Hong Kong is a major name when it comes to the list of the World’s most competitive business cities and this is why it’s a fair market for your trading business. The city has become a major trading hub in the previous years and one major reason can be its absolute free trade policy.
It acknowledges the efforts and provides all the legal and economical protections a new business startup, online business, or an entrepreneur might need. Though it comes with its own challenges, it can be a wise decision to choose Hong Kong as your trading partner. And to answer ‘why choose Hong Kong for your Trading Business,’ here’s a guide with all the possible answers.
Without further ado, let’s begin with different aspects of trading in Hong Kong and its scope, benefits, and expected difficulties.
Why Choose Hong Kong For Your Trading Business?
Hong Kong has marked its place in the list of the World’s Most Competitive Economies and is globally recognized for its ample trade potential. According to the International Institute for Management Development (IMD), Hong Kong has been ranked 7th among 64 global economies in the World Competitive Yearbook 2021. Adding on, the World Trade Organization (WTO) ranked Hong Kong as the 8th largest merchandise exporter and the 17th largest commercial services exporter in 2019.
Adding on, Hong Kong is also top-ranked for “Business legislation” and in top threes of “International trade”, “Finance,” “Tax policy,” and “Management practices.” These figures clearly depict that trading in Hong Kong can be a game-changing and quite opportunistic decision. It reflects how consistent Hong Kong has stride in developing a favorable business environment for every stakeholder.
5 Good Reasons to Start Trading In Hong Kong
Although the list can go long, here are 10 swift reasons to choose Hong Kong as your next trading business partner.
Easy Company Registration and Compliance
Hong Kong allows quick and easy company set up with the lowest possible registration costs, no inbound or outbound investment restrictions, and no nationality restrictions. The law allows foreigners to invest in any Hong Kong-based business with up to 100% equity claim. Another plus point is, the city allows online registration for any Hong Kong Limited company and it eases up the struggles of online businesses and solo entrepreneurs. You can incorporate any company at the Hong Kong Companies Registry without any specific limitation on share capital or minimum requirement for paid-up capital. Furthermore, the company can avail of tax benefits and concessions just like any other fully incorporated business in the entity. Though there are some requirements like local office address and company secretary, it’s easy to launch a Hong Kong Trading Company.
Low, Simple, and Competitive Tax System
One of the major reasons for Hong Kong’s high repute as a business center is its friendliest predictable tax system. Companies usually have to bear only three direct taxes and there are plenty of allowances and deductions that can further reduce the payable tax amount. The state offers ‘two-tiered profits tax’ for corporations; 8.25% for companies earning a minimum HK$2 million assessable profit and around 16.5% for companies earning above. For unincorporated businesses, the tax rates are set at 7.5% and 15%. Adding on, the salaries tax at 15% whereas properties at 15%, and there is no VAT or sales tax, withholding tax, capital gains tax, dividends tax, or inheritance tax.
One of The World’s Freest Economies
Hong Kong offers a well-developed free-market economy with low taxation, a stable international financial market, and almost free port trade. The city majorly depends on international trading and has no tariffs on imports except duties on hard alcohol, oil, methyl alcohol, and tobacco. Another beneficiary is, the legislation does not bind the trader to any quota or dumping laws and the currency is closest to the US dollar to maximize convenience. Adding on, the stock exchange is quite favorable for international firms as the Hong Kong capital market has all the financial tools comparable to any bigger market like New York or London. This is why it was ranked as the world’s 2nd freest economy in 2020 by the US think-tank Heritage Foundation.
Trading-Friendly Location with Easy Accesses
As Hong Kong is a ‘Special Administrative Region’ or SAR of China, it enjoys well-established cooperative relationships with the Mainland and the Greater Bay Area (GBA). As GBA integrates Hong Kong and Macao, two SARs of China, it connects these two SARs with nine major cities through the Pearl River Delta to facilitate the flow of trading and other interactions. As result, the GBA has become a huge urban area combining 72 million people and generating a GDP of around USD1.65 trillion in total. In simpler words, Hong Kong can be your easy gateway to the biggest trading hub with a stable, well-established network of Free Trade Agreements (FTA). This business-friendly cosmopolitan can kick start your new or existing small-to-mid-sized business either online or offline.
Innovation and Technology Supported By Government
Hong Kong enjoys a reputation as a competitive city with a leading innovative and technological environment. The authorities have committed HK$100 billion for I&T development in Hong Kong to further improve the infrastructure and economy. This is why it has become a leading trading hub for startups, small businesses, and entrepreneurs, as it can offer the technological facilitates to increase the growth rates and ultimately, revenue. Furthermore, the infrastructure in Hong King boosts high-profile public listings of many bigger firms in the Stock Exchange resulting in better support for trading businesses. In addition, there’s also a co-investment funding system called Innovation and Technology Venture Fund (ITVF) that excels in boosting private investment opportunities for local startups.
Barriers to Trading Business in Hong Kong
Though Hong Kong seems a highly-functional trade market, it comes with its own limitations or difficulties that a new business might face. For example, the very first limitation can be the simplest task like opening a Bank Account. It can cost a lot of money and time as it requires an ample amount of paperwork before proceeding. Getting the license for a specific business also comes packed with its own hurdles and may restrict trading activities. Also, the Hong Kong infrastructure has strict regulations, especially for financial companies involved in finance and trading. Adding on, the city is ranked as the most expensive city to live in that can affect the overall profit margin of a business. Another least-expected barrier is the tech adoption by businesses in Hong Kong as businesses here are not tech-adopted as expected. In addition, the cash flow is a major problem here for SMEs as receiving payments from customers can take as long as 34 days and can seriously affect the efficiency of capital flow.
Why Choose Hong Kong for Your Trading Business – Conclusion
Hong Kong can offer a perfectly grown and well-established trading environment and allows self-incorporating a trading firm. With easy company registration, competitive taxing system, freest economy, easy access to other regions, and innovative infrastructure, Hong Kong is a feasible trading hub even for small to medium-sized companies, online companies, and solo entrepreneurs. Though there are some barriers, in a nutshell, a hong kong trading company can be your gateway to a well-reputed and well-earning corporate life.