Executive Summary

Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on July 1, 1997. Hong Kong’s status since reverting to Chinese sovereignty is defined in the Sino-British Joint Declaration (1987) and the Basic Law. Under the concept of “one country, two systems” articulated in these documents, Hong Kong will retain its political, economic, and judicial systems for 50 years after reversion. Hong Kong pursues a free market philosophy with minimal government intervention. The Hong Kong Government (HKG) welcomes foreign investment, neither offering special incentives nor imposing disincentives for foreign investors.

Hong Kong’s well-established rule of law is applied consistently and without discrimination. There is no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Foreign firms and individuals are allowed freely to incorporate their operations in Hong Kong, register branches of foreign operations, and set up representative offices without encountering discrimination or undue regulation. There is no restriction on the ownership of such operations. Company directors are not required to be citizens of, or resident in, Hong Kong. Reporting requirements are straightforward and are not onerous.

Twenty years after its reversion to PRC sovereignty, Hong Kong remains an excellent destination for U.S. investment and trade. Despite a population of less than eight million, Hong Kong is America’s ninth-largest export market, sixth-largest for total agricultural products, and fourth-largest for high-value consumer food and beverage products. Hong Kong’s economy, with its world-class institutions and regulatory systems, is based on competitive financial and professional services, trading, logistics, and tourism. It is the world’s most services-oriented economy, with the service sector accounting for more than 90 percent of its nearly USD 319 billion GDP in 2016. Hong Kong hosts a large number of regional headquarters and regional offices. Close to 1,400 U.S. companies are based in Hong Kong, and more than half are regional in scope. Finance and related services companies, such as banks, law firms, and accountancies, dominate the pack. Seventy of the world’s 100 largest banks have operations here.

Table 1

Measure Year Index or Rank Website Address
TI Corruption Perceptions index 2016 15 of 176 transparency.org/news/feature/corruption_
World Bank’s Doing Business Report “Ease of Doing Business” 2012 4 of 190 doingbusiness.org/rankings
Global Innovation Index 2016 14 of 128 globalinnovationindex.org/
U.S. FDI in Partner Country ($M USD, stock positions) 2015 64,049 bea.gov/international/di1usdbal.htm
World Bank GNI Per Capita 2015 41,000 data.worldbank.org/indicator/

Policies Towards Foreign Direct Investment

Hong Kong is the world’s second-largest recipient of foreign direct investment after the United States, according to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2016. The HKG’s Invest Hong Kong department encourages inward investment as a means of introducing new or improved products, processes, designs, and management techniques. U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis. Hong Kong does not have laws or practices that discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment in a sector of the economy.

Capital gains are not taxed, nor are there withholding taxes on dividends and royalties. Profits can be freely converted and remitted. Foreign-owned and Hong Kong-owned company profits are taxed at the same rate – 16.5 percent. No preferential or discriminatory export and import policies affect foreign investors. Domestic industries receive no direct subsidies. Foreign investments face no disincentives, such as quotas, bonds, deposits, or other similar regulations.

According to HKG statistics, 3,731 regional operations of overseas companies were registered in Hong Kong in 2016. The U.S. has the largest number of regional headquarters and offices in Hong Kong (766 companies), followed by Japan (659 companies), and the United Kingdom (347 companies). The major lines of business of the regional headquarters include wholesale/retail; import/export; finance and banking; manufacturing; professional, business, and education services; information technology services; and transportation, storage, and courier services.

Hong Kong has a free trade agreement (FTA) with Mainland China, called the Closer Economic Partnership Arrangement (CEPA), which provides tariff-free export to Mainland China of Hong Kong-origin goods and preferential access for specific services sectors. Signed in 2003, CEPA has gradually expanded every year thereafter. Following the 10th phase, announced in August 2013, service providers in 48 sectors (e.g., logistics, distribution) now enjoy preferential treatment on the Mainland. U.S. and other foreign firms engaged in substantive business operations in Hong Kong over the past three to five years are eligible to take advantage of most CEPA concessions to enter the Mainland market. Since March 2015, Hong Kong and China’s Guangdong Province have implemented an agreement signed in December 2014 on achieving basic liberalization of trade in services in Guangdong. The agreement has introduced for the first time under the CEPA framework the use of a “negative list” that covers 134 service sectors for Hong Kong and granted national treatment to Hong Kong’s 62 service industries. In addition, this agreement has offered Hong Kong most-favored nation treatment – i.e., any CEPA-plus liberalization measures included in the FTAs signed by the Mainland China with other countries will be automatically extended to Hong Kong. The framework and content of the agreement has set a model for basic liberalization of trade in services between Hong Kong and all of Mainland China by the end of 2015. With the PRC’s launch of the Guangdong Free Trade Zone in March 2015, industry observers expect Hong Kong will deepen further its economic integration with Guangdong.

Hong Kong also has FTAs with New Zealand (2010); member states of the European Free Trade Association – Iceland, Liechtenstein, Norway and Switzerland (2011); and Chile (2012). These agreements are fully consistent with the provisions of the World Trade Organization. In November 2011, Hong Kong made a formal request to join the ASEAN-China FTA (ACFTA). However, in April 2013, the HKG announced that Hong Kong and ASEAN had agreed to pursue a bilateral FTA instead of making Hong Kong a member of the ACFTA. In July 2014, Hong Kong and ASEAN launched the negotiation of a FTA, which is expected to conclude in the first quarter of 2017. Hong Kong started FTA negotiations in September 2016 with Georgia and Maldives, respectively. In May 2017, the HKG announced that it planned to pursue a FTA with Australia. Finally, Hong Kong is an Asia-Pacific Economic Co-operation (APEC) member economy and a participant in the APEC Business Travel Card Scheme, which grants qualified business travelers streamlined immigration clearance.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors can invest in any business and can own up to 100 percent of equity. Like domestic private entities, foreign investors have the right to engage in all forms of remunerative activity.

The HKG owns all land, granting long-term leases without transferring title. Local and foreign leaseholders are treated equally. The HKG plays a significant role in the housing market, with about 50 percent of homes in Hong Kong either rented from the Government or purchased with government assistance at below-market rates. In September 2012, in reaction to complaints about excessively high real estate prices for average Hong Kong residents, the HKG announced a pilot program to implement the “Hong Kong land for Hong Kong people” project to develop 1,100 new residential flats. These properties will be restricted to Hong Kong residents only. Furthermore, in October 2012, the HKG introduced a 15 percent Buyer’s Stamp Duty on all non-permanent-resident and corporate buyers, which expatriates claim discriminates against them. In April 2014, the HKG announced that it had shelved the “Hong Kong land for Hong Kong people” policy because the property market had cooled down due to the dampening effect imposed by the stamp duties.

The main exceptions to the HKG’s open foreign investment policy are:

  • Broadcasting – Voting control of free-to-air television stations by non-residents is limited to 49 percent. There are also residency requirements for the directors of broadcasting companies.
  • Legal Services – Foreign lawyers at foreign law firms may only practice the law of their jurisdiction and are prohibited from practicing Hong Kong law. Foreign law firms may become “local” firms after satisfying certain residency and other requirements. Localized firms may thereafter hire local attorneys, but must do so on a 1:1 basis with foreign lawyers. Foreign law firms can also form associations with local law firms.

