|
Overview
Hong Kong is a major international financial centre, comprising an
integrated network of institutions and markets which provide a wide
range of products and services to local and international customers and
investors. Hong Kong’s financial markets are characterised by a high
degree of liquidity and operate under effective and transparent
regulations, which meet international standards. Hong Kong has a mature
and active foreign exchange market due to an absence of exchange
controls and a favourable time zone location. The Hong Kong dollar is
freely convertible. There are no restrictions on capital movements in
to or out of Hong Kong. Foreigners can repatriate their capital or
funds out of Hong Kong and borrow Hong Kong dollars in the Hong Kong
market. There are no restrictions on the trading or ownership of
securities or property, or in the setting up or owning of companies by
foreigners. In addition, the government has maintained a policy of low
taxation.
As at the end of July 2005, Hong Kong was the world's 10th largest
trading economy, one of the world's four largest gold markets, the
fourteenth largest banking centre in terms of external transactions,
the ninth largest stock market in terms of market capitalisation, sixth
largest financial centre in terms of foreign exchange turnover and
seventh largest if over-the-counter derivatives transactions are
included.
Hong Kong's securities market has been increasingly
internationalised. There has been a continued rise in the participation
of international investors in the market. Many of the initial public
offerings through the stock exchange are also made global. The majority
of these issuers are supranational bodies, whose issues are almost
invariably accompanied by global fund raising.
Online News Sources
South China Morning Post: www.scmp.com
The Standard: www.thestandard.com.hk
Business Environment
Business Entities
Business may be carried out in Hong Kong in various forms:
sole proprietorship; partnership; limited company and as a branch of a
foreign company. A business registration certificate from the Business
Registration Office of the Inland Revenue Department must be obtained
to commence a business in Hong Kong.
A local company or an overseas company must be registered with the
Company's Registry. Overseas companies are defined as those
incorporated outside of Hong Kong. The total number of overseas
companies on register at the end of June 2005 was 7,362. The total
number of local companies on register was 535,886. An amended Companies
Ordinance was adopted in July 2003, with most provisions taking effect
in February 2004. The Companies Ordinance is administered by the Legal
Services Division of the Companies Registry, a government agency. For
further details refer to the Hong Kong Government’s “Doing Business in
Hong Kong”(www.business.gov.hk/english/)
Banking
Hong Kong maintains a three-tier system of deposit-taking
institutions: licensed banks, restricted licence banks, deposit-taking
companies. Overseas banks may also establish local representative
offices. Hong Kong has one of the highest concentrations of banking
institutions in the world. 70 of the world's 100 largest banks have an
operation in Hong Kong. At 31 August 2005, there were 131 licensed
banks, 36 restricted licence banks, and 35 deposit-taking companies in
business. These institutions come from 37 countries. In addition, there
are 83 local representative offices of overseas banks in Hong Kong. The
external assets held by banks and deposit-taking institutions reached
US$508.1 billion (end of 2004).
The Hong Kong Monetary Authority is the licensing authority
responsible for the authorisation, suspension and revocation of all
types of authorised institutions. Only licensed banks may operate
current and savings accounts, and accept deposits of any size and
maturity from the public and pay or collect cheques drawn by or paid in
by customers. Restricted licence banks are principally engaged in
merchant banking and capital market activities. They may take deposits
of any maturity of HK$500,000 (about US$64,103) and above.
Deposit-taking companies are mostly owned by, or otherwise associated
with, banks. Deposit companies may engage in a range of specialised
activities, including consumer finance and securities business. They
may take deposits of HK$100,000 (about US$12,821) or above with an
original term of maturity of at least three months. Overseas banks
without one of the three types of licenses may establish local
representative offices in Hong Kong. Representative offices are not
allowed to engage in any banking business and are confined mainly to
liaison work between the bank and Hong Kong customers.
