1. Introduction

• 1.1 Why Hong Kong?
• 1.2 Hong Kong at a glance
• 1.3 Hong Kong and Australia: the bilateral relationship

1.1 Why Hong Kong? Opportunities for Australian businesses

Hong Kong has been popular with Australian businesses for decades, and for good reason. This magnificent world city, named for the 'fragrant harbour' it sits on, is ideally positioned for international trade. Strategically located at the crossroads of China and North Asia, most cities in Asia are less than a five-hour flight away. Hong Kong also enjoys easy access to the Pearl River Delta in southern China, a global manufacturing centre and one of the fastest-growing regions in the world.

Doing business in Hong Kong is an attractive proposition for many reasons.

• A safe, predictable jurisdiction for business: Hong Kong enjoys a clean and efficient government system and the rule of law is well established.
• A connected global city: Hong Kong is well served by its award-winning international airport, advanced ICT network and high-capacity sea port.
• A launch pad for expansion: Its strategic location and booming tourism industry make Hong Kong ideal for establishing a presence in the region.
• A developed and growing economy: Hong Kong is an advanced, high-income economy with a per capita income of just under USD 58,000. Its GDP is forecast to continue growing at just under 3 per cent every year to 2020, making it an excellent location for engaging Asia's growing ranks of middle class consumers.
• Highly skilled and international workforce: In addition to the highly educated and skilled local population, Hong Kong attracts talent from around the world.
• Low and simple taxation: Business and individual taxes are low, with the corporate tax rate set at 16.5 per cent. Offshore income, capital gains and dividends are tax-free.
• International financial centre: As of April 2015, there were financial institutions from 36 counties with local representative offices in Hong Kong. This included 71 of the world's largest 100 banks. Hong Kong's position as a significant financial hub is set to continue, following the establishment of the Shanghai-Hong Kong Stock Exchange Connection in 2014 and the internationalization of China's currency, the renminbi (RMB).

Hong Kong is one of China's richest and most developed provinces. Since 1997, it has been a Special Administrative Region with autonomy in most areas except foreign affairs and defence. It operates under the 'one country, two systems' principle, meaning its legal and local political systems are distinct from the rest of China.

While Hong Kong's market is modest, with a population of 7.3 million, Hong Kong's inhabitants are wealthy and cosmopolitan, driving demand for premium Australian products. It's a great place for businesses to start building a brand in Asia.

Specific sectors where Australian businesses are performing well include:

• Food and beverage
• Wine
• Seafood
• Clothing and fashion
• Cosmetics
• Aged care
• ICT technologies

For more information, access the full Hong Kong Country Starter Pack

1.2 Hong Kong at a glance

Geography

At the south-eastern tip of China, Hong Kong covers Hong Kong Island, Lantau Island, the Kowloon Peninsula and the New Territories, including 262 outlying islands. Between Hong Kong Island and the Kowloon Peninsula lies Victoria Harbour, one of the world's most renowned deep-water harbours. Its total area is 1104 square kilometres.

Climate

Hong Kong's climate is sub-tropical, tending towards temperate for nearly half the year. July is the hottest month in Hong Kong with an average temperature of 29°C, while January is coldest at 16°C. August is the wettest, with an average of 281 millimetres of rain. Typhoon season begins in May and ends in November.

History

Prior to the mid-19th century the area that is now Hong Kong was little more than a few fishing villages and a haunt for pirates. The area attracted the attention of British traders in the 1820s, who realised the commercial significance of a sheltered deep-water harbour astride the main trade routes of Asia.

As a result of its victory in the first and second Opium Wars (1832-42 and 1856-60), Britain gradually gained control of the area via a series of treaties and agreements. The Treaty of Nanjing (1842) ceded Hong Kong Island to Britain, then the Convention of Beijing (1860) gave it control of much of the Kowloon Peninsula. The New Territories, along with 235 islands, were leased by Britain from China in the Convention of 1898 for 99 years.

Hong Kong soon became an international, commercial city attracting Western and Chinese merchants alike. The growth in trade saw it become an important centre for financial services.

After Japanese occupation in the Second World War, Hong Kong reverted to British rule in 1945. The development of advanced manufacturing such as electronics helped Hong Kong become one of the first 'Asian Tiger' economies, enjoying annual growth rates of between 8 and 9 per cent in the 1970s and 1980s. It has more recently transitioned to a services-based economy including finance, logistics and insurance.

The British and Chinese governments started discussions on the future of Hong Kong in the late 1970s, and on 1 July 1997 Hong Kong Island, the Kowloon Peninsula and the New Territories were returned to China and became known as the Hong Kong Special Administrative Region (SAR).

Culture and communication

Hong Kong's contemporary culture is a unique blend of East and West. Around 90 per cent of Hong Kong's population is of Chinese descent, mostly of Cantonese ethnicity. The remainder consists of ethnic groups including those of British, Indian, Vietnamese and Pakistani descent. Most Hong Kong business people speak English fluently.

Hong Kong society is underpinned by traditional Chinese Confucian values, particularly in the importance of family, collectivism, relationships and the concept of 'face'. This roughly equates to a person's dignity, pride or social standing. Shaming and confronting people in front of others is not acceptable. Showing loyalty, respect for authority, age and hierarchy are all important.

As in many Asian cultures, relationships are crucial for business. It's important to Hong Kongers that they get to know you on a personal level.

The people of Hong Kong can be sensitive about being grouped and referred to as 'Chinese'. Having a very different modern history and political and socioeconomic values to the people of mainland China, they consider themselves to be from Hong Kong and refer to themselves as Hong Kongers (香港人). The connection to China has recently become an increasingly delicate topic amid growing political tensions.

Politics and government

Chief Executive

Hong Kong's 'executive-led' system of government is substantially inherited from the British colonial administration. The Chief Executive (CE) heads the government and is responsible for implementing the 'Basic Law' and other laws of the territory. The Chief Executive makes policy decisions and has the power to initiate legislation.

Legislative Council

The major functions of the Legislative Council (LegCo) are to enact laws, examine and approve budgetary matters, monitor the government's performance, and debate issues of public interest. It cannot initiate bills involving government expenditure and so has a limited role in policy development.

