Hongkong market

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  • 1. HONG KONG SPECIAL ADMINISTRATIVE REGION
  • 2. Group Members  ARCHIT JAIN ST20023148  KURNIKA GUPTA ST20015634  NIKHIL CHATURVEDI ST20028708  YUSUF ALI ST20028751
  • 3. Today’s Menu  History & Features of Hong Kong  PESTEL factors  The Cultural environment  Setting up a new business in Hong Kong  Imports, Exports and Trade Barriers  Tax structure  Foreign Direct Investment (FDI)  Key sectors attracting foreign investment  Why Hong Kong?
  • 4. History & Main Features Of Hong Kong  Hong Kong is positioned at the mouth of the Pearl River Delta on the coast of southern China.  Hong Kong was formed in the year 1842 and became a part of British colony. Handed back by the British in the year 1997.  The population of Hong Kong was 7.072 million in 2011 out of which 95% are Chinese & rest 5% percent are non-ethnic Chinese.  Hong Kong acts as a supply chain connection between China & Rest of the World.   Currency of Hong Kong is HK Dollar ($). 1 HK$ = 0.08 £ (United Kingdom Pound) = 0.12 $ (United States of America)
  • 5. Consistent growth since past 2 decades with GDP reaching $243.7 billion in 2011
  • 6. EXTERNAL ENVIRONMENT POLITICAL LEGAL ECONOMIC ENVIRONMENT AL SOCIOCULTURAL TECHNOLOGI CAL
  • 7. PESTEL ANALYSIS  Political section on Hong Kong provides inputs about the political system, key figures in the country, and governance indicators.  Economic section on Hong Kong outlines the economic story of the country to provide a balanced assessment on core macro-economic issues.  Social section on Hong Kong enables understanding of customer demographics through the income distribution, rural-urban segmentation and centre of affluence, healthcare and educational scenario in the country.
  • 8. Contd..  Technological section on Hong Kong provides strategic inputs on information communications and technology, technological laws and policies, technological gaps, patents data and relevant laws.  Legal section on Hong Kong provides information about the legal structure, corporate laws, business set-up procedures and the tax regime.  Environmental section provides information on environmental policies in Hong Kong and the performance in terms of important environmental indicators.
  • 9. POLITICAL RELATIONSHIP Favourable political relationships:  Foster stable business environments  Increase international cooperation in many areas  Lead to increase business opportunities and lower risk
  • 10. CULTURAL ENVIRONMENT
  • 11. LANGUAGE  The official languages in Hong Kong are Chinese and English blending cultures of East and West  Every well-educated person in Hong Kong must command Cantonese, Putonghua and English fluently
  • 12. CUSTOM  The local Chinese are mainly living with the traditional Chinese principle  The Hong Kong spirit means hard working, facing new challenges, high degree of adaptability and globalization.  In weekends, people of Hong Kong like family gathering or yum cha, doing exercise, watching television, etc.
  • 13. RELIGION  Hong Kong people are very religious. Different religions like Buddhism, Taoism, Protestant, Catholic, Muslim, Jew, Hin dus and Sikh prevail.  Buddhism is followed by about 90% of the total population  Traditionally, because of its early role in fishing, many Hong Kongers believe in Tin Hau, the protector of seafarers.  Christmas and Easter are still stipulated as official holidays.
  • 14. EDUCATION  The education system has been maintained in Hong Kong nowadays, which is quite British with local properties  At the higher education levels, both British and American systems do exist  The University of Hong Kong, the oldest institution of tertiary education, has traditionally been based on the British model
  • 15. Setting up a new business
  • 16. PROCEDURE:  Step 1: Application for Establishment  Step 2: Forward the application to MOFCOM-  Step 3: Application for Registration
  • 17. CONSIDERATIONS FOR FOREIGN INVESTORS  Foreigners are free to be the sole directors and shareholders of a Hong Kong company.  There are no local resident requirements.  Although their is no requirement to be physically present at the time of company registration, physical presence may be required for the purpose of opening a bank account, depending on the bank chosen.
  • 18. CAPITAL REQUIREMENTS  The minimum registered capital of a limited liability company is Rmb30,000 while that of a joint-stock limited company is Rmb5 million.  The minimum registered capital of a foreign or JV bank is Rmb300 million worth of freely convertible currencies  The minimum registered capital of a JV international freight forwarding agency is US$1 million;
  • 19. IMPORT & EXPORT
  • 20. Trade Benefits  Hong Kong is a major international financial centre  It features a free trade economy with low taxation  Lesser intervention of the government  HK is a full time member of WTO and Asia Pacific Economic Cooperation forum  The government has signed a CEPA, a free trade agreement with China.  The corner stone of HK’s free trade approach is a strong and credible multilateral trading system.
