Hong Kong has retained its title as the world's freest economy for the 22nd year in a row, according to the latest Index of Economic Freedom, even as rising political strife and civil discontent grip the financial hub.

The index—published annually by the Wall Street Journal and think tank the Heritage Foundation—judges economic freedom on four key pillars: rule of law, limited government, regulatory efficiency and open markets.

People in economically free societies earn incomes that more than twice the average levels in all other countries and they live longer too, according to the report released on Tuesday.

"Hong Kong is free because it has a better right to higher wages, longer lives, a better environment—all of that comes with economic freedoms," Ed Feulner, the think tank's founder, told CNBC, noting the city's transformation from a manufacturing-driven economy to one that's now 97 percent service-oriented.

Some of the 'freest' countries on the index were Asian Pacific (APAC) economies: Singapore came in second, with New Zealand at third and with Australia fifth. In fourth place, Switzerland was the sole non-APAC economy in the top five.