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The total number of overseas and Mainland Chinese parent companies running business operations in Hong Kong has recorded its highest level to date: 6,948 companies, or a 5.9 per cent increase from 2010, according to the results of an annual survey released by Invest Hong Kong (InvestHK) and the Census and Statistics Department (C&SD) today (October 20).
Director-General of Investment Promotion, Mr Simon Galpin, said, "Hong Kong is the perfect base from which to access Mainland China. At the same time, Mainland companies are also using Hong Kong as a springboard from which to go global."
He added, "In the first half of 2011, InvestHK assisted close to 200 overseas and Mainland companies to set up business in Hong Kong. This level of activity supports our experience on the ground where we are seeing an increasing number of smaller, high-growth companies from all over the world choosing Hong Kong as the base for their regional operations."
The "2011 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. The results for 2011 compared with those of 2010 are as follows:
Regional Regional Local RHQs +
headquarters offices offices ROs +
(RHQs) (ROs) (LOs) LOs
2011 1,340 2,412 3,196 6,948
2010 1,285 2,353 2,923 6,561
% change +4.3% +2.5% +9.3% +5.9%
Of the 6,948 companies that responded to the survey, 24 per cent indicated that they plan to expand their business in Hong Kong in the next three years. This is a four percentage point increase compared with 2010.
With regards to country of origin, roughly half of the parent companies come from four countries. The United States (US) tops the list with a total of 1,328 RHQs/ROs/LOs operating in Hong Kong, followed by Japan with 1,150, Mainland China with 805 and the United Kingdom (UK) with 562.
When choosing a location 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) political stability and security, and (5) communication, transport and other infrastructure.
Mr Galpin said, "Hong Kong has once again been ranked the world's freest economy by the Heritage Foundation's 2011 Index of Economic Freedom. The city's low and simple tax regime includes profits tax of 16.5 per cent and salaries tax capped at 15 per cent. There is no VAT, no GST, no estate duties, no capital gains tax and even zero duty on wine, all of which definitely help to convince companies to set up and run their businesses in Hong Kong."
Survey Highlights
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As at June 1, 2011, there were 1,340 regional headquarters (RHQs), 2,412 regional offices (ROs) and 3,196 local offices (LOs) in Hong Kong representing their parent companies located outside Hong Kong.
Regional Headquarters
The US topped the list of countries/territories with RHQs in Hong Kong (315), followed by Japan (222) and the UK (117). All RHQs taken together employed about 140,000 people in Hong Kong.
Regional Offices
The US also topped the list of countries/territories with ROs in Hong Kong (525), followed by Japan (426) and the UK (210). All ROs taken together employed roughly 92,000 people in Hong Kong.
Local Offices
Mainland China topped the list of countries/territories with LOs in Hong Kong (557), followed by Japan (502) and the US (488). All LOs taken together employed some 136,000 people in Hong Kong.
Major Lines of Business of RHQs, ROs and LOs
The major lines of business were broadly identical for RHQs, ROs and LOs. They were mainly engaged in import/export trade, wholesale and retail; financing and banking; professional, business and education services; and transportation, storage and courier services.
Key favourable factors for Hong Kong as a location for setting up RHQs/ROs/LOs
According to the RHQs/ROs/LOs that responded to the survey, the key favourable factors for Hong Kong as a location for setting up RHQs/ROs/LOs, in descending order, were as follows:
(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) Political stability and security;
(8) Geographical location;
(9) Rule of law and independent judiciary; and
(10) Availability of business services and professional support services.
The above were regarded by 60 to 80 per cent of the RHQs/ROs/LOs that responded to the survey as favourable factors for Hong Kong.
Unfavourable factors for Hong Kong as a location for setting up RHQs/ROs/LOs
About 40 per cent and 37 per cent, respectively, of the RHQs/ROs/LOs that responded to the survey revealed that the availability and cost of residential accommodation and those of business accommodation were the top two unfavourable factors for Hong Kong.
Overall business environment in Hong Kong
The overall business environment in Hong Kong as a location for setting up RHQs/ROs/LOs has remained more or less the same, according to two-thirds (64 per cent) of the RHQs/ROs/LOs that responded to the survey.
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 sampling 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 sampling 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 per cent 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 their business in Hong Kong or in the region 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 their business in Hong Kong or in the region independently but not on behalf of the investors outside Hong Kong. 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 2011 Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong" by the Census and Statistics Department (C&SD). The publication is available for download free of charge from the C&SD website at: www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/commerce_and_industry/index_cd_B1110004_dt_detail.jsp .
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 and Mainland 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 11th year of operation, Invest Hong Kong has completed over 2,300 investment projects creating more than 28,000 new jobs in the first year of operation or expansion and HK$60 billion of investment. For more information, please visit www.investhk.gov.hk.
For event photos, please visit www.flickr.com/photos/investhk/sets/72157627734754973.
Ends/Thursday, October 20, 2011
Issued at HKT 15:31
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