Stephen Phillips says increasing investment, growing number of company listings put to rest claims city is losing luster for global businesses
As businesses and entrepreneurs around the world seek post-pandemic growth opportunities, Hong Kong remains an excellent entry point to tap into Asia, the global growth engine led, of course, by China.
Hong Kong sceptics have said much about the city in recent years, but the reality I see and the facts are very different. Hong Kong's fundamentals as a premier international business hub are very sound and this is borne out by global investors' continued confidence in the city. Opportunities abound too. Hong Kong is very much open for business, and investors from around the world are raring to go.
Before looking at some of the growth opportunities, let us look at some facts. In 2020, inward investment in the city remained robust. According to a joint survey by Invest Hong Kong and the Census and Statistics Department, Hong Kong is home to some 9,025 international and Mainland companies, of which 1,504 use the city as a base for their regional headquarters. That is an increase of 10 percent and 6 percent over 2017, respectively. In my daily work, I see no evidence of the exodus that some commentators claim.
The origin of the investment is remarkably diverse. The city attracts leading companies from around the world, including from the Chinese Mainland, the United States, Europe and Asian markets. Notably, similarly sized Singapore is the fifth-largest source of investment, which says something about the important role Hong Kong plays for Singaporean companies.
Hong Kong's startup scene is equally vibrant and international in nature. The number of startups in 2020 was up an impressive 51 percent over 2017 standing at 3,360. What's more, 26 percent of co-founders hail from outside Hong Kong, with the Mainland, US, UK and Australia leading the way. Perhaps not surprisingly, the sectors provide us with an insight into the future shape of Hong Kong's economy - fintech, e-commerce, advanced logistics, biotech, data analytics, digitally delivered professional services and many more.
In my day-to-day work at Invest Hong Kong, I can share that I see very keen interest from so many fantastic, leading businesses and ambitious entrepreneurs from across the entire globe in using Hong Kong to capture opportunities in Hong Kong, the Chinese mainland and Asia.
Hong Kong's financial system and markets are performing robustly too, as one of the world's foremost international financial centers. The Hong Kong Monetary Authority reported a net capital inflow with Hong Kong's dollar exchange rate remaining in the strong half of the convertibility zone throughout 2020. Total amount of banking deposits rose in both 2019 and 2020, with 2.9 percent year-on-year growth in 2019 and a further 5.4 percent in 2020.
This has been seen too on the Hong Kong Exchange with 38 newly listed companies on the main board since Jan 1 this year. As of April 9, there were 2,554 listed companies in Hong Kong with market capitalization at nearly HK$53 trillion ($6.82 trillion).
So the facts speak for themselves. And, of course, facts are what businesses base their investment decisions upon.
But what of the business opportunities? Whilst the impact from the COVID-19 pandemic continues to restrict business travel around the world, now is a good time to plan and prepare for a much-anticipated - and needed - post-pandemic recovery. So why should businesses and entrepreneurs take a close look at Hong Kong?
At its core, Hong Kong offers a business friendly environment. A convenient geographical location at the heart of Asia. A competitive and simple tax regime. A free and open market, including free flow of information and capital. Businesses value too our predictable and robust environment in which to operate and manage risks. As the only common law jurisdiction in China, Hong Kong is a renowned center for both deal-making and structuring, as well as a preferred international legal and dispute resolution center.
All of this is underpinned under the "one country, two systems" principle, making Hong Kong the bidirectional business bridge between the Chinese mainland and the rest of the world. Importantly too for business and society as a whole, after the violence of 2019 Hong Kong has reverted to the safe, inclusive and vibrant society it has long been celebrated for.
As for opportunities, I like to picture an image of Hong Kong offering ever-growing circles of opportunity. Hong Kong itself, which is a mature and developed economy, has opportunities across many sectors to meet the needs of sophisticated businesses and discerning consumers. Hong Kong is also a great location to find partners from all around the world and particularly for the Chinese Mainland an attractive location to achieve global aspirations.
The innovation and technology space - a priority of the SAR government - is also going from strength to strength. Hong Kong has high quality R&D capabilities and facilities, with five universities ranked among the top 100 in the world. There is a wealth of opportunity and expertise in fintech, biomedicine, artificial intelligence, robotics, smart city solutions and much more. This makes Hong Kong an ideal location for technology transfer as well as application and commercialization of R&D. All backed by a world-class intellectual property framework. A number of funding schemes are also available for businesses setting up and growing in Hong Kong, especially for R&D activities. We also offer an enhanced tax deduction for qualifying R&D expenditure - amongst the most attractive worldwide.
Another new area of high potential is Hong Kong's growing role as a leading hub for family offices. A new, specialized team has just been set up to support family offices from around the world to establish a presence in Hong Kong. Hong Kong's leading international financial center status, the world-class professional services, high quality talent and access to a full range of investments from listed equities through to early stage investments in high-growth businesses are the key ingredients that make Hong Kong such an ideal location.
Looking to the future, Hong Kong's commitment to net zero greenhouse gas emissions by around 2050 combined with the country's target of 2060 will also create new opportunities to meet the shared challenges of climate change.
Beyond Hong Kong itself, the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area or GBA) is a major magnet for FDI. With its focus on innovation and financial services, GBA can be served from Hong Kong. Home to some 72 million of China's most affluent consumers, many of China's most innovative businesses and with first-class connectivity, the GBA is already around the 11th- or 12th- largest economy in the world. The 14th Five-Year Plan (2021-25) supports the further integration of Hong Kong and Macao into the development of the country, as well as the high quality development of the Greater Bay Area. This means that Hong Kong has an important role to play in the development of the Greater Bay Area as its international innovation and technology center. To help companies understand the exciting range of opportunities within the GBA, we have recently set up a dedicated team that will also work closely with our counterparts in the other 10 GBA cities.
Hong Kong is also an ideal base to tap into the markets of ASEAN and indeed many companies use Hong Kong as a regional headquarters to do that. A notable trend I see is the growing trade and investment flows to and from the GBA and ASEAN.
The widest opportunity of all is to tap into Belt and Road opportunities, using Hong Kong to set up and finance joint ventures in countries along the Belt and Road. Whilst the opportunities include infrastructure, the digital Silk Road is fast becoming a reality enabling digital delivery of products, and services in many fields.
In support of all of these opportunities, Hong Kong offers a comprehensive range of free trade agreements (FTAs), including the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) and an FTA with the economies of ASEAN. The Regional Comprehensive Economic Partnership (RCEP) is also expected to boost trade and investment flows within the region and Hong Kong has signalled its desire to join as a member.
For businesses that need funding, as one of the world's foremost international financial centers, Hong Kong offers everything from trade finance and working capital, through to green bonds and, of course, listing opportunities on the Hong Kong Stock Exchange. Furthermore, a wide array of hedging and risk management products and services, including renminbi investment and risk management products are widely available and used.
Let me conclude with a few key points. Hong Kong has an international, vibrant business environment. Companies can tap into a wide range of opportunities in the city, the Greater Bay Area, ASEAN and further afield. The comprehensive range of world-class legal, financial and professional services, as well as intellectual property protection, underpins and fuels business growth, whilst mitigating risks effectively. A pool of well-qualified, international-savvy talent brings insights and expertise to help companies create impact swiftly.
So if your interest has been piqued - and if you are looking to grow your business - I would suggest you have a discussion with any of our teams in more than 30 locations around the world.
The views do not necessarily reflect those of China Daily.
