In our latest webinar, Donald Tsang, head of Corporate and Legal Solutions, Hong Kong, and Fang Ling Khor, head of Fund Solutions, APAC, discussed Hong Kong’s role as a major global trade and investment center.
Hong Kong has established a reputation as a major fund center in a relatively short space of time. To cement its position, it has introduced two homegrown fund entity structures in the last few years.
The Hong Kong Limited Partnership Fund (LPF) is the most common structure for private equity and other closed-end funds. Its rules around compliance, reporting, and distribution will be familiar to international managers. The Open-Ended Fund Company (OFC), meanwhile, is a collective investment scheme in corporate form. It can act as an umbrella entity for sub funds. Hong Kong’s financial authorities saw a need and acted decisively. Both structures seem to be hugely popular with international fund managers.
It’s this kind of innovation that keeps Hong Kong near the pinnacle of global trade and investment. In 2020, Hong Kong ranked as the sixth-largest destination for foreign direct investment (FDI) in the world.[1]
In our recent webinar, Doing Business Internationally: Hong Kong , CSC experts discussed the city’s role as the gateway to China, and its commitment to continual innovation.
Finance in Hong Kong: A well-established industry in an ideal location
Hong Kong offers business and investors a knowledge-based economy characterized by advantageous taxation rules and minimal government intervention. It has a highly skilled and multilingual workforce, a mature financial services sector, and a long tradition as a trading center. Historically, Hong Kong has been a melting pot; that international outlook continues today.
The impact of the city’s unique perspective can be seen in its bustling business districts. Hong Kong is home to nearly 9,000 regional headquarters, regional offices, and local offices of international companies with parent companies located outside Hong Kong.[2] Its foreign exchange market is the fourth largest in the world.[3]
International investors use Hong Kong as a gateway to China. Chinese companies use it as a gateway to the world. In 2021, it was the world’s largest offshore renminbi (RMB) clearing center, handling about 76% of the world’s RMB payments.[4]
For foreign investors, Hong Kong also offers a simple tax system with no indirect taxation, a free trade port with no tariffs on goods, and a well-established legal system based on English common law.
Innovation: Hong Kong’s key to success
On top of these factors, a continual quest for improvement has always been central to the city’s success. Recently, that includes participation in the Greater Bay Area initiative, a regional scheme bringing together 72 million people and a combined GDP of USD 1.7tn. Hong Kong is the area’s key financial and legal hub.
The Hong Kong government also introduced the Top Talent Pass Scheme at the end of 2022, aimed at attracting high earners and top graduates to careers in the city. These initiatives, alongside the LPF and OFC, serve to increase knowledge, talent, and capital flows in the region. The success of the strategy is not in question. As of the end of 2020, Hong Kong structures had assets under management worth USD 4.5tn.[5] Financial authorities, however, believe that significant potential remains untapped, and are committed to developing further investment vehicles in the coming years.
Outsourcing is increasingly popular among Hong Kong businesses
Setting up and maintaining funds and businesses of all kinds is relatively straightforward in Hong Kong, not least because of the presence of a large professional services sector.
Outsourcing is popular in the city because many fund managers want immediate access to specialist talent and technology, rather than building operations teams from scratch. In addition, businesses looking to use Hong Kong as an entry point to mainland China often look to outsourcers with an in-depth knowledge of the business and regulatory environments in both jurisdictions.
Hong Kong’s world-class financial infrastructure and deep pool of finance and legal professionals is one more reason for its success. In the post-COVID world, Hong Kong remains one of the world’s most forward-thinking business centers.
Why CSC?
CSC provides knowledge-based solutions for every phase of the business life cycle, helping businesses form entities, maintain compliance, execute transaction work, and support real estate, M&A, and other corporate transactions in hundreds of U.S. and international jurisdictions.
We work with some of the world’s largest banks and commercial lenders to reduce risk in their lien portfolios, improve their transaction speeds, and create a secure environment for their financial processing needs. We also provide solutions for secure real estate document preparation and recording.
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