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Hong Kong: STILL Open for Business

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Looking to monetize the growing consumer spending in China, but don’t know where to start? Hong Kong is the vital intermediary that can make this “Business as Usual” for offshore businesses.

Financial Titan of the East

According to the Hong Kong Monetary Authority, Hong Kong manages two-thirds of inflow and outflow of China’s foreign investments. Furthermore, the SWIFT RMB tracker notes that Hong Kong is responsible for clearing76.8% of offshore Renminbi (RMB) payments as of June 2021.

So what? Why should foreign investors and businesses invest or register their business in Hong Kong, and not directly in China? To answer that question, we have arranged a zoom call with Get Started HK, a leader in the company formation industry in Hong Kong, they gave us some good reasons below. let’s compare China and Hong Kong through an important aspect of business operations: Flow of Money.

Flow of Money

Let’s say you would like to start an offshore business directly in China. You would need to conduct key financial activities, such as funding business activities, injecting capital, and financing, with RMB, China’s official currency. All of which would require you to perform currency exchange from your originating currency (e.g. USD) to RMB. However, China’s policies do not make it easy for offshore business owners.

China’s System

China has a series of long-standing policies and procedures around foreign exchange due to their concerns over currency manipulation of RMB, especially after the currency devaluation event in 2015. The country is also “at risk of asset bubbles, which would burst were that money to start pouring out”, where the government has no choice but to control the inflow and outflow of money. Therefore, controls and regulations are enforced to maintain the stability of the currency.

Depending on the nature of your business, setting up your offshore company for foreign exchange services in China may require you to acquire multiple certifications and to complete numerous filings and applications. All of which could take up to 3 months .Even after the completion of registrations, there are many post-registration rules set by State Administration of Foreign Exchange(SAFE), China’s governing body for overseeing foreign exchange activities and policies, to monitor and regulate incorporated foreign-invested enterprises (FIE). For example, FIEs are subject to a debt-to-equity ratio requirement. Failure to adhere to SAFE’s rules may result in your business being denied of foreign exchange services.

Hong Kong’s System

In Hong Kong, it is a totally different story. According to Chapter Vof Hong Kong’s Basic Law, it states that “no foreign exchange control policies shall be applied in the Hong Kong Special Administrative Region”. In terms of RMB services, the Hong Kong Monetary Authority states that any offshore individual or company can open RMB accounts with any of the major banks in Hong Kong. These banks offer a wide range of RMB services, such as deposits, remittance, currency exchange, and financing. Although cross-border fund transfers are still subjected to rules and regulations in China, the end-to-end services provided by banks in Hong Kong offer offshore business owners a seamless experience, from funding their business activities to managing their flow of capital.

What’s Next?

Free flow of money is just one of the advantages in setting up an offshore company in Hong Kong.” There are many other benefits that await, making Hong Kong the perfect gateway for offshore businesses to tap into the Chinese market without having to navigate China’s complex regulatory environment on your own.

From television to the internet platform, Greg switched his journey in digital media with California Herald. After serving as a journalist for popular news channels he currently contributes his experience for California Herald by writing latest and trending Politics news.

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