Why foreign entrepreneurs often choose Hong Kong as their business headquarters in Asia?
Hong Kong is a popular hub for international firms keen on setting up businesses in Asia. Its’ physical and
political proximity to China coupled with modern infrastructure, internationally accepted and transparent
legal system based on English law and lower tariff structure have rendered it into one of the world’s
leading financial and business centres.
According to an annual survey conducted by Invest Hong Kong and the Census and Statistics
Department, the region situated on the southern coast of China is sought after by multinationals and
inland companies looking to expand their business operations in East Asia. The survey identifies new
investment trends wherein international firms have made Hong Kong a focal point for their, both regional
and worldwide operations while inland companies from China have relocated here to benefit from
numerous business opportunities.
A versatile work culture adept in both English and Mandarin languages makes for easier transactions
saving companies time and translation costs in the process. Besides, the free floating currency of Hong
Kong dollar, the absence of good and services tax, and a flat profit tax rate of 17.5 percent for company
operations based in Hong Kong translate into hefty financial gains for multinational corporations. Also, the
Hong Kong based companies gain from the provision of re-invoicing.
Re-invoicing involves international trading between the buyer and seller companies through an
intermediary company based in regions that exempt tax on import and export processing. The companies
that want to trade goods and services from abroad to China or vice versa set up an intermediary company
in Hong Kong, which invoices the buying or selling price at higher than the original production costs. This
way they are able to show reduced or zero profit margins while at the same time masking the original
procurement costs. Reduced or zero profit margins as recorded by the intermediary company allow
it to retain maximum profit margins while minimizing the profit tax. The financial gains are substantial
especially for the foreign firms keen to trade in goods and services in Chinese markets.
What boosts their business strategy further is the special trade agreement between Hong Kong and main
land China. The bilateral free-trade agreement known as Closer Economic Partnership Arrangement
(CEPA) allows Hong Kong based businesses easy access and reduced tariff rates to sell goods in the
Chinese markets. Tariffs on 273 categories of goods including textiles, electronic and electric products,
jewellery and clothing have been exempted. Further, 90 percent of Hong Kong’s total export to China
has been waived off the tariff duty from year 2006. Even though China’s ascension to World Trade
Organisation (WTO) has warranted a string of trade liberalisation measures to allow business with other
WTO members Hong Kong enjoys special privilege in being allowed the first opportunity to capture
mainland China’s budding markets.
In addition the ongoing liberalization of various service sectors including infrastructure development,
housing, banking, logistics and commodities, and real estate promise newer opportunities for Hong Kong
based companies. Their business potential is enormous considering some of the advantages that Hong
Kong based companies enjoy in China are accrued due to its’ special relationship with China especially
since no such provisions are allowed by WTO in the long term. The ongoing inward investment in the
People’s Republic of China coupled with Hong Kong’s zero-tariff status will attract foreign companies
especially those selling service-sector based goods to establish and operate their headquarters from this
Last but not the least the vibrant and cosmopolitan culture of Hong Kong accommodates both local and
Western tastes. Living in the city is a pleasure for both local and expats as this southern port city of China
celebrates Chinese New Year, Dragon Boat racing and mid-Autumn festival with as much aplomb as
Christmas, Valentine’s Day and Halloween. Besides, an efficient transport network, rich night life and
cultural waterholes make it an attractive destination for international companies looking to set up their
business operations in East and South East Asia as well as for their relocating staff. This enhanced by
political stability, strong law and order, greater freedom of information, and availability of business and
professional support services makes living in Hong Kong equal to living in any other metropolis in the
GuideMeHongKong.com is a Hong Kong-focused portal that provides comprehensive, accurate and
current information to global business professionals and entrepreneurs about doing business, relocation,
and living in Hong Kong.
To learn more details about setting up a business in Hong Kong,
please refer to Hong Kong Company Registration Guide http://www.guidemehongkong.com/company/