July 2011

Quarterly Issue : 3/2011

NEWSLETTER

It will be the 25th Anniversary of the International Business Center in November this year.

This is the third quarterly newsletter issue of 2011. We are carrying on with the profile of Hong Kong while we identify some more business opportunities by industry, and add some practical hints for doing business here. We further elaborate the services that we as IBC are offering in facilitating your business start-up and/or development operations in Hong Kong and Mainland China.

 

Profile of Hong Kong

The geographical, climatic, political, social, economic and demographic background was described in our Quarterly Issue 1/2011 in January. The GDP, industrial sectors, imports and re-exports were reported in our Quarterly Issue 2/2011.

Hong Kong is one of the most open and business-friendly environments in the world. It has been ranked as the world’s freest economy in the Wall Street Journal and Heritage Foundation’s Index of Economic Freedom for 15 consecutive years.

Not only is Hong Kong an attractive market in its own right and a springboard to the Mainland Chinese market, it is also an ideal base for regional operations. Hong Kong, as a regional hub, is situated in the prime central position in East Asia, with half the world’s population within a 5-hour flying time. Position, position, position!

Hong Kong offers a level playing field to business with an accountable government, well-established rule of law, robust protection of Intellectual Property Rights, a well-regulated banking system and a free flow of people, ideas and information. It has an ideal business environment in line with international business practices.

Hong Kong is a global player and is an active member of ADB, APEC, BIS, FATF, ICC, IHO, IMF, IMO (associate), Interpol (sub-bureau), IOC, ISO (correspondent), ITUC, UNWTO (associate), UPU, WCO and WTO.

As a free market economy Hong Kong is a pre eminent center of international trade and finance. The Hong Kong SAR Government also promotes the city for RMB internationalisation.

Hong Kong residents are allowed to open RMB-dominated savings accounts. RMB-dominated corporate and Chinese Government bonds are issued in Hong Kong, and RMB trade settlement is allowed. RMB deposits grew to roughly 4.6% of total system deposits in Hong Kong by the end of 2010.

The Mainland has long been Hong Kong’s largest trading partner, accounting for about half of Hong Kong’s exports by value. China’s easing of travel restrictions led to 22.5 million Mainland tourists visiting the territory in 2010.

Hong Kong has also established itself as the premier stock market for Chinese firms seeking to list abroad. In 2010 Mainland Chinese companies constituted about 19% of the firms listed in the Hong Kong Stock Exchange and accounted for 62% of the Exchange’s market capitalisation.

Investment (gross fixed) weighs 21.4% of GDP (2010 est.) whereas public debt is 18.2% of GDP (2010 est.). Inflation rate (consumer prices) is 4.5% (2010 est.) Commercial bank prime lending rate is currently 5%. Reserves of foreign exchange and gold were USD268.9 billion (31 December, 2010 est.).

Hong Kong currency is pegged to the US dollar. Hong Kong dollars per US dollar was 7.78 (2010), 7.75 (2009), 7.751 (2008), 7.802 (2007) and 7.7678 (2006).

(Source of Information: World Fact book, Central Intelligence Agency, British Consulate General Hong Kong, UK Trade & Invest)

Business Opportunities in Hong Kong

Our previous Quarterly Issues 1/2011 and 2/2011 covered the aspects of Financial & Professional Services, Construction & Engineering, Education & Training and Environmental Protection, the Aerospace Industry and the Railway Industry respectively. In this new issue, we shall talk about three more positive industrial opportunities in Hong Kong: -

  1. Information & Communication Technology
  2. The Information and Communication Technology (ICT) industry has been enjoying prosperity in Hong Kong for many years. Mobile phone penetration was 174% in December 2009. About 9,000 public Wi-Fi access points were established in March 2010. Broadband is enabled throughout the majority of commercial and residential buildings. Internet adoption is very high indeed.

