Investors from around the world are taking another look for business opportunities in the former British colony of Hong Kong. Some of the biggest investors are from Mainland China by companies who wish to go international. The city-state has all the necessary inputs for such efforts. The city maintains its Western orientation, despite the return to Chinese rule in 1997. The commitment the Chinese government made with the United Kingdom to allow Hong Kong a great deal of economic and political autonomy for an additional 50 years, has allowed prosperity to continue unabated. It ranks second behind Singapore in the Ease of Doing Business Index, behind Singapore.
Hong Kong is ranked 4th world wide (8.5%) in terms of the highest percentage of millionaire households behind Switzerland, Qatar, and Singapore.
In Hong Kong, Chinese companies will find the Western type expertise needed to make their goods and services have international appeal. It is here they will find the global standards needed in accounting, design, marketing and research necessary for the development of new product lines.
Despite increased competition, Hong Kong has remained a popular venue for hosting representative offices and company regional headquarters. It is also a major magnet for international exhibits, conferences and meetings, especially concerning technology, business and investment.
Recognizing the new business demands in manufacturing and industry, Hong Kong has expanded its new business hubs 10 fold in the last few years. With the present 32 establishments to assist with expanding entrepreneurial opportunities, over 1,500 companies have been able to begin operations here recently.
China’s continuing rise in the world economy and the growing importance of East and South Asia in global trade, gives Hong Kong a unique opportunity to benefit immensely from this economic growth.
In addition, to start up businesses Hong Kong is well positioned to be the Asian headquarters for many established businesses, given the commitment to free enterprise and its geographic proximity to most of the important economic players in East Asia. The location of the territory has allowed Hong Kong to develop an impressive transportation and communication hub that provides the logistics infrastructure necessary, to remain a world leader in trade. The airport is the busiest in the world for international cargo and the port is ranked second globally in container business for goods. It is ranked 8th worldwide in 2014 up from 14 a year earlier, for readiness in communications and information technologies. It is the 2nd highest in Asia alone. This is the rating received by the international Network Readiness Index determined by the World Economic Forum.
Why invest in Hong Kong? It ranks first in having the freest economy in the world as ranked by the Index of Economic Freedom. It has held this distinction every year since 1995. It is the only place to receive above 90% or above on the 100 point scale, as set by Index of Economic Freedom of the Heritage Foundation. This is across the board in all of the major economic indicators. The services sector accounts for more than 90% of GDP (Gross Domestic Product). This gives the city-state the number one ranking in this category as well. Hong Kong is the second largest recipient of foreign direct investment (FDI) in Asia, after the Chinese mainland (3rd largest in the world). The territory is the third largest source of FDI in Asia after the Chinese mainland and Japan.
Although not traditionally seen as a tax haven, Hong Kong ranks 4th in the world on the Financial Secrecy Index posted by Tax Justice Network. It has becomes East Asia’s most attractive business environment for opening and expanding a company.
Given the clout that Hong Kong has in the global economy, many people are surprised at the small geographic size of the territory. The total area is just 1,104 km2 which is 426 square miles. That is 179th in the world in land. The population has swelled to over 7 million (100th in the world ranking). Population density is 6,544 km2 or 17,024 per square mile.
The nominal GDP estimate for 2014 is $302.8 billion USD (United States Dollar). It is the 39th largest economy in the world. Per capita it holds the 25th world rank at $41,421 USD. In Purchasing Power Parity (PPP) the GDP estimate for this year is $404.9 billion USD giving Hong Kong the 35th rank in the world. Per capita PPP is $55,383 USD the 7th highest in the world.
Hong Kong has been and is still one of the leading financial centers of the world. The Hong Kong Dollar was the 8th most traded currency in the world as of 2010. The Hong Kong Stock Exchange still ranks among the top ten in the world, with over $3 trillion (USD) of market capitalization. The Stock Exchange is the second largest in Asia and 6th largest in the world. It is one of the easiest places in the world to raise capital for business and industrial expansion. It is one of the largest centers for IPOs (Initial Public Offerings) of stock in the world.
Hong Kong can boast being the second largest private equity center in Asia as well as the third largest foreign exchange market in Asia (5th worldwide).
Hong Kong is the 11th largest trading entity in the world. The total value of imports and exports exceed the GDP of the territory. This is because Hong Kong is the largest re-export center in the world. This is mostly the result of having Mainland Chinese exports coming through the city-state at a massive rate.
As stated previously over 90% of the economy of Hong Kong is service oriented. Main industries outside this sector include clothing,electronics, textiles and tourism. In 2013 alone, 54.3 million people visited Hong Kong with 75% of the total originating from Mainland China. There is already an increase of 14.2% this year alone, after an impressive 11.7% gain in 2013. Total tourism expenditures increased 14.8% in 2013. This mass influx presents excellent business opportunities. In addition, the territory has a specialization in clocks, toys, plastics and watches.
The total value of exports exceed $400 billion USD. The main export partners are China with over 54% of the total trade followed by the United States at 9.9% and Japan with 4.2%. Imports are in excess of $500 billion USD. The deficit in trade is made up with the extensive services industry that contribute greatly to the GDP Of Hong Kong. The main import partners consist of China at nearly 47% of the total followed by Japan with 8.4%. Taiwan comes in 3rd at 7.5% of the total. South Korea and the United States come in at 5% and 4.7% respectively.
Public debt is about 30% of the GDP which allows this city state a Triple A rating for both Domestic and Foreign Credit by Standard and Poor’s credit ranking agency. Foreign Exchange Reserves are in excess of $300 billion USD. Government revenues and expenses are in rough balance.
The economy of Hong Kong expanded 2.9% in 2013 and recorded growth of 2.5% in the first Business Quarter of 2014. The economy is expected to grow from 3 to 4% for the year driven by growth in the export of services.
Unemployment is at a 16 year low at 3.1%. Annual inflation is between the 4 to 5% rate.
The four pillars of the economy in Hong Kong are trading and logistics, tourism, financial services, and professional with other producer services. The percentages to the GDP are 24.6%,4.7%,15.9%,and 12.8% respectively.
The six industries that show the most promise for further investment and business expansion begin with the cultural and creative sectors because of the rapidly expanding tourist industry. Others include medical services, education services, innovation and technology, testing and certification, and environmental services. They account for under 10% of the total GDP in terms of value added, but are growing in importance at a rapid rate.
The only cloud on the horizon is the tightening labor market because of stricter controls on immigration to Hong Kong. A recently added minimum wage did not seem to have adversely impacted the economy to an great extent. Of course, a continuing global economic slow down will eventually impact Hong Kong. The only other major concern is the special relationship the territory has with Mainland China. A similar agreement exists with Macao. There have been recent attempts by authorities in Beijing to tighten economic and especially, political control over the city state. However, despite verbal threats from China and demonstrations in Hong Kong, it is unlikely that events will be allowed to spiral out of control. The main reasons are two fold. The people of Hong Kong will wish to continue the special relationship, so they will temper their disobedience. The other factor is that China will not wish to kill the golden goose which continues to lay so many wonderful economic eggs.