April 2011

Quarterly Issue : 2/2011

NEWSLETTER

The International Business Center … IBC is approaching its 25th Anniversary this year.

We are continuing with the second Newsletter issue of this New Year with a profile of Hong Kong together with some identified business opportunities chosen by industry category and have added some useful points to note when doing business in Hong Kong. We also explore why you need to set up a company in Hong Kong when transacting business in China and describe other professional services that we offer as part of being a long established International Business Center.

Profile of Hong Kong

The geographical, climatic, political, social, economic and demographic background of Hong Kong was described in our Quarterly Issue 1/2011 in January of this year.

Hong Kong is a city of 7 million inhabitants that has the 39th biggest GDP in the world, and is thus bigger than Israel, New Zealand and Singapore. The per capita GDP is USD45,600 with an estimated growth of 5.7% (est. 2010). The service sector accounts for over 90% of GDP. It is the world’s most service-oriented economy.

The Purchasing Power Parity is USD323.3 billion (est. 2010). The composition by sector is agriculture 0.1%, industry 7.6%, and services 92.3% (est. 2010). The labour force is 3.7 million by occupation manufacturing weighs 6.1%, construction 1.9%, wholesale & retail trade, restaurants, and hotels 42.9%, financing, insurance, and real estate 21.4%, transport and communications 7.9%, community and social services 19.7%.

The current unemployment rate is 3.6% as announced by Census and Statistics Department on 17th of March, 2011. This is the best level recorded since June, 2008.

The export volume in January 2011 rose by 20.7% year on year whereas the import volume increased by 12.5%, and re-exports grew 21.4%.

The earthquake and tsunami that occurred in Japan on the 11th of March may have a negative trade impact globally and on the economy of Hong Kong, which cannot be quantified at this time.

(Source of Information: The World Factbook, Central Intelligence Agency, British Consulate-General Hong Kong, and Census and Statistics Department, Hong Kong SAR Government)

Business Opportunities in Hong Kong

We previously discussed Financial & Professional Services, Construction & Engineering, and Education & Training in our Quarterly Issue 1/2011 . In this new issue of our newsletter, we shall discuss three more industrial opportunities in Hong Kong:

  1. Environment Protection
  2. The Hong Kong SAR Government has pledged to a 5-year USD12 million for a Cleaner Production Partnership Programme helping Hong Kong owned factories in the Pearl River Delta to adopt cleaner production technologies and practices.

    Financial incentives are provided to Hong Kong companies to improve their technology, including a 100% tax deduction for capital expenditure on environmental protection machinery, and the reduction of the depreciation period for environmental protection installation from 25 years to just 5. Tax incentives are also applicable to electric vehicles.

    A USD516 million Integrated Waste Management project will begin in 2011. It includes core technology for bulk waste treatment and various environmental capital works projects, such as a sludge treatment facility, harbour area treatment system, district cooling system in the former airport Kai Tak airport area, and a water mains rehabilitation programme.

    Opportunities in the Environmental Protection industry:

    • Water & energy efficiency
    • Renewable energy
    • Water recycling recovery      
    • Construction & demolition waste disposal
    • Electric vehicles  
    • Carbon audits
    • New waste recovery, recycling and processing facilities and technology
    • Cleaner technology and process for infrastructure projects
    • Environmental impact assessments & environmental management systems

     

  3. Aerospace Industry
  4. In 2009, 46.1 million passengers and 3.35 million tonnes of air cargo made use of the Hong Kong International Airport. Every day, there are some 800 aircraft flying in and out with around 90 airlines in operation, linking Hong Kong with approximately 150 destinations globally, including more than 40 cities on the Chinese Mainland

    The Hong Kong International Airport Authority is considering building a 3rd runway while it also has the exclusive right to manage and operate the Zhuhai Airport for 20 years commencing from August 2008.

    The 3rd Hong Kong Asian Aerospace Expo & Congress was held on 8th – 10th of March, 2011. The status of Asian Aerospace as the region’s premier commercial air transport event has been dramatically demonstrated with the number of VIP delegates up more than 130% over the 2009 show and the number of Chinese delegations up over 50%. Overall attendance at Asian Aerospace over three days reached a record high of 12,300 delegates, with a further 5,300 attending the Asian Business Aviation event.