    Mobile & Wireless Applications

    Mobile and wireless device usage is driven by the HKSAR government taking a strong pro-competition and pro-consumer approach which drives mobile operators to maximise the use of mobile bandwidth. In the presence of 3 successful bidders for Hong Kong’s Broadband Wireless Access licences, 4G long term evolution services were launched on 16th of May, 2011. Opportunities relating to mobile applications:

    • Games
    • Content
    • Infotainment related applications
    • Location based applications (GPS)
    • B2B, B2C, and C2C applications
    • Augmented reality games, content and applications
    • Social networking applications

    Augmented reality games, content and applications

    With the evolution of both computer hardware and software, local businesses are increasingly employing business applications so as to enhance their efficiency and effectiveness. Opportunities abound in the following fields: -

    • Enterprise resources planning (ERP)
    • Customer relationship management (CRM)
    • Supply chain management (SCM)
    • Business intelligence applications
    • Applications tailored for vertical industries

    Digital Advertising
    In 2009, it was estimated that digital advertising revenue was USD121 million, i.e. less than 3.6% of the overall advertising revenue. It is now considered an emerging niche sector with a growth rate of over 7% in 2009. Opportunities are found in: -

    • Digital marketing
    • Reporting and monitoring applications
    • Digital advertising tools and applications

    e-Learning
    To let primary and secondary schools in Hong Kong fully deploy e-Learning, an e-Learning Consortium has been founded. It is facilitator to test run solutions in a real education environment. Opportunities are identified for: -

    • Application service providers
    • Technology providers

    e-Government
    The vision of the Hong Kong SAR Government is to develop the city as the leading digital city in the region. The Digital 21 Strategy was published in 1998 with the 4th edition following in 2008. Opportunities stem from 5 key policy drivers: -

    • “Joined-up” government
    • Exploiting opportunities of cloud computing
    • Information technology to help tackle climate change
    • Driving greater efficiencies
    • Exploiting chances of social computing

     

  3. Creative Industries
  4. Hong Kong has developed a leading edge in key areas of creative industries. The creative industries sector forms one of the new 6 pillars of Government policy to strengthen the economy. There are around 32,000 creative industry related establishments offering job opportunities for over 176,000 employees. These areas include film, TV, music, 2D & 3D design, architecture, comics & animation, games, and digital entertainment etc.

    Create Hong Kong’ is an office dedicated to promoting the development of creative industries in Hong Kong. It is set up under the Commerce and Economic Development Bureau. The office is responsible for the administration and management of funding schemes related to creative industries: The CreateSmart Initiative, DesignSmart Initiative, Film Development Fund, the regulatory control of special effects materials for the production of special effects for film shooting and theatrical performance. You will find more comprehensive information at the website of Create Hong Kong (www.createhk.gov.hk).

    The Hong Kong Design Centre has been a strategic partner of the Government in promoting design since its establishment in 2001. Founded by 5 leading design professional bodies in Hong Kong and supported by the Government, the Centre aims to promote design as a value-adding activity, raise design standards and foster design-related education, and raise the profile of Hong Kong as an innovation and creative hub.

    Creative industry accounts for about 4% of the total GDP, approximating to USD8 billion annually. Opportunities stem from: -

    • The employers and the employees of the creative industries
    • The self-employed of the creative industries

     

  5. Automotive Industry
  6. Hong Kong has a dense population and a congested urban environment just like many other great cities. Based on the statistics of Hong Kong Transport Department, in March 2011, we had 613,622 licensed vehicles: -

    • 420,160 Private cars
    • 18,124 Taxis
    • 12,672 Public buses
    • 503 Private buses
    • 4,347 Public light buses
    • 2,103 Private light buses
    • 69,599 Light goods vehicles
    • 37,192 Medium goods vehicles
    • 3,338 Heavy goods vehicles
    • 37,956 Motor Cycles
    • 1,327 Special Purpose vehicles
    • 6,301 Government vehicles

    Plenty of room exists for development in the areas of electric vehicles and auto parts. It is Government policy to promote a green environment whereas about 98% of the total exports of auto parts were re-exports to Mainland China.

    Opportunities for Electric Vehicles: -

    Opportunities for Automotive industry: -
    (Source of Information: Transport Department & Information Services Department, Hong Kong SAR Government, UK Trade & Investment, and CSL Hong Kong)

Doing Business in Hong Kong

We discussed the ways of doing business in Hong Kong in our last newsletters Quarterly Issue 1/2011 and Quarterly Issue 2/2011. In this issue, we introduce the topics of Business Etiquette, Language and Culture.

Generally the business culture in Hong Kong is very similar to the western business culture. People in Hong Kong are sufficiently familiar with western customs to be fully tolerant of cultural differences. We are a multi-cultural society.