Other Investment Policy Reviews

Hong Kong conducted the Trade Policy Review in November 2014 through the World Trade Organization (WTO). https://www.wto.org/english/tratop_e/tpr_e/g306_e.pdf 

Business Facilitation

The Economic Analysis and Business Facilitation Unit under the Financial Secretary’s Office is responsible for taking forward the business facilitation initiatives aiming to improve the business regulatory environment of Hong Kong.

InvestHK is a government agency whose mission is to attract and retain foreign direct investment which is of strategic importance to the economic development of Hong Kong. InvestHK offers services to all investors applying the following core values: passion, integrity, professionalism, customer service, business friendliness, and responsiveness.

http://www.cr.gov.hk/en/home/index.htm  links to the application for company incorporation and business registration site.

https://www.eregistry.gov.hk/icris-ext/apps/por01a/index  links to the e-Registry, which is an online one-stop platform jointly provided by the Companies Registry and the Inland Revenue Department for applying for company incorporation and business registration. Before using the e-Registry services, applicants have to register for user accounts. User registration is free of charge. Applicants for the e-Registry must present the original identification document (e.g., Hong Kong Identity Card or overseas passport), or attach a certified true copy of the identification document. If it is an application for company incorporation, the Companies Registry will normally issue the Business Registration Certificate and the Certificate of Incorporation within the same day. If it is an application for registration of a non-Hong Kong company, the Companies Registry will normally issue the Business Registration Certificate and the Certificate of Registration on the 14th working day after the submission date.

The HKG defines small and medium-sized enterprises (SMEs) as any manufacturing enterprises which employ fewer than 100 persons, or any non-manufacturing enterprises which employ fewer than 50 persons. The HKG has set up the SME Loan Guarantee Scheme, the SME Export Marketing Fund, and the SME Financing Guarantee Scheme, among other programs, to assist enterprises in securing trade finance and business capital, expand market, and enhance overall competitiveness. A Dedicated Fund on Branding, Upgrading and Domestic Sales was launched in 2012 to assist enterprises in exploring and developing the Mainland market. All these support measures are available to any enterprise in Hong Kong irrespective of its origin.

Outward Investment

As a free market economy, Hong Kong does not promote or incentivize outward investment, nor restricts domestic investors from investing abroad. British Virgin Islands and Mainland China were the top two destinations for Hong Kong’s outward investments in 2015.

To date, Hong Kong has signed agreements with Australia, Austria, the Belgium-Luxembourg Economic Union, Canada, Chile, Denmark, Finland, France, Germany, Italy, Japan, South Korea, Kuwait, the Netherlands, New Zealand, Sweden, Switzerland, Thailand, and the United Kingdom. Hong Kong has concluded separate negotiations with each of Bahrain, Myanmar, Mexico, and the United Arab Emirates, and will sign each respective agreement after completion of the necessary internal procedures by each party concerned. The HKG is negotiating agreements with Iran and Russia. Hong Kong is expected to commence negotiations on an agreement with India in 2017.

All such agreements are based on a model text approved by Mainland China through the Sino-British Joint Liaison Group. The United States and Hong Kong held talks on a bilateral investment agreement in the late 1990s, but certain differences could not be resolved at the time, and negotiations were suspended. U.S. firms are generally not at a competitive or legal disadvantage, since Hong Kong’s market is open and its legal system impartial.

The United States does not have a bilateral treaty on the avoidance of double taxation with Hong Kong, but in 2014, the United States signed a Tax Information Exchange Agreement with Hong Kong and an Inter-Government Agreement on the Foreign Account Tax Compliance Act.

In March 2017, Hong Kong signed agreements with six jurisdictions (namely, Belgium, Canada, Guernsey, Italy, Mexico and the Netherlands) on the automatic exchange of financial account information in tax matters (AEOI). Previously, Hong Kong had signed AEOI agreements with Japan and the United Kingdom (in October 2016), as well as South Korea (in January 2017).

Transparency of the Regulatory System

Hong Kong’s body of law and regulation recognizes the value of competition in economic activity. Regulations and policies typically strive to avoid distortions or impediments to the efficient mobilization and allocation of capital. Bureaucratic procedures and “red tape” are held to a minimum and are equally transparent to local and foreign investors.

In amending or making any legislation, including investment laws, the HKG will conduct a three-month public consultation on the issue concerned and write up a draft bill based on the results of the public consultation. The lawmakers will discuss the draft bill and finally give it a vote. Hong Kong’s legal, regulatory, and accounting systems are transparent and consistent with international norms. For instance, Hong Kong adopts the International Financial Reporting Standards, issued by the International Accounting Standards Board.

International Regulatory Considerations

Hong Kong is a member of WTO and APEC, adopting international norms. The HKG notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

Hong Kong’s legal system is firmly based on the rule of law and the independence of the judiciary. Courts of justice in Hong Kong include the Court of Final Appeal, the High Court (composed of the Court of Appeal and the Court of First Instance), the District Court, the Magistrate’s Courts, the Coroner’s Court, and the Juvenile Court. Tribunals include the Lands Tribunal, Labor Tribunal, Small Claims Tribunal, Market Misconduct Tribunal, Competition Tribunal, Copyright Tribunal, and other statutory tribunals.

Hong Kong’s commercial law covers a wide range of issues related to doing business, such as the rights and relations of business people and businesses involved in commerce, trade, sale, and merchandise. Most of Hong Kong’s contract law is found not in legislation, but in the reported decisions of the courts in Hong Kong, as well as other common law jurisdictions.

Laws and Regulations on Foreign Direct Investment

Hong Kong’s extensive body of commercial and company law generally follows that of the United Kingdom, including the common law and rules of equity. Most statutory law is made locally. The local court system, which is independent of the government, provides for effective enforcement of contracts, dispute settlement, and protection of rights. Formalities are minimal in company incorporation and business registration. Foreign and domestic companies register under the same rules and are subject to the same set of business regulations.

The Hong Kong Code on Takeovers and Mergers (1981) sets out general principles for acceptable standards of commercial behavior.

The Companies Ordinance (Chapter 622) applies to Hong Kong-incorporated companies and contains the statutory provisions governing compulsory acquisitions. For companies incorporated in jurisdictions other than Hong Kong, the relevant local company laws will apply.

The Securities and Futures Ordinance (Chapter 571) contains provisions requiring shareholders to disclose interests in securities in listed companies and provides listed companies with the power to investigate ownership of interests in its shares. It also regulates the disclosure of inside information by listed companies and restricts insider dealing and other market misconduct offences.

Competition and Anti-Trust Laws

The Competition Commission (CC), an independent statutory body which was set up in January 2013 under the competition law, investigates anti-competitive conduct that prevents, restricts, or distorts competition in Hong Kong. The competition law has been in effect since December 2015. In March 2016, 12 trade and professional associations indicated publicly that they had revised their conduct or were in the process of doing so to remove one or more price restrictions or fee scales. In addition, the CC has identified over 20 trade and professional associations whose public practices such as price recommendations appeared to place them at high risk of contravening the competition law.

