute a large portion of their income to tax authorities. Consequently, they are left with smaller amount of money to use for domestic consumption.
Furthermore, Hong Kong’s tourism business greatly shrank due to global economic crisis. This resulted into reduced foreign revenue earned from tourism businesses. Hong Kong has also been suffering from persistent and recurring pollutions due to high number of industries. Most industries and firms have thus opted to move to Singapore. This outflow of investment capital has led to decrease in the gross domestic product (GDP) in Hong Kong.
An economic survey that was carried out by Alexandra Columbus in 2009 revealed that consumer goods and services cost approximately 6 percent more in Hong Kong than in Singapore (Columbus 62). Additionally, basic amenities such as healthcare, electricity, and water have become more expensive. It was also revealed that the high cost of living has been facilitated by the weak Hong Kong currency which became less competitive in international foreign exchange markets. This reduced the purchasing power of Hong Kong citizens. It also negatively affected foreign trade by making imports from foreign countries more expensive.
Recommendations for Finding Solutions to High Cost of Living
In order to help in controlling the increassing cost of living in Hong Kong, the government should take appropriate measures to curb inflation rates as well as increase in prices. Through the Hong Kong Monetary Authority (HKMA), appropriate discretionary monetary policies should be developed and implemented to help in reducing macroeconomic and financial imbalance in Hong Kong’s economy. Adequate economic analysis should be performed and appropriate corrective measures taken to prevent further increase in unemployment rates.
The government should effectively control measures to curtail pollution rates as well as introduce investment incentives such as tax exemptions to attract more potential investors. It should aim at making Hong Kong an attractive business hub. In my view, increased investments would imply increase in employment opportunities in addition to economic growth and development hence increased gross domestic product (GDP).
Last but not least, the Hong Kong Monetary Authority should maintain a stable exchange rate for the Hong Kong dollar. It should implement appropriate fiscal policies that would increase the value of the dollar in international foreign exchange markets. It should also adopt prudential supervisory policies to curb and regulate inflation rates and changes in prices of basic commodities such as food and housing.
In conclusion, I would recommend the Hong Kong government to take appropriate measures to lower the cost of living as soon as possible before it reaches uncontrollable level. The government should not just watch as its citizens are battling hardships during these unstable economic times.