Why should you open an office in Hong Kong?

theDesk - co-working space: Open Office in Hong Kong
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Hong Kong has long been an important financial and business hub for all of Asia, and with the ongoing growth of the Chinese economy, the strategic importance of the city has only continued to grow. The benefits of opening an office in the SAR are becoming clear to both Chinese companies seeking greater international exposure, and international companies looking to enter the Chinese market. However, Hong Kong also presents a unique set of questions and challenges for companies looking to expand, particularly around the unique laws that govern the city, and its outlook for growth over the coming decades. What are the specific values that Hong Kong can bring to Chinese and international companies? What are the main questions they might have before making the move? And what is the most practical way to set up an office in the city?

We reached out to key experts to get their opinions on Hong Kong’s business environment, and to provide key insights for companies trying to navigate this space: Kevin Pang, Partner at PwC, and Ricky Lau, Deputy Managing Director and Head of Office Leasing at Savills. We asked for their views on the key issues affecting businesses who are considering expanding to Hong Kong:

Tip 1: Plan for the development of the Greater Bay Area

The “Greater Bay Area” initiative is a plan to link major cities in the Pearl River Delta such as Hong Kong, Macau, Guangzhou and Shenzhen, and transform the area into an integrated economic and business hub. Accounting for less than 1% of China’s land mass but contributing to 12% of the GDP, the plan is certainly ambitious and challenging, but the outcome will have a huge impact on how business is conducted in the region.

Kevin Pang: The Greater Bay Area (GBA) is certainly a hot topic since China announced the plan a few years ago. Nowadays, the value of GBA is becoming clearer, particularly from an economic standpoint, and how ideas like sharing and collaboration will have a significant impact.

There are very few places in the world that offer such a strong concentration of GDP and skilled workers. I identify five main points that are a draw to the area. Number one is the concentration of creative technology companies. Number two, it is a major draw as a financial center for the entire region. Number three is the advanced infrastructure required, making the entire GBA hyper-connected. Connected to this, number four is the ‘smart city’ initiatives in the area. Finally, number five is the business environment, which is very international and open to companies from around the world.

The Greater Bay Area initiative promises many benefits, but the outcome is especially important for companies involved in technology and innovation, and could be a magnet for creativity and talent in the coming years. Specifically, with a business-friendly environment and an established international workforce, Hong Kong provides several unique advantages over other nearby cities even within GBA.

Tip 2: Understand the shift towards high-tech growth

GBA is not the only thing driving change in the tech industry. As the Chinese economy grows, the types of companies that will succeed in this environment are changing along with it.

theDesk - GBA - Technology

Kevin Pang: China has undergone rapid change over the past 40 years. As the Chinese economy continues to grow and the market is becoming more international, we’re seeing a different China emerge.

One of the main driving factors is the transition to a ‘higher value’ economy, meaning there is a greater emphasis on industries such as technology and finance, or companies that provide a service rather than a commodity. With this transition, Chinese companies need to expand beyond the domestic market and into the international arena. Hong Kong is an important bridge to international markets as a resource for high-skilled workers and an access point to capital through lower cost financing, which is why the trend of Chinese businesses setting up in Hong Kong will only continue to grow.

For tech companies looking to grow, Hong Kong can be an important hub for access to talented workers and capital. It is important to leverage that access to talented workers in order to drive creative business solutions.

Tip 3: Take advantage of Hong Kong’s growth incentives

As a famously pro-business environment, Hong Kong offers some key advantages over other international cities if accessed properly. This can be a key consideration for international businesses deciding to set up in Hong Kong instead of going straight to places such as Shanghai and Beijing, as well as for Chinese companies seeking growth.

Kevin Pang: In China’s relatively developed areas like Beijing, Shanghai, Guangzhou, Shenzhen, and others, it has become easier for international companies to come in. However, they might still stumble on specific policies, such as how to interact with the local government, or the tax rate. Because of this, many companies will elect to set up in Hong Kong first as the process is easier.

Tax is one of the main incentives: in Hong Kong companies will be subject to the two-tiered profits tax rate of 8.25% and 16.5%, whereas setting up in China, the corporate income standard tax rate will be 25%. Qualified new and high tech enterprises are eligible for a reduced rate of 15%. That can make a significant difference in the business equation. Also, recent changes to the 183 days counting method of the “China tax resident status” for expatriates provide more flexibility for those cross border workers with overseas employment or dual employment arrangement to do business.

So you’ve decided to move to Hong Kong…how do you find the right space?

Tip 4: Leverage the power of co-working

When selecting an office in Hong Kong, companies are presented with a choice: either go for a traditional office space, or elect for a more flexible co-working space. Each provides certain advantages, but there are several reasons why companies are increasingly turning to co-working as a solution, especially in industries like tech.

Looking for a cost-effective option to stay in this prime business hub? Use the calculator here to help you plan ahead.

theDesk - co-working space - Gen Z - millennial
By locating your office in intrinsically collaborative environments, company are able to build relationships with innovative SMEs from a range of industries and cultures, promote diversity of thought, empower people to share ideas.

Ricky Lau: Working populations are getting younger and younger, and millennials tend to enjoy open offices and co-working environments. They are more open to ideas of self-employment or freelance, and they have a different understanding of personal freedom.

Kevin Pang: There are several reasons why companies might prefer a co-working space. The first reason is that younger high-skilled workers, particularly millennials, are seeking out more sophisticated workspaces that better suit their lifestyle. If a company is coming to Hong Kong and wants to attract this kind of worker, they are more likely to find them by setting up in a co-working environment. The mingling and networking opportunities in a co-working space are also important for Chinese companies looking to establish connections with the local business community around their industry.

Younger generations have different expectations around work. Co-working spaces can help offer greater flexibility to companies, but also importantly are attractive to young talent seeking work environments that better match their lifestyle.

Tip 5: Pick a central location

Though Hong Kong is extremely well connected and easy to get around, location still plays a crucial role in terms of perception. Picking the right address is an important step in unlocking the potential of the city.

theDesk United Centre - Admiralty - co-working space - Open Office in Hong Kong
Setting up an office in Central is generally a huge cost, but neighborhoods such as Admiralty are only 5 minutes away and can offer all the same advantages in terms of location and convenience, at a much more reasonable cost.

Ricky Lau: One of the main purposes for private enterprises coming to Hong Kong is to attract investors. The requirements for listing are relatively high, so they are all inclined to locate in a central area or near other landmark buildings to build a high-profile image. [for these kinds of companies] It is important to pick a convenient location near the CBD or close to their customers.

While setting up an office in Hong Kong does not come without hurdles, it’s clear that the city presents some key and very tangible benefits, both for Chinese and international companies hoping to broaden their business prospects. Furthermore, with ongoing development in the region, Hong Kong’s place promises to be secure for at least decades to come. By leveraging these tips and expert insights, we hope to inspire you to make the move to co-working in Hong Kong.

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