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How to expand into China through Hong Kong

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How to expand into China through Hong Kong

2020-09-08T08:24:28+00:00August 4, 2020|0 Comments

Since become a Special Administrative Region of China (SAR) in 1997, Hong Kong has grown into an international business hub, that is well-known to be friendly to foreign investors. With China’s growing dominance, more companies looking to capitalize on China. This combination makes Hong Kong a preferred option for many looking to expand their business. Find out more about why Hong Kong Companies Should Conduct Business in Mainland China.

Expand into China through Hong Kong

Why start from Hong Kong

Several reasons make Hong Kong the ideal place to start from when thinking of operating in China.

Geographically and culturally rich location
Hong Kong is located as China’s southern tip at the Pearl River Delta’s mouth and shares a common culture with mainland China. It will take one only five to eight flight hours to China. Apart from that, visitors can also travel within a single day across the waters from Hong Kong to major cities like Beijing and Shanghai.

Economic freedom and business opportunities
As a Chinese mainland city, Hong Kong is a free and open economy that allows the territory to attract money from different parts of the world. It has been ranked high in the world’s leading surveys as having economic freedom and business opportunities for higher ease of doing business. It also provides the most important international banking and financial hub.

It has free trade policy, no trade barriers, and no limit for foreign investments. It also enjoys political stability, a key ingredient to the success of a foreign investment.

Hong Kong is also one of the most e-ready economies in the world. It is also the most significant single investor in the Chinese Mainland and close to 45 percent of outside investment in China’s main cities.

Sophisticated and simple business
Because of being SAR of the people’s republic of China with a high degree of autonomy in all matters except defense and foreign affairs, Hong Kong enjoys many advantages like a robust economic relationship with mainland China.

It has zero export tariffs and strict Intellectual Property Rights (IPR) legislation, and free flow of information. It also enjoys a network of bicultural business professionals and most corruption-free economies.

The corporate taxation in Hong Kong is also very business friendly. With a low rate, and many possible exemptions, this makes it easier to conduct business in Hong Kong.

Did you know that Hong Kong companies pay zero tax on business activities conducted overseas? Not to worry, Paul Hype Page is able to advise you on all the various tax incentives and obligations of Hong Kong. This simplifies the process even further. 

Visa-Free Support
Hong Kong is the fifth-busiest international passenger airport operating more than 85 airlines, making it a global business hub. Its visa system invites foreign investors in the city to visit The Guangdong province, which is China’s largest provincial economy.

It has convenient visa policies that attract Mainland Chinese. There are various schemes and policies for the employment of Mainland talents and professionals for those wishing to invest and open a new company. Visitors can access China’s main cities through Hong Kong’s ports using an entry permit and visitor visa. Learn more about Hong Kong’s visas and the restrictions relating to them here.

Business Support & Assistance
There are various programs and schemes established by the Hong Kong government and the private sector to help a company improve every aspect of their business. Programs like government funding schemes, business development support, seed capital providers, market access co-working spaces and promotion platforms.

While the schemes and forms of assistance available are many, it can be difficult for businesses that are not familiar with the legislation or the schemes to benefit from them. Fortunately, Paul Hype Page is well versed and knowledgeable on this, and we can advise you on the options available for you, and how to ensure your application to these programmes are successful.

Thinking of incorporating in Hong Kong? Let’s get started. 
E A S I E R • F A S T E R • B E T T E R

Strategies on How to operate in China

Do Research
You should fully research any local regulatory barriers that could block market entry in specific regions, and while already established, constantly monitor for any changes to legislation or regulations that could affect your business. You should also spend time mapping out customers’ and suppliers’ locations and understanding how distribution channels vary between different locations.

Advantages of researching

  1. It helps determine the size and nature of the market opportunity and acts as a benchmark against which firms are able to measure future performance.
  2. It helps identify potential roadblocks to market
  3. It identifies any weaknesses in a company’s product or service offering.
  4. It helps prevent poor decision-making and establishes a clear strategy map for the future.

If this all sounds too difficult for you to do alone, or you have questions regarding the market in Hong Kong, Paul Hype Page is able to advise you on the market conditions and how to best enter the market. We have a wealth of experience in the region and are able to advise you based on your specific needs.

Identify and Segment the Market
Know the geographical locations of these markets and how to access them by understanding the local environment of china. Below is how china market looks like:
It is socially and economically disparate and fragmented due to uneven economic growth rates in different parts of the country. There are huge variations between different provinces in terms of population levels, education levels, literacy rates, consumer spending habits, and lifestyles.

China’s markets vary in nature and make-up. Hence, a company should think carefully about which geographical location offers the best vantage point to target the broader China market by tending focus in the densely populated and higher-income coastal regions like Guangdong, Jiangsu, Zhejiang, and Shanghai.

A company should not ignore the economic growth and rising incomes in China’s Tier 2 cities like Nanjing, Wuhan, Dalian, Shenzhen, Chongqing, Hangzhou, Chengdu, Qingdao, and Dalian. As they have the advantage of lower operating costs and increased consumer spending power that is creating rapid growth in demand for foreign manufactured goods and products.

Choose the Right Market Entry Mode
Entry mode depends on many factors like industry landscape, geographical size & scope of the market, nature of the company & the level of on-the-ground sales & technical support required by consumers, the cost of setting up a local entity, and of hiring local employees. The cost will vary depending on the size and scope of an enterprise along with the specific characteristics of the market it is entering. A company can enter as a wholly foreign-owned enterprise (WFOE) or a Joint Venture (JV) business model

Carrying Out Due Diligence
Due diligence helps verify the trustworthiness of partners and employees and to expose any skeletons or any hidden agendas before proceeding with any sizeable investment. It can help in-house or through risk assessment consultants.

Develop an International Property Rights (IPR) strategy
The infringement of IPR is widespread in China. Therefore, any company entering the market for the first time should work under the assumption that its technology will be compromised at some point. Here for it is advisable that foreign companies, especially those with large IP inventories, should consult with lawyers and IPR specialists to formulate and IPR strategy for the China market.

A company should be sure to understand the first-to-file patent system, first-to-file trademark systems. Register trademarks in China before market entry and know how to register them both in English and Chinese.

 

Difficulties in Hong Kong and China

Language Barrier
In Hong Kong, the official languages spoken are Cantonese, Chinese and English. In China, the official language is Chinese. For foreign investors from outside the region, they may not be experienced in the language, and may face communication problems.

Culture Barrier
The culture in Hong Kong and China is very different from western culture. The concept of Guanxi, dominates professional relationships. This affects how business is conducted and being an uninformed participant can cause riffs with their local stakeholders.

IPR Infringement
As mentioned above, IPR in China can be problematic for companies with patents relevant to their core business activities. This is due to the process that China has adopted, and the regulation surrounding it

How to expand into China through Hong Kong FAQs

Which region in China is best for pharmaceutical companies?2020-08-04T09:47:37+00:00

Shanghai has one of the best potential markets for a business dealing in petrochemicals, pharmaceuticals automobile electronic apparatus.

How to prevent Intellectual property rights infringement in Hong Kong and China?2020-08-04T09:47:12+00:00

Without having an experienced advisor, it can be easy to ruin your professional reputation and to lose out on opportunities because of a lack of knowledge or a lack of awareness. By engaging Paul Hype Page, we will assist in not only your incorporation and annual compliance needs, but also in your business planning and how to best approach key stakeholders such as suppliers

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