Hong Kong Company Registration
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1. Latest Developments
Hong Kong’s economy expanded by 2.1% year-on-year in real terms in the first quarter of 2015, moderated from 2.5% in 2014, which was mainly attributed to the slower global economic recovery weighing on exports of goods and the sluggishness in inbound tourism. Growth in private consumption expenditure fared relatively better to 3.5% year-on-year in the first quarter of 2015, from 3.2% in 2014. Investment expenditure, including machinery and equipment acquisition, gained 14.2% year-on-year in the first quarter of 2015, from a 6.5% decline in 2014. On the external front, total exports of goods saw only mild year-on-year growth of 0.4%, while exports of services slid by 0.6% year-on-year, in the first quarter of 2015, compared with 0.8% and 0.9% gains, respectively, in 2014. For 2015, Hong Kong’s external demand is expected to be constrained by the unsteady global economic environment and sluggishness of the advanced markets, but domestic demand will remain a stable growth driver. In the latest round of review in May, the government maintained its forecast of Hong Kong’s economic growth at 1-3% for 2015 as a whole.
Dragged by the visibly slower growth in tourist arrivals and weaker tourist spending, the value of retail sales, in nominal terms, dropped 2.3% year-on-year in January-March 2015, after a small decline of 0.2% in 2014. Yet the labour market conditions remain tight. The seasonally adjusted unemployment rate stood at 3.2% for February-April 2015, close to the lowest level in 17 years. Meanwhile, Hong Kong’s consumer prices rose 4.0% year-on-year in January-April 2015, after rising by 4.4% in 2014. Looking ahead, inflationary pressure should be contained in the near term, as the softening trend in global food and commodity prices should keep external price pressures in check, while local cost pressures will likely stay moderate.
In 2014, a total of 60.8 million visitors, equivalent to 8.4 times of the size of Hong Kong’s local population, were recorded, with those from the Chinese mainland accounting for 78% of the total. In January-April 2015, visitor arrivals to Hong Kong increased 3.9% year-on-year, after rising by 12% in 2014, while those from the Chinese mainland saw a stronger year-on-year growth of 6.1%, after rising by 16% in 2014. In 2014, total tourism expenditure associated to inbound tourism amounted to HK$359 billion, an increase of 8.5% from the previous year.
The four pillar economic sectors of Hong Kong are: trading and logistics (23.9% of GDP in terms of value-added in 2013), tourism (5%), financial services (16.5%), and professional services and other producer services (12.4%). On the other hand, the six industries which Hong Kong has clear advantages for further development are cultural and creative, medical services, education services, innovation and technology, testing and certification services and environmental industries, which together accounted for 9.1% of GDP in terms of value-added in 2013.
2. Budget and Government Initiatives
The Chief Executive, Mr C Y Leung, in his 2015 Policy Address delivered on 14 January 2015, unveiled new measures to boost the economy, increase housing supply and harness the potential of Hong Kong people. On the economic front, the government will continue to provide support to the pillar industries of trading, financial services, shipping, tourism and professional services, as well as emerging small industries with great potential. On housing, Mr Leung provided a comprehensive report on the concerted efforts being made to make available more land for housing and commercial development, and to achieve the government's 10-year housing target of 480,000 units. Besides, Mr Leung also announced a series of initiatives in poverty alleviation, elderly care, environmental protection, health care, education and youth development, and a new five-prong strategy to address the challenges brought about by demographic change, including plans to extend the retirement age, nurture local manpower, attract talent from outside Hong Kong and help women and the underprivileged enter the workforce.
In the 2015-16 Budget announced on 25 February 2015, Financial Secretary John Tsang proposed a number of support and tax measures, and offered a range of initiatives to reinforce Hong Kong's long-term economic development. These include encouraging start-ups and technological enterprises by expanding the Microfinance Scheme and injecting HK$5 billion to the Innovation and Technology Fund; promoting cultural and creative industries by adding HK$200 million to the Film Development Fund; and augmenting the competitiveness of the pillar industries by earmarking HK$23 million in the coming three years for offering IP consultation, manpower training and other services to SMEs.
The Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA) was firstly concluded in 2003. Thereafter, the two sides broadened and enriched the content of CEPA and signed ten Supplements between 2004 and 2013, expanding market liberalisation and further facilitating trade and investment for the economic cooperation of the two places. At present, all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff free under CEPA. Hong Kong service suppliers enjoy preferential treatment in entering into the mainland market in various service areas. There are also agreements or arrangements on mutual recognition of professional qualification.
On 18 December 2014, the Agreement on Achieving Basic Liberalization of Trade in Services in Guangdong was signed for implementation on 1 March 2015. The Agreement adopts a hybrid approach of positive and negative lists to set out the liberalisation measures in the Guangdong province applying to Hong Kong. The breadth and depth of liberalization surpass the previous measures for early and pilot implementation in Guangdong.
3. Investment Flows
Hong Kong is a highly attractive market for foreign direct investment (FDI). According to the UNCTAD World Investment Report 2014, global FDI inflows to Hong Kong amounted to US$77 billion in 2013, only after the three giant economies of the US (US$188 billion), Chinese mainland (US$124 billion) and Russia (US$79 billion). In terms of outflows, Hong Kong ranked fifth with US$92 billion, after the US (US$338 billion), Japan (US$136 billion), Chinese mainland (US$101 billion) and Russia (US$95 billion).
