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The number of overseas and Mainland Chinese companies running business operations in Hong Kong has increased 2.6 percent to a total of 6,561 companies, according to an annual survey released by Invest Hong Kong and the Census and Statistics Department (C&SD) today (October 19). Director-General of Investment Promotion, Mr Simon Galpin, said, "The results are very encouraging and reflect the rebound of Hong Kong's economy in the wake of the global financial crisis. Hong Kong continues to be an attractive city for these companies to base their operations in this part of Asia."
The "Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong" aims to understand the profile of these companies and their views on the business environment of Hong Kong. Of the 6,561 companies surveyed, 1,285 are regional headquarters (RHQs), 2,353 are regional offices (ROs) and 2,923 are local offices (LOs). This represents a year-on-year growth of 2.6 percent, 1.1 percent and 3.8 percent, respectively.
Mr Galpin said, "We observed the highest increase in the number of LOs. We work with these companies to help them set up and expand their business and to, hopefully, fulfil their potential as the RHQs and ROs of tomorrow."
Of the companies surveyed, 20 percent indicated that they may expand their businesses in Hong Kong in the next three years either by increasing staff, expanding the scope of business functions or increasing office size.
In terms of sectors, finance and banking demonstrated the most robust growth and reinforced Hong Kong's status as a world-leading international financial centre. Finance and banking regional headquarters increased five percent to 135 and local offices increased 13 percent to 622. Other leading sectors are import/export trade/wholesale/retail, professional/business/education services, and transportation/storage/courier services.
With regards to country of origin, roughly half the parent companies come from four countries. The United States tops the list with a combined total of 1,263 RHQs, ROs and LOs, followed by Japan with 1,085, Mainland China with 789 and the United Kingdom with 505.
Mr Galpin said, "We are seeing greater numbers of overseas companies setting up in Hong Kong as a base from which to expand into the Mainland and beyond. The same is also true of Mainland companies that use Hong Kong as a springboard from which to go global. This phenomenon highlights the strategic importance of Hong Kong to access business opportunities in the Mainland as well as offer geographical proximity to north and southeast Asian markets."
When choosing to set up RHQs/ROs/LOs, the top five factors rated as most important include:
(1) simple tax system and low tax rate, (2) free flow of information, (3) corruption-free government, (4) absence of exchange controls, and (5) political stability and security.
Mr Galpin said, "We are delighted to see a more optimistic outlook from the companies surveyed this year. Compared to 12 months ago, 77 percent of them now consider Hong Kong's outlook as a business location has improved or not changed."
Survey Highlights
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As at June 1, 2010, there were 1,285 regional headquarters (RHQs), 2,353 regional offices (ROs) and 2,923 local offices (LOs) in Hong Kong representing their parent companies located outside Hong Kong.
Regional Headquarters
The United States topped the list of countries/territories with RHQs in Hong Kong (288), followed by Japan (224), and the United Kingdom (113). The major lines of business of RHQs were import/export trade, wholesale and retail; professional, business and education services; financing and banking; and transportation, storage and courier services. All RHQs taken together employed over 140,000 persons in Hong Kong.
Regional Offices
The United States also topped the list of countries/territories with ROs in Hong Kong (529), followed by Japan (405) and the United Kingdom (194). The major lines of business of ROs were import/export trade, wholesale and retail; professional, business and education services; financing and banking; and transportation, storage and courier services. All ROs taken together employed some 90,000 persons in Hong Kong.
Local Offices
Mainland China topped the list of countries/territories with LOs in Hong Kong (528), followed by Japan (456) and the United States (446). The major lines of business of LOs were import/export trade, wholesale and retail; financing and banking; professional, business and education services; and transportation, storage and courier services. All LOs taken together employed over 120,000 persons in Hong Kong.
Key favourable factors for Hong Kong as a location for setting up RHQs/ROs/LOs (in descending order of favourableness rating)
(1) Simple tax system and low tax rate;
(2) Free flow of information;
(3) Corruption-free government;
(4) Absence of exchange controls;
(5) Communication, transport and other infrastructure;
(6) Free port status;
(7) Rule of law and independent judiciary;
(8) Availability of financial services;
(9) Geographical location; and
(10) Political stability and security.
They were regarded by some 60% to 70% of RHQs/ROs/LOs surveyed as favourable factors for Hong Kong.
Unfavourable factors for Hong Kong as a location for RHQs/ROs/LOs
Around 35% and 32% of the RHQs/ROs/LOs surveyed respectively viewed that the availability and cost of residential accommodation and those of business accommodation were unfavourable factors for Hong Kong, while 14% and 18% of them respectively regarded availability and cost of residential accommodation and those of business accommodation as favourable factors.
Overall business environment in Hong Kong
About two-thirds (64%) of RHQs/ROs/LOs surveyed opined that the overall business environment in Hong Kong as a location for setting up RHQs/ROs/LOs had remained more or less the same, and some 13% considered that it had improved when compared with a year ago.
Survey Definitions
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Regional Headquarters
* an office that has managerial control over offices in the region (i.e. Hong Kong plus one or more other places) on behalf of its parent company located outside Hong Kong.
Regional Office
* an office that co-ordinates offices and/or operations in the region (i.e. Hong Kong plus one or more other places) on behalf of its parent company located outside Hong Kong.
Local Office
* an office that only takes charge of the business in Hong Kong (but nowhere else) on behalf of its parent company located outside Hong Kong.
Survey Methodology
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Owing to the lack of a complete frame of companies covered in the survey, the number of RHQs, ROs and LOs enumerated in each survey round represents only the best snapshot that could be taken at the time of the survey. Coupled with the voluntary nature of the survey, changes between years in the number of RHQs, ROs and LOs may be affected by the continuous improvement in the frame of companies and response rate, and hence should be interpreted with care. However, it should be noted that since 2003, a high response rate of 98% or above has been achieved in each round of the survey, so that the effect of response rate is relatively insignificant.
The survey only covers companies that manage businesses in Hong Kong on behalf of their parent companies located outside Hong Kong. It does not cover companies which are funded by investment from outside Hong Kong and manage the business in Hong Kong independently but not on behalf of the investors. Hence, the total number of RHQs, ROs and LOs in Hong Kong does not represent all companies with investment from outside Hong Kong.
The survey results are published in greater detail in the "Report on 2010 Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong" by the Census and Statistics Department (C&SD). Users can download the publication free of charge from the website of C&SD(www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/commerce_and_industry/index.jsp). Print version of the publication will be available for sale at HK$39 per issue in late November. Enquiries about the survey results may be directed to the Business Expectation Statistics Section of C&SD (Tel: 2805 6112).
About Invest Hong Kong
Invest Hong Kong is the department of the Hong Kong Special Administrative Region (HKSAR) Government established in July 2000 to take responsibility for Foreign Direct Investment and support overseas, Mainland and Taiwanese businesses to set up or expand in Hong Kong. It provides free advice and customised services to help businesses succeed in Hong Kong's vibrant economy. As it celebrates its 10th anniversary, Invest Hong Kong has completed over 2,000 investment projects creating over 25,000 new jobs in the first year of operation or expansion and HK$52 billion of investment. For more information, please visit www.investhk.gov.hk.
For event photos, please visit www.flickr.com/photos/investhk/sets/72157625139537842.
Ends/Tuesday, October 19, 2010
Issued at HKT 16:33
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