1. Introduction
When thinking about expansion of your business to Asian countries, it is not much to say that Hong Kong is the first location to come to your mind. The city is already well-known through magazines or internet. However, too much information makes you difficult to find out what you really need. In this News, we will introduce Hong Kong’s current situation and future business perspective through our periodical visits.

2. Political and Economic Overview
● Basic Information

● Advantages in Hong Kong’s Market

(a) Flexibility in finance
Hong Kong is called a giant financial city. The government has less restrictions on funding, foreign exchanges, overseas remittance, etc., which enables foreign investors to make effective fund management.

(b) Skilled workforce
Hong Kong is a multicultural and multilingual city with the British and Chinese cultural background, where highly talented work-force is available.

(c) Geographical advantage
The flight from Tokyo to Hong Kong is about five hours. The four-hour flight access to other Asian countries such as Singapore, China, Philippines, Malaysia, and Thailand is also a strong point as a major cargo hub. When talking about Hong Kong’s geographical advantage, it is often said that “half the world’s population is within five hour’s flight time.” Easy access is highly evaluated as a foothold to start up business in Mainland China and across Asia.

(d)Low and simple taxation
Compared with Japan, Hong Kong has low taxes and a simple taxation system. Certain income which is taxable in Japan is exempt from taxation in Hong Kong. The corporate income tax rate is 16.5%. There is no sales tax or VAT (equivalent to consumption tax in Japan). Interest income and dividend income are also exempt from taxation.

(e) Economic freedom
According to the 2017 “Index of Economic Freedom” by the Heritage Foundation in the U.S., Hong Kong has retained its position as the world’s freest country for the 23rd year in a row. The “Index of Economic Freedom” scores countries by 0～100 points, counting from twelve categories of freedom (business freedom, trade freedom, etc.).
The survey indicates that Hong Kong’s less government regulations and free business operation attract foreign investors.

3. Future perspective

● “One Belt One Road” initiative
China advocates “One Belt One Road” initiative to establish a new economic zone and a cooperative alliance among neighboring countries. Although the idea might be partly affected by the result of US presidential election, Hong Kong will continue to grow as an international financial center in the foreseeable future.

● Shift from “production base” to “consumer market”
Chinese market was characterized as Hong Kong’s “production base”, but it is now shifting to a giant “consumer market” with more than 1.3 billion people. Especially, the remarkable growth in the high-income class is an attractive business target for Japanese companies. At the same time, Chinese traditional business customs, compliance issues and tax codes are obstacles to investment. On the other hand, Hong Kong has separate political and social system called “One Country, Two Systems” concept even under Chinese sovereignty. The city fully understands Japanese culture and business customs, which is highly expected to serve as a point of entry into the domestic Mainland market.

● Expansion from local regions in Japan
U.S. and Japanese companies compete for the first place in expanding business to Hong Kong. They are mainly food and service industries, seeking new consumer market. At exhibitions held in Hong Kong, Japanese companies’ booths enjoy many visitors, and even companies from local regions in Japan successfully introduce their businesses. Considering expanding business to Hong Kong is one of the new ways of activating local regions in Japan. Hong Kong itself is a small market, but it has the important role for Japanese companies looking for a gateway of doing business in Mainland China.

4. Conclusion
In this News, we have mentioned “Expand Business Abroad – Hong Kong”. Other than mentioned above, various business methods specialized in Hong Kong exist. We are ready to support your company by providing total services from investment schemes to accounting and tax services. If you are interested in doing business and investing in Hong Kong, please do not hesitate to contact us.

Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.