Hong Kong SAR, China: Investing

FDI in Figures

According to the World Investment Report 2023 released by UNCTAD, Hong Kong received USD 117.7 billion in FDI in 2022, down by 16% compared to the USD 140.1 billion recorded one year earlier. Despite the decrease, Hong Kong was the fourth receiver worldwide. At the end of the same year, the total stock of FDI stood at USD 2.09 trillion, around 579.1% of the country’s GDP. Examining the primary sources of investment, the British Virgin Islands and mainland China are Hong Kong's top contributors to inward direct investment, accounting for 30.9% and 30% respectively of the stock at the end of 2022. Regarding the major economic activities of Hong Kong enterprise groups receiving FDI, those involved in investment and holding, real estate, and professional services held the largest share, totaling 65.4%, followed by banking at 13%, while import/export, wholesale, and retail trade comprised 10.9% (data Census and Statistics Department). According to the same source, 3,647 overseas companies had regional operations registered in Hong Kong as of 2023.

With advanced institutions and regulatory systems, Hong Kong's economy thrives on competitive sectors such as finance, professional services, trade, logistics, and tourism. Hong Kong maintains equality in law and practice between investments by foreign-controlled and local companies. Foreign entities can establish operations, register foreign branches, and set up representative offices in Hong Kong without facing discrimination or excessive regulation. Ownership of these operations faces no restrictions. Hong Kong generally adheres to a free-market philosophy with minimal government intervention in economic matters. Capital gains remain untaxed, and there are no withholding taxes imposed on dividends and royalties. Moreover, profits are freely convertible and can be remitted without restrictions. On the other hand, factors potentially impeding FDI in Hong Kong include the lack of innovation and diversification in the economy, vulnerability to slowdowns in mainland China, disparities in business cycles between the United States and China due to the HKD-USD peg, risks within the real estate sector, particularly concerning housing affordability, and the upward trend in income inequality. Overall, Hong Kong has an excellent business climate, and it ranks 17th among the 132 economies on the Global Innovation Index 2023 and 14th out of 180 countries on the 2023 Corruption Perception Index.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	134,710	140,186	117,725
FDI Stock (million USD)	1,851,464	1,957,365	2,090,558
Number of Greenfield Investments*	88	101	113
Value of Greenfield Investments (million USD)	2,286	3,850	2,917

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI STOCKS BY COUNTRY AND SECTOR

Main Investing Countries	2022, in %
British Virgin Islands	30.9
Mainland China	30.0
United Kingdom	10.0
Cayman Islands	9.9
Bermuda	4.4
United States	2.2
Singapore	2.2
Canada	1.6

Main Invested Sectors	2022, in %
Investment and holding, real estate, professional and business services	65.4
Banking	13.0
Import/export, wholesale, and retail trades	10.9
Financing (except banking, investment and holding companies)	2.4
Insurance	1.9
Construction	1.9

Source: Hong Kong Statistics Office, Latest data available.

Form of Company Preferred By Foreign Investors: Limited companies, limited partnerships or sole proprietorships.
Form of Establishment Preferred By Foreign Investors: Subsidiary
Main Foreign Companies: According to official figures, 4,031 overseas companies had regional operations registered in Hong Kong in 2019.
For a list of foreign companies established in Hong Kong, consult the dedicated page on the InvestHK website.
Sources of Statistics: Census and Statistics Department

What to consider if you invest in Hong Kong SAR, China

Strong Points

Hong Kong is an international leader in terms of international trade, a services centre with high added value and the bridgehead to one of the largest production bases in the world, China. Hong Kong has a sound economy and a stable and efficient financial and banking system. Key strong points for FDI in Hong Kong include:

Favourable tax measures
The transparency of local institutions
Freedom of information
Availability of qualified human resources
Its advantageous geographical location in Asia

Weak Points

Disadvantages for FDI in Hong-Kong include:

High cost of property and work space (offices, shops, etc.)
High cost of salaries, compared to other Asian countries such as Mainland China and India
The excessive importance of the financial sector in national economy

Government Measures to Motivate or Restrict FDI

Hong Kong is a free territory for investments, which are in fact encouraged by the government with a favourable taxation policy and light legislation. Foreign companies can be set up freely, register their brands and the director of the company doesn't have to be a citizen nor a resident of Hong Kong. The government has also put in place numerous initiatives to support business innovation.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Hong Kong SAR, China: To see the list of investment treaties signed by Hong Kong, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD: Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for Settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: China is signatory of the MIGA convention .

