Hong Kong has a very unique history in terms of global commerce. Due to its former ties with England, Hong Kong has a very stable economy and laws, which have always been appealing to foreign direct investment. That said, where Hong Kong’s true strength lies is its proximity to Mainland China serving as a territory that protects Western interests while providing access to the budding market in Mainland China. Due to the complex history that Hong Kong has with Mainland China, it has several treaties and partnerships that make it far easier for foreign entities to establish a corporation in Hong Kong, have a bank account legally, and get through a great deal of red tape that exists within Mainland China.
Reasons Behind Hong Kong Being a Top Destination for the Fin-Tech Industry
As pictured above, Hong Kong has one of the highest adoption of Fin-Tech in the world. That said, it is still believed that Hong Kong has even more potential to grow in this space due to its unique position in global commerce. The reason for this is related to having a manner to provide access to financial institutions for individuals that never had access to such services through technology. Another benefit to these initiatives is lower fees that traditional institutions have historically charged. In terms of areas that Hong Kong can and has already begun to move into Cybersecurity, Payments and Securities Settlements, Digital and KYC Utility, Wealth Tech and InsureTech, and RegTech. Here, Hong Kong will be able to support a transition between traditional finance centers to the rapidly growing Fin-Tech sector. Hong Kong has a major advantage here in that they have very little regulation and that they have strong ties to Mainland China. This could put them in an ideal strategic place as Mainland China begins to open more and engage in more commerce with the West.
How Hong Kong Became a Leading Financial Center
- Security: Hong Kong is quite secure because it has a strong foundation in the English system. In terms of banking, there have been several laws enacted to avoid money laundering. Banks have protections that are worthwhile for companies as well. Relating to currency, Hong Kong has a stable currency that does not have has many issues as the Renminbi in terms of foreign investment and ability to exchange money between markets.
- Common Law: Individuals often forget the value of a territory’s history in relation to its current economic situation. In terms of legal system, Hong Kong has its roots in traditional British Common Law. This system is very easy to conduct business with from the Western world as it has common roots to many of the legal systems in the West. This is why investors feel secure doing business with Hong Kong as an intermediary between Mainland China.
- Opportunity to Foreign Entities: Foreign entities are far easier to open in Hong Kong than Mainland China. In fact, it is about a two-day process to open a company in Hong Kong as a foreigner. Foreigners are able to have their company there without any Chinese partner, making it quite easy to become a hub for foreign direct investment and commerce overall.
- Linguistic Ability: Hong Kong has a very high level of English, which makes it prime to become the international city that it has already. It is very easy to conduct commerce there as an English-speaker due to the historic ties that the territory has to England.
- Taxation: Taxation is another great benefit in Hong Kong for foreign companies. Due to the increased investment in Hong Kong, there are many treaties available between countries and Hong Kong. That said, it is highly recommended to have an expert look at the particular circumstances of your company in order to ascertain what would be the best tax planning specific to your company.
- Banking: Banking is something that has become more regulated in Hong Kong in recent years. However, there are still opportunities for foreigners to legally open bank accounts in Hong Kong. In fact, for those that are already conducting commerce in Mainland China, having a contract with a Chinese company and one year of incorporation is sufficient to legally open a bank account as a foreigner in Hong Kong. This has another benefit in that there are many ways to transfer capital to Mainland China from Hong Kong.
Concluding Remarks on the Subject
Hong Kong has become a paradise for investment for high net worth individuals from around the globe. Hong Kong; however, still has more to accomplish. Due to its potential, the Fin-Tech industry considerably in the coming years, it should be no surprise that Hong Kong will continue to be powerful. As Mainland China, continues to become more attractive for commerce from the West, Hong Kong can and absolutely will play a pivotal role in the region for foreign direct investment and secure commerce.