Securities
The Securities and Futures Commission (SFC) administers the
laws relating to the protection of investors and regulation of any
activities relating to securities and commodities trading/advising,
securities margin financing and non-bank retail leveraged foreign
exchange market in Hong Kong. Since the new Securities and Futures
Ordinance became operational in April 2003 market intermediaries only
require a single licence to carry on different types of regulated
activity. The nine types of regulated activity are: dealing in
securities; dealing in futures contracts; leveraged foreign exchange
trading; advising on securities; advising on futures contracts;
advising on corporate finance; providing automated trading services;
securities margin financing and asset management.
Insurance
The Insurance Authority regulates insurance companies and
insurance intermediaries (insurance agents and insurance brokers) in
Hong Kong based on the Insurance Ordinance.
At the end of June 2005, 179 insurers (approximately 64% general
business insurers, 25% long term business (or life) insurers and 11%
composite insurers) were authorized in Hong Kong. Of these insurers, 92
were companies incorporated in Hong Kong while the rest come from 22
different countries/regions, with the US taking the lead (15), followed
by Bermuda (14) and the UK (11).
Taxes
Corporate tax in the 2005/2006
financial year: 17.5%. Only the profits or income arising from Hong
Kong are subject to tax. Offshore profits, capital gains, dividends and
most bank deposit interest income are exempt from tax. Profits from
qualifying debt instruments issued in Hong Kong with an original
maturity of not less than 5 years are subject to a concessionary rate,
being 50% of the normal profits tax rate. Commencing from the year of
assessment 2003/04, this concession extends to cover debt instruments
that are issued in Hong Kong on or after 5 March 2003 and have an
original maturity of less than 7 years but not less than 3 years.
Commencing from the year of assessment 2003/04, profits derived from
qualifying long term debt instruments on or after 5 March 2003 with an
original maturity of not less than 7 years are exempt from profits tax.
Interest from Hong Kong bank deposits is exempt from Hong Kong
profits tax (provided the deposit is not used to secure or guarantee a
loan), as are profits earned by authorised mutual funds, unit trusts
and certain collective investment schemes. The rate of deeming
assessable profits from royalty type payments for the use in Hong Kong
(and from 25 June 2005 for the use outside Hong Kong) of intellectual
property is 30% of the payment, with the effective tax rate on such
payments at 5.25%. Hong Kong has no sales tax or value-added tax.
Estate duty ranges from 0% to 15% and applies only to companies owning
assets in Hong Kong. It is noted that in the 2005/06 Budget, the
Financial Secretary has proposed to abolish Estate Duty altogether. No
estate duty is payable on assets less than HK$7.5million. Stamp duty is
payable on securities transactions by both seller and buyer (0.1%
each). Customs duties are payable on imports.
Stock Exchange
The Hong Kong Exchanges and Clearing Limited (HKEx) is the holding
company of the Stock Exchange of Hong Kong Limited (SEHK), the Hong
Kong Futures Exchange Ltd. and Hong Kong Securities Clearing Company
Ltd. The Growth Enterprise Market (GEM) is an alternative stock market
operated by the HKEx for 'high growth, high risk' businesses that do
not fulfil the requirements for listing on the main board of the
exchange. GEM is designed for professional and informed investors. HKEx
went public in June 2000.
In July 2005, 906 companies were listed on the Main Board of the
SEHK (including 76 incorporated in mainland China). Those companies had
issued a total of 2,092 securities with a market capitalisation of
US$925 billion. The GEM market had 205 listed companies with a market
capitalisation of US$8 billion. The principal stock market index is the
Hang Seng Index a measure of 33 companies representing approximately
two-thirds of the SEHK's total market capitalisation.
The SFC has regulatory oversight of the HKEx and its subsidiaries.
