The Fraser Institute recently released its annual “Economic Freedom of the World” report. While the US inched up one spot from its previous ranking to fifth-best, this ranking remains below its peak of third-best in 2000.

A first-time finding not seen in any of 27 prior years: Hong Kong fell from first place. Singapore nudged out Hong Kong for the top spot by 0.01 points. While that rating may seem minuscule, the implications of how both countries got here are not. 

The report, which shows comprehensive data from 2021, assesses economic freedom among nations across five major areas: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulations.  

According to the Fraser Institute’s Matt Mitchell, “The most important component of economic freedom…is the rule of law section…you need to be able to trust that the contracts you form and the property you acquire will be protected. We found that regulatory barriers and the rule of law matter more than taxes [for economic freedom].”

Given these guidelines, Hong Kong’s fall isn’t surprising.