Hong
Kong Executive Summary
Hong
Kong Was A British Colony . . .
Hong
Kong is a former British colony in South-East
China, near Canton and Macau. With a surface
area of 404 sq miles, Hong Kong is densely populated
with 7m people. The capital city at Victoria,
on Hong Kong Island, boasts one of the world's
finest natural harbours. Hong Kong has one of
the world's busiest international airports.
Mean
January and July temperatures are 16° C
and 28° C respectively. 90% of average rainfall
of 85 inches falls between April and October.
Typhoons occur between July and October.
Chinese
and English are the official languages of Hong
Kong. 99% of the people are ethnic Chinese.
About 10% of the population are Christian with
the balance being followers of Buddhism or Taoism.
The major non-Chinese elements of the population
are from the Philippines, British Commonwealth
countries, the USA, Portugal and Japan.
.
. . . But Is Now Again A Part Of China
Since
1st July 1997 Hong Kong has been a special administrative
region (SAR) of the People's Republic of China.
The constitution is known as the "Basic
Law" and is modeled on the constitution
of the People's Republic. Under the guiding
principle of "one country, two systems"
which was established before the handover the
Chinese Government agreed that Hong Kong's capitalist
system would remain unchanged until the year
2047.
The
SAR's administration is headed by a Chief Executive,
appointed by China. The Chief Executive appoints
the Executive Council of Government. A legislative
body, the Legislative Council passes laws and
controls expenditure; its members are elected
but the arrangements are undemocratic, so that
the Executive can control a majority. This arrangement,
established by the British, has not been changed
since the handover.
The
SAR maintains a common law system; the regulation
and taxation of business and financial services
follow Western patterns.
Hong
Kong Is The Economic Gateway To China . . .
. .
Hong
Kong has thrived historically as a trading entrepot
serving many Asia Pacific countries, and also
as a low-cost manufacturing centre, although
latterly the rise of cheaper Asian competitors
has driven the SAR more into the provision of
services, particularly financial services.
At
the time of writing, Hong Kong is the world's
3rd largest financial center (after New York
and London), the 9th largest economy and the
11th largest exporter of services. GDP per capita
exceeds that of Britain, Canada and Australia.
The external assets of the banking sector are
the world's 5th largest, forex turnover is the
world's 6th largest and the Hong Kong stock
market has the largest market capitalization
in Asia outside of Japan. The territory has
the largest representation of international
banks in the world including 80 of the top 100
institutions and is the regional headquarters
of over 1,300 multinational companies.
Since
1992 the territory has had the world's busiest
container port with throughput increases of
up to 20% per annum. Its shipping register is
considered a quality register and ranks 14th
in the world.
The
government has consistently followed business
friendly policies and continues to do so. Other
Asia-Pacific countries and cities such as Shanghai
or Singapore may mount effective competition
to Hong Kong as financial/trading hubs, but
they will probably not be able to replicate
Hong Kong's unique blend of Western expertise
and Chinese knowledge. As China opens up to
the world through its membership of the WTO,
Hong Kong is both the natural conduit for Chinese
exports towards the West, and the obvious base
for international companies taking part in opening
up China's expanding economy.
.
. . . And Has A Highly Attractive Fiscal Environment
Hong
Kong is not an 'offshore' jurisdiction as such,
but has low tax rates which are levied only
on Hong Kong-source income.
There
is no capital gains tax, no withholding tax,
no sales taxes, no VAT, no annual net worth
taxes and no accumulated earnings taxes on companies
which retain earnings rather than distribute
them. Individuals pay no tax on investment income
or capital gains, whether resident or not.
Hong
Kong's spectacular economic success is largely
based on a whole hearted adherence to free and
open trade, the values encompassed in a British
common law legal system and a laissez-faire,
non-interventionist attitude on the part of
government. As such there are few if any significant
barriers to investment by foreigners.
However,
Hong Kong's economy suffered considerably during
and after the Asian crisis in the late 1990s.
Continued deflation and low property prices
were accompanied by higher unemployment and
depressed levels of trade, leading to tax increases
in the 2003/2004 budget.
Economic
growth was muted in 2002 and 2003, but 2004
saw a major turnaround to 7.5% growth.
However,
not even Hong Kong could escape the economic
fall-out from the credit crunch, and growth
slowed to 2.2% in 2008, before shrinking by
2.7% in 2009. The economy bounced back strongly
in 2010, recording growth of 6.8%. Hong Kong's
economy continues to power forward in 2011,
with robust GDP growth of 8.5% in the first
quarter of the year.
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