    The overwhelmingly positive mood currently prevailing amongst Asian / Chinese carriers was perfectly reflected in orders worth approximately US$10 billion being announced on the first day of the show.  Air China led the way by announcing an order for five Boeing 747- 8 intercontinental airliners within minutes of the show opening, whilst Hainan Airlines Group announced its intention to purchase 32 Boeing 787s and 6 Boeing 777s for it Hong Kong Airlines subsidiary.  As a further sign of confidence about Asia’s future, Cathay Pacific Airways placed orders for 25 wide-body Airbus and Boeing airliners worth US$6 billion later in the week, following the announcement of a record profit of US$1.8 billion for 2010.

    Opportunities in the Aerospace industry:

    • Aero-engine repair and maintenance    
    • Training on aircraft engineering
    • Aircraft conversion                              
    • Private / Business jet aviation
    • Base and line maintenance                    
    • Repair and overhaul of aircraft

     

  5. Railway Industry
  6. Hong Kong is spending USD17 billion on five railway projects. These are the new West Island Line, South Island Line (east), Shatin-Central Link, Kwun Tong Line Extension, and the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. The Hong Kong MTR Corporation (MTRC) is the sole railway operator.

    MTRC has an ongoing programme to renovate and upgrade the existing facilities. The corporation has a constant stream of procurement activity across the full range of railway-related products and services. It also provides consultancy services to China and overseas countries in the scope of operation & maintenance services, project management, rolling stock engineering, signaling engineering, infrastructure maintenance & engineering, non-fare business & marketing, safety & system assurance, transport planning & operations, and training services.

    In addition to the extension of the current railway network, MTRC is also committed to the enhancement and renovation of existing railway lines through the following improvement works: retrofitting external lifts at railway stations, new subways/entrances station improvement projects, noise mitigation projects, additional wide gates, slope improvement works, automatic platform gates, additional kiosks, and additional public toilets.

    Opportunities in the Railway industry:

    • Station design
    • Tunnel construction
    • Track work
    • Value Engineering, and construction supervision
    • Programme, project and risk management services
    • Building and architectural finishes
    • Power systems, signaling and communication technology
    • Advanced components and electronics supplies
    • Building services for stations and depots
    • Environmental control systems
    (Source of Information: UK Trade & Investment, Asian Aerospace International Expo and Congress 2011, and Mass Transit Railway Corporation)

Doing Business in Hong Kong

Following on from our last newsletter Quarterly Issue 1/2011 in January 2011, we can further share the business opportunities in Hong Kong. Not only is Hong Kong an attractive market in its own right and a springboard into the Mainland Chinese market, it is also an ideal base for regional operators.

Hong Kong is situated in a prime central position in East Asia, with half of the world’s population within a 5-hour flying time. Obvious strengths of the market are:

The growth of the Mainland Chinese market offers excellent opportunities for foreign businesses looking to internationalise while approaching this market directly can be a daunting prospect. As a major service gateway into China, Hong Kong is an attractive indirect route, offering significant trade advantages and easy access with CEPA. You will find similar business systems to the western world, intellectual property protection, proximity to the Pearl River Delta, with knowledgeable well established agents and distributors available to assist newcomers.

Hong Kong will remain at least until 2047 with its own system of Government, legal and judicial systems administered by an independent judiciary and based on the use of English common law with a strong copyright and patent system.

Most companies find that having a local business partner (such as an agent or distributor) is the most successful approach to start trading successfully in and from Hong Kong and Mainland China. Licensing or franchising may also be viable options for some products and services.

Hong Kong offers opportunities to the world across many sectors. If you are considering trying to enter the Hong Kong market, your first step should be to undertake research into the likely demand for your goods or services.

The vast majority of businesses are located in the densely populated urban areas. These urban areas can all be reached within an hour or less of each other by public transport. The Hong Kong Government and the most prestigious business offices are located around “Central” on the northern edge of Hong Kong Island.  Other major business areas are Kowloon, and the new town of Shatin in the New Territories.

