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Has Hong Kong’s ability to attract multinationals and expatriates declined over the past 20 years?

It has been 20 years since Hong Kong assumed its status as a Special Administrative Region (SAR) of the People’s Republic of China. The years since have seen its development interrupted by events such as the Asian financial crisis, Severe Acute Respiratory Syndrome (SARS), the global financial crisis and the Occupy protests. Despite all this, Hong Kong remains one of the most attractive destinations for companies who see Asia as part of their global business plan. Within Asia, there are plenty of competitors such as Singapore and China that vie with Hong Kong to entice companies hoping to establish or expand regional operations. A location’s attractiveness to foreign businesses and private investment is a well-debated topic within Asian media.

Residents of Hong Kong are often concerned about the territory’s competitiveness versus other locations in the region. Therefore, we wanted to use the 20th anniversary of Hong Kong’s establishment as a SAR within China to look at how Hong Kong’s attractiveness compares with 20 years ago and in relation to other regional competitors, vying to be the favoured destination of multinational companies and expatriates alike.


The attractiveness of a location is often subjective. However, our Location Ratings products are designed to give companies a tool to assess whether or not a relocating employee should receive an allowance to compensate them for moving to a given location and, if so, how much should be provided.

Comparing Hong Kong against three of its peers, Singapore still offers the best quality of living and it is the easiest location for an expatriate to adapt to. This was also the case 20 years ago. However, Shanghai and Beijing still sit behind Hong Kong in terms of living standards.

Has Hong Kong’s overall liveability declined?

According to our scoring system, the number of points awarded to Hong Kong has fallen gradually since 19981. This indicates that Hong Kong is an easier place for an expatriate to adapt to now than it was nearly 20 years ago. Using the points score that we awarded to each location in 1998 as the basis for comparison, the chart below shows how the scores compare now. A score below 100 indicates that points have fallen since 1998 and it is therefore easier for expatriates to adapt to life in the city.

Quality of living chart

Despite persistently high levels of air pollution, improvements have been seen elsewhere in Hong Kong’s quality of life. Even though Singapore remains the best location in absolute terms, its score is largely unchanged over the past 20 years. Therefore, the gap in terms of quality of living between the two locations has narrowed, which is good news for Hong Kong.

Back in 1998, the difference in quality of living between Hong Kong and both Beijing and Shanghai was considerable (as someone who lived in mainland China back in 1998, I can personally vouch for this). Since then, both mainland Chinese cities have witnessed immeasurable improvements relating to infrastructure, availability of goods and services, housing, utilities etc. As can be seen from the chart above, the total scores that we allocate to Beijing and Shanghai have fallen by approximately 25% and 30% respectively since 1998. This means that while Hong Kong is still seen to offer a better living environment than its Chinese peers, its comparative advantage against these cities in terms of quality of living has gradually reduced since the handover.


There are many factors which impact salaries offered to expatriates, such as the methodology used to calculate them, the employee’s location of origin, circumstances in the employee’s home location, cost of living differences and exchange rate movements etc. When assessing the relative wealth of an expatriate working in one country versus another, simple salary comparisons may not be adequate or meaningful if these factors aren’t also taken into consideration.

So, how do salaries of expatriates in Hong Kong compare?

Our MyExpatriate Market Pay Survey data shows that expatriates in Hong Kong have done relatively well in terms of the remuneration they receive. While salaries provided to expatriates in mainland China2 are higher than in either Hong Kong or Singapore, as our latest research shows, expatriates in Hong Kong are in a much better position in terms of the compensation they receive relative to 20 years ago, especially in comparison to their peers in mainland China and Singapore. When salaries are measured in local currency terms, the net salary (basic salary excluding bonuses and taxes) of a middle manager is 22% higher in 2016 than in 1997. Whereas average salaries have increased by just 10% in Singapore and have declined in mainland China over this period. Declining expatriate salaries in mainland China contrast sharply with rapidly-rising local salaries and are perhaps related to the lower location (hardship) allowances that need to be provided to staff as living conditions improve there.

MyExpat Market Pay chart

Cost of living

In terms of expatriate purchasing power, do higher salaries mean that assignees in Hong Kong are better off relative to 20 years ago?

The high rate of salary increases in Hong Kong between 1997 and 2017 may be partly influenced by the fact that many expatriates in Hong Kong receive cost of living allowances. As such, if the cost of living has increased in Hong Kong over the course of the past 20 years, there is likely to be a direct relationship with higher salaries.

Using the USA as the basis of our comparison (i.e. the home location of the expatriate), we can observe the cost of living indices for Hong Kong, Singapore and China3 since 1997. The chart below shows the rate at which the cost of living has increased for each location in comparison to the base period of 1997.

Change in cost of living

Has Hong Kong become more expensive for expats?

Back before the handover and the Asian financial crisis, Hong Kong was the most expensive of the three locations and has recently claimed the accolade of being the most expensive location in Asia, as our recent Cost of Living Survey showed. The Asian financial crisis triggered deflation in many economies and also the depreciation of most major Asian currencies, which explains the fall in the cost of living index for each location in the years after 1997.

