Weak Dollar Makes HK More Expat-friendly

08 Dec 2011


Immigration News

Hong Kong is not terribly expensive to live in - if accommodation costs are excluded, that is.

And that, according to the latest global study targeted at businesses, has to do with the weak US dollar.

Hong Kong plunged in global and Asian rankings of the most expensive cities to live in and has been overtaken by Beijing and Shanghai, human resources consultancy ECA International found in the study.

It shows the most dramatic fall on the global scale - of 26 points from 32nd place last year to 58th this year, the biggest drop of any Asian city.

Tokyo tops the global chart, followed by Oslo. Singapore ranks 31st, Beijing 35th and Shanghai 41st.

In Asia, Hong Kong drops from sixth to ninth, after Tokyo and three other Japanese cities, plus Seoul, Singapore, Beijing and Shanghai.

But the survey, designed to help multinational companies calculate expatriate salaries, leaves out housing costs - factor them in and Hong Kong rises to second place.

"Hong Kong is pegged against the US dollar," ECA director Lee Quane said yesterday. "The weak dollar means the city is now cheaper than a number of other locations including Beijing and Shanghai, where there has been not only significant price inflation but [where there is] also [the stronger yuan]."

The survey compares the cost of a basket of consumer goods and services commonly purchased by overseas workers, including groceries, drinks, tobacco, clothing, electrical goods and meals out, in more than 400 locations worldwide.

Overall prices in Hong Kong rose more than 7 per cent in the past 12 months, 2 per cent less than the rise in Beijing and Shanghai.

"While the fall in ranking is good news for many companies who have international assignees in Hong Kong, sending staff members out of Hong Kong to the major mainland cities could become more expensive if allowances designed to protect assignees' purchasing power need to be increased," Quane said.

He said the survey did not take into account the cost of housing because multinational companies often provided housing as a separate staff benefit in kind.

China has seen fierce inflation in recent years, with an average 5.6 per cent increase in the consumer price index for the first three quarters of the year.

A pack of 10 imported Gala apples costs 80 yuan (HK$98) at Hualian supermarket in Beijing, yet is HK$20 in Hong Kong. A box of fresh pork chops sells for more than 30 yuan at Hualian, at least 10 per cent higher than at Wellcome or ParknShop.

Professor Zhao Xijun, an economist at Renmin University in Beijing, said one factor that contributed to the rise of mainland cities in ECA's rankings was the yuan's gain on the US dollar.

"If all the prices are compared in US dollars, surely prices in mainland cities will rise with the rising currency," Zhao said.

Hu Xingdou , an economist with the Beijing Institute of Technology, cited high logistics costs and taxation, which had increased product costs.

Another factor contributing to the rankings, Hu said, was speculative capital on the mainland.


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