Hong Kong: Business Environment
Hong Kong offers an unusually stable and efficient business environment with the modern infrastructure and telecommunications that could be expected of the world's 9th largest economy. The territory's economy could rightly be described as the most laissez faire economy in the world. The government's policy is strictly non-interventionist.
Government controls and disclosure requirements on businesses are minimal, except for public limited companies. There are only minimal capitalization requirements for private companies and financial statements need not be filed if a company incorporates as a wholly-owned subsidiary in Hong Kong. Six month visas are normally granted to intending residents with employment, and holders of dependant visas (like spouses and children) are allowed to accept employment with no special consents. Hong Kong has no compulsory union membership and copyright laws essentially follow those of the United Kingdom, with Hong Kong a party to the Paris Convention.
Although a special administrative region of China the territory is a British common law jurisdiction which recognizes the concept of a trust. British and Hong Kong company and trust law are virtually identical and the tight secrecy, minimal corporate disclosure and loose administrative requirements that characterize some offshore island common law jurisdictions either do not apply or have little significance in the territory. In any event Hong Kong does not consider itself an offshore center in the traditional sense of the word. (For further information on companies and trusts see Forms of Company.)
Bankers, accountants, lawyers, and other professionals who serve multinational firms have thrived in a community of local firms that has become increasingly transnational since the opening of the Mainland to foreign trade and investment in the late 1970s. This deep-rooted local familiarity with the needs of international business makes Hong Kong an easy place in which to find joint-venture partners and to find expatriate professionals. Local staff can easily be recruited from local companies which have a ready familiarity with the dispersed operating needs of a multinational business.
Hong Kong is unsurpassed in the extent to which it brings local and overseas firms together into a single business community. The constant interaction between thousands of overseas firms and local businesses in a supercharged business environment generates growth opportunities for both sides in setting up international networks, entering new lines of business, finding new sources of supply and new markets and linking up with business partners from Hong Kong, China and elsewhere. As one local business executive observed: "For multinational firms which seek out and thrive from interaction with the local environment and local firms, Hong Kong is the Asian location without par."
According to the results of an annual survey released by Invest Hong Kong (InvestHK) and the Census and Statistics Department in October 2011, the total number of overseas and Mainland Chinese parent companies running business operations in Hong Kong has recorded its highest level to date, as, in particular, did the number of those operating regional headquarters.
By June 2011, the total number of foreign parent companies with operations in Hong Kong had reached 6,948 companies, a 5.9 per cent increase from 2010. Within that total, the number of regional headquarters was 1,340, an increase of 4.3%.
In terms of sectors, finance and banking demonstrated the most robust growth and, it was said, reinforced Hong Kong's status as a world-leading international financial centre. Finance and banking regional headquarters increased by 5% to 135, while local offices increased by 3% to 622.
With regards to country of origin, roughly half the parent companies came from four countries: the US tops the list with a total of 1,263 companies, followed by Japan with 1,085, Mainland China with 789 and the UK with 505.
Director-General of Investment Promotion, Simon Galpin, said: "Hong Kong is the perfect base from which to access Mainland China. At the same time, Mainland companies are also using Hong Kong as a springboard from which to go global."
"In the first half of 2011,” he added, “InvestHK assisted close to 200 overseas and Mainland companies to set up business in Hong Kong. This level of activity supports our experience on the ground where we are seeing an increasing number of smaller, high-growth companies from all over the world choosing Hong Kong as the base for their regional operations."
When choosing to set up RHQs, ROs or LOs, the top five factors in Hong Kong rated as most important were its simple tax system and low tax rate, free flow of information, corruption-free government, absence of exchange controls, and political stability and security.
Hong Kong is a relatively expensive jurisdiction. At the time of writing, professional charges for initial incorporation may be US$1,400; and the provision in the first year of a registered office facility, nominee shareholders, nominee directors and nominee secretary costs US$1,300. Thereafter annual running costs which include attendance to all statutory requirements, the provision of a registered office facility, nominee shareholders, nominee directors and nominee secretary stand at US$2,250 per annum. Annual audit, accounting and taxation services are not included in the annual running costs fee since they vary, are charged on a time cost basis and so must be negotiated and billed separately.
In a territory as densley populated as Hong Kong, housing and office stock is limited, and therefore remains comparatively expensive by international standards. After a slump in property values and costs in 2001-2003, in 2006 Hong Kong leaped up the global office occupancy costs league table and entered the top three most expensive office locations in the world, according to a survey by DTZ, the global property adviser.
DTZ's 2010 survey forecasts that Asia Pacific will experience the strongest growth in occupancy costs over the next four years as the region’s economic growth is expected to continue to surpass that in Europe and the United States. The region features three of the world’s top five fastest growing markets in terms of occupancy costs per workstation – Hong Kong, Guangzhou and Bengaluru, which are expected to grow by 8.82%, 4.84% and 4.36% respectively between now and 2013 – with Hong Kong predicted to emerge as the most expensive location in Asia-Pacific, as supply constraints drive increases in rents.