Economy

Hong Kong is consistently ranked as one of the most open economies in the world. It is a major international financial centre, a leading world trading entity and home to some of the region's most important corporate headquarters. The territory is a major provider of services to China and is the mainland's designated centre for the internationalisation of the renminbi.

Hong Kong's economic integration with mainland China developed through the 1980s with the establishment of China's first Special Economic Zone in Shenzhen. Since 2004, the China-Hong Kong Closer Economic Partnership Arrangement (CEPA) has accelerated integration between Hong Kong and the Pearl River Delta, giving favourable treatment to Hong Kong manufacturers and services.

Hong Kong's manufacturing sector has moved almost completely to the mainland since the 1980s, and services now dominate its economy, accounting for 92.5 per cent of GDP.

Forecast GDP growth for 2017 is just under 2 per cent, with growth averaging 2.7 per cent until 2020. Economic growth in China will continue to provide crucial support to the regional economy, while domestically, infrastructure projects will continue to support broader economic activity.

Legal system

Hong Kong's legal framework is based on common law and the independence of the judiciary. The territory's constitutional document, the Basic Law, ensures that Hong Kong will retain a free market economic system and a common law legal system until 2047.

Infrastructure

Hong Kong ranked third out of 140 economies in the World Economic Forum's Global Competiveness Index for quality of overall infrastructure.

Sea port: Hong Kong's port is the fifth busiest in the world.

Airport: Hong Kong International Airport (HKIA) is one of the world's busiest international airports, connecting to about 180 destinations and hosting more than 100 airlines.

Rail: Hong Kong is connected by rail to Shenzhen and Guangzhou in southern China, both major cities in the Pearl River Delta.

Roads: Hong Kong has a good road network and is connected to mainland China by a number of highways.

ICT: Hong Kong has well-developed ICT infrastructure with most of the territory covered by broadband and 3G networks.

Public transport: Hong Kong's public transport system is world-class: reliable, efficient and reasonably priced. Ninety per cent of the 12.6 million commuter trips made daily are on commercially operated buses, trams, trains, metro and ferries.

For more information, access the full Hong Kong Country Starter Pack

1.3 Hong Kong and Australia: the bilateral relationship

The official relationship between Australia and Hong Kong is part of the broader Australia-China relationship. However, Hong Kong has considerable autonomy. In particular, it has some leeway in trade and economic ties.

Australian merchandise trade with Hong Kong was worth over AUD 9.9 billion in 2015-16, with exports valued at AUD 8.8 billion and imports at AUD 1 billion. Major Australian exports were gold, edible products and preparations, fruit and nuts, telecommunications and parts. Imports included telecommunications equipment and parts, printed matter, optical goods, monitors, projectors and TVs.

Trade in services was of an even greater value, totaling AUD 5.4 billion in 2015-16. Australia imported AUD 2.9 billion worth of services from Hong Kong while exports equalled AUD 2.4 billion. Transport, personal travel and other professional services figure highly in the trade in services between Australia and Hong Kong.

Hong Kong and Australia also invest substantially in each other's economies. Hong Kong is the sixth-largest source of foreign investment in Australia, with investment from Hong Kong into Australia totalling over AUD 85.4 billion in 2015. Hong Kong is also a popular destination for outbound Australian investment, with it receiving over AUD 50 billion in 2015, the fourth-highest amount of Australian investment in Asia.

For more information, access the full Hong Kong Country Starter Pack

2. Getting Started in Hong Kong

• 2.1 What you need to consider
• 2.2 Researching Hong Kong
• 2.3 Possible business structures

2.1 What you need to consider

Even though Hong Kong is one of the easiest places to do business in the world, it may seem daunting for newcomers. Taking a strategic approach is one of the keys to making the process manageable. Think of Hong Kong as a connected regional hub and stepping stone to other markets, and consider the differences that exist between regions, industries and markets that can be targeted from Hong Kong.

Location

Hong Kong is compact, with most of the city easily accessible by public transport. It is divided into three main areas: Hong Kong Island, the Kowloon Peninsula and the New Territories. Many businesses, especially financial institutions, are on Hong Kong Island, with most of the population living on the Kowloon Peninsula and in the New Territories.

Language

Chinese and English are the official languages of Hong Kong. English is widely used in government and by the legal, professional and business sectors. While English and Cantonese have been the main languages in the past, Mandarin is increasingly used.

Financing your Hong Kong business venture

You may be eligible for financing from a variety of sources in Australia, including grants, loan facilities, venture capital and equity-sharing deals. However, banks remain the easiest and most approachable source of funding. Government assistance is available to Australian businesses wanting to expand overseas. Full information can be found at http://www.efic.gov.au and http://www.austrade.gov.au/EMDG.

The Government of Hong Kong offers a number of targeted incentives aimed at attracting businesses to the territory. For more information, visit the InvestHK website ( www.investhk.gov.hk).

Risks

Hong Kong's stable and well regulated market makes it a low risk destination for doing business in Asia. In the World Bank Governance Index Ratings, Hong Kong scored a perfect 100 for regulatory quality and a very high 95 for rule of law. Corruption is low with Hong Kong ranking 15th out of 176 on the 2016 Transparency International Corruption Perceptions Index.

Vulnerability to external shocks and dependence on external demand have been identified as the key risks for doing business in Hong Kong. For example, its economy shrank by 2.5 per cent of GDP in 2009 as a result of the Global Financial Crisis.

Large-scale protests calling for greater democracy disrupted Hong Kong in 2014, and could re-occur. While these shook business confidence, the protesters were focused on domestic political issues and were not calling for economic reforms. Australian businesses are unlikely to be targeted by these protests.

Intellectual property

Intellectual property rights are well protected in Hong Kong. The Intellectual Property Department of the Government of Hong Kong is responsible for registration of trademarks, patents and designs and for overseeing copyright licensing bodies in Hong Kong: http://www.ipd.gov.hk

It is important to note that as Hong Kong's and China's legal systems are different, IP protections and rulings are not applicable between these jurisdictions.