The Hong Kong Customs and Excise Department carries out inspections quickly and efficiently, and as a result goods are rarely held up on entry to Hong Kong. Hong Kong is a free port and goods are not subject to import duty or taxes with the few exceptions of liquors (30% and above alcohol by volume), tobacco, hydrocarbon oil and methyl alcohol. If you are importing these items, you will need to obtain an import and export licence from the Customs and Excise Department, and you will also need a removal permit should you wish to re-export them.

There are a number of goods which cannot be imported without a licence but are not subject to duty. These include pharmaceutical products and certain foodstuffs. The goods requiring a licence are controlled imports, including:

  • Animals and plants
  • Controlled chemicals
  • Dangerous drugs
  • Dutiable commodities
  • Explosives
  • Firearms and ammunition
  • Food
  • Infectious goods
  • Motor vehicles
  • Optical disc mastering and replication equipment
  • Ozone depleting substances
  • Chinese herbal medicines and proprietory Chinese medicines
  • Pesticides
  • Pharmaceutical products and medicines
  • Prescribed articles
  • Radioactive substances and irradiating apparatus
  • Radio transmitting equipment
  • Rice, frozen or chilled meat and poultry
  • Game, meat and poultry
  • Sand
  • Smokeless tobacco products
  • Strategic commodities
  • Textiles
  • Rough diamonds
  • Waste
  • Hazardous chemicals
  • Weapons

The legal framework in Hong Kong is very similar to that of the UK. Many of the practising lawyers have been trained in the UK and almost all are fluent in English. You can find a full list of lawyers operating in Hong Kong and the areas they cover at www.hklawsoc.org.hk/pub_e/lawfirmdirectory/.

Some businesses require a licence or registration to operate in Hong Kong, including restaurants, bars, banks, travel agencies, law firms, and others.  The following categories are controlled:

Food

  • Beverages & tobacco
  • Crops, vegetables & fruits
  • Dairy, bakery & confectionery
  • Fish & crustaceans
  • Meat
  • Other food products
  • Restaurants & other food shops

Consumer Goods

  • Antiques, jewellery & watches
  • Aquariums & pets
  • Chemical manufacturing
  • Chemical trading
  • Clothing, footwear & accessories
  • Department stores
  • Electrical appliances
  • Fabricated products
  • Feather, fur & leather
  • Film & video
  • Furniture & fixtures
  • Photographic & optical goods
  • Toiletries, cosmetics & medicines

Services

  • Amusement & recreation
  • Cultural & social services
  • Education
  • Financial services
  • Land & air transport
  • Personal services
  • Printing & publishing
  • Storage & freight handling
  • Travelling services
  • Water transport & shipping agents

Other goods & services

  • Construction
  • Firearms, explosives, fire & security
  • Gas, petroleum & coal
  • Machinery & equipment
  • Medical equipment/service & social welfare service
  • Metallic & non-metallic mineral products
  • Mining & quarrying
  • Telecommunication
  • Wastes or scraps

Hong Kong has the world’s busiest airport for international cargoes and the world’s 3rd busiest container port so it follows that air and sea are the main routes for goods entering and leaving Hong Kong. There are numerous shipping and freight handling companies that can help with the logistics of getting your goods to and from Hong Kong and China.

Based on the “One Country Two Systems” principle, Hong Kong laws and judicial system, including its regulations relating to intellectual property, are independent of the Chinese system. Hong Kong established its first trademark laws in 1873. Hong Kong is also a member of the World Trade Organisation in its own right, and is thus bound by international agreements such as those related to the Trade-related Aspects of Intellectual Property Rights.

Should you need any assistance in these areas from our International Business Center, please e-mail us and we will give you a timely reply.

(Source of Information: UK Trade & Investment, Customs and Excise Department, Trade and Industry Department, Hong Kong SAR Government)

Gateway to China

First discussed in our Quarterly Issue 1/2011 in January, this year, Hong Kong is the best business “Gateway to China”. Despite its impressive economic growth over the past three decades, China still has concerns for many foreign enterprises. In general, the bureaucratic process, regulatory difficulties and the lack of transparency in a developing legal system, together with concerns over intellectual property rights protection encourage foreign companies to look for alternatives.