The CC issued in September 2016 its proposed five-year block exemption order (BEO) for vessel sharing agreements (VSAs, agreements between shipping lines on certain operational arrangements, including consortia, slot exchange agreements, joint service agreements, and alliances), in consideration of the economic efficiencies generated by such agreements. The CC, however, indicated that it did not propose to issue a BEO for voluntary discussion agreements, which relate to particular shipping routes, on the grounds that such agreements do not enhance overall economic efficiency like VSAs do. The CC is reviewing the suggestions on the proposed BEO for VSAs after a public consultation period ended in December 2016.

By October 2016, the CC had begun in-depth probes into 10 cases, without disclosing which industry sectors the investigations concern. In March 2017, the CC brought its first case before the Competition Tribunal (CT) for alleged bid-rigging by five information technology companies. The CT has scheduled a trial of the case for May 2018.

Expropriation and Compensation

The U.S. Consulate General is not aware of any expropriations (direct or indirect) in the recent past. Expropriation of private property may occur if it is clearly in the public interest, but only for well-defined purposes such as implementation of public works projects. If this is the case, expropriations are to be conducted through negotiations, in a non-discriminatory manner in accordance with established principles of international law. Due process and transparency are to be observed. Investors in and lenders to expropriated entities are to receive prompt, adequate, and effective compensation. Property may be acquired under the State Land Resumption Ordinance, the Land Acquisition Ordinance, the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance, or the Roads Ordinance. These ordinances provide for payment of compensation. If agreement cannot be reached on the amount payable, either party can refer the claim to the Land Tribunal.

Dispute Settlement

ICSID Convention and New York Convention

Both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) apply, by extension, to Hong Kong now that it has reverted to Chinese sovereignty. (China is a signatory to both.)

Investor-State Dispute Settlement

The U.S. Consulate General is not aware of any investor-state disputes in recent years involving U.S. or other foreign investors or contractors and the HKG. The Hong Kong Department of Justice is also not aware of any such disputes. Private investment disputes are normally handled in the courts or via private mediation. Alternatively, disputes may be referred to the Hong Kong International Arbitration Center.

International Commercial Arbitration and Foreign Courts

The HKG accepts international arbitration of investment disputes between itself and investors. Hong Kong has also adopted the United Nations Commission on International Trade Law (UNCITRAL) model law for domestic and international commercial arbitration. Since 1999, Hong Kong and Mainland China have maintained a Memorandum of Understanding on an arrangement parallel to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), for the reciprocal enforcement of arbitral awards.

Under Hong Kong’s Arbitration Ordinance, any emergency relief granted by an emergency arbitrator before the establishment of an arbitral tribunal, whether in or outside Hong Kong, is enforceable. The HKG is planning to amend the Arbitration Ordinance in 2017 to attract more parties to resolve their intellectual property (IP) disputes by arbitration in Hong Kong.

Another option to resolve disputes is by mediation. The Mediation Ordinance, which fortifies Hong Kong’s status as an international dispute resolution center, deals with the rights and obligations of participants in mediation, especially in relation to confidentiality and admissibility of mediation communications in evidence.

The HKG will amend the Arbitration Ordinance and the Mediation Ordinance in 2017 to make it clear that third party funding for arbitration and mediation, respectively, is permitted under Hong Kong law.

Foreign judgments in civil and commercial matters may be enforced in Hong Kong at common law or under the Foreign Judgments (Reciprocal Enforcement) Ordinance, which facilitates reciprocal recognition and enforcement of judgments on the basis of reciprocity. A judgment originating from a jurisdiction which does not recognize a Hong Kong judgment may still be recognized and enforced by the Hong Kong courts, provided that all the relevant requirements at common law are met. However, a judgment will not be enforced in Hong Kong if it can be shown that either the judgment or its enforcement is contrary to Hong Kong’s public policy.

Bankruptcy Regulations

Hong Kong’s Bankruptcy Ordinance provides the legal framework to enable i) a creditor to file a bankruptcy petition with the court against an individual, a firm, or a partner of a firm who owes him/her money; and ii) a debtor who is unable to repay his/her debts to file a bankruptcy petition against himself/herself with the court. Bankruptcy offences are subject to criminal liability.

In May 2016, LegCo passed the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Bill. The bill, which was enacted into law in February 2017, aims to improve and modernize the corporate winding-up regime by increasing creditor protection and further enhancing the integrity of the winding-up process.

Hong Kong’s average duration of bankruptcy proceedings is 0.8 year, ranking 28th in the world for resolving insolvency, according to the World Bank’s Doing Business 2017 rankings.

Investment Incentives

Consistent with its principle of “Big Market, Small Government,” and “Market Leads, Government Facilitates,” Hong Kong imposes no export performance or local content requirements as a condition for establishing, maintaining, or expanding a foreign investment. There are no requirements that Hong Kong residents own shares, that foreign equity is reduced over time, or that technology is transferred on certain terms.

In June 2016, the HKG enacted a new law to allow a deduction on interest paid to overseas associated corporations and to provide an 8.25 percent concessionary tax rate (reduced by half) derived by a qualifying corporate treasury center.

The Financial Secretary announced in February 2017 that the HKG will introduce a bill into the LegCo in 2017 to amend the Inland Revenue Ordinance, to offer tax concession so as to attract aircraft leasing companies to develop their business in Hong Kong.

The HKG announced in March 2017 that it will include a cinema requirement in the land lease of two designated government land sale sites, with a view to building up an audience and promoting the long-term growth of Hong Kong’s film industry.

Regardless of size, companies registered in Hong Kong with “substantial connection to Hong Kong” are eligible to apply for the Innovation and Technology Fund (ITF), which supports midstream/downstream research and development (R&D) projects undertaken mainly by universities, R&D Centers, industry support organizations, professional bodies, trade and industry associations, and private companies. “Substantial connection to Hong Kong” means that it must have a significant proportion of its research, design, development, production, management, or general business activities located in Hong Kong. Universities or research institutes outside Hong Kong are not eligible to apply for the ITF.

The Hong Kong Science & Technology Parks Corporation’s incubation programs provide subsidized office spaces, consultancy services, investment matching, and financial aid packages to support R&D. An applicant must be a Hong Kong registered technology start-up company established for no more than two years before the date of application.

Foreign Trade Zones/Free Ports/Trade Facilitation

Hong Kong is a free port without foreign trade zones. Hong Kong’s modern and efficient infrastructure supports Hong Kong’s role as a regional trade, finance, and services center. Rapid growth has placed severe demands on that infrastructure, necessitating plans for major new investments over the next few years in transportation and shipping facilities. Significant elements include a planned expansion of container terminal facilities, additional roadway and railway networks, major residential/commercial developments, community facilities, environmental protection projects, and redevelopment of the old Kai Tak Airport. The HKG is planning to spend over USD 13 billion in the next decade to redevelop Kai Tak into a modern green zone that contains government offices, public housing, commercial centers, and cruise terminals. Construction at the site began in July 2009. The HKG has started to build a third runway at Hong Kong International Airport, at the cost of USD 19.3 billion, and will finish the construction by 2023.