For more information, access the full Hong Kong Country Starter Pack

2.2 Researching Hong Kong

Getting help

A variety of research organisations in Hong Kong, including large international professional and accounting firms can be a major source of information. Austrade provides a range of services for Australian firms seeking to go offshore. The Hong Kong Government's InvestHK ( www.investhk.gov.hk) is a good place to start when researching Hong Kong.

Market visits

You will need to visit Hong Kong to develop a deeper understanding of your target market and make contacts.

Visit before entering agreements with prospective agents, distributors or other business partners. Consider meeting with several potential partners to give you a basis for comparison. Arrange in-country assistance to help set up your program. This will help you see the right agents and customers who will be briefed and screened for interest and suitability. Numerous trade shows and exhibitions take place in Hong Kong, and can provide an excellent opportunity to meet potential customers.

Building relationships and making connections

Don't waste time in Hong Kong doing what you can do in Australia. Various organisations have training courses or seminars that can expand your knowledge about doing business in Hong Kong, including Asialink Business, Austrade, Export Council of Australia (ECA) and state and territory governments.

Prearrange as many of your meetings as possible and reconfirm them a day in advance. Within 48 hours of your appointment, send an email thanking your contact for the meeting and providing any follow-up information.

Joining a business association is a great way to learn more about the local business community and to meet colleagues. Try the Australian Chamber of Commerce Hong Kong and Macau ( www.austcham.com.hk) and Hong Kong-Australia Business Association (www.hkaba.com.au).

For more information, access the full Hong Kong Country Starter Pack

2.3 Possible business structures

There are multiple channels of entry open to foreign investors in Hong Kong, and no differences between the business structures available to foreign and local businesses.

Joint ventures, limited partnerships and general partnerships are permitted in Hong Kong. Unlike in many other jurisdictions, foreign businesses do not have to form partnerships or joint ventures with local businesses to invest.

Limited liability company: The most commonly used business structure in Hong Kong. Companies incorporated in Hong Kong can take advantage of the tax benefits and concessions available to any fully incorporated business, including CEPA. Subsidiaries can also be established as limited liability companies.

Joint venture: An arrangement between two or more companies to undertake business together. Joint ventures in Hong Kong are usually established as limited liability companies.

Branch office: Companies incorporated outside of Hong Kong can set up a branch office. Hong Kong law makes no distinction between branch offices and locally incorporated companies, meaning branch offices can engage in all areas of business activities, but may face limitations in accessing CEPA benefits. The main difference between a branch office and a subsidiary is that a branch office is treated as part of its parent company whereas a subsidiary is a separate legal entity.

Representative offices: Functions of representative offices are limited to non-profit making activities such as conducting research and making contacts. They are useful for exploring the Hong Kong market.

Sole proprietorship: While a sole proprietorship is the simplest and quickest kind of business to establish in Hong Kong, it is not a common structure for foreign businesses. As a sole proprietor, the business owner and the business are considered one and the same, meaning ownership cannot be transferred and comes with unlimited liability.

Partnerships: Partnerships registered on the Companies Registry are limited partnerships, giving the principals limited liability. Partnerships not registered on the Companies Registry are general partnerships and have unlimited liability. In addition to the advantage of working with other people and spreading risk, the key benefit of a partnership over a sole proprietorship is that ownership can be transferred.

Shelf companies: Shelf companies are incorporated and registered with the purpose of being sold to other businesses. The advantage of using a shelf company is that the registration process has already been done, meaning you can start business right away. It does, however, cost more than establishing a new business.

Using a holding company in Hong Kong to do business in China

Another option for setting up in China, preferred by some Australian businesses, is to establish holding companies for their Chinese entities in the jurisdiction of Hong Kong. This permits Australian businesses to partially avoid China's regulatory environment, which is tougher and has more extensive procedures. Holding companies also allow for a layer of protection between the parent company and Chinese subsidiary from potential risks and liabilities.

For more information, access the full Hong Kong Country Starter Pack

3. Sales and marketing in Hong Kong

• 3.1 Agents and Distributors
• 3.2 Online Sales
• 3.3 Direct Selling
• 3.4 Franchising
• 3.5 Marketing
• 3.6 Labelling requirements

3.1 Agents and distributors

Many Australian firms doing business in international markets rely on agents or distributors. Using agents and distributors in Hong Kong can be quite different to doing so in other Asian markets. Generally, the Hong Kong business environment is relatively fast paced. Immediate responses are expected and decisions are made quickly.

Agent: An agent represents the supplier, but does not take ownership of the goods. They generally earn a commission based on an agreed percentage of sales value generated. Usually Hong Kong-based, they often represent numerous services or product lines, operating as the sole agent for a company's goods or services in that market, or as one of a number of agents.

Distributor: Buys the goods from the exporter then resells them to local retailers or consumers. Distributors may carry complementary and competing lines and usually offer after-sales service. Their fees are higher than agents' because of associated costs. They usually carry inventory, but seldom take on marketing.

Choosing an agent or distributor: The most important thing is that you can establish a close working relationship. Meet with a potential partner to get to know them and observe their knowledge and presence in their own market. Get trade references and consider professional credit checks.

For more information, access the full Hong Kong Country Starter Pack

3.2 Online sales

E-commerce in Hong Kong offers a growing opportunity. Hong Kong has fast and accessible internet with household broadband penetration rates of over 84 per cent. 64 per cent of the population are on social media. Online sales are continuing to grow, increasing by 5 cent in 2014-15 and reaching a total of HKD 16.7 billion (AUD 2.8 billion) according to Euromonitor International.

As a high-cost retail destination with shelf space at a premium, selling online is one way to get a product into the Hong Kong marketplace. And the environment is good for online sellers. There is no levy duty, no sales tax or other import charges.

The top 10 search engines and websites are a mix of Western and Chinese sites. Google, Facebook, Yahoo and YouTube are all popular, along with the Chinese search engine Baidu and micro-blog Weibo. For e-commerce sites, Taobao, a Chinese site, has the largest market share followed by Amazon and TMall.

