The Chief Executive has said on several occasions that, under the “Belt and Road” Initiative, Hong Kong can perform the role of “super connector” between the Mainland and countries along the “Belt and Road”. However, according to the Reports on Annual Survey of Companies in Hong Kong Representing Parent Companies Located Outside Hong Kong published by the Census and Statistics Department, the numbers of regional headquarters (“RHQs”) and regional offices (“ROs”) established in Hong Kong by companies located outside Hong Kong (“non-Hong Kong companies”) have shown a downward trend in recent years, with the former decreasing by 22 from 1 401 in 2015 to 1 379 in last year, and the latter decreasing by 11% from 2 644 in 2007 to 2 352 in last year. In this connection, will the Government inform this Council:
(1) whether it knows the reasons why non-Hong Kong companies had removed their RHQs and ROs from Hong Kong; if it does not know, of the reasons for that;
(2) of the measures and support in place to attract non-Hong Kong companies to invest and establish operations in Hong Kong; if no such measures and support are in place, of the reasons for that; and
(3) whether it will consider providing financial incentives (e.g. tax concessions) to attract non-Hong Kong companies to establish RHQs and ROs in Hong Kong, with a view to promoting economic development and creating more employment opportunities for local talents?
My reply to the three parts of the question is as follows:
(1) The Census and Statistics Department (“C&SD”), in collaboration with Invest Hong Kong (“InvestHK”), conducts an annual survey on the number of overseas and Mainland companies with Hong Kong business operations. This annual survey, the response to which is voluntary in nature, gathers statistics on the profile of the regional headquarters (“RHQs”), regional offices (“ROs”) and local offices (“LOs”) in Hong Kong representing their parent companies located outside Hong Kong. It also collects views on the attractiveness of Hong Kong as a location for setting up RHQ/ROs/LOs. In the 2016 survey, a total of 1 379 RHQs, 2 352 ROs and 4 255 LOs responded.
In fact, the numbers of RHQs, ROs and LOs responded in the annual survey vary from year to year. Since 2007, the number of RHQs has registered a year-on-year increase ranging from 0.7% to 4.3%, except for the drops in 2009 (-3.5%) and 2016 (-1.6%). For ROs, the year-on-year changes ranged from 4.3% to -9.9%, whereas for LOs, the year-on-year increase ranged from 3.2% to 9.3%.
Despite the changes in the number of RHQs and ROs over the years, we have so far not seen any evidence suggesting a trend of RHQs and ROs retreating from Hong Kong. We are looking into the possible reasons for the change and our preliminary view is that the contributing factors might involve hiving off of operations of the Hong Kong RHQs/ROs (e.g. overseas offices managed by the Hong Kong RHQs/ROs becoming independent as part of a natural business process, and hence the managerial or coordination functions of the Hong Kong RHQs/ROs become unnecessary) or restructuring of business of parent companies (e.g. closure of overseas offices which used to be managed by the Hong Kong RHQs/ROs).
(2) Hong Kong offers a business-friendly environment for overseas and Mainland companies to establish their presence or expand business. Through InvestHK, the Government offers one-stop, free and customised support services to companies which plan to invest in Hong Kong from the planning to implementation stages. The following support services are provided –
(i) Provision of business information: Provide the latest information on Hong Kong’s business environment including sector-specific advice and opportunities, latest tax and business regulations, cost-of-business models, immigration requirements, employment legislation, etc.
(ii) Business facilitation support: Provide introductions to business service providers, facilitation of visa applications, advice on funding and other support schemes provided by the Government, facilitation of meeting with relevant government departments and organisations where appropriate, advice on opening and maintaining bank accounts, relocation advice, etc.
(iii) Publicity and networking opportunities: Provide publicity and marketing support (e.g. press briefings, company introduction in our case studies and bi-monthly newsletters), invitation to thematic seminars and networking events, etc.
(3) Investors would take into account a host of factors when choosing a location to set up business. As mentioned in (1) above, the annual survey also collects views on Hong Kong as a location for setting up RHQs/ROs/LOs. As revealed in the 2016 survey, simple tax system and low tax rate are regarded by the majority of the RHQs/ROs/LOs as favourable factors for Hong Kong. Others favourable factors included free flow of information, geographical location and free port status.
As an international financial centre, Hong Kong possesses sound legal and banking systems, diversified capital markets, as well as quality infrastructure and talents. These competitive edges are conducive to attracting multinational enterprises to set up RHQs/ROs/LOs in Hong Kong. To further consolidate Hong Kong’s position as a financial hub, the Government has introduced dedicated tax regimes in recent years to foster the development of various industries, including corporate treasury centre and captive insurance. We trust that these measures and the existing advantages of Hong Kong will help promote economic development and increase the employment opportunities for local talents.