The benefits of Hong Kong as a business hub
Hong Kong has long been recognised as a leading international finance centre, and recent developments have only reinforced this status. A highly dynamic city that serves as the perfect platform into mainland China and beyond, Hong Kong is the ideal place for business in Asia.
With all of Asia’s key markets less than four hours’ away, it is easy to understand why over 9,000 businesses and companies have made Hong Kong their home. Many of these have positioned their strategic functions in the city, including sales, operations, research and development (R&D), distribution, regional headquarters and corporate treasury centres.
With its strategic location, robust infrastructure and dynamic economy, Hong Kong offers unique advantages for businesses looking to expand in Asia. In this month’s Sovereign Report, we explain the benefits of Hong Kong as a business hub.
Resilience and Recovery
Hong Kong has faced significant challenges in recent years, but its resilience has been remarkable. The government has played an active role in the recovery, leveraging its fiscal reserves to invest in critical projects, enhance the innovation and technology ecosystem, and promote the mega event economy.
A key achievement was the issuance of HKD800 million in tokenised green bonds, solidifying Hong Kong’s position as a leader in green finance. The working population has also rebounded due to successful talent attraction initiatives, particularly through the Quality Migrants Admission Scheme.
This investment has paid off, with the city regaining its position as the top financial centre in the Asia-Pacific region in the Global Financial Centres Index (GFCI) this October. Hong Kong ranked third globally, behind New York and London, and its overall rating increased by eight points, the largest improvement among the top five financial centres.
Strategic Gateway to China
Hong Kong’s unique position as a Special Administrative Region of China makes it an ideal gateway for businesses looking to enter the Chinese market. Mainland China is a significant market for trade and for inward and outward investment, and Hong Kong is also home to the world’s largest offshore hub in Renminbi settlement. Businesses can easily enjoy a wide variety of Renminbi services on offer from banks and financial institutions.
Strengthening ties with mainland China, facilitated by agreements like the Closer Economic Partnership Agreement (CEPA) and the Guangdong-Hong Kong-Macao Greater Bay Area, which offers vast opportunities for collaboration and growth, has further bolstered economic cooperation. Hong Kong’s proximity to Shenzhen, known as the ‘Silicon Valley of China’, further enhances its appeal by providing access to a hub of technology and innovation.
The Stock Connect and Bond Connect initiatives have given investors in Hong Kong direct access to mainland China whilst further cementing the city’s status as an international finance centre. This will be followed by the implementation of the Wealth Management Connect, which will allow residents in Hong Kong, Macao and nine cities in Guangdong Province to undertake cross-boundary investment in wealth management products distributed by banks in the Guangdong-Hong Kong-Macao Greater Bay Area.
Strong Financial Infrastructure
With its strengths in banking, capital markets and asset management, Hong Kong provides an all-encompassing and high-quality financial platform for investors, financiers, asset managers, funds and financial institutions alike from all over the world. It is also a preferred location for corporate treasury centres.
As an international banking centre, over 70 of the largest 100 banks in the world have a presence in Hong Kong and over 29 multinational banks having their regional headquarters in Hong Kong. The city is a major regional fund management centre with a large concentration of international fund managers, advisory businesses and private banks. It is the largest international asset management hub in Asia, the largest cross-border private wealth management and hedge fund centre in Asia, and the second largest private equity centre after Mainland China in Asia.
Hong Kong Exchanges and Clearing (HKEX) operates a range of equity, commodity, fixed income and currency markets. HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant market.
Hong Kong’s financial markets operate under effective and transparent regulations that are in line with international standards. The principal regulators are the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Insurance Authority (IA) and the Mandatory Provident Fund Schemes Authority (MPFA). They are responsible respectively for regulation of the banking, securities and futures, insurance and retirement scheme industries.
Business-Friendly Environment
Hong Kong was ranked first in the 2024 ‘Economic Freedom of the World’ report issued by the Fraser Institute of Canada, which measures the degree to which people in 165 jurisdictions around the world are allowed to make their own economic choices.
The report, based on data from 2022, assessed five areas – freedom to trade internationally, regulation, size of government, legal system and property rights, and access to sound money. Hong Kong was ranked first globally in ‘openness to international trade’ and ‘regulation’, and third in respect of ‘access to sound money’.
With a streamlined process for registering a company, which typically takes 24 to 48 hours, entrepreneurs can enjoy low set-up costs, a low and simple tax structure, friendly immigration policies, and a supportive environment that fosters growth. Additionally, securing a Hong Kong work visa is straightforward, making it easier for attract the best talent to your business.
The city’s territorial tax regime is another draw. Businesses are subject to a two-tiered profits tax rate of 8.25% on the first HKD2 million of profits and 16.5% on profits above, but only profits that have a source in Hong Kong are taxable here.
In addition, Hong Kong does not levy VAT, capital gains tax, dividends tax, inheritance or gift tax, and does not impose withholding taxes on dividends and interest. Together with various targeted incentives, Hong Kong’s tax system makes it a highly attractive location for businesses.
Diverse Economy and Talent Pool
Hong Kong’s economy is diverse and highly developed, with key strengths in financial services, professional services, innovation and technology, FinTech, family offices, tourism and hospitality, creative industries, as well as transport, logistics and industrials.
The city has a rich talent pool and, with liberal immigration policies, a vibrant cosmopolitan lifestyle and abundant opportunities for career advancement, Hong Kong offers attractive prospects for skilled professionals and experts from around the world.
This cosmopolitan environment fosters innovation and collaboration, making Hong Kong a vibrant place to live and work. A variety of talent admission schemes are in place to attract talent and drive Hong Kong’s development as a high value-added and diversified economy.
Cultural and Lifestyle
Hong Kong is a global city that has attracted people from all corners of the world. Many are drawn to its compact size, vibrant lifestyle, beautiful scenery and flourishing international community. English is one of the city’s official languages along with Cantonese.
Beyond business, Hong Kong offers a rich cultural experience. From world-class events like the Hong Kong Sevens Rugby and the Art Basel international art fair to a wide array of dining options, the city is a melting pot of cultures and experiences.
Hong Kong has made significant investments in its broadband and fibre-optic infrastructure, so individual and businesses can enjoy reliable and secure communications throughout the territory.
Hong Kong is one of the easiest cities to travel around thanks to its abundance of low-cost public transport options including buses, ferries, taxis, trains and trams. And journeying further afield, it takes less than half an hour on the Airport Express to reach Hong Kong International Airport, one of the world’s busiest passenger airports, while the Guangzhou-Shenzhen-Hong Kong Express Rail Link has shortened the travelling time to Guangzhou to just 46 minutes.
Conclusion
Hong Kong’s strategic location, robust infrastructure and favourable business environment make it an ideal hub for companies looking to expand in Asia. Its unique position as a gateway to China, combined with its resilient economy and rich cultural offerings, ensures that Hong Kong continues to evolve and innovate and remains a top choice for businesses worldwide.
