These challenges included significant property market corrections, a declined retail climate, and a downturn in the luxury goods industry. In addition to this, political agitation such as the Umbrella Movement has been highly publicized by local media and also international news networks.
You would think that such events would easily scare away investors from any country, let alone one that is relatively small and known for its close proximity to Mainland China. So how is Hong Kong still the world’s number three financial center in the world, behind only New York and London?
However Hong Kong’s economy has shown itself to be remarkably resilient, and the city still remains a supremely attractive place for international investment, with 6.5% economic growth expected in 2021. It’s a somewhat complex tale, but there are a number of reasons why Hong Kong not only remains in good stead, but is in fact poised for more growth.
And yes, it goes well beyond low corporate taxes and financial markets.
Hong Kong has one of the world’s most diverse and highly educated workforces
This is certainly not the first reason why people invest in Hong Kong, but it is an important one nonetheless. Hong Kong’s workforce is the most highly educated in Asia-Pacific, with over 80 percent of its population having received tertiary education. The city has both private and public institutes of higher learning, with internationally recognized institutions such as the University of Hong Kong (HKU) and the Chinese University of Hong Kong (CUHK). More importantly, these two universities are among Asia’s best.
The city also has one of the world’s largest expatriate populations at 4.2%. Hong Kong invests heavily in its workforce and provides a very familiar and attractive environment for international workers. A highly educated and multicultural workforce is important for any business, as it helps to ensure that employees are better able to achieve their goals.
None of this is news for Hong Kong, as this diverse and talented workforce has been maturing for decades — its solidity and complexity suggest it will endure for some time to come.
Hong Kong is still the world’s number one gateway to Mainland China
This is without a doubt the number one reason for Hong Kong’s competitiveness.
Hong Kong’s close proximity to Mainland China gives foreign investors an opportunity to be close enough to understand and access the domestic market, while still being far away enough for legal and operational protection.
Despite some misconceptions, Hong Kong still maintains the ‘one country, two systems’ framework — it is seen as an international city (and not China) that allows foreign companies to operate in a very familiar environment while still having access to the growing Chinese market.
This, along with trade agreements like the China-Hong Kong Closer Economic Partnership Arrangement (CEPA), ensures that Hong Kong is highly sought after as an entry point for Mainland Chinese businesses seeking to expand globally.
For these reasons, Hong Kong is still seen as one of Asia’s preferred platforms for international businesses to enter the growing Chinese market.
The strategic significance of the Greater Bay Area Initiative
If there were any doubts as to Hong Kong’s influence and strategic importance, the Greater Bay Area Initiative should put them to rest for good. While it merits its own discussion, it also amplifies the previous point of Hong Kong being the best gateway to Mainland China.
The Greater Bay Area is the region that is an “ecologically and economically integrated area” of eleven cities: Hong Kong, Macau, Shenzhen, Dongguan, Foshan, Guangzhou, Huizhou, Zhuhai, Jiangmen, Zhongshan, and Zhaoqing. The Greater Bay Area already has a population of 71 million and a GDP of $1.6 trillion — by 2030, the region’s economic output is projected to exceed New York, the world’s largest bay area.
The Greater Bay Area presents a unique opportunity for corporations who want to tap into new markets in the Eastern part of China. With strict regulations on foreign investment limiting international expansion opportunities abroad, there are no constraints for business owners in this region who want to do business in the Greater Bay Area.
Inherited from its time as a British colony, Hong Kong’s common law system will also certainly pay dividends for businesses looking to set up shop in this future economic powerhouse. Hong Kong’s unique judiciary system means that there is a large body of case law that governs Hong Kong’s courts and provides greater certainty to businesses working here. In addition, Hong Kong English common law will continue to evolve in the coming years, thanks to the contributions made by Hong Kong’s judiciary.
The Chinese Government is far from haphazard in their planning, so it seems obvious that they see Hong Kong as a large part of their future plans.
Low tax rates have very little to do with Hong Kong’s future
Hong Kong has obviously done well to leverage its traditionally low corporate tax rates, easy company registration, low corruption, and mature banking infrastructure. However, you’ll notice none of those reasons has been listed as indicators for its future growth and success.
Yes, these aspects are integral to its reputation, but Hong Kong has a wealth of opportunities on its horizon, and we would be foolish to think that Hong Kong’s reign as a global financial leader is over. If you would like to learn more about incorporating a business in Hong Kong, our incorporation experts are ready to assist you. Please contact us today.