Hong Kong Returns to Second in Global Competitiveness: A Test of Resilience for the Asian City-State Model

Hong Kong Returns to Second Place in Global Competitiveness: Resilience of the Asian City-State Model

In June 2025, the International Institute for Management Development (IMD) in Lausanne, Switzerland, released its World Competitiveness Yearbook, with Hong Kong leaping to second place among 70 global economies — its best ranking in seven years, behind only Singapore. The ranking is based on four dimensions: government efficiency, infrastructure, economic performance, and business efficiency, all of which Hong Kong maintained at a consistently high level. IMD specifically noted that Hong Kong’s rise “consolidates the dominance of Asian economies at the top of the rankings.”

The significance of this ranking extends far beyond short-term recovery. Against the backdrop of globalization restructuring, geopolitical frictions, and supply chain reorganization, the two city-state economies of Hong Kong and Singapore continue to occupy the top of the competitiveness pyramid, revealing the deep logic of contemporary global urban competition: institutional quality, infrastructure connectivity, and the resilience of the business ecosystem are surpassing scale advantages to become the core pillars of long-term competitiveness.

A Tale of Two Asian Cities: Structural Solidification of the Competitiveness Landscape

Hong Kong’s leap from seventh place in 2023 to second place this year is not an isolated event. Over the past five years, Asian economies have consistently occupied three to four seats in the top ten of the IMD competitiveness rankings, with Singapore and Hong Kong alternately leading. This phenomenon shows that, amid the general eastward shift of the global economic center of gravity, Asian city-states or regions, by virtue of their highly open markets, rule of law, efficient governments, and strategic geographic locations, have formed competitive barriers that are difficult for other large economies to replicate.

It is particularly noteworthy that Hong Kong’s ranking rebound has been achieved after experiencing social unrest, the impact of the pandemic, and external policy adjustments. The speed of its recovery reflects deep structural advantages: the common law system, free capital flows, a regulatory framework aligned with international standards, and its unique role as a “super connector” between China and the world. These elements cannot be replaced by short-term policies; they are decades of accumulated institutional capital.

Insights from Competitiveness Dimensions: Infrastructure and Government Efficiency as Anchors

In the IMD report, Hong Kong performed particularly well on the two indicators of “government efficiency” and “infrastructure.” This is not surprising: global urban competition has shifted from simply attracting investment to a contest of systemic support capabilities. Efficient digital governance, a well-established transportation and logistics network, stable energy supply, and transparent business regulations constitute the infrastructure ecosystem for long-term business operations.

Compared with large economies, Hong Kong and Singapore have shorter governance chains — the time lag between policy formulation and implementation is smaller, and the response to market changes is faster. This agility proved especially valuable during the post-pandemic recovery period. While other cities were still bogged down by bureaucratic procedures, Hong Kong quickly restored international flights, reactivated the convention and exhibition economy, and maintained the depth and liquidity of its financial market.

Hidden Concerns Behind the Ranking and Long-term ChallengesDespite the impressive ranking, Hong Kong still needs to confront deep-seated risks. First, there is the spillover effect of the global economic slowdown on trade and financial centers. As a small, open economy, Hong Kong is highly vulnerable to external interest rate cycles and geopolitical shocks. Second, its human capital structure is under pressure from aging and skill mismatches, particularly in the field of technological innovation, where Hong Kong has yet to develop an entrepreneurial ecosystem comparable to Shenzhen or Singapore. Moreover, while economic integration with the mainland brings opportunities, it also adds complexity to policy coordination—how to maintain the advantage of "two systems" under "one country" tests governance wisdom.

Singapore’s problems are more structural: bottlenecks in land and labor supply drive up costs, and over-reliance on foreign capital and immigration may trigger social tensions. The common challenge for both city-states is how to maintain openness while avoiding imbalances in social equity and spatial justice.