A U.S.-based public policy research institute says Hong Kong is the world's freest economy.

The former British colony, which became a Chinese territory in 1997, has ranked first in the Cato Institute's annual report on global economic freedom since the study was started 15 years ago.

Hong Kong Chief Executive Donald Tsang says the territory has remained true to the principles of free and open markets, such as strong fiscal discipline, low taxes, clean government and a level playing field for business.

Singapore, New Zealand, Switzerland and Australia rounded out the report's top five freest economies.

They were followed by Canada, Chile, Britain, Mauritius and the United States. The report says America's standing declined in part because of higher government spending and borrowing.

The report rates a nation's economic freedom in five areas — size of government, legal structure and security of property rights, access to sound money, international trade and regulation of credit, labor and business.

The Cato Institute is a conservative research organization “dedicated to the principles of individual liberty, limited government, free markets and peace.”