Hong Kong has a population of over 7 million people and was a British colony until 1997. It has a free market economy and low tax rates. Some of the key industries attracting foreign investment are financial services, trading and logistics, tourism, and professional services. Hong Kong has simple business registration procedures and encourages foreign direct investment through its political stability, rule of law, and low taxes. Its strategic location and world-class infrastructure also make it attractive for businesses.

1. HONG KONG SPECIAL
ADMINISTRATIVE
REGION

2. Group Members
 ARCHIT JAIN
ST20023148
 KURNIKA GUPTA
ST20015634
 NIKHIL CHATURVEDI
ST20028708
 YUSUF ALI
ST20028751

3. Today’s Menu

History & Features of Hong Kong

PESTEL factors

The Cultural environment

Setting up a new business in Hong Kong

Imports, Exports and Trade Barriers

Tax structure

Foreign Direct Investment (FDI)

Key sectors attracting foreign investment

Why Hong Kong?

4. History & Main Features Of Hong Kong

Hong Kong is positioned at the mouth of the Pearl River Delta on the coast of
southern China.

Hong Kong was formed in the year 1842 and became a part of British colony.
Handed back by the British in the year 1997.

The population of Hong Kong was 7.072 million in 2011 out of which 95% are
Chinese & rest 5% percent are non-ethnic Chinese.
 Hong Kong acts as a supply chain connection between China & Rest of the
World.


Currency of Hong Kong is HK Dollar ($).
1 HK$ = 0.08 £ (United Kingdom Pound)
= 0.12 $ (United States of America)

5. Consistent growth since past 2
decades with GDP reaching $243.7
billion in 2011

6. EXTERNAL
ENVIRONMENT
POLITICAL
LEGAL
ECONOMIC
ENVIRONMENT
AL
SOCIOCULTURAL
TECHNOLOGI
CAL

7. PESTEL ANALYSIS

Political section on Hong Kong provides inputs about the
political system, key figures in the country, and governance
indicators.
 Economic section on Hong Kong outlines the economic story
of the country to provide a balanced assessment on core
macro-economic issues.
 Social section on Hong Kong enables understanding of
customer demographics through the income
distribution, rural-urban segmentation and centre of
affluence, healthcare and educational scenario in the
country.

8. Contd..
 Technological section on Hong Kong provides strategic inputs on
information communications and technology, technological laws and
policies, technological gaps, patents data and relevant laws.
 Legal section on Hong Kong provides information about the legal
structure, corporate laws, business set-up procedures and the tax
regime.

Environmental section provides information on environmental policies
in Hong Kong and the performance in terms of important
environmental indicators.

9. POLITICAL
RELATIONSHIP
Favourable political relationships:
 Foster stable business environments
 Increase international cooperation in many areas
 Lead to increase business opportunities and lower
risk

10. CULTURAL ENVIRONMENT

11. LANGUAGE
 The official languages in Hong Kong are Chinese
and English blending cultures of East and West
 Every well-educated person in Hong Kong must
command Cantonese, Putonghua and English
fluently

12. CUSTOM
 The local Chinese are mainly living with the
traditional Chinese principle
 The Hong Kong spirit means hard working, facing
new challenges, high degree of adaptability and
globalization.
 In weekends, people of Hong Kong like family
gathering or yum cha, doing exercise, watching
television, etc.

13. RELIGION
 Hong Kong people are very religious. Different religions
like
Buddhism, Taoism, Protestant, Catholic, Muslim, Jew, Hin
dus and Sikh prevail.
 Buddhism is followed by about 90% of the total
population
 Traditionally, because of its early role in fishing, many
Hong Kongers believe in Tin Hau, the protector of
seafarers.
 Christmas and Easter are still stipulated as official
holidays.

14. EDUCATION
 The education system has been maintained in Hong
Kong nowadays, which is quite British with local
properties
 At the higher education levels, both British and
American systems do exist
 The University of Hong Kong, the oldest institution of
tertiary education, has traditionally been based on
the British model

15. Setting up a new business

16. PROCEDURE:
 Step 1: Application for Establishment
 Step 2: Forward the application to MOFCOM-
 Step 3: Application for Registration

17. CONSIDERATIONS FOR
FOREIGN INVESTORS
 Foreigners are free to be the sole directors and
shareholders of a Hong Kong company.
 There are no local resident requirements.
 Although their is no requirement to be physically
present at the time of company registration, physical
presence may be required for the purpose of opening a
bank account, depending on the bank chosen.

18. CAPITAL
REQUIREMENTS
 The minimum registered capital of a limited liability company is
Rmb30,000 while that of a joint-stock limited company is Rmb5 million.
 The minimum registered capital of a foreign or JV bank is Rmb300
million worth of freely convertible currencies
 The minimum registered capital of a JV international freight forwarding
agency is US$1 million;

19. IMPORT & EXPORT

20. Trade Benefits
 Hong Kong is a major international financial centre
 It features a free trade economy with low taxation
 Lesser intervention of the government
 HK is a full time member of WTO and Asia Pacific
Economic Cooperation forum
 The government has signed a CEPA, a free trade
agreement with China.
 The corner stone of HK’s free trade approach is a
strong and credible multilateral trading system.