Languages
The official languages of Hong Kong are Chinese (Cantonese dialect is dominant) and English. English is widely spoken in the business world and in urban areas. Although most taxi drivers are familiar with the English names of popular destinations, it can be useful to have the address written in Chinese to show the taxi driver.

In most cases sales and marketing material in English is sufficient. In some fields, it may be advantageous of have materials prepared in Chinese. The ‘traditional’ form of written Chinese is used in Hong Kong while the ‘simplified’ form of Chinese is used in the Mainland.

In Chinese, one character is of one syllable. Surnames come first, followed by the given name. Plenty of people in Hong Kong also have a western given name, which is used before the surname. You should address contacts by their western names, or surnames. However it is not common for women to change their surnames when they get married.

Meetings and Presentations
Punctuality is considered important in Hong Kong. Being late will leave a poor impression to potential business partners which may adversely affect future co-operation. If you are unavoidably late, give a call to apologise, let them know when to expect you and check that the meeting will still be able to go ahead.

The normal greeting is a handshake, which you should repeat at the end of the meeting. It is appropriate to greet the most senior staff member first, if you know who they are, to recognise hierarchy.

Business cards are very important and exchanged frequently. You should bring sufficient quantity and never be caught without supply! The initial exchange should be fairly formal. You should accept and offer cards with both hands and take a moment to read them carefully to show respect.

The dress code for meetings is similar to the UK and the US. Business attire is appropriate to most business meetings. When hot and humid… “business casual” can be acceptable but often still with shirt and tie.

Negotiations
Face to face meetings and the careful building of relationships is considered important in Hong Kong. Contacts may like to meet you several times in order to know you more including meetings for meals, and formal meetings in offices before concluding negotiations,.

The giving and receiving of gifts is a traditional way of building relationships with business partners and clients. However it is not necessary to give expensive gifts.  The act of giving is more important than the value of the gifts.

The Easiest Place to Do Business
Being one of the easiest places in the world to do business, Hong Kong generally presents far less challenges for foreign companies than many overseas markets. Corruption is not common and is a serious crime in Hong Kong. A dedicated bureau named the Independent Commission Against Corruption (commonly known as “ICAC”) very successfully tackles corruption at all levels through enforcement, prevention and community education.

Terms of Payment
Most foreign companies doing business in Hong Kong find that they receive payments smoothly and to agreed timescales. Any company experiencing difficulties in getting paid should get legal advice locally. A list of local law firms is available at www.hklawsoc.org.hk/pub_e/lawfirmdirectory.

Opening a Bank Account
For companies needing to open a bank account locally in Hong Kong, they can go straight to the bank and sign a complete set of regulatory documents and forms. You should consider the wide range of options before choosing the most suitable banking facilities for your business.

Besides the branches of international banking institutions, there is a multitude of local banks in Hong Kong. Any bank can provide details of the documents necessary to open a company or a personal account. For convenience sake you are welcome to appoint International Business Center to open any sort of bank account for you. All Hong Kong Banks follow Internationally agreed “Know Your Customer” (KYC) procedures to guard against fraud and money laundering.

Investing in Hong Kong
Investing in Hong Kong is more straightforward than in many parts of the world. The process to start a company is the same for a foreigner as it is for a local, and there is no restriction of nationality in the ownership or directorship of a company.

There are a few company structures you can choose from, all requiring an application for a Business Registration Certificate (commonly abbreviated as “BR” certificate) from the Inland Revenue Department. These include setting up a representative office, a branch office, a Limited Company, or a Private Limited Corporation. There are many variations including "Offshore" companies.

To start a business of be employed, you must obtain a visa if you are not a Hong Kong citizen, such as a work visa, an investment visa, a dependent visa, or one through the Capital Investment Visa Scheme. A local sponsor may be required for your application. You can obtain more information from the Immigration Department of Hong Kong or your nearest Chinese diplomatic office.

Alternatively it is very time and cost effective if you appoint International Business Center to apply for the necessary visa on behalf of you and/or your organisation. You will be impressed by our efficient and prompt services which are the result of many years of practice.

