After 150 years as a British colony, Hong Kong’s sovereignty reverted back to the People’s Republic of China on 1 July 1997, and became the Hong Kong Special Administrative Region (SAR). The Government of the People’s Republic of China retains power over matters relating to defence and foreign affairs, while the SAR is fully “self governing” in virtually all other areas.
Since the early 1990s the Hong Kong economy has become inextricably linked to that of southern China. This has been a significant factor in the SAR’s continued prosperity. Due to its physical proximity to Mainland China, Hong Kong has developed into the main base for China operations over the years. It is very common for Hong Kong companies to be incorporated as the vehicle for such trade.
Moreover, the Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”) and a number of supplements have been signed between Mainland China and Hong Kong, providing preferential access to the Mainland market and reduced tariffs for the export of certain finished goods and services by certain enterprises and individuals in Hong Kong, whether locally or foreign-owned.
Hong Kong also remains a centre for trade throughout the rest of Asia, and has long been used by multinational companies as a regional base to manage their businesses in the Asia Pacific. It also provides an international gateway for Mainland companies wishing to explore financing opportunities, within or outside Asia.
There are many reasons for Hong Kong’s success, but probably the main reasons are as follows:
Free Economy
Hong Kong has a stable government which encourages free enterprise and prefers to rely on market forces, and is opposed to regulation or intervention unless deemed absolutely essential. Also, Hong Kong has a free press that is widely-owned, independent, and vocal.
Foreign Exchange Control
No form of exchange control exists in Hong Kong. There is no minimum requirement or restriction on foreign investments, nor is there any requirement to report or obtain approval for international transactions. Capital and profit can be freely remitted in and out of Hong Kong.
Legal System
Hong Kong has a respected, independent legal system that remains based upon that of England and Wales. Legislation is by locally enacted Ordinance. The fundamental principles upon which the law operates are to remain because they have been incorporated into the Basic Law of the Hong Kong SAR.
Tax System
Hong Kong has a simple tax system and low levels of taxation by international non-tax haven standards. There is no tax on dividends, no capital gains tax, no sales tax, GST or VAT, and no estate duty.
Banking System
Hong Kong’s financial services are of a high level and all the sophisticated banking services are available that one may expect in an environment that claims to be the world’s third major financial centre. Statutory requirements are laid down in the Banking Ordinance whilst the Monetary Authority is entrusted with the supervision of the industry.
Geographical Location
Hong Kong is located at the geographical centre of Asia. For many years Hong Kong relied on its excellent harbour and proximity to China. The position of Hong Kong has been strengthened from largely a manufacturing centre to an important global financial hub.
People
Hong Kong has a good blend of entrepreneurial skills and a stable, talented, adaptable and hard-working labour force. Businessmen are willing to diversify according to international market demands and react quickly to changing trends.
Use of English
English (in addition to Chinese) is an official language in Hong Kong and is widely used by the Government, legal, professional and business sectors.
Professional Services
A complete range of high quality professional services are available in Hong Kong. Most major banks, law firms, CPA firms and ourselves, as a licensed Trust & Company Service Provider, have expertise available to assist clients wishing to invest in or trade with China.