In May 2016, Hong Kong and Mainland China signed a Free Trade Agreement Transshipment Facilitation Scheme that enables Mainland-bound consignments passing through Hong Kong to enjoy tariff reductions on the Mainland. The arrangement covers goods traded between Mainland China and its trading partners, including the ASEAN members, Australia, Bangladesh, Chile, Costa Rica, Iceland, India, New Zealand, Pakistan, Peru, South Korea, Sri Lanka, Switzerland and Taiwan.

Hong Kong was the first WTO member to ratify the Trade Facilitation Agreement in 2014. To keep Hong Kong in line with the international trend, the Financial Secretary announced in his Budget Speech for 2017-18 that the HKG will establish a Trade Single Window, providing a one-stop electronic platform for submitting trade documents, promoting cross-border customs co-operation and expediting trade declaration and customs clearance.

Performance and Data Localization Requirements

The HKG does not mandate local employment or performance requirements. In addition, the HKG does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.

Foreign nationals normally need a visa to live or work in Hong Kong. But Hong Kong adopts light-touch visa policies, which means that short-term visitors are permitted to conduct business negotiations and sign contracts while on a visitor’s visa or entry permit. Companies which plan to employ people from overseas need to demonstrate that a prospective employee has special skills, knowledge, or experience not readily available in Hong Kong.

Hong Kong has free flow of information, with no censorship of content and adequate protection of data privacy — elements that are critical to support global data center operations. The HKG has no requirements for foreign IT providers to turn over source code and/or provide access to surveillance. In addition, the HKG has never interfered with data center operations or censored content, and there are no laws that allow the HKG to do so.

Real Property

Private ownership of property is enshrined in the Basic Law, Hong Kong’s mini-constitution. The real estate sector is one of Hong Kong’s pillar industries, and is equipped with a sound banking mortgage system.

The Basic Law requires the protection of the lawful traditional rights and interests of the indigenous inhabitants of the New Territories.

Since 1844, land transactions in Hong Kong have been operating on a deeds registration system governed by the Land Registration Ordinance. The Land Titles Ordinance was enacted in July 2004 to provide greater certainty on land title and to simplify the conveyancing process.

HK ranked 61st for ease of registering property, according to the World Bank’s Doing Business 2017 rankings.

Intellectual Property Rights

Hong Kong’s commercial and company laws provide for effective enforcement of contracts and protection of corporate rights. Hong Kong has filed its notice of compliance with the Trade-Related Aspects of Intellectual Property Rights (TRIPs) requirements of the WTO. The Intellectual Property Department, which includes the Trademarks and Patents Registries, is the focal point for the development of Hong Kong’s IP regime. The Customs and Excise Department (HKCED) is the sole enforcement agency for intellectual property rights (IPR). Hong Kong has acceded to the Paris Convention for the Protection of Industrial Property, the Bern Convention for the Protection of Literary and Artistic Works, and the Geneva and Paris Universal Copyright Conventions. Hong Kong also continues to participate in the World Intellectual Property Organization, as part of Mainland China’s delegation; the HKG has seconded an officer from HKCED to INTERPOL in Lyon, France to further collaborate on IPR enforcement.

The HKG devotes significant attention and resources to IPR enforcement. Enforcement of laws passed in recent years, including aggressive raids at the retail level and corresponding criminal prosecutions, has significantly reduced illegal production and retail sales of copyright and trademark protected products. The Hong Kong courts have imposed longer jail terms than in the past for violations of Hong Kong’s copyright ordinance. In addition, HKCED works closely with foreign customs agencies and the World Customs Organization to share best practices and to identify, disrupt, and dismantle criminal organizations engaging in IP theft that often operate in multiple countries. The government has conducted public education efforts to encourage respect for IPR. Nevertheless, pirated and counterfeit products remain available on a small scale at the retail level throughout Hong Kong. The remaining sellers of infringing goods tend to keep a small stock of items and are highly mobile. HKCED detected a total of 845 infringement cases in 2016, representing a drop of 16 percent when compared to 2015. Among these cases, 201 involved internet crime.

Other IPR challenges include end-use piracy of software and textbooks, the rapid growth of internet peer-to-peer downloading, and the illicit importation and transshipment of pirated and counterfeit goods from Mainland China and other places in Asia. Hong Kong authorities have taken steps to address these challenges by strengthening collaboration with Mainland Chinese authorities, prosecution of software end-use piracy, and monitoring of suspect shipments at points of entry. In addition, the HKG has established a task force to monitor and crack down on internet-based peer-to-peer piracy and reviewed ways to strengthen copyright protection in the digital environment. HKCED opened a new Electronic Crime Investigation Center (ECIC) in early 2013. In December 2013, ECIC programs expanded to begin monitoring cases involving cyberlockers. In July 2015, HKCED rolled out a SocNet Monitoring System for online surveillance of infringing activities on social networking platforms. Using the new system, HKCED can screen 4,000 social media accounts per day, compared to 200 in the past by manual.

Effective from January 2016, the Drug Office of Hong Kong is imposing a new drug registration requirement where applicants for new drug registrations need to make a non-infringement patent declaration. The Copyright Ordinance protects any original copyrighted work created or published by any person anywhere in the world. In 2007, the government amended the Copyright Ordinance, criminalizing the copying and distribution of infringing printed works in business and the act of circumventing technological protection measures. The amendments provide rental rights for sound recordings, computer programs, films, and comic books, and include enhanced penalty provisions and other legal tools to facilitate enforcement. The amended ordinance also decriminalized parallel imports of copyrighted products 15 months after their release anywhere in the world, although it maintained civil penalties. The law continues to define possession of an infringing copy of computer programs, movies, TV dramas, and musical recordings (including visual and sound recordings) for use in business as an offense, but provides no criminal liability for other categories of works.

Over the past few years, the HKG has consulted unsuccessfully with internet service providers and content user representatives on a voluntary framework for IPR protection in the digital environment. In June 2011, the government introduced an amended copyright bill to the LegCo for debate. In June 2012, the government shelved the bill because of concern from “netizen” groups regarding freedom of speech and parody protections. Between July and November 2013, the HKG held a public consultation on parody. In June 2014, the HKG introduced the amended copyright bill into the LegCo. The bill aims to enhance copyright protection against online piracy, while providing exemptions for parody makers. LegCo resumed its second reading of the bill in February 2016. But in March 2016, the HKG technically shelved the copyright bill without a vote after a total of 28 hours of debating and a total of 62 hours of filibustering by the pan-democrats. The HKG’s decision was made in light of a backlog of 23 other bills on livelihood and economic issues, as well as the fiscal budget that must be passed by the legislators before LegCo’s summer recess in July 2016.