For more information, access the full Hong Kong Country Starter Pack

3.3 Direct selling

You may choose to contact buyers and end users of your product or services directly. This DIY approach is low-cost, and could help you get a feel for the market at relatively low risk, but it is not an easy option.

For more information, access the full Hong Kong Country Starter Pack

3.4 Franchising

Hong Kong is an attractive destination for franchising thanks to its open market and population of more than seven million, many of whom are wealthy and keen consumers. It can be an excellent showcase for your brand, and a stepping stone into other global markets.

Almost every major global franchise brand has a presence in Hong Kong, and a large number of local companies also operate there. The Hong Kong Franchise Association ( www.franchise.org.hk) estimates that currently there are 75 franchise operators, 56 per cent of which are local franchises. Forty per cent of all franchises are in the catering industry, with services and retail franchises also popular.

For more information, access the full Hong Kong Country Starter Pack

3.5 Marketing

Hong Kong is a developed and sophisticated consumer market. Consumers are open to Asian and Western brands with nationalism playing an almost non-existent role in purchasing decisions. Brand names, product quality and price are key considerations. As Hong Kong is one of the trend-setting centres of Asia and acts as China's 'shop window', how you market your product or service may affect how it is perceived in other markets.

The following should be kept in mind when marketing in Hong Kong:

Affluent consumers: Hong Kong has a high concentration of high net worth individuals, and increasingly wealthy consumers from China and elsewhere in Asia visiting the territory.

An international and trend-setting city: Hong Kongers are big spenders on fashion, and its status as a trend-setting centre for Asia is a key attraction for millions of international visitors.

Status-conscious: In Hong Kong, a person's standing and wealth are reflected in the items and services they spend their money on. As a result, consumption of brand names and luxury items is significant.

Research, research, research: Many Hong Kong consumers research non-consumable products online before buying in store. So make sure you have detailed product information and reviews available. You should also do a competitor price comparison online.

Advertising agencies: More than 3500 advertising and market research companies maintain offices in Hong Kong. Many service other markets in Asia including mainland China and Southeast Asia.

Trade shows and exhibitions: Hong Kong hosts numerous trade shows and exhibitions every year. These events attract suppliers and buyers from around the world, especially from elsewhere in Asia.

Advertising and media: Television commercials, advertisements in newspapers and magazines, and specialised trade directories are all successful advertising avenues. Hong Kong has more than 50 newspapers in English, Chinese and other languages, along with numerous magazines, TV channels and radio stations.

For more information, access the full Hong Kong Country Starter Pack

3.6 LABELLING REQUIREMENTS

Hong Kong has extensive labelling requirements, especially for food products. This is in part due to contamination and safety issues with agricultural products from mainland China. Labelling requirements can be more extensive than in Australia, so check the regulations and make sure that your products are labelled correctly. As it is not possible to give a detailed list of all the labelling requirements for Hong Kong in this guide, it is recommended that you check with the Customs and Excise Department of Hong Kong, Austrade and other organisations mentioned in this section before exporting to the territory.

Food labelling regulations

Imported food and beverage products, whether packaged for retail or the catering sector, must comply with Hong Kong's composition and labelling regulations. Labelling can be in English or English-Chinese (bilingual). Generally, all products must be labelled with:

• name and address of the manufacturer
• net weight
• list of ingredients
• special storage instructions
• expiry date (if applicable)

A declaration of the presence of allergic substances must be specified in the list of ingredients.

Nutrition labelling regulations

Hong Kong has unique nutrition labelling regulations that require more information than is currently necessary in Australia. These regulations are mandatory with fines or possible imprisonment for non-compliance. This affects all manufacturers of pre-packaged foods that export to Hong Kong and requires testing and labelling of nutrients, or provision of such results for re-labelling by your Hong Kong importer or distributor to meet these regulations. The nutrition label must contain information on energy plus seven core nutrients:

• protein
• carbohydrates
• total fat
• saturated fatty acids
• trans fatty acids
• sodium
• sugar

In addition, the amounts of any claimed nutrients must be listed, and there are rules on how claims of comparative nutrient levels or how a particular nutrient affects function should be displayed. If a nutrition claim related to any type of fat is made, the nutrition label should also include the amount of cholesterol. For a list of accredited laboratories in Australia that can help with this visit the website for the National Association of Testing Authorities: www.nata.com.au

For more information on these labelling requirements and to view a copy of the relevant regulation, visit the Centre of Food Safety's website: www.cfs.gov.hk

For more information, access the full Hong Kong Country Starter Pack

4. Conducting business in Hong Kong

• 4.1 Culture and business etiquette
• 4.2 Building relationships in Hong Kong
• 4.3 Meetings and negotiations
• 4.4 Due diligence

4.1 Hong Kong culture and business etiquette

Hong Kongers are not as conservative in their mannerisms as those from other Asian cultures. This is particularly obvious in the way teams are managed, where directness is the norm. Nevertheless, 'face' and social standing is incredibly important.

Greetings and titles: As in Australia, a handshake is the most common form of greeting when first meeting someone. It is polite to address someone with their title, for example Mr or Ms, followed by their family name until you are invited to call them by their first name. Many Hong Kongers have a Western first name rather than a traditional Chinese name, or may invite you to address them by an adopted Western name.

Business cards: Business cards are exchanged following initial introductions and are important in determining someone's status. Offer and receive business cards using both hands and make a show of reading any card you are given. It might be worthwhile getting your business cards translated into Cantonese or Mandarin on the reverse.

Dress code: In the business context, both men and women should dress conservatively. Men should wear suits and ties. Women should choose business skirts or trousers, and a smart jacket for meetings.

For more information, access the full Hong Kong Country Starter Pack

4.2 Building relationships in Hong Kong

No matter what industry you are operating in, you'll need to invest in relationships in Hong Kong. As in Australia, socialising is critical, and after-work drinks are popular. However, it's also common to follow the Chinese custom of socialising over food. In Hong Kong, this tends to be done at lunch meetings and events.

Dining and socialising: At business lunches and dinners, the host pays for the meal. However, guests are expected to offer to pay, which of course will be refused by the host. Offer to host a dinner in return.

