1. Maximise your China business through a Hong Kong base
John Rutherford
Associate Director-General
Invest Hong Kong

2. 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

3. 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

4. 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

5. 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

6. 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

7. Centres of economic activity in Asia

8. 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

9. 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

10. 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

11. 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 = %
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

12. Opportunities for Overseas Companies
Agent/Distributor – work with TDC
Own operation:
Sourcing
Trading
Logistics/Distribution
Local and regional management operations
Research & Development

13. 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

14. 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

15. 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

16. 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

17. 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

18. Thank you for listening
For further information contact:
Julia Herries/Lynette Quah
In Hong Kong:
John Rutherford