Here is why Hong Kong will continue to be indispensable to U.S. businesses

October 11 09:13 2022

The Pearl of the Orient, Hong Kong, has always been an ideal place for doing business. At present, there are more than 1,400 U.S. companies based in Hong Kong with more than half regional in scope. In 2020, the U.S. had a substantial trade surplus of U.S.$18.7 billion over Hong Kong. While some are worried about its position being affected by the epidemic and escalating U.S.-China tensions, there are plenty of reasons for holding an optimistic view.

Take advantage of Hong Kong’s special status to expand the capital business. The Hong Kong time zone is located between the United States and Europe and backed by the mainland, and its geographical location is better than that of Singapore and Japan. As an international financial center, Hong Kong has a developed equity market. By 2021, 10 licensed banks, 4 restricted licence banks in Hong Kong were owned by US interests. US firms also participate actively in fund management, credit rating, investment consulting, securities and futures trading, and so on. Based on the latest data available in 2018, the sales of services in Hong Kong by majority U.S.-owned affiliates were U.S.$31.1 billion.

The rising tensions between U.S. and China happen to create new demand for financial services in Hong Kong. For many reasons, the audit dispute to keep Chinese firms on American exchanges sparks off the ongoing plans of returning Chinese stocks to Hong Kong. These stocks can pursue either dual listings, privatisation, or secondary listings in Hong Kong. Financial institutions estimate that, China Concept Stock companies that comply the requirements of secondary listing and return to Hong Kong may bring about approximately HK$200 billion of new financing needs by 2024. Against this backdrop, the U.S. companies in Hong Kong would capture the untapped business opportunities.

Hong Kong’s entrepôt role should not be overlooked.  Hong Kong adopts a free port policy and does not maintain barriers on trade. No tariff is charged on export or import of goods except four dutiable commodities. Between the U.S. and Mainland China, Hong Kong is one of the most important hubs for merchandise trade. Hong Kong has all along been treated as fully autonomous in terms of trade status. For this reason, both U.S. and Hong Kong have a fruitful trade relationship with free exchange of the U.S. dollar and Hong Kong dollar, virtually without tariffs, visa-free travel, and the list goes on.

U.S. is now plagued by stagflation which is accompanied by skyrocketing inflation and significant rise in unemployment. It is, therefore, crucial to maintain harmonious trade relations with Mainland China and Hong Kong. In 2021, U.S.$28.1 billion (around 5%) of Mainland China’s exports to the U.S., and U.S.$13.7 billion (around 7.6%) of Mainland China’s imports from the U.S., were routed via Hong Kong. Once the trade corridor is restricted, U.S. companies in Hong Kong, as well as American manufacturers and consumers, will suffer huge losses.

After all, Hong Kong is committed to maintaining an open business environment for foreign business activities and commerce with limitless opportunities. Recently, the Hong Kong government just announced lifting the compulsory quarantine requirement for inbound persons from overseas. It is the first signal of Hong Kong’s move back to normality and reconnection with the world. Coupled with the abovementioned unique strengths, Hong Kong will continue to be a valuable platform for U.S. firms as well as other international businesses. Any miscalculation and reckless moves towards Hong Kong would only jepoardise the inextricably intertwined interests including the U.S. business sectors’.

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