Published on December 2, 2014
A former British colony and currently a special administrative region of China, Hong Kong is known as a place where “East meets West”. It has evolved from being a trading point for local fishermen and British sailors into a unique and dynamic economy.
Hong Kong’s capitalist economy, with its free trade and low taxation policies, and the proximity to the largest Asian market, makes it a lucrative place for multinational companies to establish their regional headquarters and for investors to explore their opportunities.
Hong Kong’s unique relationship with the Mainland allow it to serve as a facilitator and a bridge for both parties. Moreover, having three languages - English, Mandarin and Cantonese - fluently spoken in the city makes Hong Kong a valuable communication hub between East and West.
The Closer Economic Partnership Arrangement, a free trade agreement signed in 2003 between China and Hong Kong, has given Hong Kong privileges in accessing the Mainland market. For example, it permits Hong Kong to establish marketing and advertising facilities in its neighbor's market, making China the major income source of Hong Kong’s marketing export.
Hong Kong is located within a 4-5 hours flight of other key markets in the region. Its state of the art international airport occupies the Landau Island and is one of the busiest airports in the world offering nonstop flights to major cities in Asia-Pacific, North America, Europe, the Middle East and South Africa.
Hong Kong is incredibly business-friendly: it has been consistently occupying the top placements in numerous business rankings for over a decade. For instance, The World Bank Group evaluates and ranks countries annually on the ease of doing business based on different procedures involved in establishing a business abroad. Hong Kong demonstrated encouraging results for 2015: ranked first in building warehouses and obtaining necessary permits, second in protecting minority investors and trading across borders, fourth in tax payments and sixth in enforcing contracts. Overall, Hong Kong has been ranked third in the world two years in a row.
Other impressive recognition earned over years include being placed first in the top freest economies in the world by Index of Economic Freedom (20 years in a row), first in infrastructure by World Economic Forum (four consecutive years) and fourth among the most competitive economies in 2014 by IMD.
The telecommunications system is extremely well developed thanks to the government deregulation back in 1995 and the distribution of licenses to different parties. There is no foreign ownership restriction in this industry; therefore, the competition is very intense among mobile service carriers and Internet providers.
One of the main reasons why Hong Kong has such a welcoming business environment stems from the government’s adoption of the positive non-intervention policy. It was first introduced by the financial secretary John Cowperthwaite in 1971 who believed that letting the colony be (also know as the laissez-faire practice in macroeconomics) will help it reach its fullest potential. Furthermore, the low tariff and tax levels encourages creation of more businesses and the inflow of foreign investment. Hong Kong taxes are one of the lowest in the world. Both the income and property tax rates are 15%. They are applied only to incomes earned or paid out from Hong Kong and on land or buildings owned in Hong Kong. The profits tax rate is equal for foreign and local companies – around 16.5%; and there is no tax on capital gains.
There are four key industries driving the Hong Kong economy to its heights: Finance, Trading and Logistics, Tourism and Professional services. Together they contributed to $1,166.8 billion in value and employed 1,727,600 people in 2012.
Hong Kong is one of the major financial centers in Asia and in the world, providing great variety of financial and banking services and as well as being home to the Hong Kong Stock Exchange. The tourism industry, especially the inbound stream, is fueled predominantly by frequent visitors from China. The largest contributor to the Hong Kong economy is definitely the Trading and Logistics sector both as a value generator and an employer. The industry recorded moderate growth (2%) and earned 24.6% of the GDP in 2012 as well as generated jobs for 20.9% of the total workforce. Finally, Hong Kong, as the service capital of Asia, provides a wide array of professional and producer services, including world-class expertise in management consulting and legal advising. According to Hong Kong Monthly Digest of Statistics, the industry generated value added of $257.6 billion (or 12.8% of GDP) and provided jobs for 483,000 persons (or 13.2% of total employment) in 2012.
Other emerging industries which are expected to grow rapidly and make a positive impact on the region’s economy in the next few years include the creative industries, medical services, education services, innovation and technology and environmental industries.
The labour force in Hong Kong is generally in a good shape and enjoys favourable working conditions. The unemployment rate remained as low as 3.3% for the past two years, while the numbers of jobs have been steadily increasing. Working conditions in the region are quite good, although some benefits might seem not as appealing if compared to those offered in the European companies. Hong Kong employees usually work from 9 am to 6 pm and are entitled to at least one day off per week (some people work half a day on Saturdays), a minimum of seven days annual vacation and 12 statutory holidays. Women are allowed to take ten weeks maternity leave if they have worked for at least 40 consecutive weeks at the same workplace.
If you are an expat or a visiting intern in Hong Kong, familiarize yourself with some nuances of the region’s work culture to avoid potential business etiquette faux pas. In general, most multinational companies follow the Western business culture, while smaller enterprises are guided by Chinese traditions. Looking at the overall picture, people in Hong Kong are hard-working and punctual. Although only few Hong Kongese work overtime, they work diligently and strive to complete tasks promptly. Punctuality is highly valued, so try to arrive to meetings few minutes prior to the scheduled time.
Hierarchy is closely followed in Hong Kong, so make sure you pay respects to your senior members of the workplace by greeting them first and inviting them to sit at the head of the table. This might seem unusual for business people coming from other cultures, but it is quite common for Hong Kongese to engage in small talks before business meetings and exchange gifts between business partners. To be polite, you should hesitate to accept the gift and even refuse it first until your colleague or partner insists that you accept it.Apply now to our award-winning program to boost your business career!
Photo 2. based on Stocksnap.io, by Verne Ho