Entering the Hong Kong Market
Hong Kong Market
Foreign companies who wish to expand into Hong Kong will be met with world-renowned financial sectors, a highly educated and multicultural workforce, competitive tax incentives, and exceptional ease of business in company registration.
However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Starting a Business in Hong Kong
Hong Kong’s geographical position benefits from international access to diverse marketplaces in Asia. With a robust infrastructure, and reputable telecommunications systems, this creates an attractive environment for any business owner who seeks to expand their business.
To start a business in Hong Kong you must go through a company registration procedure, which is straightforward and designed to be executed easily. These steps can be done online or in person. The necessary steps to start a business in Hong Kong include:
- Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements. Common company types include:
– The Private Limited Company
– The Public Limited Company
– The Company Limited by Guarantee
– a branch office
– a representative office
- Choose a company name – can be in English (must end in Limited), traditional Chinese, or an English and Chinese name (but the combination of English and Chinese characters is prohibited).
- Appoint a company secretary.
- Obtain a business address in Hong Kong.
- Prepare the appropriate registration documents and have them translated to Chinese or English.
- Notarize and legalize the registration documents at a notary’s office.
- Confirm your company name and register your company at the Company Registry.
- Receive a Certificate of Incorporation.
- Register with the Inland Revenue Department and obtain a Business Registration Certificate, which includes the company’s Tax Identification Number.
- Open a corporate bank account.
- Apply for any additional permits or licenses (if required), within a month of incorporation.
Expanding into Hong Kong
Foreign companies wishing to expand into Hong Kong will be swept into a formidable economy with a multinational and multilingual talent pool, and attractive administrative and labor costs – which is provided to all companies that enter their market.
The country’s position offers access to trade in the East, as well as a formidable infrastructure and a cultural mix of eastern and western-oriented business environments.
Hong Kong boasts a strong and well-regulated financial sector, as well as robust tourism, production, logistics, cultural, and creative industries. Hong Kong is a business hub of Asia, with the continent’s key markets less than four hours’ away. This ease of access and proximity to these major markets make Hong Kong an ideal place to set up a company’s base.
These industries are abundant for international expansion, but they can also be expanded locally into Mainland China.
Business strategy in China places significance on regional advantages, so it is important to be aware of every region’s benefit, and how they can be most beneficial for your business. A city’s economic classification, as well as access to infrastructure, are also important to take note of when considering business expansion in China.
Popular business locations and tourist destinations include Shanghai, Qingdao, Shenzhen, Guangzhou, Tianjin.
Hong Kong Business Facts
- Capital City – City of Victoria
- Population – 7.5 million
- Cities – Kowloon, Tsuen Wan New Town, Tuen Mun New Town, Tai Po New Town, Aberdeen Harbor, Peng Chau, Kwun Tong, Lei Yue Mun, Sok Kwu Wan
- Official language(s) – English, Chinese
- Economy/GDP (2020) – $341 billion (45th)
- World Ranking (Ease of Doing Business) – 3rd (2020)
- Leading sectors – textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches, clocks
- Main exports – electrical machinery and appliances, textiles, apparel, watches, clocks, toys, jewelry, goldsmiths’ and silversmiths’ wares, other precious and semi-precious materials.
- Main imports – raw materials, semi-manufacturers, consumer goods, capital goods, foodstuffs, fuel (mostly re-exported)
- Main trading partners – China, United States, Japan, the United Kingdom, and Taiwan.
- Government – Devolved executive-led system within a socialist republic
- Currency – Hong Kong Dollar (HKD/HK$)
Advantages and Challenges of the Hong Kong Market
The Hong Kong market has a variety of significant advantages:
- Competitive tax system: Hong Kong benefits from business-friendly low-tax regimes, as well as one of the most competitive rates in Asia. Companies in Hong Kong may also benefit from tax exemptions from gains received from outside the country.
- Free economy and trade: In 2019, the Heritage Foundation recognized Hong Kong as the freest economy in the world, due to its trade and monetary freedoms combined with its government’s integrity and transparency.
- High-quality education: Hong Kong is home to 22 award-winning higher education institutions and has various admission schemes in place to attract world-wide talent and diversify the economy.
- Language: English is the favored language for doing business in Hong Kong, and most local are multilingual, with knowledge of Cantonese or Mandarin.
- Ease of Business: Hong Kong is currently ranked 3rd in the word for Ease of Business by the World Bank Report.
- Logistics: With high-quality infrastructure by air, sea and land, Hong Kong has access to trade in Asia, only taking 5 to 8 hours to get to any country in the area.
- Telecommunications: Hong Kong also has one of the fastest hotspots and broadband speeds worldwide.
The biggest challenge facing the Hong Kong market currently is the effects of COVID-19, like many other nations in Asia and around the world. Other challenges also include inequality, poverty levels, and unemployment levels due to COVID-19. But these challenges are being tackled by the government with necessary reforms.
Limited Company / Subsidiary or Branch in Hong Kong?
A subsidiary established in Hong Kong is considered a legal separate entity from the parent company, with independent administration and management, providing freedom explore the local market and create international credibility.
A branch, however, does not have any independence from the parent company, but it is taxed and reported similarly to resident entities, and is limited in its commercial activities.