It's usual for several dishes to be ordered in local restaurants. It is best to try a little bit of each dish but note that it is impolite to finish everything served as this indicates that your host did not buy enough food. It is best to leave some food on your plate.

Gifts: Gift giving is quite common in Hong Kong business circles. It generally occurs once the relationship is established. Avoid expensive or tacky presents; a good bottle of wine or whisky is an appropriate gift.

Business partners

A good relationship with a local associate can help you understand the dynamics of the Hong Kong market and introduce you to a network of business contacts. Developing trust with your business partners is important. Australians in Hong Kong recommend communicating through Skype or video conference meetings to help build a stronger personal connection. It is also vital to always send the most senior people possible to meet with your local business partners.

Local government and authorities

The main agencies and their areas of licensing authority for foreign investors include:

Invest Hong Kong: As the name suggests, this agency's goal is to attract foreign investment into Hong Kong. They offer free advice and services to foreign businesses looking to invest in the territory.

The Customs and Excise Department: In addition to its law enforcement activities, it is responsible for collecting revenues such as import/export taxes and duties and fees. It advises on export promotion and privileges, and customs-related information for travellers.

Inland Revenue Department: Responsible for administering Hong Kong's tax system and collecting taxes.

Hong Kong Monetary Authority: Hong Kong's central bank, charged with maintaining monetary and banking stability.

Hong Kong Trade and Development Council: Works to promote the international business activities of Hong Kong small to medium enterprises.

For more information, access the full Hong Kong Country Starter Pack

4.3 Negotiations and meetings

Hong Kong business people tend to focus on direct results, unlike other cultures in the region where the emphasis may be more on long-term relationships and outcomes. Expect a mostly transactional approach similar to Australian business practices.

Make sure you have facts and figures at hand. Print-outs, brochures and presentations should be available in English, Cantonese or Mandarin, depending on who you are meeting. Hong Kongers do not make business decisions lightly and negotiations can be time-consuming, with extensive details requested.

Hong Kongers are not as direct as Australians. Flat-out rejections, refusals and just saying “no" should be avoided. Instead, use phrases such as “that may be difficult" or “we shall see". Ensure your body language is open and doesn't suggest you are annoyed or negative. A “yes" from a Hong Konger does not necessarily mean agreement; rather, it signifies understanding.

Managing Hong Kong business meetings

Setting up a business meeting

Meetings should be arranged significantly in advance. Give at least three weeks' notice and send a confirmation email a few days before the meeting. Meetings should be organised for normal business hours or held over lunch or dinner.

Structure of the meeting

Be prepared to make small talk and then get to business rather quickly. The first meeting will likely be about getting to know each other, each organisation's goals, strengths and weak points. Hong Kongers, like Westerners, focus more on ties between organisations than people.

But Hong Kongers do have a different approach to ordering tasks than Australians. They are used to managing multiple tasks and interactions at once. Don't be offended if they use their mobile phones and take calls during meetings. This is not considered disrespectful. But it does mean that meeting agendas may not be as strongly adhered to as in Australia. Topics may be revisited even if you thought a decision had been made. Try not to get frustrated by this. It is just a different working style, not an attempt to wrong-foot you.

Ending a meeting

As in Australian business, it is best to follow up a meeting with an email, thanking your associate for their time. List any action items, confirm the next steps and give a date for the next meeting if possible.

Negotiating in Hong Kong

Expect your Hong Kong counterparts to negotiate as a team, and be prepared for them to have some skilled negotiators on board. It is best if you, too, have a team with you. Do not be surprised if your Hong Kong counterpart uses displays of anger to extract concessions. However, never engage in these displays yourself, remain calm and persistent.

Be prepared to negotiate on price, with final prices being up to a third lower than initial prices. Each side is expected to 'give' so start with a price you are willing to drop. Your Hong Kong counterpart will likely do the same. Be aware that demanding too low a price from your Hong Kong counterpart may have unexpected and negative consequences.

Keys to negotiating in Hong Kong

• Preserve 'face'
• Be patient and persistent
• Control emotions and expectations
• Be respectful, trustworthy and sincere
• Have a well-prepared team

For more information, access the full Hong Kong Country Starter Pack

4.4 Due diligence

Hong Kong has an established legal system and is a safe location for doing business. Nevertheless, fraud, scams and corruption do happen and may be a concern if you are servicing more challenging markets from Hong Kong. Performing due diligence is important and may help avoid these pitfalls when looking to operate in new markets.

Australian firms planning to operate in Hong Kong should commit to the highest level of corporate behaviour. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas.

There are various ways to carry out due diligence in Hong Kong. It is recommended that you seek professional advice to develop specific strategies for your business's situation. Hong Kong has a large number of professional services and legal firms that can assist with due diligence.

For more information, access the full Hong Kong Country Starter Pack

5. Business practicalities in Hong Kong

Understanding the rules and practicalities of tax law, employment law and other relevant provisions is critical. The laws and regulations relevant to your business are subject to revision and change, and may apply differently depending on your business structure, so seek advice.

• 5.1 Foreign investment
• 5.2 Import duties, tariffs and regulations
• 5.3 Taxation
• 5.4 Audit and accountancy
• 5.5 Employing workers
• 5.6 Banking in Hong Kong
• 5.7 Repatriating profits

5.1 Foreign investment environment

In 2015, Hong Kong bypassed the US in the United Nations Conference on Trade and Development's (UNCTAD) World Investment Report in global foreign direct investment (FDI) flows, both in and outbound. Second only to mainland China, this was the first time Hong Kong has ranked so highly. Its 2015 inflows were estimated at USD 175 billion, compared to mainland China's USD 136 billion and USD 308 billion for the United States.

Key factors contributing to this rise include Hong Kong's highly attractive business environment, which has limited investment regulations and restrictions. According to Invest Hong Kong, this is encouraging foreign investors to use Hong Kong as a platform to do business with mainland China, as well as a base for establishing a regional hub.

