Maximise your China business through a Hong Kong base John Rutherford Associate Director-General Invest Hong Kong jrutherford@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*: 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 Source: * KPMG

Where to Start in China? Bohai Region Yangtze River Delta Greater Pearl River Delta “The fastest growing large region of the fastest growing large economy” Source: Professor Michael Enright

Centres of economic activity in Asia

Hong Kong and the Pearl River Delta GDP of Greater PRD is more than Singapore, Malaysia & the Philippines combined 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

Hong Kong and the Pearl River Delta – a winning combination Hong 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

Closer Economic Partnership Arrangement (CEPA) 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 Pre-CEPA: vague rules; some logistics joint ventures achieved Post-CEPA: can set up wholly owned logistics company

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 Well known British companies in Hong Kong: HSBC, Barclays Bank, HBOS, Royal Bank of Scotland, Prudential, Pret-a-Manger, Marks & Spencer, British Airways, Virgin Airways, and Clifford Chance

Some UK Companies in Hong Kong Trade Related Services Burberry Ashworth Aquascutum Kent & Curwen Transportation/Logistics British Airways P & O Nedlloyd Exel Technology GlaxoSmithKline AstraZeneca Financial Sector Barclays HSBC Prudential Professional Services Clifford Chance Ove Arup & Partners PA Consulting Group Ltd Information Technology Logica Footfall Copitrak

UK Companies in China In Hong Kong In Mainland Regional 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

About Invest Hong Kong 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 Relevant up-to-date information Facilitation of set-up / expansion Matchmaking and networking support Public relations support for launch / 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