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Hong Kong remains the location of choice for international companies to manage their regional operations. The number of regional headquarters reached another all-time high and both regional and local offices registered increases -- despite the outbreak of SARS and the difficult economic situation regionally and internationally.

Survey results

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Regional headquarters, regional offices and local offices in

Hong Kong

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As at June 2, 2003, there were 966 regional headquarters and 2 241 regional offices in Hong Kong of companies incorporated outside Hong Kong, according to results of the 2003 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong conducted by the Census and Statistics Department. The 2003 survey results were released today (October 21). The corresponding numbers as at June 1, 2002 were 948 for regional headquarters and 2 171 for regional offices.

The United States topped the list of countries with companies having regional headquarters in Hong Kong. A total of 242 American companies had regional headquarters in Hong Kong in 2003. This was followed by Japan, with 168 companies, and the United Kingdom, with 86 companies.

The major lines of business of the regional headquarters in Hong Kong were wholesale, retail and import/export trades; and business services. Other major lines of business included finance and banking; manufacturing; and transport and related services.

As in the case of regional headquarters, the United States also topped the list of countries with companies having regional offices in Hong Kong. A total of 498 American companies had regional offices in Hong Kong in 2003. Japan was next, with 442 companies, followed by the United Kingdom, with 196 companies.

The major lines of business of the regional offices in Hong Kong were wholesale, retail and import/export trades; and business services.

For the purpose of the survey, a Regional Headquarters is an office that has control over the operations of offices in the region (i.e. Hong Kong plus one or more other places), and manages the business without frequent referrals to its parent company outside Hong Kong.

A Regional Office is an office that coordinates offices/operations in the region (i.e. Hong Kong plus one or more other places), and manages the business but with frequent referrals to its parent company outside Hong Kong or its regional headquarters.

The 2003 Survey is the fourth one of its kind conducted by the Census and Statistics Department. The previous surveys were conducted by the ex-Industry Department on an annual basis beginning in 1990.

As from 2001, the coverage of the survey has been extended to include local offices in Hong Kong of companies incorporated outside Hong Kong.

According to the survey, there were a total of 2 207 local offices in Hong Kong of companies incorporated outside Hong Kong as at June 2, 2003. The corresponding number as at June 1, 2002 was 1 748.

A Local Office is an office that solely takes charge of the business in Hong Kong on behalf of its parent company outside Hong Kong.

Japan topped the list of countries with companies having local offices in Hong Kong. A total of 390 Japanese companies had local offices in Hong Kong in 2003. The United States was next, with 381 companies, followed by the mainland of China, with 307 companies.

The major lines of business of the local offices in Hong Kong were also wholesale, retail and import/export trades; and business services.

Views of regional headquarters and regional offices

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The survey also collected views on Hong Kong as a location for setting up regional headquarters and regional offices from the regional headquarters and regional offices identified.

Among the factors affecting the choice of location for setting up regional headquarters and regional offices, low and simple tax system was considered as the most important factor. Other important factors included free flow of information; political stability and security; corruption-free government and rule of law and independent judiciary. All these five factors were rated by more than half of the companies as favourable for Hong Kong as a location for setting up regional headquarters and regional offices.

Among the various factors, low and simple tax system was regarded as a favourable factor for Hong Kong by the largest proportion of companies (71%). This was followed by free flow of information (68%); absence of exchange controls (68%); communication, transport and other infrastructure (67%); and geographical location (65%).

Factors viewed as unfavourable for Hong Kong by relatively larger proportion of companies included cost and availability of residential accommodation (37%); cost and availability of business accommodation (28%); and cost and availability of staff (25%).

About 53% of the companies considered that the overall business environment in Hong Kong as a location for setting up regional headquarters and regional offices had deteriorated compared with the previous year. Over half of the companies indicated that their views on overall business environment were affected by the outbreak of SARS in Hong Kong and the region earlier on.

Commentary

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The Director-General of Investment Promotion at Invest Hong Kong, Mr Mike Rowse, was delighted with the outcome of the survey. He said: "The fact that the number of regional headquarters and regional offices in Hong Kong has continued to increase demonstrates that Hong Kong's economy is on the track towards recovery. It is also very encouraging to see that the number of regional headquarters has risen to 966 -- an all-time high -- despite the adverse impact of SARS and very difficult economic conditions in Asia and globally."

"These figures also confirm Invest Hong Kong's own experience. We are having our best year ever in terms of the number of completed projects we have assisted. Our discussions with companies and enquiries from prospective investors suggest this favourable trend will continue, including that in such high profile and consumer-sensitive areas as the luxury retail sector.

"The signing of CEPA also creates considerable potential for Hong Kong to strengthen its position as a centre for value-added manufacturing and high quality services for the China market. We expect that this will attract more companies to invest here and increase their presence in Hong Kong," Mr Rowse added.

Further information

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The survey was conducted to study regional headquarters, regional offices and local offices in Hong Kong of companies incorporated outside Hong Kong. While the survey reference date was June 2, 2003, fieldwork of the survey was mainly conducted within the two to three months thereafter.

As from 2001, the coverage of the survey has been extended to include companies in Hong Kong that are local offices of companies incorporated outside Hong Kong. Unlike regional headquarters and regional offices which are more likely to be prominent undertakings in Hong Kong with higher profile, local offices are usually less prominent undertakings with lower profile. Moreover, since local offices have only been covered as from the 2001 survey, the frame in respect of local offices is still undergoing continuous enhancement to a larger extent.

Owing to the lack of a complete survey frame, the number of regional headquarters/regional offices/local offices identified in each survey round represents only the best snapshot that could be taken at the time of the survey. Hence changes between years in the number of regional headquarters/regional offices/local offices, which would be affected by the continuous improvement in survey frame and response rate, should be interpreted with care.

The survey only covers companies that manage the business in Hong Kong or in the region on behalf of their parent companies incorporated outside Hong Kong. It does not cover, for example, companies which are funded by investment from outside Hong Kong but manage the business in Hong Kong or in the region independently and not on behalf of the investors. Hence, the total number of regional headquarters, regional offices and local offices in Hong Kong does not represent all companies with investment from outside Hong Kong.

More detailed results of the survey are set out in the "Report on 2003 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong". The softcopy of the report (in PDF format) is now available for sale at HK$26, while the hardcopy of the report will be available for sale by end October/early November (at the same price). The report (both hardcopy and softcopy) can be purchased online at the "Statistical Bookstore, Hong Kong" (http://www.statisticalbookstore.gov.hk) where purchasers can enjoy a special 25% discount from now until February 29, 2004. Purchase through mail order can be made by returning a completed order form which can be downloaded from the Census and Statistics Department's website (http://www.info.gov.hk/censtatd/eng/prod_serv/forms_index.html). Purchase in person can be made at the Publications Unit of the Census and Statistics Department (Address: 19/F, Wanchai Tower, 12 Harbour Road, Wan Chai; Tel: 2582 3025) when hardcopy of the report is available for sale.

Enquiries about the survey results may be directed to the Business Expectation Statistics Section of the Census and Statistics Department (Tel: 2805 6112).

Ends/Tuesday, October 21, 2003

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( Floor / Cantonese / Putonghua / English )