Maximise your China

business through a Hong Kong base

John Rutherford
Associate Director-General
Invest Hong Kong
jrutherford@investhk.gov.hk
 Agenda

• Hong Kong as a business location – 10 key advantages

• Hong Kong & Mainland China
 The Greater Pearl River Delta
 CEPA
• The UK business community in Hong Kong
• How Invest Hong Kong can help
 One Country, Two Systems
Post 1997, Hong Kong retains its competitive advantages:
 Rule of law
 Level playing field
 Currency convertibility, separate from Renminbi
 International business practices
 Free flow of information

At the same time, Hong Kong is an integral part of China

Relationship advantages including CEPA, GPRD, 9+2

 Hong Kong - 10 Key Advantages
 Rule of law – including rigorously enforced IP legislation
 Unrivalled location
 Low and simple taxes
 World’s freest economy
 International finance centre
 Free flow of information
 World class infrastructure
 Skilled workforce
 International lifestyle
 Gateway to the Mainland
 Business infrastructure
• Mature legal infrastructure
• Robust intellectual property protection
• Level playing field
• Transparent and corruption free
• Simple tax regime with low taxes*:
Corporate tax rates 17.5%

Personal tax rates Top marginal tax rate is 20%, capped at

maximum average rate of 16%

VAT/GST Nil

Income not subject to tax Offshore income; dividends; capital

gains; tax exemption for interest income
from deposits placed with authorised
financial institutions

Source: * KPMG
 Where to Start in China?

Bohai Region

Yangtze
River Delta

Greater Pearl
River Delta
“The fastest growing
large region of the
fastest growing large
economy”
Source: Professor Michael Enright
Centres of economic activity in Asia
Hong Kong and the Pearl River Delta
GDP of Greater PRD is
more than Singapore,
Malaysia & the Philippines
combined

Retail sales in
Greater PRD is 25% higher
than Beijing & Shanghai
combined

Over 60,000 HK firms employ

over 11 million workers in
Greater PRD

Hong Kong handles 80% of

PRD’s imports and exports
 Hong Kong and the Pearl River Delta –
a winning combination
Hong Kong provides the capital, management skills, technology,
market knowledge, mature business infrastructure and access to
international markets.

Mainland PRD cities provide world-class,

low-cost manufacturing, and access to a new, demanding consumer
base
 Closer Economic Partnership Arrangement
(CEPA)
• China’s - and Hong Kong’s - first free trade agreement
• WTO compliant but many benefits go beyond WTO commitments
• Available to people and businesses of ALL nationalities

• By investing in Hong Kong to export to the Mainland:

• For goods – you save money (zero tariffs apply)
• For services – more markets are open to you and many entry
barriers are lower

• Confirmation of Beijing’s support for Hong Kong as the gateway

to the Mainland
 Closer Economic Partnership Arrangement
(CEPA)
• To be eligible for CEPA benefits:
• criteria to meet + applications to be approved

• Trade in goods
• Most popular: textiles/clothing; pharma; plastics and paper
• Example benefit:
• Pre-CEPA: tariff on exporting textiles = 5 - 21.3%
• Post-CEPA: tariff on exporting textiles = nil

• Trade in services
• Most popular: transport/logistics; advertising; construction and
management consultancy
• Example benefit:
• Pre-CEPA: vague rules; some logistics joint ventures achieved
• Post-CEPA: can set up wholly owned logistics company
 Opportunities for Overseas Companies
• Agent/Distributor – work with TDC

Own operation:
• Sourcing
• Trading
• Logistics/Distribution
• Local and regional management operations
• Research & Development
 UK Presence In Hong Kong
• 3rd largest number of regional operations:
– Regional headquarters 115
– Regional offices 215
– Local offices 154
• HK$48.1 billion total stock of direct investment from UK as at
end 2003
• Total exports to UK grew by 15% to US$8.4 billion in 2004
• Imports from the UK rose by 19% to US$3.7 billion in 2004
• Over 1,000 UK companies in Hong Kong, employing about
10% of the workforce
• Very effective British Chamber of Commerce in Hong Kong is
largest British Chamber in Asia
• Approximately 20,000 UK citizens residing in Hong Kong
 Some UK Companies in Hong Kong
Financial Sector Trade Related Services
• Barclays • Burberry
• HSBC • Ashworth
• Prudential • Aquascutum
Professional Services • Kent & Curwen
• Clifford Chance Transportation/Logistics
• Ove Arup & Partners • British Airways
• PA Consulting Group Ltd • P & O Nedlloyd
Information Technology • Exel
• Logica Technology
• Footfall • GlaxoSmithKline
• Copitrak • AstraZeneca
 UK Companies in China
In Hong Kong In Mainland
Regional management, 50 retail outlets, sourcing
including all Mainland products
operations. 120,000sqft
retail store to open in 2007

Asian sourcing office and Manufacturing

retail outlets

Engineering and Manufacturing

manufacturing control
 About Invest Hong Kong
• Award-winning* Government Department

• Our Mission - To attract to and retain in Hong Kong economically

and strategically important direct investment

• Our Offer - Free and confidential facilitation services to ensure

that investors smoothly establish or expand their operations in
Hong Kong

Relevant Facilitation of Matchmaking Public relations

up-to-date set-up / and networking support for
information expansion support launch /
expansion

*Voted best managed investment promotion agency in Asia,

Strategic Direct Investor awards 2004
 Final word…

“No other city in the world can help overseas

investors manage the risks inherent in entering
Mainland markets as well as Hong Kong. This is an
important part of the reason why overseas firms
prefer Hong Kong for the highest-value activities
that they perform in the
Asia-Pacific region.”

Michael Enright, Sun Hung Kai Properties

Professor, School of Business,
University of Hong Kong
 Thank you for listening
www.InvestHK.gov.hk
For further information contact:
Julia Herries/Lynette Quah
julia_herries@hketolondon.gov.hk
lynette_quah@hketolondon.gov.hk
020-7499-9821
In Hong Kong:
John Rutherford
jrutherford@investhk.gov.hk
+ 852 3107 1002