The Patent Ordinance allows for granting of an independent patent in Hong Kong based on patents granted by the United Kingdom and China. The patent granted in Hong Kong is independent and capable of being tested for validity, rectified, amended, revoked, and enforced in Hong Kong courts. In 2011, the government initiated a public comment process to ensure that the patent system continues to meet the most modern standards and is well-suited to Hong Kong’s development into a regional innovation and technology hub. The HKG announced in February 2013 it intended to establish an “original grant patent” (OGP) system, while retaining the current re-registration system for the granting of standard patents. In June 2016, LegCo passed the new patent bill into law, which has taken into account the patent systems generally established in the regional and international patent treaties, such as the European Patent Convention and its Implementing Regulations, the Patent Co-operation Treaty, and the Patent Law Treaty. The HKG will implement the OGP system in 2019 upon the completion of all preparatory work..

The Registered Design Ordinance is modeled on the EU design registration system, with certain modifications. To be registered, a design must be new. The system requires no substantive examination. Protection is for an initial period of five years and may be extended for four periods of five years each, up to a maximum of 25 years.

Hong Kong’s trademark law is TRIPS-compatible and allows for registration of trademarks relating to services. All trademark registrations originally filed in Hong Kong are valid for seven years and renewable for 14-year periods. Proprietors of trademarks registered elsewhere must apply anew and satisfy all requirements of Hong Kong law. When evidence of use is required, such use must have occurred in Hong Kong. In November 2014, the HKG launched a three-month consultation on the application of the Madrid Protocol. The HKG is analyzing public comments on the merits of introducing the Madrid Protocol to Hong Kong.

Hong Kong has no specific ordinance to cover trade secrets; however, the government has a duty under the Trade Descriptions Ordinance to protect information being disclosed to other parties. The Trade Descriptions Ordinance prohibits false trade descriptions, forged trademarks, and misstatements regarding goods supplied in the course of trade. The law was amended in July 2012 to extend coverage to services and was put into force in July 2013.

The Working Group on IP Trading released in March 2015 a report with recommendations on measures to further develop Hong Kong as an IP trading hub in the region. The HKG has accepted the Working Group’s report for implementation and set aside about USD 3 million in the coming three years to roll out a series of new support measures. In February 2017, the HKG was planning on expanding the scope of tax deductions for capital expenditure incurred for the purchase of IP rights, from the existing five categories to eight.

Resources for Rights Holders

Danielle Zheng
U.S. Patent and Trademark Office (USPTO)
U.S. Consulate General
43 Hua Jiu Road, Zhujiang New Town
Tianhe District
Guangzhou, China 510623
+86 (20) 3814-5533

American Chamber of Commerce Hong Kong
1904 Bank of America Tower
12 Harcourt Road
Central, Hong Kong
+(852) 2530 6900

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

Local lawyers list: https://hk.usconsulate.gov/u-s-citizen-services/attorneys/ 

Capital Markets and Portfolio Investment

There are no impediments to the free flow of financial resources. Non-interventionist economic policies, complete freedom of capital movement, and a well-understood regulatory and legal environment have greatly facilitated Hong Kong’s role as a regional and international financial center. Hong Kong has one of the most active foreign exchange markets in Asia.

The Hong Kong Mortgage Corporation (HKMC, wholly-owned by the government), promotes the development of the secondary mortgage market in Hong Kong. The HKMC purchases residential mortgage loans for its own retained portfolio and also repackages mortgages into mortgage-backed securities for sale. In January 2017, the HKMC’s outstanding amount of debt totaled USD 4.9 billion.

In 2006, a Deposit Protection Scheme (DPS) began operation. Depositors are now protected up to a maximum of HKD 500,000 (USD 64,100) per bank. As a result of the global financial crisis in late 2008, the HKG announced the use of its Exchange Fund to guarantee the repayment of all customer deposits in Hong Kong dollars and foreign currency held with licensed banks, restricted license banks, and deposit-taking companies, including Hong Kong branches of overseas institutions. The assets of the DPS Fund (funded through contributions by member banks) amounted to USD 397.4 million at the end of March 2016, which is sufficient to cope with the simultaneous failures of two medium-sized banks. While Hong Kong requires locally licensed banks to participate, overseas-incorporated banks may apply for an exemption if a comparable scheme in their home jurisdiction covers deposits taken in by its Hong Kong branches. In March 2016, the HKG implemented new amendments to the DPS Ordinance. Under the new gross payout approach (as compared with the previous net payout approach), depositors under most circumstances will be fully compensated in the event of a bank failure within seven days from the previous six weeks.

In 2004, HKMA and Dun & Bradstreet (HK) Ltd. jointly launched a Commercial Credit Reference Agency to collate information about the indebtedness and credit history of SMEs and make such information available to members of the Hong Kong Association of Banks and the Hong Kong Association of Deposit Taking Companies.

In July 2016, HKMA established the Infrastructure Financing Facilitation Office to provide a platform for pooling the efforts of investors, banks, and the financial sector to offer comprehensive financial services for infrastructure projects in the emerging markets.

Under the Insurance Companies Ordinance, insurance companies are authorized by the Office of the Commissioner of Insurance (OCI) to transact business in Hong Kong. As of December 2016, there were 160 authorized insurance companies in Hong Kong. Of these, 71 were foreign companies (from 21 countries) and two were Mainland-Chinese enterprises. A number of the world’s top insurance companies (in terms of assets) have branch offices or subsidiaries in Hong Kong. In April 2014, the HKG introduced the Insurance Companies (Amendment) Bill into the LegCo. The bill, which was enacted in July 2015, aims to provide a legal framework for establishing an Independent Insurance Authority (IIA) and a statutory licensing regime for insurance intermediaries, and to enhance protections for policyholders. The IIA has replaced the OCI since the end of 2016.

The Hong Kong Stock Exchange’s total market capitalization rose by 0.4 percent during 2016, to USD 3.2 trillion, with 1,973 listed firms as of year-end 2016. Hong Kong’s stock exchange ranked fourth in Asia after Tokyo, Shanghai, and Shenzhen, and eighth in the world in terms of capitalization. Hong Kong Exchanges and Clearing Limited, a listed company, operates the stock and futures exchanges. In June 2011, Samsonite International S.A. became the first U.S.-based company to list on the Hong Kong stock market, followed in December by luxury-brand Coach, the first U.S.-domiciled company to list. The Securities and Futures Commission, an independent statutory body outside the civil service, has licensing and supervisory powers to ensure the integrity of markets and protection of investors.

No discriminatory legal constraints exist for foreign securities firms establishing operations in Hong Kong via branching, acquisition, or subsidiaries. In practice, foreign firms typically establish operations in Hong Kong in the form of subsidiaries. Rules governing operations are the same, irrespective of ownership. Portfolio investment decisions are left to the private sector. No laws or regulations specifically authorize private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control.

