Maximise your China business through a Hong Kong base

John RutherfordAssociate Director-General

Invest Hong Kongjrutherford@investhk.gov.hk

Agenda

• Hong Kong as a business location – 10 key

advantages

• Hong Kong & Mainland China

The Greater Pearl River Delta

CEPA

• The UK business community in Hong Kong

• How Invest Hong Kong can help

One Country, Two Systems

Post 1997, Hong Kong retains its competitive advantages: Rule of law Level playing field Currency convertibility, separate from Renminbi International business practices Free flow of information

At the same time, Hong Kong is an integral part of China

Relationship advantages including CEPA, GPRD, 9+2

Hong Kong - 10 Key Advantages

Rule of law – including rigorously enforced IP legislation Unrivalled location Low and simple taxes World’s freest economy International finance centre Free flow of information World class infrastructure Skilled workforce International lifestyle Gateway to the Mainland

Business infrastructure• Mature legal infrastructure• Robust intellectual property protection• Level playing field• Transparent and corruption free• Simple tax regime with low taxes*:

Source: * KPMG

Corporate tax rates 17.5%

Personal tax rates Top marginal tax rate is 20%, capped at maximum average rate of 16%

VAT/GST Nil

Income not subject to tax Offshore income; dividends; capital gains; tax exemption for

interest income from deposits placed with authorised financial institutions

Greater Pearl River Delta

Yangtze River Delta

Source: Professor Michael Enright

Where to Start in China?

Bohai Region

“The fastest growinglarge region of the fastest growing large economy”

Centres of economic activity in Asia

Hong Kong and the Pearl River Delta

Retail sales in Greater PRD is 25%

higher than Beijing & Shanghai combined

Over 60,000 HK firms employ over 11 million workers in Greater PRD

Hong Kong handles 80% of PRD’s imports and

exports

GDP of Greater PRD is more than Singapore,

Malaysia & the Philippines combined

Hong Kong and the Pearl River Delta –

a winning combinationHong Kong provides the capital, management skills,

technology, market knowledge, mature business infrastructure and access to international markets.

Mainland PRD cities provide world-class, low-cost manufacturing, and access to a new,

demanding consumer base

Closer Economic Partnership Arrangement

(CEPA)• China’s - and Hong Kong’s - first free trade

agreement• WTO compliant but many benefits go beyond WTO

commitments• Available to people and businesses of ALL

nationalities

• By investing in Hong Kong to export to the Mainland:• For goods – you save money (zero tariffs apply)• For services – more markets are open to you and

many entry barriers are lower

• Confirmation of Beijing’s support for Hong Kong as the gateway to the Mainland

• To be eligible for CEPA benefits:• criteria to meet + applications to be approved

• Trade in goods• Most popular: textiles/clothing; pharma; plastics and paper• Example benefit:

• Pre-CEPA: tariff on exporting textiles = 5 - 21.3%• Post-CEPA: tariff on exporting textiles = nil

• Trade in services• Most popular: transport/logistics; advertising; construction

and management consultancy• Example benefit:

• Pre-CEPA: vague rules; some logistics joint ventures achieved

• Post-CEPA: can set up wholly owned logistics company

Closer Economic Partnership Arrangement

(CEPA)

Opportunities for Overseas Companies

• Agent/Distributor – work with TDC

Own operation:• Sourcing• Trading• Logistics/Distribution• Local and regional management operations• Research & Development

UK Presence In Hong Kong

• 3rd largest number of regional operations:– Regional headquarters 115 – Regional offices 215– Local offices 154

• HK$48.1 billion total stock of direct investment from UK as at end 2003

• Total exports to UK grew by 15% to US$8.4 billion in 2004 • Imports from the UK rose by 19% to US$3.7 billion in 2004 • Over 1,000 UK companies in Hong Kong, employing about

10% of the workforce • Very effective British Chamber of Commerce in Hong Kong is

largest British Chamber in Asia• Approximately 20,000 UK citizens residing in Hong Kong

Some UK Companies in Hong KongFinancial Sector

• Barclays

• HSBC

• Prudential

Professional Services

• Clifford Chance

• Ove Arup & Partners

• PA Consulting Group Ltd

Information Technology

• Logica

• Footfall

• Copitrak

Trade Related Services

• Burberry

• Ashworth

• Aquascutum

• Kent & Curwen

Transportation/Logistics

• British Airways

• P & O Nedlloyd

• Exel

Technology

• GlaxoSmithKline

• AstraZeneca

UK Companies in China

In Hong Kong In MainlandRegional management, including all Mainland operations. 120,000sqft retail store to open in 2007

50 retail outlets, sourcing products

Asian sourcing office and retail outlets

Manufacturing

Engineering and manufacturing control

Manufacturing

• Award-winning* Government Department

• Our Mission - To attract to and retain in Hong Kong economically and strategically important direct investment

• Our Offer - Free and confidential facilitation services to ensure that investors smoothly establish or expand their operations in Hong Kong

About Invest Hong Kong

Relevant up-to-date information

Public relations

support for launch /

expansion

Matchmaking and

networking support

Facilitation of set-up / expansion

*Voted best managed investment promotion agency in Asia, Strategic Direct Investor awards 2004

Final word…

“No other city in the world can help overseas investors manage the risks

inherent in entering Mainland markets as well as Hong Kong. This is an important part of the reason why overseas firms prefer Hong Kong for the highest-value

activities that they perform in the Asia-Pacific region.”

Michael Enright, Sun Hung Kai Properties Professor, School of Business,

University of Hong Kong

Thank you for listening

www.InvestHK.gov.hk

For further information contact:

Julia Herries/Lynette Quah

julia_herries@hketolondon.gov.hk

lynette_quah@hketolondon.gov.hk

020-7499-9821

In Hong Kong:

John Rutherford

jrutherford@investhk.gov.hk

+ 852 3107 1002