HONG KONG FOREIGN DIRECT INVESTMENT
Foreign Investment Incentives
Hong Kong offers no
special incentives to overseas investors or foreign-owned
firms. Nevertheless, its free-port status, low tax rates,
good infrastructure, relative freedom from government interference
and substantial available capital make it attractive to potential
investors and thus competitive with other countries in the
region that do offer specific incentives.
Restrictions on Foreign Investment
The simplicity of procedures for investing, expanding and
establishing a local company is a major attraction for foreign
investment in Hong Kong. It is relatively easy to start a
company: ready-made company, also known as shelf companies,
are widely available and enable a businessperson to walk off
a plane in the morning and start operating a firm in the afternoon.
The government's special industrial-land policy features somewhat
more complex rules, but it is still less demanding than the
policies of many other Asian investment centres.
Controls on new investments are almost non-existent, and
there are no exchange controls. However, new building construction
requires permits, and polluting industries face increasingly
strict controls. Moreover, pharmaceutical operations face
strict rules on importation, manufacture, sale and distribution;
the Department of Health oversees compliance.
There is no investment-approval procedure directed specifically
towards foreign investors. All businesses must comply with
the registration requirements of the Companies Ordinance and
subsequent amendments. Except for state-owned activities,
there are almost no limits on foreign investors. An exception
is broadcasting and cable: foreign ownership of local broadcasting
stations or cable operators may not exceed 49%. The handover
did not affect the free movement of foreign equity. The Basic
Law safeguards "free movement of goods, intangible assets
and capital".
The government amended and enacted the Companies Ordinance
(Companies (Amendment) Ordinances 2003) in February 2004,
based on the recommendations of the Standing Committee on
Company Law Reform. Companies (Amendment) Ordinances 2003
aims to enhance shareholders' protection, update the requirements
on directorships, simplify the requirements for registration
of foreign companies and make structural changes to modernise
the ordinance.
Exchange Controls
Hong Kong imposes no controls on foreign exchange, and no
restrictions on entry and repatriation of capital or on conversion
and remittance of profits and dividends derived from direct
investments. Investors bring their capital into Hong Kong
through the open exchange market and remit it the same way.
Hong Kong has tried to reassure nervous investors. For example,
it has signed investor-protection agreements with trading
partners to guarantee free transfer of funds.
In July 2002 the Legislative Council (Legco) approved anti-money-laundering
legislation allowing the tracing and confiscation of proceeds
derived from drug-trafficking and organised crime. In the
same month, the Legco also enacted a new anti-terrorism law
allowing authorities to freeze funds and financial assets
believed to belong to terrorists, as required by UN Security
Council Resolution 1373. Following passage of the new laws,
in September 2002 the Hong Kong Monetary Authority (the central
bank) ordered banks to submit report cards outlining the steps
they had taken in the fight against terrorist financing.
Foreign Trade
The Basic Law stipulated that Hong Kong would independently
participate in international trade agreements and issue independent
certificates of origin after the handover. The transition
agreements ensure that Hong Kong retains its border controls
with China, its own customs procedures and the right to conduct
international trade relations. Hong Kong is a member of the
World Trade Organisation and the Asia-Pacific Economic Co-operation
(APEC) forum, which is moving to liberalise the region's import
restrictions by 2010-20.
Some 90% of Hong Kong's exports were re-exports. Using competitive
manufacturing bases in China, Hong Kong has become the world's
leading re-exporter of garments, imitation jewellery, travel
goods, handbags, umbrellas, artificial flowers, toys and clocks.
In recent years, however, there has been increasing use of
direct shipments or transshipments of goods manufactured in
mainland China to overseas markets at the expense of re-exports
through Hong Kong. This trend should increase in future, now
that China is a member of the WTO.
Apart from re-exports, Hong Kong's domestic exports consist
mostly of the following: (1) textiles; (2) clothing apparel;
(3) machinery, equipment, apparatus, parts and components;
and (4) consumer electrical and electronic products. Its main
imports include raw materials, consumer goods, capital goods,
foodstuffs and fuels.
Hong Kong's major export markets are mainland China, the
United States, Japan and Germany. Its main sources of imports
are mainland China, Japan, Taiwan and the US.
Hong Kong also had a clear interest in China's WTO entry,
which occurred in December 2001. As well as obliging China
to respect multilateral rules and disciplines, membership
curtails other countries' freedom to take unilateral trade
sanctions against it and ensure that trade disputes are settled
through binding international arbitration. Since more than
half of China's exports pass through Hong Kong, liberalised
trading rules for China will significantly benefit Hong Kong.
In general, any person who imports or exports any goods must
lodge an import/export declaration with the Customs and Excise
Department within 14 days after the importation or exportation
of goods. The declaration can be made on a prescribed form
or via Electronic Data Interchange Service. At the time of
lodging declarations, importers and exporters must pay a declaration
charge and/or export clothing training levy.
See also:
Types of Companies Available in Hong
Kong
Registration as an Overseas
Company
Features of Hong Kong company
Hong Kong company registration
procedures
Hong Kong company registration
and maintenance costs
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