The relative roles of the SFC and SEHK in relation to the regulation of
listed companies are set out in a Memorandum of Understanding Governing
Listing Matters signed between the two organisations. SFC has
front-line regulatory responsibility for takeovers and merger activity,
regulation of offers of investment products, and the enforcement of
laws regarding market malpractices. Since March 2000, the SFC has taken
over the front-line regulation of all exchange participants (brokers
and dealers) from the two exchanges. However, the stock exchange
remains the front-line regulator for all companies listed on the Main
Board and the GEM.
Being the most liquid overseas market for Chinese
Mainland enterprises, Hong Kong is an important centre for raising
capital for China. Over 90% of the overseas listed Mainland companies
have their listing in Hong Kong. As of December 2004, 304 Mainland
companies were listed in Hong Kong, comprising H-share, red-chip and
private companies with total market capitalization amounting to
HK$ 2.0 trillion (US$ 256 billion) or 30% of Hong
Kong's total market capitalisation. From 1993 to 2004, Mainland
companies have raised HK$895 billion (US$ 115 billion) in Hong Kong.
Key Contacts
Companies Registry
Queensway Government Offices
66 Queensway
Hong Kong
Tel: 2867 2600/2867 2604
Fax: 2869 6817
Email: crenq@cr.gcn.gov.hk
Internet: www.info.gov.hk/cr/
Hong Kong Monetary Authority
30th Floor
3 Garden Road
Central, Hong Kong
Tel: (852) 2878 8196
Fax: (852) 2878 8197
E-mail: hkma@hkma.gov.hk
Internet: www.info.gov.hk/hkma/index.htm
The Securities and Futures Commission
12th Floor, Edinburgh Tower
The Landmark
15 Queen's Road Central, Hong Kong
Tel: 852-2840-9222
Fax: 852-2521-7836
E-mail: enquiry@hksfc.org.hk
Internet: www.hksfc.org.hk
Office of the Commissioner of Insurance
21st Floor, Queensway Government Offices,
66 Queensway,
Hong Kong.
Tel: (852)2867 2565
Fax: (852)2869 0252
E-mail: iamail@oci.gov.hk
Internet: www.info.gov.hk/oci/index.htm
Hong Kong Exchanges and Clearing Limited
12/F One International Finance Centre
1 Harbour View Street
Central, Hong Kong
Tel: (852) 2522 1122
Fax: (852) 2295 3106
Email: info@hkex.com.hk
Internet: www.hkex.com.hk
Key Stats
Jurisdiction Description:
On 1 July 1997 China resumed its
sovereignty over Hong Kong after about 150 years of British colonial
control. Under the handover agreement Hong Kong is classified as a
special administrative region of China and operates under the 'one
country, two systems' policy pledged by China's central government. The
Sino-British Joint Declaration (1984) and the Basic Law allows Hong
Kong to retain a high degree of autonomy in most matters except foreign
and defence affairs for 50 years after the handover. Hong Kong
continues to participate in international agreements and organisations
under the name 'Hong Kong, China'. Hong Kong is made up of Hong Kong
island, Kowloon, the New Territories, and numerous small islands.
Population (July 2005 estimated)
6.9 million. English and
Cantonese are the languages of administration and commerce. Mandarin
Chinese is becoming more common.
Currency: Hong Kong dollar. US$1 = HK$7.8 (September 2005)
Legal system: The Basic Law (approved in March 1990 by China’s
National People’s Congress) is Hong Kong’s ‘mini-constitution'. The
legal system is based on English common law. Court of Final Appeal in
the Hong Kong Special Administrative Region
Government
Hong Kong is governed by a chief executive, a
cabinet of 14 principal officers, and a 60-seat Legislative Assembly
(LegCo). The Basic Law allows for the 'gradual and orderly' progress
toward the ultimate aim of electing the chief executive and all members
of the legislature by universal suffrage after 2007. However China's
government ruled in April 2004 that it would not permit direct election
of the chief executive in 2007 or of LegCo in 2008. The chief executive
is responsible for appointing the principal officers for the cabinet.
