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HONG KONG: FOREIGN INVESTMENT


flag Hong Kong HONG KONG: FOREIGN INVESTMENT




In this page: FDI in Figures | What to consider if you invest in Hong Kong | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 


FDI in Figures

According to the 2018 World Investment Report released by UNCTAD, Hong Kong received USD 104 billion in FDI in 2017, 11 percent less than in 2016. Hong Kong is a hub for foreign MNEs' regional headquarters, and was affected by the fluctuation of intracompany loans in 2016 and 2017. However, despite two consecutive years in which FDI flows are down, the country is the 3rd largest flow recipient in 2017, behind the United States and China. In Asia, China, Hong Kong, Singapore, India and Indonesia captured in 2017 about 4/5 of inflows. The stock of FDI has increased by 21% between 2016 and 2017, reaching nearly $ 1,970 billion. Hong Kong is also one of the largest providers of FDI in the world.

The main investing countries in 2017 are China, the British Virgin Islands, the Cayman Islands, the United Kingdom, the Netherlands, the United States, Bermuda and Japan. The vast majority (80%) of investments are intended for financial activities: holding, real estate, finance, insurance, banking etc. Trade, construction, information and communication are the other sectors attracting FDI in 2017.

The country is attractive due to several strong factors: its strategic position (it is a gateway to the Chinese market), its status as a free port; its simple tax system that provides many incentives, its good infrastructure and judicial security. According to the Doing Business 2018 ranking issued by the World Bank, Hong Kong ranks 5th out of 190 countries in business climate.

 



Foreign Direct Investment201520162017
FDI Inward Flow (million USD)174,353117,387104,333
FDI Stock (million USD)1,591,6271,626,0131,968,645
Number of Greenfield Investments***199205203
FDI Inwards (in % of GFCF****)251.6156.6n/a
FDI Stock (in % of GDP)514.4496.1n/a

Source: UNCTAD, Latest available data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.




 

FDI inflows by country and industry


Main Investing Countries2016, in %
China28.2
British Virgin Islands26.4
Cayman Islands14.9
United Kingdom7.1
The Netherlands5.5
USA5.2
Bermuda1.6
Japan1.6
Main Invested Sectors2016, in %
Investment holdings, real estate services and miscellaneous services55.9
Banks and deposit companies15.7
Wholesale, retail trade and import/export10.8
Financing (except banking, investment and holding companies)6.7
Insurance3.5
Construction3.0
Information and communication1.7


Source: Hong Kong Statistics Office - Latest available data.

 


Form of Company Preferred By Foreign Investors
Limited companies, limited partnerships or sole proprietorships.
Form of Establishment Preferred By Foreign Investors
Subsidiary
Main Foreign Companies
News on foreign companies established in Hong Kong on the Invest in Hong Kong website, news columns and Events.
Sources of Statistics
Invest in HK



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What to consider if you invest in Hong Kong


Strong Points

Hong Kong is an international leader in terms of international trade and a services centre with high added value. The country is also the bridgehead to one of the largest production bases in the world, China. Hong Kong has a sound economy and a stable and efficient financial and banking system. Hong Kong is a place of choice for companies, for several reasons: 

  • Favourable tax measures
  • The transparency of local institutions 
  • Political stability 
  • Freedom of information 
  • Availability of qualified human resources  
  • Its advantageous geographical location in Asia
Weak Points

However, there are limiting aspects to consider in the perspective of a Hong Kong presence. Here is a non-exhaustive list:

  • High cost of property and work space (offices, shops, etc.)
  • High cost of salaries, compared to other Asian countries such as Mainland China and India
  • The excessive importance of the financial sector in national economy
Government Measures to Motivate or Restrict FDI
Hong Kong is a free territory for investments, which are in fact encouraged by the government with a favourable taxation policy and light legislation. Foreign companies can be set up freely, register their brands and the director of the company doesn't have to be a citizen nor a resident of Hong Kong. The government has also put in place numerous initiatives to support business innovation.


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Protection of Foreign Investment


Bilateral investment conventions signed by Hong Kong
Hong Kong has signed bilateral agreements for investments with 15 countries. To see the list of countries, click here.

Hong Kong is currently negotiating agreements with the following countries: Chile, Singapore, Russia.

International Controversies Registered By UNCTAD
There is no registered case of controversy.
Organizations Offering Their Assistance in Case of Disagreement
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
China is signatory of the MIGA Convention .



 

Country Comparison For the Protection of Investors


 Hong KongEast Asia & PacificUnited StatesGermany
Index of Transaction Transparency*10.05.07.05.0
Index of Manager’s Responsibility**8.05.09.05.0
Index of Shareholders’ Power***9.06.04.08.0
Index of Investor Protection****8.05.26.56.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.



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Procedures Relative to Foreign Investment

Freedom of Establishment
Yes. For more information, consult InvestHK.
Acquisition of Holdings
Acquisition is authorized, except in certain sectors of activity.
Obligation to Declare
A registration certificate should be requested from Inland Revenue Department (IRD). Foreign Investment Agency in the country keeps you informed about the authorizations necessary for the establishment.
Competent Organisation For the Declaration
Companies Registry
Tax authority of Hong Kong (IRD)
Requests For Specific Authorisations
Only some sectors are closed for foreign investors, like communications or other areas of activity considered for public utility.

Learn more about Foreign Investment in Hong Kong on Globaltrade.net, the Directory for International Trade Service Providers.

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Office Real Estate and Land Ownership

Possible Temporary Solutions
Leasing of the premises.
The Possibility of Buying Land and Industrial and Commercial Buildings
Yes

 

 

Risk of Expropriation
Expropriation can be possible but along with negotiations. Expropriated people or companies have a right to compensation.

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Investment Aid

Forms of Aid
Hong Kong government encourages foreign investments, especially projects which are aimed to introduce new or improved products and services on the territory. However, there are no direct incentives for foreign investment because in the opinion of the government, Hong Kong already offers very attractive advantages, as its infrastructures, tax system, skilled manpower, a strategic position. Invest Hong Kong is the Agency for International investment promotion and provides plenty of information in this regard.
Free Zones
Hong Kong is a free port.

 

 

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Investment Opportunities

The Key Sectors of the National Economy
The service sector has a very significant role in the economy of Hong Kong (92% of GDP). 
Business services, retail, information and communication technologies, electronics and biotechnology, tourism and transportation are sectors that, in addition to being already highly established, have strong potential.
High Potential Sectors
In order to pursue economic development towards greater diversification, the government has set priorities for development: medicine (assistance to the disabled and the elderly), education, environmental technologies, tourism and innovative services are thus sectors with strong development potential.
Privatization Programmes
Airport, social housings, social security
Tenders, Projects and Public Procurement
HK Government, E-Tender Box (ETB)
Tenders Info, Tenders in Hong Kong
DgMarket, Tenders Worldwide

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Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Legal services

 

 

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Finding Assistance For Further Information

Investment Aid Agency
Invest in HK
Doing Business Guides
Deloitte's "International Tax and Business Guide" on Hong Kong