flag Hong Kong SAR, China Hong Kong SAR, China: Investing

In this page: FDI in Figures | What to consider if you invest in Hong Kong SAR, China | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 

FDI in Figures

Global foreign direct investment (FDI) flows in the first half of 2021 reached an estimated USD 852 billion, showing stronger than expected rebound momentum, with an increase of 78% of the partial-year growth rate on the previous year according to UNCTAD’s Investment Trends Monitor released on October 2021. The global FDI outlook for the full year 2021 has also improved from earlier projections. The current momentum and the growth of international project finance are likely to bring FDI flows back beyond pre-pandemic levels. Nevertheless, the duration of the health crisis and the pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risk factors, including labour and supply chain bottlenecks, energy prices and inflationary pressures, will also affect final year results. (UNCTAD, October 2021). Covid’s impact on developing markets and shifting investment from China are major trends that will impact foreign investment in 2022.

According to the 2021 World Investment Report released by UNCTAD, Hong Kong received USD 119 billion of FDI in 2020, almost 62% more than in 2019 (USD 74 billion), driven mainly by an increase in intracompany loans and reinvested earnings. While representing a small share of FDI, the rebound in cross-border M&A sales to USD 11 billion (from - USD 1 billion in 2019) also contributed to this increase, thanks to many cases of Chinese MNEs consolidating affiliates in Hong Kong. Given the economy's sizeable intra-company flows and its close ties with China, which contributes 28% of its FDI stock, the rise in FDI in Hong Kong reflects corporate restructuring, particularly by Chinese multinationals, rather than new investment. It ranks third in terms of FDI inflows after the US and China in 2020. It is also the fourth largest country in terms of FDI outflows, registering USD 102 billion in 2020. The stock of FDI reached USD 1 884 billion in 2020. Hong Kong is a hub for foreign MNEs' regional headquarters, inflows were mostly invested in services sector operations (including regional headquarters and finance functions that facilitate indirect FDI flows). The main investing countries are China, the British Virgin Islands, the United Kingdom, Bermuda and Japan. The vast majority (around three-quarters) of investments are intended for financial activities: holding, real estate, finance, insurance, banking, etc.

Hong Kong is attractive due to several strong factors: its strategic position (it is a gateway to the Chinese market), its status as a free port; its simple tax system that provides many incentives, good infrastructure and judicial security. According to the last Doing Business 2020 ranking issued by the World Bank, Hong Kong ranks 3rd out of 190 countries in business climate, rising one spot compared to last year. Hong Kong has one of the world’s best regulatory systems for paying taxes. In 2019, Hong Kong made dealing with construction permits easier by enhancing its risk-based approach to inspections.

The latest United Nation Asia-Pacific Trade and Investment Trends Report provides additional information on FDI in Hong Kong and Asia-Pacific in 2021 and 2022.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 73,714134,710140,696
FDI Stock (million USD) 1,867,6971,851,4642,022,195
Number of Greenfield Investments* 19588100
Value of Greenfield Investments (million USD) 4,3732,2283,828

Source: UNCTAD, Latest available data.

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 2019, in %
British Virgin Islands 33.9
Mainland China 28.1
Cayman Islands 9.5
United Kingdom 8.2
Bermuda 5.9
United States 2.4
Singapore 2.2
Japan 1.5
Main Invested Sectors 2019, in %
Investment and holding, real estate, professional and business services 65.7
Banking 12.9
Import/export, wholesale, and retail trades 10.7
Financing (except banking, investment and holding companies) 3.0
Construction 2.3
Insurance 1.6
Transportation, storage, postal and courier services 1.1

Source: Hong Kong Statistics Office - Latest available data.

 
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

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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.

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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: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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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).

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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.

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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.
 
 

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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

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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.

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Latest Update: November 2022