Official Name: Hong Kong Special Administrative Region
Internet Domain: .cn (same as China)
International Dialing Code: +852
Location and Size
Hong Kong is located in Eastern Asia, bordering the South China Sea and China. Its total area equals 1,104 sq. km. — six times the size of Washington, DC.
Government
Hong Kong’s government is a limited democracy.
Executive Branch:
- Chief of State: President of China Xi JINPING
- Head of Government: Chief Executive Carrie LAM
- Cabinet: 15 official members and 14 non-official members
Legislative Branch: Unicameral Legislative Council (70 seats; 35 members directly elected in multi-seat constituencies by party-list proportional representation vote; 30 members indirectly elected by the approximately 220,000 members of various functional constituencies based on a variety of methods; 5 at large “super-seat” members directly elected by all of Hong Kong’s eligible voters who do not participate in a functional constituency; members serve 4-year terms)
Judicial Branch: Court of Final Appeal in the Hong Kong Special Administrative Region
Legal System
Hong Kong’s legal system is based on English common law. Its constitution strongly supports private property and freedom of exchange.
Interesting Facts About Hong Kong
- The meaning of “Hong Kong” is “Fragrant Harbor”.
- Hong Kong is among the most densely populated areas of the world.
- The new airport of Hong Kong is on Lantau Island. It is linked to the mainland by the Tsing Ma Bridge, one of the longest suspension bridges in the world.
- Hong Kong has more Rolls Royce’s per person than any other city in the world.
- Hong Kong has the most skyscrapers in the world. Classified as buildings with more than 14 floors, Hong Kong has around 8000, almost double that of New York, its nearest rival.
Economy
Hong Kong has a free market economy, highly dependent on international trade and finance – the value of goods and services trade, including the sizable share of reexports, is about four times GDP. Hong Kong has no tariffs on imported goods, and it levies excise duties on only four commodities, whether imported or produced locally: hard alcohol, tobacco, oil, and methyl alcohol. There are no quotas or dumping laws. Hong Kong continues to link its currency closely to the US dollar, maintaining an arrangement established in 1983.
Excess liquidity, low interest rates and a tight housing supply have caused Hong Kong property prices to rise rapidly. The lower and middle-income segments of the population increasingly find housing unaffordable.
Hong Kong’s open economy has left it exposed to the global economic situation. Its continued reliance on foreign trade and investment makes it vulnerable to renewed global financial market volatility or a slowdown in the global economy.
Leading Markets (2019): China 55%, US 8.6%
Leading Exports – Commodities: Electrical machinery and appliances, textiles, apparel, watches, toys, jewelry, goldsmiths’ and silversmiths’ wares and other articles of semiprecious materials.
Leading Suppliers (2019): China 46.3%, Singapore 6.4%, South Korea 5.9%, Japan 5.5%, US 4.9%
Leading Imports – Commodities: Raw materials and semi-manufactures, consumer goods, capital goods, foodstuffs, fuel (most is re-exported)
Top Industries: Textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches, clocks
Top Agricultural Products: Fresh vegetables and fruit; poultry, pork; fish
Comparative Economic Indicators ” 2020
| Hong Kong | China | Indonesia | Malaysia | Japan | United States | |
| 2020 Population (millions) | 7.24 | 1,394.0 | 267.7 | 32.6 | 125.50 | 332.6 |
| Population growth rate (%) | 0.24% | 0.32% | 0.79% | 1.29% | -0.27% | 0.72% |
|
Age Structure (%)
(15 to 64 years old)
|
68.7 | 70.37 | 68.31 | 66.3% | 58.33% | 64.69 |
|
Age Structure (%)
(65+ years old)
|
18.4% | 12.34 | 7.82 | 6.9% | 29.18% | 16.85% |
| Literacy (%) | 99% | 96.4% | 95.4% | 94.6% | 99% | 99% |
| Unemployment rate (%) | 3.1% | 3.9% | 5.4% | 3.4% | 2.9% | 4.4% |
| Inflation (%) | 1.5% | 1.6% | 3.8% | 3.8% | 0.5% | 2.1% |
| Population below poverty line (%) | 19.9% | 3.3% | 10.9% | 3.8% | 16.1% | 15.1% |
| GDP** (USD billions) | 480.5 | 25,360.0 | 3,250.0 | 933.3 | 5,443.0 | 19,490.0 |
| GDP real growth rate (%) | 3.8% | 6.9% | 5.1% | 5.9% | 1.7% | 2.2% |
| GDP per capita** (USD) | 64,500 | 18,200.0 | 12,400.0 | 29,100.0 | 42,900.0 | 59,800.0 |
| Public debt (% of GDP) | 0.1% | 47% | 28.8% | 54.1% | 237.6% | 78.8% |
| Exports (USD billions) | 530.6 | 2,490.0 | 168.9 | 187.9 | 688.9 | 1,553.0 |
| Imports (USD billions) | 602.4 | 2,140.0 | 150.1 | 160.7 | 644.7 | 2,361.0 |
| Reserves of foreign exchange and gold (USD billions) | 431.4 | 3,236.0 | 130.2 | 102.4 | 1,264.0 | 123.3 |
| Currency | Dollars HKD |
Yan Renminbi RMB |
Rupiah IDR |
Ringgits MYR |
Yen JPY |
Dollar USD |
| Exchange rate per USD) 01/31/2020 | 7.78 | 6.94 | 13.681.50 | 4.07 | 108.96 | n/a |
| Exchange rate (per EUR) 01/31/2020 | 8.57 | 7.65 | 15,079.13 | 4.48 | 120.05 | 1.10 |
Data from CIA World Factbook
* 2019 estimates
** PPP ” Purchasing Power Parity
Credit and Collections
ABC-Amega’s collection experience in China
- Be wary of whom you select in Hong Kong to collect debts. There are still Hong Kong companies in the collection industry that utilize gangster-type tactics for which the creditor can be held responsible.