Real estate in Hong Kong is among the most expensive in the world and accommodation is likely to be one of your largest personal and operating costs. A serviced office with short term leases or a virtual office that simply provides a mailing address and telephone operator is an ideal option. International Business Center has been providing excellent serviced offices for 25 years and more recently we have developed a virtual office package.

In terms of an online presence, you can obtain a domain name in Hong Kong, through the Hong Kong Domain Name Registry (www.hkdnr.hk). Again you might appoint International Business Center to complete the whole registration procedure for you.

Financial Assistance
Invest Hong Kong (www.investhk.gov.hk) is a government body that supports overseas companies to set up business in Hong Kong. The services are free of charge.

(Source of Information: UK Trade & Investment, Invest Hong Kong, and Hong Kong Domain Name Registry)

Gateway to China

Hong Kong is culturally where East meets West. It is geographically located as the prime entrance to Mainland China. Hong Kong is well known of its openness, free economy, sound legal system, low taxation rate, the world class communication freedom and efficiency, and the most modern and convenient transportation system.

Both the Chinese Motherland and Hong Kong SAR signed the Closer Economic Partnership Agreement (commonly known as “CEPA”) providing preferential access to Hong Kong enterprises and individuals to the Mainland market. CEPA is a World Trade Organisation (commonly abbreviated as “WTO”)-compliant, free trade agreement, which became effective from January 2004.

CEPA covers 3 broad areas: -

  1. Trade in goods – almost all goods that qualify as “made in Hong Kong” can be exported duty-free to Mainland China.
  2. Trade in services – geographical, financial and ownership restraints are reduced or eliminated in a broad range of service sectors.
  3. Trade & investment facilitation – a series of measures have been agreed to make business between the two economies easier, more efficient and effective.

Hong Kong is a member of the WTO dedicated to maintain an open and free multilateral trading system. Being one of the world’s largest trading economies and a major international financial and commercial centre, Hong Kong has been continuously rated as one of the world’s freest economies by the leading international institutions since 1970.

Hong Kong is highly stable in its political and economic environment with minimum government intervention. It has been a free port with free trade ever since 1842. There is no foreign exchange control. Free flow of capital within, into and out of Hong Kong is permitted. Property rights, including intellectual property rights, are well safeguarded. There are also advanced banking and insurance systems.

The British Government ruled Hong Kong from 1842 to 1997 when the territory was handed back to the Chinese Government. Built on the English common law and rules of equity, Hong Kong laws remain basically unchanged and the “Basic Law” serves as the constitutional legislation.

The Hong Kong taxation system is simple with one of the lowest personal and business tax rates in the world. Tax is levied on a ‘territorial source’ principle. In short, companies and individuals pay tax only on income or profits generated from activities in Hong Kong. There is no sales tax or VAT, no capital gains tax, no withholding tax on dividends and interest. There is no duty on wine but tobacco products, and spirits are taxed.

The telecommunication system in Hong Kong is fully digitised. Market competition in both mobile phone services and broadband internet provision is very keen so that service providers ensure top quality service but with very competitive pricing. There are no barriers to freedom of speech, communication and information flow.

Both inland and international transportation and travel are backed up by an efficient and sophisticated modern network. The Hong Kong International Airport links to over 100 destinations all over the world, served by more than 3,600 flights per week. It can process over 35 million passengers and 3 million tonnes of air cargo annually. The processes for seeking approval for and the eventual construction of a third runway have just begun.

The container Terminals are busy but extremely efficient, handling more than 24 Million TEU (Twenty Foot Equivalent Units) per year. The port charges are among the lowest worldwide. The largest Container ships at terminal berths are routinely turned around in 10 hours or less, while conventional vessels working cargo at buoys are in port for only 1.8 days on average.
(Source of Information: Sinova Management Consultancy Ltd.)

We Offer Helpful And Effeicent Professional Services

For almost a quarter of a century, we have been providing 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 an extensive 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). Or simply fill in the enquiry form on www.ibchk.com and we shall reply to your message shortly.

Recent Activity

Caring Company NGO Partnership Day 2010/11

On 19th April 2011, International Business Center, IBC Capital Limited and IBC Solutions Limited were granted their “Caring Company” certificates in the event of “Caring Company NGO Partnership Day 2010/11. Ms. Teresa Ng, Ms Madelaine Tsung and Mr. Andy Chan represented the 3 companies to receive the certificates.

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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