21. Procedure for ImportExport
 Cash in Advance

22.  Documentary Credit

23.  Documents against Payment

24.  Open Account

25. Hong Kong Export
Commodities
 Electrical machinery and appliances
 Textiles and apparel
 Footwear
 Watches and clocks
 Toys and Plastics

26. Export Partners
 China 48.5%
 US 12.8%
 Japan 4.3%
 EU 8.0%

27. Hong Kong Imports
Commodities
 Raw materials and semi – manufactures
 Consumer goods
 Capital goods
 Food stuffs
 Fuel

28. Imports Partners
 China 46.6%
 Japan 9.8%
 Singapore 6.4%
 Taiwan 6.4%

29. Source: http://bso.hktdc.com/bso/BrokerServlet

30. Source: http://hong-kong-economy-research.hktdc.com/businessnews/article/Market-Environment/Economic-and-Trade-Information-on-HongKong/etihk/en/1/1X000000/1X09OVUL.htm

31. TAX STRUCTURE

32. PERSONAL INCOME TAX
RATE
NET CHARGEBLE
INCOME (HKD)
RATE
0-40,000
2%
41,001-80,000
7%
80,001-120,000
12%
ABOVE 120,001
17%

33. TAXATION
The principal sources of revenue to the Hong Kong Government
(apart from revenue from the sale of government land) are:
 Salaries tax;
 Profits tax;
 Property tax; and
 Stamp duty.

34. SALARY TAX
 There is no capital gains tax, no dividend tax and no
inheritance tax in Hong Kong.
 Hong Kong follows a territorial principle of taxation. Individuals
are taxed only on income that has been “earned in Hong
Kong”.

35. PROFITS TAX
 An individual carrying on trade, profession or
business in HK is chargeable to profits tax
 Profits sourced outside HK are not taxed in HK even
if remitted to HK
 The rate of profit tax is 16.5% for corporations and
15% for taxpayers other than corporations

36. PROPERTY TAX
 Property tax is charged at the rate of 15% of net
assessable value of any land or buildings in HK
 Corporations carrying on business in HK can elect to
be exempted from property tax

37. STAMP DUTY
 Leases of property not exceeding one year - 0.25%
of the total rent payable over the term of the lease
 Leases of property exceeding one year but not
exceeding three years - 0.5% of the average yearly
rent

38. TAXABLE BENEFITS
 Accommodation and housing allowances
 Meal allowance
 Education benefits for children
 Company gifted car
 Transport allowance
 Holiday journey allowances
 Share rewards and share options

39. THE TAX SYSTEM
 Low rate optional flat tax of 16% on personal income
 No Pay-as-you-Earn in HK
 Corporate income tax is at a flat rate of 17.5%
 No payroll taxes in HK
 No death tax in HK
 HK budget has a budget surplus and a very little
government debt

40. TAX SYSTEM GOOD?
YES..HERE’S WHY
 Low level of taxation and public spending
 Simplicity
 Economic prosperity
 Low, flat rates of tax
 Generous allowances
 Scheduler structure
 Corporate profits and dividends

41. FOREIGN DIRECT
INVESTMENT
(FDI)

42. FDI IN HONG KONG
 FDI flows in HK exceeded US$83 billion in 2011, an all
time high (World Investment Report, 2012)
 FDI stock remained stable at US$1.14 trillion in 2012
as compared to US$1.09 trillion in 2010
 Globally, HK ranked 4th in FDI inflows after the
US, CHINA and BELGIUM respectively

43. LAW & POLICY
 The Hong Kong government encourages foreign investment
 Itplays an important part in building Hong Kong as an
international financial centre
 It supports a free market economy and adopts a low
interference policy.
 There is no investment approval procedure directed
specifically towards foreign investors.

44. Contd..
 Hong Kong’s economy scored 89.9%, making it the freest
economy in the world.(Index of Economic Freedom, 2012)
 The two exchanges, namely, the Stock Exchange of Hong
Kong Limited &the Futures Exchange of Hong Kong Limited
are currently owned and operated by Hong Kong Exchanges
and Clearing Limited (HKEx)

45. ATTRACTING THE
FOREIGN INVESTMENT
Factors that have been identified are:
 Rule of law and protection of property rights;
 Free flow of information;
 Low taxation and a simple tax system;
 Acorruption-free government;
 Absence of exchange control; and
 Effective communication, transport and other infrastructure.

47. Source: UNCTAD; for further information on data and
methodology, see www.unctad.org/diae.

49. INDUSTRIES IN HONG
KONG

50. KEY INDUSTRIES OF HONG
KONG
Four Key Industries in Hong Kong are:
 Financial services,
Trading and logistics,
Tourism, and
 Professional and producer services

51. FEATURES
 The Four Key Industries in the Hong Kong economy
generated value added of HK$1,113.1 billion and
employed 1 703 600 persons in 2011.
 The share of the total value added of these industries in
Gross Domestic Product (GDP) was 58.5% in
2011, higher than that of 57.8% in 2006.

52. Contd..
 The trading and logistics services industry is the largest
among the Four Key Industries, in terms of both value
added and employment
 Being an important global business hub, professional
services and other producer services in Hong Kong
together generated value added of HK$235.9 billion and
provided jobs for 469 400 persons in 2011.

53. Value added & Employment in
key industries
http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099

54. DEVELOPING
INDUSTRIES
Emerging industries are:

Cultural and creative industries,

Medical services,

Education services,

Innovation and technology,

Testing and certification services and,

Environmental industries,
These industrieshave been identified asenjoying advantages for further development.

55. Value added and Employment in
developing industries
http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099

56. WHY HONG KONG??
 Strategically located for business in Asia
 Low and simple tax regime
 International, transparent and efficient
 World-class business infrastructure
 Easy recruitment of skilled staff
 Government support for companies

57. Contd..
 The world’s freest economy
 The world’s most competitive economy
 The world’s most services-oriented economy
 The world’s second highest per capita holding of
foreign exchange reserves
 The second largest source of FDI in Asia after Japan
 The second largest recipient of FDI in Asia after
China

58. Contd..
 <http://www.youtube.com/watch?v=d9m_ILu7rH0>

59. THANK YOU!!