The territory faces a period of intense political strain in 2015-19. The government's failure to address public concerns about growing social inequality and the high cost of living (especially for housing) will fuel a row over electoral reform. This pits those calling for full democracy against the territory's business and civil service elites. The latter are allied-not always comfortably-with a central Chinese government that refuses to renounce its ultimate control over the local political environment. Against this background, electoral reforms that would allow the chief executive to be directly elected by Hong Kong's people in 2017, but only from candidates approved by a committee controlled by the Chinese government, are likely to fail. The row over democracy will impede efforts to advance reforms in other areas, such as healthcare financing.

Hong Kong-highlights 7

Political outlook 7

Demographic outlook 7

Business environment outlook 7

Economic outlook 8

Market opportunities 8

Long-term outlook 8

Fact sheet 9

Political outlook 10

Political forces at a glance 10

Political stability 11

Political and institutional effectiveness 12

Election watch 13

Key players to watch 13

International relations 14

Demographic assumptions 15

Business environment outlook 17

Hong Kong's business environment at a glance 18

Macroeconomic environment 18

Policy towards private enterprise and competition 20

Policy towards foreign investment 21

Foreign trade and exchange controls 22

Taxes 22

Financing 23

The labour market 24

Infrastructure 25

Economic forecast 26

Policy trends 26

Fiscal policy 26

Monetary policy 27

International assumptions 27

Economic growth 28

Sectoral trends 28

Inflation 29

Exchange rates 30

External sector 30

Foreign direct investment in Hong Kong 31

Market opportunities 33

Market outlook 33

Long-term outlook 36

The long-term outlook 36

Methodology for long-term forecasts 39

Data summary 41

Data sources and definitions 46

Guide to the business rankings model 47

Indicator scores in the business rankings model 48

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