Except for the appointment, removal and discipline of officials and the
adoption of measures in emergencies, the chief executive consults the
cabinet on all major policy matters. The chief executive is elected by
an 800-member election committee for a five-year term. The election
committee seats are split equally between four sectors: (1) industrial,
commercial and financial; (2) the professions; (3) labour, social
services and religious groups; and (4) members of the Legislative
Council, local deputies to the National People’s Congress,
representatives of local members of the National Committee of the
Chinese People's Political Consultative Conference and representatives
of district-based organizations. The 60 LegCo members are chosen
through two separate sets of votes. Thirty members are selected by
universal suffrage in geographic constituencies. The other 30
legislators are selected through 'functional constituencies', which
represent business and professional groups. The functional
constituencies have an electorate of about 200,000 voters, which
includes companies and other groups. In Hong Kong's five geographic
constituencies, allocated one seat for each 100,000 registrants, each
voter casts a single vote for a party list. Under the
proportional-representation system, the number of ballots cast is
divided by the number of available seats. Any party with more than that
number of votes wins a seat and has that number of votes deducted from
its total. Parties with the highest total of voters after the round of
deductions get the remaining seats. Legco members serve four-year
terms.
Executive branch
Chief of State: President of China HU Jintao (since 15 March 2003)
Head of Government: Chief Executive Donald TSANG (since 24 June 2005)
Cabinet: Executive Council consists of seven non-official members and 14 official members
elections: previous chief executive TUNG Chee-hwa was elected to second
five-year term in March 2002 by 800-member election committee dominated
by pro-Beijing forces, resignation accepted 12 March 2005; Donald TSANG
acted as chief executive between 12 March 2005 and 25 May 2005; Henry
TANG acted as chief executive between 25 May 2005 and 24 June 2005;
last election 16 June 2005 to fill final two years of TUNG's term (next
to be held in June 2007)
Elections
The Legislative Council elections were last held 12
September 2004. The next election is due to be held in September 2008.
Thirty seats indirectly elected by functional constituencies, 30
elected by popular vote. Election results: percent of vote by party -
pro-democracy group 62%; seats by party - (pro-Beijing 34) DAB 12,
Liberal Party 10, independents 11, FTU 1; (pro-democracy 25)
independents 11, Democratic Party 9, CTU 2, ADPL 1, Frontier Party 1,
NWSC 1; other 1
Political Parties: Association for Democracy and People's
Livelihood or ADPL [Frederick FUNG Kin-kee, chairman]; Citizens Party
[Alex CHAN Kai-chung]; Democratic Alliance for the Betterment of Hong
Kong or DAB [MA Lik, chairman]; Democratic Party [LEE Wing-tat,
chairman]; Frontier Party [Emily LAU Wai-hing, chairwoman]; Liberal
Party [James TIEN Pei-chun, chairman]
note:
political blocs include: pro-democracy - Association for Democracy and
People's Livelihood, Democratic Party, Frontier Party; pro-Beijing -
Democratic Alliance for the Betterment of Hong Kong, Hong Kong
Progressive Alliance, Liberal Party
Economic overview
Hong Kong is a free market economy dependent on international trade and
finance. The services sector accounts for about 90% of GDP and employs
about 87% of the work force. Principal services: import/export trade,
financing, real estate, business services, and tourism (21.8 million
arrivals in 2004 up by about 6 million in 2003). Manufacturing:
textiles, clothing/apparel, electronics, watches and clocks, and
chemical and industrial machinery. As a regional transhipment trading
hub for mainland China, Hong Kong has a thriving export and re-export
business. China is Hong Kong's largest trading partner, and accounts
for about one-third of Hong Kong's total exports. Since the accession
of China to the World Trade Organisation at the end of 2001 other
centres are expected to compete for the re-export business. Hong Kong
is already a member of the World Trade Organisation and the
International Monetary Fund. Hong Kong has the world's busiest
container port, which handles about 18 million TEU's (twenty-foot
equivalent units) of cargo annually .The economy grew faster than
expected in 2004, expanding by 8.1%, compared with 1.9% average growth
in the previous 3 years. Services rebounded after being hit hard by the
SARS outbreak in 2003. Exports of goods and services rose by 15.2%,
boosted by the continued strength of the PRC economy, the weak US
dollar to which the Hong Kong dollar is linked, and the robust inbound
tourism. Strong domestic demand led to import growth of 13.8%. Net
exports, which had been the driving force in GDP growth in 2003,
contributed 3.5 percentage points in 2004, about the same as private
consumption. The Closer Economic Partnership Arrangement (CEPA) between
Hong Kong, China and the PRC, which was fully implemented in January
2004 and was expanded to cover more goods and services in January 2005,
has helped strengthen investor confidence. Under the agreement, Hong
Kong, China products covered by 1,108 PRC tariff codes have tariff-free
access to the PRC market, and suppliers in 26 service areas receive
preferential treatment from the PRC.
