Are you an ambitious entrepreneur, eyeing the vast potential of the Asian market, yet finding yourself at a crossroads, unsure of which path to take? If so, Hong Kong might be the perfect solution.
Ranked 5th out of 63 by The International Institute for Management Development (IMD) World Competitive Yearbook 2022, Hong Kong stands tall as a global business powerhouse. Due to its advantageous geographic position, robust economic development, and business-friendly policies, it comes as no surprise that many entrepreneurs opt to establish their startup operations in Hong Kong to broaden their global reach into the Asian market. Besides its enduring commercial benefits, Hong Kong’s well-known entrepreneurial spirit and dynamic environment offer an ideal backdrop for initiating a business venture.
Why is Hong Kong an exceptional destination for expanding your startup? Let’s delve into the unique circumstances that make now the perfect time to invest and grow your venture in this dynamic market.
- A supportive government
- Low, simple, and competitive tax system
- Strong network of incubators and accelerators
- Proximity to mainland China and APAC markets
- Diverse and wide-ranging startup and SME ecosystem
- Language
- Conclusion
A supportive government
Embracing its role as a catalyst for progress, the Hong Kong government is committed to fostering growth and innovation across various sectors. Through the initiatives outlined in the Hong Kong Budget 2024, the government aims to drive the city forward to achieve new milestones of success. From strengthening green finance to providing vital support for SMEs and promoting international trade, these initiatives reflect Hong Kong’s commitment to maintaining its position as a leading global hub.
Innovation and Technology
- In 2024, the Greater Bay Area International Clinical Trial Institute will be established in the Hetao Shenzhen Hong Kong Science and Technology Innovation Co-operation Zone.
- The New Industrialization Acceleration Scheme will be launched in 2024, offering enterprises up to HK$200 million in matching funds.
- HK$200 million is allocated to support incubation and acceleration programs for startups in Hetao engaged in life and health technology.
- HK$3 billion is set aside to launch the Frontier Technology Research Infrastructure Support Scheme.
Assisting Small and Medium Enterprises
- Extending the application period for 80% and 90% Guarantee Products under the SME Financing Guarantee Scheme until the end of March 2026.
- Injecting HK$500 million into the BUD Fund alongside the launch of “E-commerce Easy,” offering up to HK$1 million per enterprise for the implementation of e-commerce projects in Mainland China.
- Launching the Digital Transformation Support Pilot Programme, inviting SMEs in the F&B and retail sectors to choose from ready-to-use solutions starting in early 2024.
Trade
- Establishing a multinational supply chain management center offering consulting services, trade financing, and corporate training.
- Investigating the feasibility of creating a trade single window to offer comprehensive services to enterprises.
- Encouraging Mainland manufacturing enterprises to establish offshore trading management headquarters in Hong Kong.
Exploring new markets
- Exploring the possibility of setting up Economic and Trade Offices in Riyadh, Saudi Arabia, and Kuala Lumpur, Malaysia.
- Planning to host the “Belt and Road Festival” and the “Belt and Road Initiative Tax Administration Cooperation Forum” in 2024.
Low, simple, and competitive tax system
In the realm of taxation, Hong Kong stands out as a beacon of simplicity and generosity. With just three direct taxes to contend with, complemented by a wealth of allowances and deductions, navigating the tax landscape becomes a rewarding endeavor.
The three taxes are:
- Corporations enjoy a two-tiered profits tax system in Hong Kong, with the first HK$2 million of profits taxed at a rate of 8.25 percent, and profits exceeding that amount taxed at a rate of 16.5 percent. Unincorporated businesses, such as partnerships and sole proprietorships, have corresponding tax rates of 7.5% and 15%.
- The standard rate for salaries tax stands at 15%.
- Property tax is set at a flat rate of 15%.
Here are the taxes that Hong Kong DOES NOT impose:
- Sales tax or VAT
- Withholding tax on dividends and interest
- Capital gains tax
- Tax on dividends
- Estate tax
Strong network of incubators and accelerators
In the fast-paced environment of entrepreneurship, the early stages often make or break a startup’s success. This is where the support of incubators and accelerators becomes invaluable. For those opting for Hong Kong as the base for their business venture, this is indeed the optimal decision, as the city’s programs stand out not only for their abundance but also for their effectiveness in nurturing innovation and propelling startups toward success.