While China and Singapore recovered relatively quickly, with their cost of living indices on a US base exceeding 1997’s levels in 2010 and 2011 respectively, it took until 2015 for the cost of living index for the United States to Hong Kong to return to the highs of 1997. All locations now have higher indices than in 1997, but the relative cost of living in China remains the highest of those in the sample. This, together with the fact that salaries are lower now than they were in 1997, doesn’t represent good news for expatriates currently assigned to China.


Finally, what about the cost of housing? Hong Kong remains the most expensive location for rental accommodation in the region using a three-bedroom apartment as the point of comparison4.

Are rental prices in Hong Kong higher than they were in 1997?

Despite rental prices in Hong Kong declining due to SARS (2003) and the global financial crisis (2008/9), rents paid to landlords in 2017 are significantly higher than they were 20 years ago. Since 2011, accommodation costs in Hong Kong have fallen again, but not by much. 

On the other hand, average rental prices in Beijing, Shanghai and Singapore remain below the levels seen in 1998, which is likely due to major increases in the supply of accommodation in these cities. Supply was significantly constrained in Shanghai in 1997 as the city was still in the planning stages of its development and districts such as Pudong hadn’t even been established.

How does Hong Kong measure up?

A lot has changed for expatriates based in Hong Kong and it is generally now a better place to live than it was 20 years ago. Living conditions have improved and while they may not be as good as in Singapore, the gap has narrowed - although the differences between Hong Kong’s and the mainland cities’ living standards have also lessened. Expatriate salaries have increased at a faster rate in Hong Kong than its competitors and, while the cost of living is the highest in the region, assignees in both Singapore and China have seen their living costs rise at a faster rate since 1997. However, housing costs in Hong Kong are significantly higher than they were 20 years ago - whereas expatriates based in Beijing, Shanghai and Singapore are now paying less for their accommodation.

Therefore, while it is good news for expatriates that their salaries are now more attractive versus 20 years ago than those of their counterparts in China or Singapore, higher salaries and housing prices contribute to more significant costs for employers. This may deter companies from relocating staff to Hong Kong and they might instead elect a cheaper alternative like China or Singapore. Additionally, companies may try to manage rising accommodation costs by restricting housing allowances offered to expatriates, as part of their overall benefits package, to shift some of the expense – which could lead to Hong Kong becoming a less compelling destination for expatriate personnel, especially if more generous housing allowances are offered elsewhere.

Rising assignment costs, combined with better living standards offered in Singapore and advancing standards in China, might mean that Hong Kong's ability to attract and retain multinationals and their expatriate staff could be called into question.

Editor's notes

Due to the extensive time period and range of products covered within this article, there are some variations between data comparisons.

Each section’s criteria differ slightly i.e. number of years compared and locations compared.

1. Location Ratings – This comparison is between 1998 and 2016 – 1998 is the earliest date for which historical data is available. 2017's data is available later this year. The locations compared are Hong Kong, Singapore, Shanghai and Beijing.

2. MyExpatriate Market Pay Survey – This comparison is between 1997 and 2016. 2017's data is available later this year. Only country-wide data is published so the locations compared are Hong Kong, Singapore and mainland China.

3. Cost of Living Survey – This comparison is between 1997 and 2017. The locations compared are Hong Kong, Singapore and China. China here is represented by the average cost of living of Beijing and Shanghai.

4. Accommodation Reports - This comparison is between 1998 and 2016. 2017’s data for locations in Asia is not yet available as they are due to be surveyed in September 2017. The locations compared are Hong Kong, Singapore, Beijing and Shanghai.

Additional survey information

ECA’s Location Ratings – Updated annually, this survey measures the quality of expatriate living conditions in over 470 locations around the world to arrive at a fair and consistent assessment of the level of difficulty the expatriate will experience in adapting to a new location. A series of factors are analysed and classified according to set scoring criteria. The individual scores from each category are then added together to provide an overall score for the location. Factors evaluated include climate; availability of health services; housing and utilities; isolation; access to a social network and leisure facilities; infrastructure; personal safety; political tensions; and air quality.

ECA's MyExpatriate Market Pay Survey – This looks at pay levels for expatriates around the world, including information on benefits, allowances, salary calculation methods and tax treatment. The results, free to participants, enable companies to benchmark their expatriates' actual salaries against the market.

ECA’s Cost of Living Survey – This survey provides the necessary information to ensure that an employee’s spending power is maintained when they are sent on international assignment, by calculating appropriate cost of living allowances to be applied to pay packages. Such allowances will be affected by differences in prices as well as exchange-rate movements between employees’ home and host countries.

ECA’s Accommodation Reports – This survey compares rental accommodation commonly leased by expatriate staff in over 230 locations worldwide, helping companies provide the right housing options as part of the overall compensation package for assignees. Many expatriates relocated by multinationals do not receive cash housing allowances, as housing assistance remains most commonly provided as a benefit in kind. Therefore, this point of comparison may be of more interest to employers.

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