Country Comparison For the Protection of Investors	Hong Kong SAR, China	East Asia & Pacific	United States	Germany
Index of Transaction Transparency*	10.0	5.9	7.0	5.0
Index of Manager’s Responsibility**	8.0	5.2	9.0	5.0
Index of Shareholders’ Power***	9.0	6.7	9.0	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: Hong Kong does not discriminate in law or practice between investments by foreign and local companies, so that foreign firms and individuals enjoy the same conditions as locals.
Acquisition of Holdings: There is no ownership restriction for foreigner, who can hold up to 100% of equity and have the right to engage in all forms of remunerative activity. Furthermore, company directors are not required to be citizens of, or resident in, Hong Kong.
Obligation to Declare: A registration certificate should be requested to the Companies Registry, which generally issues the Business Registration Certificate and the Certificate of Registration within two weeks from submission.
Competent Organisation For the Declaration: Companies Registry
Inland Revenue Department (IRD)
Requests For Specific Authorisations: Only some sectors have limitations for foreign investors, like broadcasting (where there are residency requirements for the directors and foreign ownership is limited to maximum 49% of equity) and legal services (with foreign firms having to satisfy certain requirements in order to be able to practice).

Office Real Estate and Land Ownership

Possible Temporary Solutions: Consult InstantOffices, CoWorker, Hong Kong Offices.
The Possibility of Buying Land and Industrial and Commercial Buildings: The government of Hong Kong owns all land, which is administered by granting long-term leases but without transferring title.
Risk of Expropriation: Private properties in Hong Kong can be expropriated only if it is in the public interest and only for well-defined reasons, after negotiations and with a prompt, adequate, and effective compensation.

Investment Aid

Forms of Aid: The government of Hong Kong encourages foreign investments through a series of measures, including: a deduction on interest paid to overseas-associated corporations; an 8.25% concessionary tax rate derived by a qualifying corporate treasury centre; no withholding taxes on dividends and royalties; capital gains are not taxed; profits can be freely converted and remitted; free advice and services to support companies offered by InvestHK; tax deductions for domestic expenditure on R&D; financial incentives to foreign universities who cooperate with local universities and establish joint research projects; the launching of the Re-industrialisation Funding Scheme (RFS), aimed at subsidising manufacturers who set up new smart production lines in Hong Kong; reduced tax rates for aircraft leasing companies; etc.
Privileged Domains: FDI aids take the form of tax breaks, government financed and subsidized research and development programs, bureaucratic assistance, etc.
Privileged Geographical Zones: Incentives are available for aircraft leasing companies, fintech companies, manufacturers, etc.
For detailed information, consult the official platform InvestHK.
Free-trade zones: Hong Kong is a free port.
Public aid and funding organisations: Several entities and organizations can provide financing, like the Innovation and Technology Fund (ITF), the Research Endowment Fund (REF), the Re-industrialisation Funding Scheme (RFS), etc.
For more information, consult the official portal InvestHK.

Investment Opportunities

The Key Sectors of the National Economy: The service sector has a very significant role in the economy of Hong Kong (89% of GDP).
Business services, retail, information and communication technologies, electronics and biotechnology, tourism and transportation are sectors that, in addition to being already highly established, have strong potential.
High Potential Sectors: In order to pursue economic development towards greater diversification, the government has set priorities for development: medicine (assistance to the disabled and the elderly), education, environmental technologies, tourism and innovative services are thus sectors with strong development potential.
Privatization Programmes: Private companies already operate all major utilities in Hong Kong under an agreement framework with the local government, except for water.
Tenders, Projects and Public Procurement: HK Government , Trace E-Gov
Tenders Info , Tenders in Hong Kong
DgMarket , Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: There are only two electricity suppliers: Hongkong Electric and China Light and Power; while Towngas is the country’s only gas supplier.

Finding Assistance For Further Information

Investment Aid Agency: InvestHK (Director-General of Investment Promotion, The Government of Hong Kong Special Administrative Region)
Other Useful Resources: An Introduction to Doing Business in Hong Kong 2021 (China Briefing)
GovHK (one-stop portal of the Hong Kong Special Administrative Region Government)
Doing Business Guides: World Bank's Doing Business - Hong Kong

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