According to a government survey, Hong Kong's total stock of inward direct investment was estimated at US$1,344 billion at the end of 2013, some 4.9 times of its GDP in that year. One distinct feature of such direct investment was the indirect channelling of capitals from non-operating companies in tax haven economies. Against this background, British Virgin Islands, Netherlands and Bermuda accounted for 33.7%, 6.6% and 5.9% of the total stock of inward direct investment in 2013. Excluding tax haven economies, the Chinese mainland was the most important source of direct investment in Hong Kong (accounting for 31.9% of the total). Other major sources include the US (3.3%) and Singapore (2.2%). The majority of the stock of investment was related to service industries including investment and holding, real estate, professional and business services; banking; and import/export, wholesale and retail trades.
Latest Trade Performance
The world's 8th largest trading economy.The world's 15th largest exporter of commercial servicesHong Kong’s merchandise exports saw a year-on-year increase of 2.3% in January-April 2015, after expanding by 3.2% in 2014. For January-April 2015, Hong Kong's major export markets were the Chinese mainland, the US, the EU, ASEAN and Japan, which respectively made up 54%, 9%, 9%, 8% and 4% of Hong Kong's total exports. During the period, changes in exports to the above markets were +1.1%, +6.2%, -0.8%, +15.2% and -5.7%, respectively. Imports grew by another 0.3% year-on-year in January-April 2015, after increasing by 3.9% in 2014. A visible trade deficit of US$20.1 billion, equivalent to 12.2% of the value of imports of goods, was recorded in January-April 2015. Hong Kong's trade performance is in part affected by outward processing activities in Guangdong where the majority of Hong Kong companies have extended their manufacturing base. In 2014, 29.3% of Hong Kong's total exports to the Chinese mainland were related to outward processing activities; the figures were 15.5% for domestic exports and 29.5% for re-exports.
Hong Kong’s merchandise exports are expected to see a modest growth in 2015. However, deflationary pressure and faltering growth in the developed economies, as well as a number of issues related to the proliferation of trading blocs and simmering geopolitical tensions, remain as potential threats to the export outlook. On the supply side, Hong Kong exporters have to live with a challenging production environment on the Chinese mainland, especially in the Pearl River Delta, which include the rising input costs.
Economic Relations with the Chinese Mainland
The most important entrepôt for the Chinese mainland
The largest foreign investment source of the Chinese mainland
The key offshore capital-raising centre for Chinese enterprises
The Chinese mainland as Hong Kong's largest source of external investment
Hong Kong is so far the most important entrepôt of the Chinese mainland. According to the HKSAR government statistics, in 2014, 60% of re-exports were of China origin and 54% were destined for the Chinese mainland. According to China's Customs statistics, Hong Kong is the second largest trading partner of the Chinese mainland after the US, accounting for 8.7% of its total trade in 2014.
Hong Kong is the largest source of overseas direct investment in the Chinese mainland. By the end of 2014, among all the overseas-funded projects approved in the Chinese mainland, 44.5% were tied to Hong Kong interests. Cumulative utilised capital inflow from Hong Kong amounted to US$745.9 billion, accounting for 49.3% of the national total.
The Chinese mainland, on the other hand, is a leading investor in Hong Kong. According to the HKSAR Census and Statistics Department, the stock of Hong Kong's inward investment from the Chinese mainland amounted to US$428 billion at market value or 31.9% of the total at the end of 2013.
As of February 2015, there were 11 licensed banks and five representative offices, incorporated in Chinese mainland, operating in Hong Kong. Big lenders including the Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank have opened their branch operations in Hong Kong. Mainland commercial banks including Bank of Beijing, Bank of Dongguan, Bank of Bohai, China Guangfa Bank and Ping An Bank have representative offices in Hong Kong.
Hong Kong is also a key offshore capital-raising centre for Chinese enterprises. As of December 2014, 876 mainland companies were listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalization of US$1.9 trillion, or 60.1% of the market total. Since 1993, mainland companies have raised more than US$400 billion via stock offerings in Hong Kong.
In November 2014, Shanghai – Hong Kong Stock Connect was launched to establish mutual stock market access between Hong Kong and Chinese mainland. The development is a significant breakthrough in the opening of China’s capital markets as well as a landmark in the internationalisation of Renminbi, which has also illustrated Hong Kong's strategic position in China’s economic and financial reforms.
Hong Kong as a Regional Centre
A popular venue for hosting regional headquarters or representative offices
A leading telecommunications hub for the Asia-Pacific region
A premier offshore RMB centre
The world's busiest airport for international cargoes
One of the world's busiest container ports
The second largest private equity centre in Asia
The third largest stock market in Asia, the seventh largest in the world
The third largest foreign exchange market in Asia, the fifth in the world
Hong Kong is a popular venue for hosting regional headquarters or representative offices for multinational companies to manage their businesses in the Asia Pacific, particularly the Chinese mainland. Based on a government survey, as of June 2014, there were 3,784 regional headquarters (RHQs) and regional offices (ROs) in Hong Kong representing their parent companies located outside Hong Kong, increased 6% from five years ago. Of these companies, some 80% were responsible for business in the Chinese mainland, confirming Hong Kong's role as a conduit for doing business with the mainland. These companies came from diverse countries and sectors. The US had the largest number of RHQs/ROs in Hong Kong (21%), followed by Japan (19%), the UK (9%) and the mainland (7%). Most of the RHQs/ROs in Hong Kong were in I/E trade, wholesale and retail (52%). Others are in professional, business and education services (18%), finance and banking (12%), and transportation, storage and courier services (7%).
Hong Kong is an important banking and financial centre in the Asia Pacific. As at end-2014, there were 203 authorised institutions and 63 representative offices in Hong Kong. Total loans provided by the authorised institutions to finance international trade and other loans for use outside Hong Kong totalled US$69.6 billion and US$282.2 billion respectively. According to the Bank for International Settlements, Hong Kong is the third largest foreign exchange market in Asia and the fifth largest in the world, with the net daily turnover of forex transactions reaching US$275 billion in 2013.
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