The stock exchange plays a significant role in raising capital for Chinese state-owned enterprises (SOEs). Chinese state enterprises may raise equity (through the issuance of so-called “H” shares) in Hong Kong, provided they meet Hong Kong regulatory and accounting requirements. These “H” shares are denominated in Renminbi (RMB), but must be purchased in Hong Kong Dollars. In 2016, a total of 241 Chinese enterprises had “H” share listings on the stock exchange, with combined market capitalization of USD 682.5 billion. In April 2014, Chinese Premier Li Keqiang announced the establishment of a Shanghai-Hong Kong stock exchanges connectivity mechanism (Shanghai-Hong Kong Stock Connect). The scheme, which aims to facilitate individual investor’s ability to cross trade Hong Kong and Shanghai stocks, has operated since November 2014. Meanwhile, the RMB conversion limit for Hong Kong residents of RMB 20,000 (USD 3,000) per day has been removed. A similar “stock connect” scheme, between the Shenzhen and Hong Kong stock exchanges, was launched in December 2016.

In July 2015, the Hong Kong and Mainland China authorities launched the Mainland-Hong Kong Mutual Recognition of Funds scheme. By the end of January 2017, 48 Mainland mutual funds and six Hong Kong mutual funds were allowed to be distributed in each other’s markets. This scheme, together with the Shanghai-Hong Kong Stock Connect, represents significant steps to liberalize the Chinese capital account and have created additional channels for the circulation of RMB funds between the onshore and offshore markets. In December 2016, the HKG announced the mutual recognition of funds program between Switzerland and Hong Kong.

Hong Kong has made a concerted effort to develop a local debt market with the Exchange Fund bills and notes program. Maturities now extend to ten years. Hong Kong Dollar debt (public and private) has increased gradually, from USD 3.46 billion at the end of 1989 to USD 221.9 billion by the end of 2016. Between July 2007 and June 2016, when the PRC Government approved the sales of RMB-denominated bonds in Hong Kong, RMB 786.9 billion (USD 114.0 billion) of offshore RMB bonds were issued in Hong Kong. The range of issuers has diversified to include a number of multinational enterprises such as McDonald’s, Caterpillar, Unilever, Volkswagen, and Renault. Regional infrastructure financing requirements and increasing investor demand are projected to stimulate further development of the local debt market. The HKG requires workers and employers to contribute to retirement funds under the Mandatory Provident Fund (MPF) scheme. Contributions are expected to channel roughly USD five billion annually into various investment vehicles. By the end of 2016, the net asset values of MPF funds amounted to USD 82.9 billion. In September 2014, the HKG made a successful inaugural issuance of sovereign Islamic bonds, with an issuance size of USD 1 billion and a tenure of five years. It was the world’s first U.S. dollar-denominated sukuk (Islamic bond) originated by an AAA-rated government, creating a 4.7-times oversubscription rate. In May 2015, the HKG launched its second sukuk, with an issuance size of USD 1 billion and a tenure of five years. Buyers of this sukuk were 42 percent from the Middle East, 43 percent from Asia, and 15 percent from Europe. In February 2017, the HKG issued the third sukuk, which had an issuance size of USD 1 billion and a tenure of 10 years. This launch was oversubscribed by a factor of 1.7.

In March 2014, the LegCo enacted the Securities and Futures (Amendment) Ordinance, which provides for a regulatory framework for the over-the-counter derivatives market in Hong Kong, to meet the commitments of the Group of Twenty (G-20). The HKG implemented the new regime in July 2015 in phases, starting first with mandatory reporting and related record keeping obligations, followed by mandatory clearing and related record keeping obligations in a later phase.

In November 2015, the HKG introduced the Financial Institutions (Resolution) Bill to the LegCo in order to promote the quality of the financial markets. The bill intends to establish a regime to facilitate orderly resolution of financial institutions when risks are posed by their non-viability to the stability and effective working of the financial system of Hong Kong. The bill was passed by the LegCo in June 2016. The HKG has not yet enacted the legislation.

Money and Banking System

Hong Kong has a three-tier system of deposit-taking institutions: licensed banks, restricted license banks, and deposit-taking companies. Only licensed banks can offer current (checking) or savings accounts. In February 2017, Hong Kong had 156 licensed banks, 22 restricted licensed banks, 17 deposit-taking institutions, and 55 representative offices. The Hong Kong & Shanghai Banking Corporation (HSBC) is Hong Kong’s largest banking group. With its majority-owned subsidiary Hang Seng Bank and 170 branches, HSBC controls more than 33.3 percent of Hong Kong dollar deposits. The Bank of China (Hong Kong) is the second-largest banking group, controlling 12.8 percent of Hong Kong dollar deposits throughout 220 branches. Thirty-five U.S. “authorized financial institutions” operate in Hong Kong. Most banks in Hong Kong maintain U.S. correspondent relationships. Hong Kong has begun implementing the Basel III capital, liquidity, and disclosure requirements from January 2013 in phases, with full implementation expected by January 2019.

Hong Kong’s five largest banks, in terms of total assets (2016):

Rank Institution Total Assets (USD Billions)
1 HSBC 967.8
2 Bank of China (Hong Kong) 284.3
3 Hang Seng Bank 176.6
4 Standard Charter Bank (Hong Kong) 129.0
5 Bank of East Asia 98.2
Source: Companies’ annual reports.

Credit in Hong Kong is allocated strictly on market terms and is available to foreign investors on a non-discriminatory basis. The private sector has access to the full spectrum of credit instruments, as provided by Hong Kong’s banking and financial system. Legal, regulatory, and accounting systems are transparent and consistent with international norms. The HKMA functions as a de facto central bank. It is responsible for maintaining the stability of the banking system and managing the Exchange Fund that backs Hong Kong’s currency. The HKMA, with the assistance of the banking sector, has upgraded Hong Kong’s financial market infrastructure. Real Time Gross Settlement helps minimize risks in the payment system and brings Hong Kong in line with international standards.

Banks in Hong Kong have in recent years been stepping up their anti-money laundering and counter-terrorist financing controls, including the adoption of more stringent customer due diligence (CDD) process for existing and new customers. A few international banks also apply different account opening processes in order to comply with the requirements or standards mandated by their head offices or overseas authorities. Under these circumstances, the HKMA has received 95 complaints over the past two years about banks rejecting applications to open business accounts. In September 2016, the HKMA issued a circular to the banking industry, stressing “the CDD measures adopted by banks must be proportionate to the risk level and banks are not required to implement overly stringent CDD processes.” In addition, the HKMA has set up a dedicated website since March 2017 to communicate with the public regarding bank account opening and maintenance.

Foreign Exchange and Remittances

Foreign Exchange

Conversion and inward/outward transfers of funds for any purpose are not restricted. The Hong Kong dollar is a freely convertible currency that, since late 1983, has been linked via a de facto currency board to the U.S. dollar, at an exchange rate that is allowed to fluctuate in a narrow band between HKD 7.75 – HKD 7.85 = USD 1.

Remittance Policies

Hong Kong has no restrictions on the remittance of profits and dividends derived from investment, nor reporting requirements on cross-border remittances. Foreign investors bring capital into Hong Kong and remit it through the open exchange market.