The FDI environment in Hong Kong includes the following attractive initiatives:

• No foreign exchange control for repatriation and entry of funds, capital and remittance of profits. This can be done via various methods including dividends, interest, branch profits, royalties and service fees. There are also no local and foreign currency import or export regulations on travellers.
• No restrictions on foreign ownership of land and/or property. Foreigners are subject to the same laws as Hong Kong residents in which property or land is leased from the government ranging for periods of 50, 75, 99, or 999 years.
• No constraints on foreign investment in Hong Kong. A foreigner can invest in any industry or business.
• Enforcement of 'rule of law'.
• The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China which entails reduced tariffs and duties on products transhipped from Hong Kong to the mainland.
• Free port. Besides four kinds of commodities, Hong Kong does not have any customs, tariffs, quotas, surcharges, value added taxes or general services taxes on imported goods.
• Import regulations with minimal government prescribed documentation for most categories of goods.
• Appealing tax regulations including incentives such as a low tax rate and foreign tax credits, as well as no capital gains tax, value added tax, or tax on foreign-sourced income.

Intellectual property

Hong Kong has various ordinances to protect intellectual property rights and is a signatory to international treaties on IP protection. Hong Kong is a 'first-to-file' jurisdiction, which means the right to a trademark or invention is based on who files first, not who invents or uses a trademark first. IP is granted on a territorial basis in Hong Kong, meaning that IP rights in other jurisdictions are not enforceable and need to be established in Hong Kong.

Go to the Intellectual Property Department of the Government of Hong Kong's website for more information: www.ipd.gov.hk

For more information, access the full Hong Kong Country Starter Pack

5.2 Import duties, tariffs and regulations

As a global trading hub and long-standing free port, Hong Kong levies very few import duties and tariffs. Coupled with the CEPA, which imposes minimal tariffs and duties on products meeting rules of origin criteria from Hong Kong, it is an attractive destination for goods transhipment and transit into mainland China.

Tariffs

Hong Kong is a free port without any customs tariffs, quotas, surcharges, value-added taxes or general services taxes. Excise duties are only imposed on four kinds of dutiable commodities: liquor, tobacco, hydrocarbon oil and methyl alcohol. No duties or tariffs are imposed on imports of food and beverages, except for spirits with over 30 per cent alcoholic content on volume basis.

Non-tariff barriers

Hong Kong does not maintain non-tariff measures for the protection of domestic industries. However, a range of non-tariff measures are in place to protect public health, safety, security and the environment.

For more information on import duties, tariffs and regulations, access the full version of the Hong Kong Starter Pack or visit the website of the Customs and Excise Department at www.customs.gov.hk

For more information, access the full Hong Kong Country Starter Pack

5.3 Taxation

Hong Kong has one of the simplest and most attractive taxation systems in the world, according to the PwC and World Bank 2016 Paying Taxes study, which looked at 189 economies. The corporate tax rate is capped at 16.5 per cent, with foreign-sourced income not included in Hong Kong tax assessment, so you only pay tax on what you earn in Hong Kong. There is no value added tax, no capital gains tax, and individuals only pay a maximum of 15 per cent tax on their salary.

The print and online versions of the Hong Kong Country Starter Pack provide an overview of the primary taxes Australian enterprises need to consider when establishing a business in Hong Kong, but they should seek professional advice on their business and its specific situation.

For more information, access the full Hong Kong Country Starter Pack

5.4 Audit and accountancy

Accounting standards

Hong Kong Financial Reporting Standards (HKFRS) is the set of 41 rules governing the treatment of financial transactions and outlining required minimum levels of disclosure. The HKFRS are modelled on the International Financial Reporting Standards (IFRS) from the International Accounting Standards Board (IASB). These apply to all profit-oriented entities.

SME-related standards

Hong Kong has separate financial reporting standards for SMEs, known as SME-FRS. These are simplified accounting principles based on the HKFRS which apply to both Hong Kong-incorporated companies and overseas companies.

Accrual basis of accounting

A requirement of HKFRS and SME-FRS is that financial statements (excluding cash flow information) are prepared by the accrual basis of accounting. In practice, new start-ups in Hong Kong tend to use cash accounting in their day-to-day transactions, then apply the accrual basis of accounting when preparing their annual financial statements. Ask your accountant what is best for your business operations.

Book and record keeping

For auditing purposes with the HKIRD, every person conducting business, working or engaging in trade in Hong Kong is required to keep detailed records (in either English, Cantonese or Mandarin) for at least seven years to enable assessable profits to be examined and determined.

Accounting period

Most companies in Hong Kong adopt an accounting period ending either on 31 March or 31 December. New incorporated companies can choose to file on the date 18 months after incorporation, and then on the same date every year. Tax returns are due one month after they are issued which is generally around 1 April.

For more information, access the full Hong Kong Country Starter Pack

5.5 Employing workers

Labour market

Hong Kong's workforce is well-educated, with expatriates bringing necessary skills in fields that the local market can't address. Hong Kong's government estimates the overall workforce encompasses 3.94 million people. The unemployment rate has been steady since 2011, hovering around 3.3 to 3.4 per cent.

Hong Kong faces challenges with talent retention, an ageing workforce, limited leadership capabilities, and critical skills shortages. Recognising these challenges, the government is developing and implementing policies that aim to increase the workforce's 'competitiveness, versatility and resilience', with an eye on the global marketplace.

Human resources and employment law

Alongside the initiatives aimed at creating a more competitive labour force, the Hong Kong government's Labour Department is working to enhance employees' rights and benefits, with an emphasis on occupational health and safety and maintaining relevant labour legislation.

The Employment Ordinance is the overarching framework for labour legislation and code of employment in Hong Kong. This governs a comprehensive range of employment benefits and protections, including payment of wages, employment termination, regulation of employment agencies, leave, and discrimination-related standards.

Industrial relations

Hong Kongers are free to join or form a trade union. In 2015, Hong Kong had 874 registered trade unions, consisting primarily of employee unions. Overall, Hong Kong has a relatively good industrial relations history with disagreements and disputes generally being solved by consensus.