  • 21. Procedure for ImportExport  Cash in Advance
  • 22.  Documentary Credit
  • 23.  Documents against Payment
  • 24.  Open Account
  • 25. Hong Kong Export Commodities  Electrical machinery and appliances  Textiles and apparel  Footwear  Watches and clocks  Toys and Plastics
  • 26. Export Partners  China 48.5%  US 12.8%  Japan 4.3%  EU 8.0%
  • 27. Hong Kong Imports Commodities  Raw materials and semi – manufactures  Consumer goods  Capital goods  Food stuffs  Fuel
  • 28. Imports Partners  China 46.6%  Japan 9.8%  Singapore 6.4%  Taiwan 6.4%
  • 29. Source: http://bso.hktdc.com/bso/BrokerServlet
  • 30. Source: http://hong-kong-economy-research.hktdc.com/businessnews/article/Market-Environment/Economic-and-Trade-Information-on-HongKong/etihk/en/1/1X000000/1X09OVUL.htm
  • 31. TAX STRUCTURE
  • 32. PERSONAL INCOME TAX RATE NET CHARGEBLE INCOME (HKD) RATE 0-40,000 2% 41,001-80,000 7% 80,001-120,000 12% ABOVE 120,001 17%
  • 33. TAXATION The principal sources of revenue to the Hong Kong Government (apart from revenue from the sale of government land) are:  Salaries tax;  Profits tax;  Property tax; and  Stamp duty.
  • 34. SALARY TAX  There is no capital gains tax, no dividend tax and no inheritance tax in Hong Kong.  Hong Kong follows a territorial principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”.
  • 35. PROFITS TAX  An individual carrying on trade, profession or business in HK is chargeable to profits tax  Profits sourced outside HK are not taxed in HK even if remitted to HK  The rate of profit tax is 16.5% for corporations and 15% for taxpayers other than corporations
  • 36. PROPERTY TAX  Property tax is charged at the rate of 15% of net assessable value of any land or buildings in HK  Corporations carrying on business in HK can elect to be exempted from property tax
  • 37. STAMP DUTY  Leases of property not exceeding one year - 0.25% of the total rent payable over the term of the lease  Leases of property exceeding one year but not exceeding three years - 0.5% of the average yearly rent
  • 38. TAXABLE BENEFITS  Accommodation and housing allowances  Meal allowance  Education benefits for children  Company gifted car  Transport allowance  Holiday journey allowances  Share rewards and share options
  • 39. THE TAX SYSTEM  Low rate optional flat tax of 16% on personal income  No Pay-as-you-Earn in HK  Corporate income tax is at a flat rate of 17.5%  No payroll taxes in HK  No death tax in HK  HK budget has a budget surplus and a very little government debt
  • 40. TAX SYSTEM GOOD? YES..HERE’S WHY  Low level of taxation and public spending  Simplicity  Economic prosperity  Low, flat rates of tax  Generous allowances  Scheduler structure  Corporate profits and dividends
  • 41. FOREIGN DIRECT INVESTMENT (FDI)
  • 42. FDI IN HONG KONG  FDI flows in HK exceeded US$83 billion in 2011, an all time high (World Investment Report, 2012)  FDI stock remained stable at US$1.14 trillion in 2012 as compared to US$1.09 trillion in 2010  Globally, HK ranked 4th in FDI inflows after the US, CHINA and BELGIUM respectively
  • 43. LAW & POLICY  The Hong Kong government encourages foreign investment  Itplays an important part in building Hong Kong as an international financial centre  It supports a free market economy and adopts a low interference policy.  There is no investment approval procedure directed specifically towards foreign investors.
  • 44. Contd..  Hong Kong’s economy scored 89.9%, making it the freest economy in the world.(Index of Economic Freedom, 2012)  The two exchanges, namely, the Stock Exchange of Hong Kong Limited &the Futures Exchange of Hong Kong Limited are currently owned and operated by Hong Kong Exchanges and Clearing Limited (HKEx)
  • 45. ATTRACTING THE FOREIGN INVESTMENT Factors that have been identified are:  Rule of law and protection of property rights;  Free flow of information;  Low taxation and a simple tax system;  Acorruption-free government;  Absence of exchange control; and  Effective communication, transport and other infrastructure.
  • 46. Source: UNCTAD; for further information on data and methodology, see www.unctad.org/diae.
  • 47. INDUSTRIES IN HONG KONG
  • 48. KEY INDUSTRIES OF HONG KONG Four Key Industries in Hong Kong are:  Financial services, Trading and logistics, Tourism, and  Professional and producer services
  • 49. FEATURES  The Four Key Industries in the Hong Kong economy generated value added of HK$1,113.1 billion and employed 1 703 600 persons in 2011.  The share of the total value added of these industries in Gross Domestic Product (GDP) was 58.5% in 2011, higher than that of 57.8% in 2006.
  • 50. Contd..  The trading and logistics services industry is the largest among the Four Key Industries, in terms of both value added and employment  Being an important global business hub, professional services and other producer services in Hong Kong together generated value added of HK$235.9 billion and provided jobs for 469 400 persons in 2011.
  • 51. Value added & Employment in key industries http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099
  • 52. DEVELOPING INDUSTRIES Emerging industries are:  Cultural and creative industries,  Medical services,  Education services,  Innovation and technology,  Testing and certification services and,  Environmental industries, These industrieshave been identified asenjoying advantages for further development.
  • 53. Value added and Employment in developing industries http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099
  • 54. WHY HONG KONG??  Strategically located for business in Asia  Low and simple tax regime  International, transparent and efficient  World-class business infrastructure  Easy recruitment of skilled staff  Government support for companies
  • 55. Contd..  The world’s freest economy  The world’s most competitive economy  The world’s most services-oriented economy  The world’s second highest per capita holding of foreign exchange reserves  The second largest source of FDI in Asia after Japan  The second largest recipient of FDI in Asia after China
  • 56. Contd..  <http://www.youtube.com/watch?v=d9m_ILu7rH0>
  • 57. THANK YOU!!