Hong Kong has anti-money laundering (AML) legislation allowing the tracing and confiscating of proceeds derived from drug-trafficking and organized crime. Hong Kong also has an anti-terrorism law, which allows the authorities to freeze funds and financial assets that belong to terrorists.

Hong Kong is not on the Financial Action Task Force List of Countries identified as having strategic AML deficiencies. Hong Kong, however, was identified as a “Jurisdiction of Primary Concern” among those “major money laundering countries” by the U.S. Department of State 2017 International Narcotics Control Strategy Report, based on the significance of the amount of proceeds laundered, not on the AML measures taken.

Sovereign Wealth Funds

In February 2015, the Financial Secretary John Tsang announced in his Budget Speech that the HKG will set up a new sovereign wealth fund, dubbed the Future Fund, with an endowment of USD 28.2 billion from part of the fiscal reserves and a proportion of future budget surpluses. The Future Fund, which has been in place since January 2016, seeks higher returns through long-term investments. The Future Fund adopts a “passive” role as a portfolio investor, and will be placed with the Exchange Fund, which follows the Santiago Principles, for an initial ten-year period. About half of the Future Fund will be deployed in alternative assets, mainly global private equity and overseas real estate, over a three-year period. The rest is placed with the Exchange Fund’s Investment Portfolio, part of which is a multi-currency portfolio invested in the major fixed-income markets.

Hong Kong does not have SOEs. The closest entity to SOEs in Hong Kong are known as “statutory bodies,” which are bodies corporate, established by statutes to perform a variety of functions that are largely commercial in nature.

Hong Kong is party to the Government Procurement Agreement (GPA) within the framework of WTO. Annex 3 of the GPA includes such statutory bodies as the Housing Authority, Hospital Authority, Airport Authority, Mass Transit Railway Corporation Limited, and the Kowloon-Canton Railway Corporation, which procure in accordance with the agreement.

Although Hong Kong is a free-market economy, the government provides more than half the population with subsidized housing, the vast majority of hospital services, and most education services from childhood through the university level. The government also owns major business enterprises, such as the stock exchange, the railway company, and the airport.

Conflicts occasionally arise between the government’s respective roles as owner and policy-maker. Industry observers have recommended that the government establish a separate entity to coordinate its ownership of government-held enterprises and initiate a transparent process of nomination to the boards of government-affiliated entities. Other recommendations from the private sector include establishing a clear separation between industrial policy and the government’s ownership function, and minimizing exemptions of government-affiliated enterprises from general laws. The Exchange Fund, for example, is exempt from the securities disclosure laws in its purchases of shares, and makes its disclosures only on a voluntary basis.

Hong Kong has a total of 581 government-affiliated enterprises (also known as “statutory bodies”). The 2012 Competition Law exempts all but six of the statutory bodies from the law’s purview. While the government’s private sector ownership interests do not materially impede competition in Hong Kong’s most important economic sectors (e.g., banking, external trade, tourism), private sector industry representatives have encouraged the government to adhere more closely to the Guidelines on Corporate Governance of State-owned Enterprises of the Organization for Economic Cooperation and Development (OECD).

Privatization Program

All major utilities in Hong Kong are owned and operated by private enterprises, with the exception of the water supply and airport. The HKG considered privatizing the Hong Kong International Airport in 2003, but concluded after a study that keeping the airport under full government ownership would ensure delivery of maximum benefit to the Hong Kong economy. The HKG has not, since then, indicated any interest in further privatization programs.

In April 2010, the Hong Kong Productivity Council announced the launch of the Hong Kong Corporate Citizenship Program (HKCCP) to raise awareness of corporate citizenship among local enterprises and to assist them in adopting it as their business strategies. HKCCP organizes a series of activities, including awards such as “The Hong Kong Outstanding Corporate Citizenship Award,” as well as seminars and workshops. In July 2012, LegCo passed amendments to the Companies Ordinance that embrace corporate social responsibility by mandating listed companies, as well as larger private companies, to report on their corporate environmental policies and performances. The new law came into force in March 2014. The Sustainability Management Research Center of the Hong Kong Polytechnic University announced the results of its Hong Kong Business Sustainability Index (HKBSI) in January 2017. It showed that the overall average score of the 50 constituent companies of the Hang Seng Stock Index was 45.73 (out of 100 points), an increase of 9.5 percent compared to the HKBSI in 2015. The rise reflected that more companies are concerned about business sustainability, and hence, were diligent in implementing corporate social responsibility practices in this round of assessment. In March 2017, the HKG held a Corporate Governance Roundtable to promote and enhance good corporate governance of companies in Hong Kong. Regulators, practitioners, and academics in the conference discussed issues relating to corporate governance from international and local perspectives.

Hong Kong is not a member of the OECD, and hence, the OECD Guidelines for Multinational Enterprises is not applicable to Hong Kong companies. The HKG, however, commends enterprises for fulfilling their social responsibility.

Hong Kong has an excellent track record in combating corruption. U.S. firms have not identified corruption as an obstacle to foreign direct investment. The Independent Commission Against Corruption (ICAC) is responsible for combating corruption. The ICAC is independent of the public service, and the ICAC Commissioner is responsible directly to the Chief Executive. A bribe to a foreign official is a criminal act, as is the giving or accepting of bribes, for both private individuals and government employees. Penalties are stiff. For example, a civil servant who solicits or accepts any advantage without special permission of the Government can receive one year’s imprisonment and a HKD 100,000 (USD 12,820) fine if convicted. Individuals in both the private and public sector can receive up to seven years imprisonment and a HKD 500,000 (USD 64,100) fine for offering, soliciting, or accepting a benefit for performance or non-performance of an official duty.

In May 2013, the ICAC started a criminal investigation into its own former head, Timothy Tong, after an audit revealed that he overspent the hospitality limit at two dinners that he hosted and spent public money on other banquets and gifts for Mainland officials during his 2007-2012 term. In January 2016, the ICAC announced that there would be no criminal proceedings or further criminal investigations into Tong because there was no clear and convincing evidence.

In December 2014, former Chief Secretary for Administration Rafael Hui and co-chairman of Sun Hung Kai Properties (SHKP) Thomas Kwok were found guilty of corruption in Hong Kong’s most high-profile corruption trial. Two of the middlemen involved in the scandal, SHKP director Thomas Chan and ex-stock exchange official Francis Kwan, were both found guilty in the months-long trial. Hui was jailed for 7.5 years, Chan for six years, and the two other defendants for five years.

It was alleged in February 2012 that former Chief Executive Donald Tsang agreed to a low-rent deal for a luxury Shenzhen flat with a businessman and accepted complimentary rides in private yachts or jets for travel to Macau and elsewhere. Tsang was charged in October 2015 by the ICAC with two counts of misconduct in public office. The High Court scheduled Tsang’s case before the Court of First Instance on January 3, 2017. In February 2017, Tsang was sentenced to 20 months in prison for misconduct, after failing to disclose plans to rent a luxury apartment for his retirement from a businessman applying for a broadcasting license. Tsang became the highest-ranking Hong Kong official sent to prison for wrongdoing. He has lodged appeals against both his conviction and sentence. He also faces a retrial, tentatively set for September 2017, for a charge on which the jury failed to reach a verdict over Tsang’s alleged receipt of about USD 430,000 worth of renovations on the luxury home, as a bribe for approving a broadcasting license.

