Hong Kong: Investing

FDI in Figures

According to the “World Investment Report 2011," published by the United Nations Conference on Trade and Development, Hong Kong has risen to the third position in the world for foreign direct investments (FDI) in 2010 and kept its second place in Asia after China.

FDI flows, which have slowed down as an effect of the global recession, again began to grow in 2010, a trend which became more marked in 2011. This tendency will continue, due to the key role which the Asian reagion will play in global growth.

Hong Kong's attraction is due to a number of its strengths: its strategic position which makes the island the access gate to the Chinese market, its status as a free port, its simple and very incentive tax regime, its efficient infrastructure and legal security.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	59,621	52,394	68,904
FDI Stock (million USD)	816,184	936,375	1,097,620
Performance Index*, Ranking on 141 Economies	2	4	-
Potential Index**, Ranking on 141 Economies	5	-	-
Number of Greenfield Investments***	216	253	-
FDI Inwards (in % of GFCF****)	138.9	3.0	-
FDI Stock (in % of GDP)	379.4	433.2	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in %
China	36.9
British Virgin Islands	32.5
The Netherlands	7.1
Bermuda	6.5
USA	3.6

Main Invested Sectors	2010, in %
Investment Holdings, real-estate services and miscellaneous services	67.7
Banks and Deposit companies	18.2
Wholesale, retail trade and import/export	9.7
Transport, storage and postal services	4.9
Construction	2.3

Source: Hong Kong Census and Statistics Department - Last Available Data.

Form of Company Preferred By Foreign Investors: Limited companies, limited partnerships or sole proprietorships.
Form of Establishment Preferred By Foreign Investors: Subsidiary
Main Foreign Companies: News on foreign companies established in Hong Kong on the Invest in Hong Kong website, News columns and Events.
Sources of Statistics: Invest in HK

Why You Should Choose to Invest in Hong Kong

Strong Points: Hong Kong is an international leader in terms of export and as a services center. The country is also the bridgehead to one of the largest production bases in the world, China. Hong Kong has a sound economy and an efficient financial and banking system.
Favorable tax measures, the transparency of local institutions, political stability, freedom of information, availability of qualified human resources as well as its advantageous geographical location in Asia, all constitute to make Hong-Kong a preferred place for company establishment, as witnessed by the millions of companies registered on the territory. In 2003, the Capital Investment Entrant Scheme (CIES) was launched by the Hong Kong Special Administrative Region (SAR) Government. This scheme aims to facilitate the entry for residence for Foreign investors through capital investment into permissible assets without the need to establish or join in a business.
Weak Points: Hong Kong has few, yet consequential, negative points against setting up:
- High cost of real estate and work space (offices, shops,etc.);
- High cost of salaries, compared to other Asian countries such as Mainland China and India;
- The question of Hong Kong's future, especially when the town will be completely integrated with the People's Republic of China;
- The excessive importance of the financial sector.
Furthermore, on the whole of the 2008-2009 year, the Hong Kong stock market was highly disturbed. The stock market's main indicator fell by 45%, the lowest in 34 years.
Government Measures to Motivate or Restrict FDI: Hong Kong is a free territory for investments, which are in fact encouraged by the government with a favorable taxation policy and light legislation. Foreign companies can be set up freely, register their brands and the Director of the company doesn't have to be a citizen nor resident of Hong Kong.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Hong Kong: Hong Kong has signed bilateral agreements for investments with 15 countries.
To see the list of countries, click here.
To see the agreements, click here.
International Controversies Registered By UNCTAD: There is no registered case of controversy.
Organizations Offering Their Assistance in Case of Disagreement: ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: China is signatory of the MIGA Convention .

Country Comparison For the Protection of Investors

	Hong Kong	East Asia & Pacific	United States	Germany
Index of Transaction Transparency*	10.0	5.2	7.0	5.0
Index of Manager’s Responsibility**	8.0	4.5	9.0	5.0
Index of Shareholders’ Power***	9.0	6.3	9.0	5.0
Index of Investor Protection****	9.0	5.3	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Yes. Visit http://www.investhk.gov.hk/
Acquisition of Holdings: Acquisition is authorised, except in certain sectors of activity.
Obligation to Declare: A registration certificate should be requested from Inland Revenue Department (IRD). Foreign Investment Agency in the country keeps you informed about the authorisations necessary for the establishment.
Competent Organization For the Declaration: Companies Registry
Tax authority of Hong Kong (IRD)
Requests For Specific Authorizations: Only some sectors are closed for foreign investors, like communications or other areas of activity considered for public utility.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Leasing of the premises.
The Possibility of Buying Land and Industrial and Commercial Buildings: Yes
Risk of Expropriation: Expropriation can be possible but along with negotiations. They have a right to compensation.

Investment Aid

Forms of Aid: Hong Kong government encourages foreign investments, specially projects which are aimed to introduce new or improved products and services on the territory. However, there are no direct incentives for foreign investment because in the opinion of the government, Hong Kong already offers very attractive advantages, as its infrastructures, tax system, skilled manpower, a strategic position. Invest Hong Kong is the Agency for International investment promotion and provides plenty of information in this regard.
Free Zones: Hong Kong is a free port.

Investment Opportunities

The Key Sectors of the National Economy: The service sector has a very significant role in the economy of Hong Kong (88% of GDP).
Corporate Services, retail sale, information technologies, telecommunications, electronics and biotechnology, tourism, transport.
High Potential Sectors: Franchise, cosmetics, electronic components, architectural services, clean construction material, environmantal technologies, tourism.
Privatization Programs: Airport, social housings, social security
Tenders, Projects and Public Procurement: HK Government, E-Tender Box (ETB)
Tenders Info, Tenders in Hong Kong
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Legal services

Finding Assistance For Further Information

Investment Aid Agency: Invest in HK
Doing Business Guides: Deloitte's "International Tax and Business Guide" on Hong Kong
Hong Kong Commercial Guide 2010 - Buy USA

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