Minimum wage: Hong Kong's Statutory Minimum Wage (SMW), rose from HKD 32.5 per hour to HKD 34.5 per hour, as of 1 May 2017.

Working hours: Hong Kong does not have regulations for working hours for employees over the age of 18. For most professional roles, the nominal work hours are 9am to 5pm, Monday to Friday, and a half day on Saturday. In practice, however, most people work much longer hours than this, with many spending more than 60 hours a week at work.

Leave: Employees on continuous contracts are entitled to seven days' annual leave after each 12-month period. Their entitlement to paid annual leave will increase progressively, up to a maximum of 14 days, according to their length of service.

Social welfare contributions: Employers are required to make an occupational benefit contribution of at least 5 per cent of monthly payroll (salary, leave pay, commissions, gratuities, bonuses, and housing allowances) to the Mandatory Provident Fund (MPF). Employees must also contribute 5 per cent of their income to the MPF. However, if they earn less than HKD 5,000 a month they are exempt.

Termination of employment: Employment can be terminated by mutual agreement, an employee giving notice and non-renewal of a contract. An employee can also be dismissed for breaching the terms of their employment or serious misconduct. If an employee has been engaged continuously for two years (but less than five) a valid reason must be given.

Managing a team in Hong Kong

In business and in the workplace you can expect Hong Kongers to communicate directly and be willing to take a risk in order to achieve a particular goal. In general, Hong Kongers are entrepreneurial and fast-paced business people. They are also generally time-driven and deadline-focused, so expect timelines to be met.

The role of a manager

In Hong Kong it's important to remember that each person has a distinct role within the organisation, and maintaining that role helps to keep order.

Managers are more autocratic than in many other countries. They do not seek a consensus before making decisions. They tell subordinates what they want done and how they expect them to perform the task. Subordinates follow a manager's instructions without comment, as it would be rude to challenge someone of a higher status. For the most part decisions are reached at the top of the company and given to managers to implement.

Approach to change

Hong Kong's intercultural competence and readiness for change is high. Businesses in Hong Kong have a high tolerance for risk and accept change.

Organisations and individuals are predisposed to a high degree of risk, partially because there are rich rewards for risk-takers who succeed. Risk-takers who fail are not deprived of future opportunities as failure is often perceived as a necessary step in the learning process.

Delegating

Employees understand their position within their organisation. When delegating tasks, managers are careful not to ask someone to do something that is 'below' their status.

Boss or team player?

It is important not to become overly familiar with your staff or your authority will be eroded. Treat all staff equitably; in return they will work obediently. One sign of rupture is an employee who suddenly disobeys orders. Intercultural adaptability is essential. It is important to understand the shame that can be felt by any criticisms voiced in public. If any criticism needs to be made, it is best if it is done through a third person, and privately.

For more information, access the full Hong Kong Country Starter Pack

5.6 Banking in Hong Kong

Hong Kong has a well-developed banking system, with around 265 banks operating in the territory and just under 1400 branches. Seventy out of the 100 largest international banks are represented and around 65 overseas banks maintain representative offices in Hong Kong. Australia's ANZ, Commonwealth Bank of Australia, National Australia Bank and Westpac all have operations in Hong Kong.

Business and banking

Most Hong Kong bank accounts can hold multiple currencies. This makes it easy for international businesses to receive and make payments in various currencies. For example, if you receive a payment in RMB, the Hong Kong bank will not automatically exchange it into HKD.

Opening a bank account can be time-consuming, taking a number of weeks for a business or corporate bank account. Opening a personal bank account is less time-consuming and may be completed in one visit to a bank branch. Non-Hong Kong residents can open bank accounts, but must visit a Hong Kong bank branch to do so.

For more information, access the full Hong Kong Country Starter Pack

5.7 Repatriating profits

As Hong Kong has no foreign exchange controls, money can be easily moved in and out of the territory. There are no limits on how much money can be moved in and out of Hong Kong. However, banks may impose limits on how much money can be transferred out of accounts in one transaction or in a 24-hour period, so check with your bank.

For more information, access the full Hong Kong Country Starter Pack

6. Visiting Hong Kong

• 6.1 Visas
• 6.2 Currency
• 6.3 Air travel and airports
• 6.4 Ground transport
• 6.5 Hotels and dining
• 6.6 Health and welfare

6.1 Visas

To visit Hong Kong your passport must be valid for at least six months after your planned departure date from the territory and have at least one empty page. Australians enjoy visa-free entry for stays less than 90 days. This covers entry for both general business and tourism purposes. General business activities are defined by the Hong Kong Government as negotiating contracts, business meetings, attending conferences or trade shows. You are not able to undertake paid employment.

If you set up operations in Hong Kong you may be eligible for 'Entry for Investment', also referred to as an entrepreneur or business investment visa. This allows you to live in Hong Kong for an initial period of 24 months which can be renewed. On this type of visa you can establish a business and earn money in Hong Kong.

You will need a separate visa to visit mainland China from Hong Kong. Australians can visit Macau without a visa for tourism purposes.

For more information, access the full Hong Kong Country Starter Pack

6.2 Currency

The HKD is a stable currency as it is pegged to the United States dollar at the rate of USD 1 to HKD 7.75. The HKD is also generally accepted in Macau.

ATMs are plentiful in Hong Kong with almost all accepting foreign debit/credit cards, but fees may apply. All ATMs have an English option.

For more information, access the full Hong Kong Country Starter Pack

6.3 Air travel and airports

Airport

Hong Kong International Airport is a major international hub with direct flights to more than 160 destinations, including 45 in mainland China. All flights in and out of Hong Kong are international, so there is no domestic airport. The airport is located on Lantau Island, around 30 kilometres from Kowloon and Central on Hong Kong Island.

The Airport Express is a high-speed train service that runs between Hong Kong International Airport and Kowloon and Hong Kong Island. It takes around 20 minutes to get to Kowloon Station and 25 minutes to Hong Kong Station, which is in Central on Hong Kong Island.

Taxis are readily available from the airport. A taxi from the airport to Kowloon should cost around HKD 240, while taking one to Central costs about HKD 295.