- Law suits are very expensive and legal fees assessed by the Court can be challenged by the loser in the suit.
- In theory, a Winding Up Petition should be able to be prosecuted within months. However, in reality, we have seen some such petitions take as much as 4-5 years to be adjudicated.
Risk Assessment
Coface Country Rating: A3 — The political and economic situation is good. A quality business environment has a positive influence on corporate payment behavior. Corporate default probability is very low on average.
Coface Business Climate Rating: A1 — The political and economic situation is very good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
Credendo Political Risk: 1.5 (low risk)
Credendo Commercial Risk: 2 (some risk)
Business Climate
Hong Kong is a free port with virtually no duties or tariffs. Its strong rule of law and respect for property rights make it a strategic platform for companies, especially small- and medium-sized firms, seeking to do business in Asia and particularly in mainland China.
Hong Kong enjoys a high degree of autonomy as a separate customs territory, with no changes to borders, staffing, or technology export controls since the 1997 handover by the United Kingdom to China.
Ease of Doing Business: According to the 2019 Trading Economics Ease of Doing Business report, Hong Kong is ranked #3 in the ease of doing business. New Zealand is ranked #1; the United States is ranked #6; China is ranked 31st. 190 countries were ranked from #1 (very easy to do business) to #190 (very hard to do business).
Market Access: Hong Kong’s weighted average tariff rate was 0 percent as of 2019. However, restrictive pharmaceuticals regulation, market access restrictions for some services, and food and energy labeling regulations do add to the cost of trade.
There are no limits on foreign ownership and no screening or special approval procedures to set up a foreign firm except for certain legal services and in broadcasting.
Regulatory System: Business freedom in Hong Kong is well protected within an efficient regulatory framework. The bureaucracy is efficient. Bureaucratic and regulatory transparency, along with the overall environment, is conducive to doing business.
Intellectual Property Rights: Despite government public awareness campaigns, pirated and counterfeit products such as CDs, DVDs, software, and designer apparel are sold openly. Pressure has been building for changes in the Copyright Ordinance.
Exchange Control: Since the Hong Kong dollar maintains a fixed exchange rate with the U.S. dollar, interest rates and currency movements follow trends in the United States. Foreign capital receives domestic treatment, and foreign investment is strongly encouraged. There are no controls or requirements on current transfers, access to foreign exchange, or repatriation of profits.
Corruption: Corruption is perceived as minimal. Giving or accepting a bribe is a criminal act. Business malpractice and corruption are serious crimes. Hong Kong scored 7.6 in Transparency International’s Corruption Perceptions Index for 2019 (1 is completely corrupt; 10 is very clean). This makes them the 16th “cleanest” country out of the 180 countries rated. (China was rated 4.1 ” 80th ranking. The U.S. rated 6.9 ” 23rd ranking).
Business Protocol in Hong Kong
Hong Kong City is a highly developed business city with a well-established code of business conduct.
Hong Kong business people prefer a no-nonsense approach in business negotiations. It is therefore not necessary to “beat around the bush.” People will come to you when they have a real business need. Business discussions should therefore be straightforward, clear and to-the-point. While relationships (guanxi) can play a role in some situations, it is increasingly the company that offers a better deal (in terms of price, quality, time-to-market, etc.) that is able to win the deal.
More information on Business Protocol: Inter Nations
Sources for further information on doing business in Hong Kong
Doing Business: Hong Kong SAR China – World Bank Group Flagship Report
Battered Hong Kong Faces Economic Recession, Existential Crisis – Reuters (August, 2019)
Hong Kong Trade Development Council
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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Hong Kong. For further information, contact [email protected].
This report represents a compilation of information from a wide variety of reputable sources.
Comparative Economic Indicators: CIA World Factbook
Exchange Rates: OANDA.com The Currency Site.