ABSTRACT

This chapter analyzes the process, the characteristics, and the problems and prospects of Hong Kong’s economic integration with the Chinese Mainland under the framework of ‘One Country, Two Systems’ (OCTS). The first section covers the framework and the process of economic integration under OCTS. The second section analyzes the three prominent asymmetries in Mainland-Hong Kong economic integration, namely, asymmetry in level of economic development, in economic size, and in openness, as these asymmetries have important repercussions on Hong Kong that need to be carefully managed. The third section covers the evolution of integration in the goods, services, financial, and factor (labour and capital) markets, with emphasis on Hong Kong’s roles in international finance and in Renminbi internationalization. The fourth section covers the costs and benefits of economic integration for Hong Kong, and Part V discusses the roles of Hong Kong in China’s ‘Belt and Road Initiative’ and in the development of the Guangdong-Hong Kong-Macau Greater Bay Area. This chapter concludes with an assessment of the problems and prospects of deeper integration.