Hong Kong’s Enduring Advantages Remain Attractive

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October 5, 2009 - Results of an annual survey jointly released by Invest Hong Kong and the Census and Statistics Department (C&SD) today shows a small 3.3% dip in the number of overseas, Mainland and Taiwanese business operations in Hong Kong.

Director-General of Investment Promotion at Invest Hong Kong, Mr. Simon Galpin, said, “The global financial and economic downturn inevitably meant many companies have had to consolidate their international operations. This has led to global foreign direct investment inflows declining by 14.1% in 2008 and the United Nations Conference on Trade and Development forecasting they will fall a further 29.4% in 2009.”

The “2009 Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong” was conducted by C&SD and Invest Hong Kong. Of the 6,397 overseas, Mainland and Taiwanese companies representing parent companies located outside Hong Kong surveyed as at June 1, 2009, there were 1,252 regional headquarters, 2,328 regional offices and 2,817 local offices. The survey results reaffirm investors’ confidence in Hong Kong's enduring advantages.

Mr. Galpin said, “The results of this survey contain a number of positive factors that Invest Hong Kong will look to build upon. Although there are currently fewer regional headquarters in Hong Kong, they account for more jobs, with the average number of staff employed increasing from 109 to 114 when compared with a year ago.

“This suggests overseas, Mainland and Taiwanese companies are moving more functions and strategic responsibilities to their Hong Kong regional headquarters, reaffirming the importance of Hong Kong as a regional business hub and the value of the Asian market. As Hong Kong strengthens its position as a leading international financial center and closes the gap on London and New York, our number of regional headquarters in the finance and banking sector has increased and now numbers 129.”

“Mainland China is an important market for Invest Hong Kong and we have devoted a lot of resources to support Mainland enterprises to establish business operations here. I am heartened to say this work is paying dividends. The number of local offices from the Mainland saw an increase of 6%, from 499 in June 2008 to 527 in June 2009 and the number of regional headquarters and regional offices remained stable. The total number of companies in Hong Kong surveyed that represent parent companies located on the Mainland now numbers 750,” Mr. Galpin added.

“We at Invest Hong Kong recognize that we need to work even harder to attract overseas, Mainland and Taiwanese companies to set up and expand in our city as the global economic outlook remains uncertain and competition in the region gets stronger,” Mr. Galpin concluded.

Survey Highlights
As at June 1, 2009, there were 1,252 regional headquarters (RHQs), 2,328 regional offices (ROs) and 2,817 local offices (LOs) in Hong Kong representing their parent companies located outside Hong Kong.

The United States topped the list of countries/territories with RHQs in Hong Kong (289), followed by Japan (224) and the United Kingdom (115). The major lines of business of RHQs were import/export trade, wholesale and retail; professional and business services; and finance and banking. All RHQs taken together employed some 143,000 persons in Hong Kong.

The United States also topped the list of countries/territories with ROs in Hong Kong (526), followed by Japan (447) and the United Kingdom (213). The major lines of business of ROs were import/export trade, wholesale and retail; professional and business services; and finance and banking. All ROs taken together employed some 91,000 persons in Hong Kong.

Mainland China topped the list of countries/territories with LOs in Hong Kong (527), followed by the United States (458) and Japan (447). The major lines of business of LOs were import/export trade, wholesale and retail; finance and banking; and professional and business services. All LOs taken together employed some 120,000 persons in Hong Kong.

Key favorable factors affecting the choice of Hong Kong as a location for RHQ/RO/LO (in descending order of favorableness rating):
(1) Simple tax system and low tax rate;
(2) Free flow of information;
(3) Absence of exchange controls;
(4) Corruption-free government;
(5) Communication, transport and other infrastructure;
(6) Rule of law and independent judiciary;
(7) Political stability and security;
(8) Free port status;
(9) Geographical location;
(10) Availability of financial services.

They were regarded by some 60%-70% of RHQs/ROs/LOs surveyed as favorable factors for Hong Kong.

Around one-third of RHQs/ROs/LOs surveyed considered the availability and cost of residential and business accommodation as unfavorable factors for Hong Kong, while 14% regarded availability and cost of residential accommodation as a favorable factor and 18% regarded availability and cost of business accommodation as a favorable factor.

Over one half (56%) of RHQs/ROs/LOs surveyed considered that comparing June 2009 with June 2008 the overall business environment in Hong Kong had remained the same or improved, in spite of the difficult global business conditions and the consequential effect on business perceptions.

Survey Definitions
Regional Headquarters: An office that has managerial control over offices in the region (i.e. Hong Kong plus one or more other places) on behalf of its parent company located outside Hong Kong.

Regional Office: An office that co-ordinates offices and/or operations in the region (i.e. Hong Kong plus one or more other places) on behalf of its parent company located outside Hong Kong.

Local Office: An office that only takes charge of the business in Hong Kong (but nowhere else) on behalf of its parent company located outside Hong Kong.

The survey results are published in greater detail in the "Report on 2009 Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong" by C&SD. The publication is now available for download free of charge at C&SD Web site (www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/commerce_and_industry/index.jsp).