Hong Kong is thus regarded as the natural entry point for access to the Mainland Chinese market. There is abundant information and research facilities available with well qualified high caliber personnel who have experience in dealing with China and can bridge the cultural and linguistic barriers. In the realms of CEPA, businesses benefit from a growing number of free-trade tariffs and benefits specifically available only between Hong Kong and the Mainland.

Hong Kong taxes are low, simple, and straight forward. Salaries tax ranges from 2% to 17% while the profits tax rate is just 16.5% and property tax 16%. There is neither capital gains tax nor tax on dividends. Thankfully there is no GST or VAT so that Hong Kong is truly a shoppers’ paradise.

For some corporations, having a Hong Kong company with a representative office in China is an attractive option. The China Representative Office can enter into contracts, such as hiring staff, sponsoring overseas nationals for visa, and renting office space etc.

It is generally the Hong Kong company that does business in China and NOT the representative office. Local tax is only payable in China by the representative office based on its monthly expense level.

China is of course a fantastic place for investors who can enjoy being part of the China growth story. After building confidence in the Mainland Chinese business environment, a foreign enterprise can then form a China company while still having a solid base in Hong Kong.

Many options are available but no matter that you determine to form a company in Hong Kong or Mainland China, you are always welcome to contact us for advice and assistance. With a long standing and rich experience in helping clients, our International Business Center staff will not let you down.

(Source of Information: Establish Hong Kong)

We Offer Helpful And Effeicent Professional Services

As a long established business center we provide information and support to our clients for matters related to all of the above mentioned topics.  As our core business we offer business center facilities on very flexible term leases for a wide choice of fully serviced offices. In addition we provide Business Identity Programmes (BIP) to cater for the needs of those companies or individuals who simply require a virtual office. With support from the 14 IBC (International Business Center) Group Companies we are also able to render a comprehensive range of professional services:

  • All Accountancy Services
  • Secretarial services
  • Business Plans / Marketing Plans
  • Franchise Building & Development
  • Brand Building & Development
  • Marketing Services / Event Management
  • Profitability Consultancy
  • Mergers & Acquisitions
  • Organisation & Methods
  • Operating Procedure Manuals
  • Due Diligence
  • Internal Control Review
  • Website Building & Maintenance
  • Short Video Production
  • 2D & 3D Media Design Services
  • Data protection and Storage

Should you need to know anything more about Hong Kong and our International Business Center, please contact us at our website. Alternatively you are always welcome to call us at +852 2268 6888 (Hong Kong is GMT +8:00 hours).

Company Activities

Caring Company

Effective 1st of March, 2011 to 29th of February, 2012 and to reflect our record for caring about people and the community, the following companies will use a Caring Company logo granted by the Hong Kong Council of Social Service:

Birth of a Charity Arm, Smiling Rainbow

Smiling Rainbow Ltd. (Company No.: 1391180), is a charitable organisation of a public character that was created to help the physically disabled and the mentally disordered in Asia. The charity was founded by Mr. Paul Chan, Miss Teresa Ng (CEO & Co-founder of IBC Group), Mrs. Alannah Ong, and Mr. Andy Chan (Business Development Manager, IBC Group).

Effective from 29th December 2010, Smiling Rainbow Ltd. acquired tax exemption status under Section 88 of the Inland Revenue Ordinance from the Inland Revenue Department (IR File No.: 91/11253), Hong Kong SAR Government.

Annual Dinner

The IBC Group of Companies and almost 100 employees celebrated our Annual Dinner on 16th of March. We firmly believe that our people are the most valuable assets of our Group even though they cannot be measured in the Balance Sheets.

The evening began with a Mahjong Contest for all of the employees followed by dinner and a series of games and competitions for staff to enjoy lucky draws and fun prizes created an exciting atmosphere. The masters of ceremony were Mr. Andy Chan of International Business Center, Miss Kimmy Leung of IBC Capital Ltd., and Miss Anna Chan of IBC Solutions Ltd. Their joint efforts produced a very memorable IBC Group gathering.

Disclaimer

The information contained in this Newsletter is for reference purposes only, and is provided by International Business Center as a complimentary service. Many sources are used in the compilation of this information, and where necessary the relevant credits and/or copyright acknowledgements are made. Due diligence must be exercised and additional research should be conducted before acting on any of the opinions expressed herein.
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