Voltage and plugs

Hong Kong operates on 220 volts AC and uses G plugs, the same as in the United Kingdom. Australian-bought electrical appliances will need adapters.

For more information, access the full Hong Kong Country Starter Pack

6.4 Ground transport

Taxis

Taxis are cheap, plentiful and reliable in Hong Kong, but getting stuck in Hong Kong's clogged traffic is a potential drawback. Allow plenty of time to get to your destination.

Red taxis operate throughout most of Hong Kong, with the exception of Tung Chung Road on Lantau Island and the entire south side of Lantau Island. Green taxis service the New Territories and blue taxis are confined to Lantau Island. All taxis are metered and most taxi drivers speak English to some degree.

Rail transport

The Mass Transit Railway Corporation (MTR) runs Hong Kong's extensive and efficient rail transport network. The network covers most of the Hong Kong region and extends to the Chinese border, connecting with Shenzhen in Guangdong Province. Note that you will need a visa for China if you travel to the border.

MTR single-use adult day passes are HKD 55 per day, but it is generally best to buy an Octopus card. The Octopus card is Hong Kong's electronic transport ticket. Cards can be loaded with money and can also be used on buses, ferries, in convenience stores, and to pay for some taxis.

Trams

Hong Kong's iconic double-decker trams are a great way to get around Hong Kong Island. They travel east to west, running from Kennedy in the west, through Central and Admiralty to Wan Chai in the east.

Ferries

Catching a ferry across Victoria Harbour is a scenic way to travel between Hong Kong Island and Kowloon. Ferries run from Tsim Sha Tsui in Kowloon to Central and Wan Chai on Hong Kong Island. Fares vary, with a typical adult fare being HKD 2.50 on a weekday. These ferry stations also host ferries to other islands in Hong Kong.

Buses

Buses cover almost all of Hong Kong, including areas not serviced by the MTR. Minibuses go to the more out-of-the-way locations.

Inter-city and High-Speed Rail Network (HSR):

Hong Kong is connected by rail to Shenzhen and Guangzhou in mainland China. Hong Kong has a border with mainland China and a visa may be necessary to visit these cities. Check with the Chinese embassy before travelling.

For more information, access the full Hong Kong Country Starter Pack

6.5 Hotels and dining

Staying in Hong Kong

Hong Kong has many hotels. With space at a premium, room rates vary and may be expensive. Nonetheless, as a compact and connected city, wherever you stay you will have access to various transport options. Most businesses and accommodation are located in Kowloon and on Hong Kong Island.

Dining

Hong Kong has a vibrant and diverse food culture, and is home to more than 12,000 restaurants. Options range from dai pai dong, small stalls selling cheap and quick food, to expensive Michelin-starred restaurants.

Tipping

Tipping in Hong Kong is usually reserved for exceptional service. Some restaurants, however, include a service charge of 10 per cent in the bill. Taxi drivers do not expect a tip.

For more information, access the full Hong Kong Country Starter Pack

6.6 Health and welfare

Health insurance

You should take out comprehensive travel insurance that will cover any medical costs, including medical evacuation.

Severe weather

Typhoon season is between May and October in Hong Kong. The territory has a well-developed severe weather alert and monitoring system. Should a threatening typhoon be on its way, warnings will be broadcast across Hong Kong, including on signs or screens at MTR stations.

Health risks

The levels of air pollution in Hong Kong can be severe and may aggravate bronchial, sinus or asthma conditions. The Hong Kong Environmental Protection Department provides up-to-date air-quality reports and advice on its website.

Outbreaks of mosquito-borne illnesses, including dengue fever, occur from time to time so try to avoid being bitten.

Water-borne, food-borne and other infectious diseases (including tuberculosis, hepatitis, scarlet fever and hand, foot and mouth disease) occur sporadically so it is sensible to avoid raw and undercooked food.

Hand, foot and mouth disease (HFMD) is common in Hong Kong, and there are occasional serious outbreaks. In Asia, outbreaks of HFMD usually start in March/April and peak in May.

Human cases of avian influenza A(H7N9) have been reported in Hong Kong involving people who had recently visited mainland China. There is currently no evidence of sustained human-to-human transmission associated with this virus.

Middle East Respiratory Syndrome, or MERS-CoV, is a new virus being monitored by Hong Kong's Department of Health.

Hospitals and medical services

Hong Kong has a wide range of medical services and facilities that are of a high, international standard. Non-Hong Kong residents are not entitled to free or subsidised healthcare and costs can be considerably higher than in Australia, which is an excellent reason to have good travel insurance. Private hospitals may require confirmation of insurance cover, guarantee of payment or an up-front deposit before admitting patients.

Penalties for crimes and drug possession

Penalties for possession of illegal drugs, including 'soft drugs', involve heavy fines and imprisonment. Laws prohibiting demonstrations without government approval are strictly enforced. If arrested, you could be imprisoned or deported. You should also avoid taking photographs of military installations.

For more information, access the full Hong Kong Country Starter Pack

7. Engage with us

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Resources and contacts

Australian Consulate-General in Hong Kong (People's Republic of China)

http://china.embassy.gov.au/hkng/home.html

Australian Chamber of Commerce Hong Kong and Macau (AusCham Hong Kong and Macau)

http://www.austcham.com.hk/

Customs and Excise Department, Government of the Hong Kong SAR

http://www.customs.gov.hk/

Hong Kong-Australia Business Association

http://hkaba.com.au/

Hong Kong Economic and Trade Office, Sydney

http://www.hketosydney.gov.hk/

Inland Revenue Department, Government of the Hong Kong SAR

http://www.ird.gov.hk/

InvestHK, Government of the Hong Kong SAR

http://www.investhk.gov.hk/index.html

Useful websites

Discover Hong Kong

http://www.discoverhongkong.com/eng/index.jsp

Export Council of Australia

http://www.export.org.au/eca/homepage

Export Finance and Insurance Corporation

http://www.efic.gov.au

Hong Kong Trade Development Council

http://www.hktdc.com

Contact us

Get in touch to learn more about our open programs, online training and events, or to access further research, insights and information products.

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