5 March 2015

  |  CBI Press Team

News

The View from The Peak

Simon Moore, CBI International Director, is visiting Hong Kong this week, at the invitation of its’ Government, to find out what the conditions are for British investors and businesses in the city.

The View from The Peak

I am in a slightly foggy Hong Kong this week, on a mission to understand exactly what sets this ‘Special Administrative Region’ of China apart, and how it can work for British investors.

Despite last year’s Occupy movement hitting the headlines, Hong Kong has prospered since 1997 under the one nation, two systems arrangement with China. But what’s the story for business?

It’s true that Hong Kong is no longer a manufacturing centre - it was interesting to meet the Federation of Hong Kong Industries, and hear that less than 5% of their member's manufacturing capacity is still in Hong Kong – but it is still the 8th largest destination for UK export, even more than India, and the 4th largest recipient of FDI.

From a political point of view, Hong Kong’s Constitution embraces principles such as equality before the law, individual rights and freedoms, independent taxation and finances, its own monetary and financial policy, the free port and the right to participate in international agreements. The independent judiciary and free courts are guarantors of justice for business and investors.

These crucial characteristics make Hong Kong unique in the world today, and give the city three special functions.

Firstly, it is a springboard into China. China remains one of the most exciting markets in the world with untapped opportunities for investors and trading companies, particularly as the expansion of rail, road, air and other infrastructure links open up the west of the country. The other side of the coin is that it is one of the trickiest places to do business if you are a western company with no experience to draw on.  Hong Kong provides a platform into this market, with a legal system that will protect your rights, arbitration and mediation that can rule on disputes in the mainland, a language that you can understand and a wealth of experienced and knowledgeable organisations that will guide and protect you.

You can take advantage of a free trade agreement that has been around for more than 10 years, and that has been expanded in scope every year. You can benefit from a free port and free access to information through an unrestricted internet. You can benefit from very low barriers to entry and a very high ease of doing business rating.

Secondly, while large Chinese companies like Huawei can invest abroad with their own resources, Hong Kong provides the opportunity for smaller outbound Chinese companies to set up in the region and invest throughout the world, as part of a fully free investing and trading entity. Hong Kong is immeasurably valuable to China as it seeks to export its capital to investment markets around the world, acting as the headquarters of many of its overseas investing companies - we should expect to see many more of these setting up in future years.

Thirdly, whilst manufacturing has moved to Laos, Thailand, Indonesia and elsewhere, Hong Kong is attracting technology companies that are developing solutions in robotics, bio-med, smart materials, electronics, green energy and much more besides. Start-up businesses are coming to Hong Kong, attracted not just by the potential access to China but by the opportunity to raise finance, receive support and integrate design, hardware and software technologies.

Yes, Hong Kong has its’ problems – it is a crowded, tightly packed city, with a chronic housing shortage and environmental challenges, and the politics are tricky to navigate. However, the Chinese authorities recognise that Hong Kong is immensely valuable to China, that this is one of the richest trading centres in the world, and that it brings China unique and special advantages that Western businesses are well placed to take advantage of as they approach the challenges of China, Asia and wider markets.