National accounts (2004/05 Financial Year)
Government revenues
received a lift from the economic rebound and buoyant property market.
General revenues, including operational and capital income, rose by
14.0% in the 2004 financial year (ended 31 March 2005), while operating
expenditures declined by 1%. The Government reported a small
consolidated surplus equivalent to 0.9% of GDP, but after excluding
receipts from bond issues the result was a deficit of 1.0% of GDP.
Fiscal reserves at March 2005 rose to HK$287 billion, equivalent to 14
months of government expenditures.
Balance of trade (2004 estimated): Exports (including re-exports)
of goods: US$268.1 billion. Imports of goods US$275.9 billion.
Deflation rate (CPI) (2004): -0.4%
Labour force (2004)
Total labour force: 3.54 million.
Unemployment: 6.5%. Labour force — by occupation: wholesale and
retail trade, restaurants, and hotels 43.7%, social services 18.5%,
manufacturing 7.5%, financing, insurance, and real estate 19.2%,
transport and communications 7.9%, construction 2.7%. Note: these
figures do not include the civil service.
Government accounts (2004)
Revenues US$26.6 billion. Total
expenditures: US$31.7 billion, made up of US$25.8 billion in operating
expenditures and US$5.9 billion in capital expenditures. Hong Kong has
for many years maintained a current account surplus on its balance of
payments, with a surplus on trade in services exceeding the merchandise
trade deficit, while net investment income usually offsets unilateral
transfers. This pattern recurred in 2004, with the merchandise trade
deficit widening to US$9.3 billion and the current account surplus
representing 9.7% of GDP
Time Zone: GMT plus 8 hours. There is no summer time clock change.
Financial year: 1 April - 31 March.
Holidays (2005)
General holidays (days on which banks, schools,
public offices and government departments close). 1 January (New Year’s
Day), 9-11 February (Chinese New Year), 25 March (Good Friday), 28
March (Easter Monday), 5 April (Monday after Ching Ming Festival), 2
May (Labour Day), 16 May (Birth of Buddha), 11 June (Dragon Boat
Festival), 1 July (Hong Kong Special Administrative Region
Establishment Day), 19 September (day after Mid-Autumn Festival), 1
October (National Day), 11 October (Double Nine or Chung Yeung
Festival), 26 December (First week-day after Christmas); 27 December
(additional Christmas holiday). In addition there are 12 statutory
holidays on which all employees receive either a holiday or, by
arrangement with their employer, another day in lieu.
Restaurant Guide
We recommend:
China Club, Wanchia
Lobster Bar
M at the Fringe
The Mandarin Grill
Va Bene, Lan Kwai Fong
Vong
Café Deco Bar & Grill (The Peak)
The Verandah (Repulse Bay).
Club Camargue, Wanchai
Click here to learn more about Robert E. Bauman's report,<
"Hong Kong Money Secrets"
|