UN Anticorruption Convention, OECD Convention on Combating Bribery

Hong Kong is not a party to the United Nations Anticorruption Convention, nor a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Simon Pei, Commissioner
Independent Commission Against Corruption
303 Java Road, North Point, Hong Kong

Hong Kong is politically stable. Demonstrations are almost always peaceful. The U.S. Consulate General is not aware of any recent incidents involving politically motivated damage to projects or installations.

However, violence erupted in the streets of Mong Kok on the night of February 8, 2016, after a municipal crackdown on illegal outdoor food vendors rapidly escalated. A few hundred people gathered in the streets. Dozens of protesters hurled bottles and garbage cans at police officers and tore bricks from the pavement to be used as weapons. Police responded with pepper spray and batons, and also fired two warning shots into the air.

In the 1980s and much of the 1990s, Hong Kong’s unemployment rate hovered around two percent. Reflecting structural changes in the local economy and weak global economic conditions, Hong Kong’s unemployment rate rose slightly to 3.3 percent by the end of February 2017. In 2016, skilled personnel working as administrators, managers, professionals, and associate professionals accounted for 38.0 percent of the total working population. Hong Kong has a significant number of imported low-skilled workers, who are predominantly domestic helpers. As at May 2016, there were a total of 346,027 foreign domestic helpers in Hong Kong. In 2016, about 19,052 foreign professionals came to work in the city. The Employees Retraining Board provides skills re-training for local employees to cope with ongoing structural change in the economy. To address a shortage of highly skilled technical and financial professionals, the HKG has made efforts to attract qualified foreign and Mainland-Chinese workers. As of July 2003, conditions for admitting Mainland Chinese for employment were eased and aligned with those applicable to foreign nationals.

The Employment Ordinance (EO) and the Employees’ Compensation Ordinance prohibit the termination of employment in certain circumstances: 1) Any pregnant employee who has at least four weeks’ service and who has served notice of her pregnancy; 2) Any employee who is on paid statutory sick leave and; 3) Any employee who gives evidence or information in connection with the enforcement of the EO or relating to any accident at work, co-operates in any investigation of his employer, is involved in trade union activity, or serves jury duty may not be dismissed because of those circumstances. Breach of these prohibitions is a criminal offence.

According to the EO, an employee employed under a continuous contract for not less than 24 months is eligible for severance payment if: 1) dismissed by reason of redundancy; 2) under a fixed term employment contract that expires without being renewed due to redundancy; or 3) laid off.

Unemployment benefits are income tested and asset tested on an individual basis if living alone; if living with other family members, the total income and assets of all family members are taken into consideration for eligibility. Recipients must be between the ages of 15-59, capable of work, and actively seeking full-time employment.

In 2015 (latest available figure), membership in Hong Kong’s 821 registered unions totaled 869,528, a participation rate of about 24.3 percent. Hong Kong has implemented 41 conventions of the International Labor Organization in full and 18 others with modifications.

Local law provides for the right of association and the right of workers to establish and join organizations of their own choosing. The government does not discourage or impede the formation of unions. Workers who allege discrimination against unions have the right to have their cases heard by the Labor Relations Tribunal. Although legislation does not prohibit strikes, in practice, most workers must sign employment contracts that state that walking off the job is a breach of contract and can lead to summary dismissal. Collective bargaining is legal in Hong Kong, but there is no obligation on employers to engage in it. In practice, collective bargaining is not widely used. For more information on labor regulations in Hong Kong, please visit the following website: http://www.labour.gov.hk/eng/legislat/contentA.htm  (click on Chapter 57 “Employment Ordinance”).

The Labor Relations Ordinance stipulates a series of conflict resolution mechanisms for settling disputes. A dispute may be referred to the Labor Department for ordinary conciliation. If such conciliation does not settle the case, the Commissioner for Labor may appoint a special conciliation officer to undertake conciliation, or may appoint a mediator or a board of mediation and refer the dispute to mediation without seeking prior consent of the parties concerned. If ordinary and special conciliation fail to settle the dispute, the Chief Executive in Council (ExCo, the cabinet of advisors to the Chief Executive) has three options: 1) referring the dispute to arbitration with the consent of the parties; 2) referring the dispute to a board of inquiry; or 3) taking any other action as warranted by the circumstances of the dispute. If the dispute has caused grave harm to the economy or seriously jeopardized the well-being of a substantial number of persons, the ExCo may invoke a cooling-off period.

In January 2011, LegCo passed Hong Kong’s first statutory minimum hourly wage, set at HKD 28 (USD 3.6) starting May 2011. After increasing the minimum hourly wages in 2013 and 2015, the government raised the minimum hourly wage to HKD 34.5 (USD 4.4) starting May 2017.

Overseas Private Investment Corporation coverage is not available in Hong Kong. Hong Kong is a member of the World Bank Group’s Multilateral Investment Guarantee Agency.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2016 $319,117 2015 $309,235 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2015 $40,333 2015 $64,049 BEA data available at http://bea.gov/international/direct_investment_
Host country’s FDI in the United States ($M USD, stock positions) 2015 $10,987 2015 $11,102 BEA data available at http://bea.gov/international/direct_investment_
Total inbound stock of FDI as % host GDP 2015 514% 2015 544% N/A

*Source: Hong Kong Census and Statistics Department. Note: The FDI statistics of the U.S. Department of Commerce differ from Hong Kong data because the Hong Kong Census and Statistics Department “country” designation refers to the immediate source/destination economy and does not necessarily reflect the country from/in which the funds are initially mobilized or ultimately used.
Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 1,394,580 100% Total Outward 1,383,586 100%
British Virgin Islands 551,685 40% China, P.R.: Mainland 607,960 44%
China, P.R.: Mainland 349,028 25% British Virgin Islands 526,214 38%
Netherlands 89,095 6% Cayman Islands 56,381 4%
Cayman Islands 85,268 6% Bermuda 43,024 3%
Bermuda 73,910 5% United Kingdom 30,933 2%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,256,929 100% All Countries 789,089 100% All Countries 467,839 100%
Cayman Islands 321,664 26% Cayman Islands 309,525 39% China, P.R.: Mainland 135,517 29%
China, P.R.: Mainland 316,944 25% China, P.R.: Mainland 181,426 23% United States 100,359 21%
Bermuda 152,600 12% Bermuda 151,306 19% Japan 37,830 8%
United States 123,595 10% United Kingdom 47,632 6% Australia 24,356 5%
United Kingdom 63,896 5% Luxembourg 28,115 4% Luxembourg 22,330 5%

Alan Brinker, Consul, Economic Affairs
U.S. Consulate General Hong Kong
26 Garden Road, Central
Hong Kong SAR, PRC

2017 Investment Climate Statements: Hong Kong
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