How do startups in Hong Kong benefit from Accelerators?
- Gain mentorship and sponsorship support, receiving valuable guidance, expertise, and knowledge to navigate startup challenges effectively.
- Connect directly with investors interested in discovering promising startups through accelerator programs, potentially opening doors to funding opportunities.
- Tap into the wealth of experience and skills accumulated by mentors and accelerator managers, accessing invaluable insights and information to accelerate startup growth.
- Benefit from the diverse and encouraging environment of Hong Kong’s accelerator programs, which offer flexibility and adaptability, fostering an atmosphere conducive to startup success.
How do startups in Hong Kong benefit from Incubators?
- Cultivate relationships and exchange information with professionals and fellow entrepreneurs to foster business growth. A strong network provides valuable connections for both short-term and long-term success.
- Gain access to essential resources like education, software, and workshops covering various topics such as business fundamentals and funding acquisition. These resources support startup development and growth.
- Access affordable workspace options, akin to coworking spaces. Ensure they offer essential amenities like centralized printing and conference room access while exploring potential incubators.
Proximity to mainland China and APAC markets
Situated strategically in Asia, Hong Kong serves as a gateway for businesses to seize the myriad opportunities available in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and beyond.
Since the signing of the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA) in 2003, collaboration between Hong Kong and Mainland China has flourished. This landmark agreement not only simplifies access to the vast mainland market for Hong Kong products and services but also surpasses China’s commitments under the World Trade Organization (WTO). By eliminating tariffs and providing preferential access to certain service sectors, CEPA paves the way for enhanced economic ties between the two regions.
The unveiling of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) outline in 2019 marks a significant boost to the relationship between Hong Kong and the mainland. With nine bustling cities in Guangdong province alongside Hong Kong and Macao, the GBA emerges as a vibrant economic powerhouse within the Pearl River Delta. Notable cities like Guangzhou and Shenzhen, renowned for their manufacturing and technological prowess, underscore the region’s economic significance. Hong Kong’s seamless integration into the GBA opens doors for both local and international investors to dive into the boundless economic potential of Mainland China.
Diverse and wide-ranging startup and SME ecosystem
According to InvestHK’s 2023 Startup Survey, a remarkable surge was witnessed in both the number of startups and employed staff. With 4,257 startups employing 16,453 staff, Hong Kong’s resilience and growth are undeniable.
Meanwhile, the SME sector continues to play a pivotal role in Hong Kong’s economic rebound, representing 98% of all businesses and employing 44% of the private sector workforce. As the backbone of the economy, SMEs contribute significantly to driving growth and innovation.
Dive deeper into Hong Kong’s vibrant startup and SME ecosystem with our infographic, offering a comprehensive look at the dynamic landscape and a window of opportunities awaiting entrepreneurs and investors.
Language
When contemplating global expansion, language often poses a significant obstacle. It can be challenging to grow your startup in a new country when effective communication with potential investors, partners, or staff is hindered. However, for many foreign startups in Hong Kong, this is not a concern.
With English, Cantonese, and Mandarin being the three main languages in Hong Kong, entrepreneurs proficient in either English or Cantonese should encounter no hurdles in connecting with potential stakeholders and enhancing their brand presence.
Conclusion
As Hong Kong is entering a truly golden age of innovation and technology, the outlook for 2024 is promising. Stepping into this Dragon year, Asia is set to lead the world in GDP, with Hong Kong playing a central role in this development.
The city offers a supportive environment for ambitious entrepreneurs, with a vibrant ecosystem, clear regulations, and access to a diverse talent pool. As a key player in the global tech scene, Hong Kong presents excellent opportunities for entrepreneurs to turn their ideas into reality and succeed.
For those with ambitions to grow on a global scale, now is the ideal time to begin this journey with a “Grow Fast Go Beyond” mindset.
