Hong Kong has once again one-upped arch rival Singapore in Forbes’ Best Countries for Business (BCB) 2011. This time, the city made it to the third place while its Southeast Asian nemesis came in the sixth place. The BCB survey rates 134 countries based on 11 factors including freedom (trade, personal and monetary), property rights, innovation, technology, red tape, investor protection, corruption, tax burden and stock market performance. Forbes referred to research conducted by Transparency International, Heritage Foundation, the World Bank and World Economic Forum, among others, to arrive at the rankings.

So how did Hong Kong manage to rank so positively in this survey?

1) Low tax burden
According to the survey, Hong Kong has the second lowest tax burden in the world. Singapore comes a close third. Interestingly, the top two countries in the survey do not rank as well as Hong Kong or Singapore when it comes to tax burden. Canada, which topped the overall BCB list, was ranked #9 for tax burden while New Zealand, at number two, ranked #21 for tax burden. Countries that are not doing well in the current economy coincidentally were ranked as economies with higher tax burdens. The US ranked #45 in the BCB list while France, Austria and Japan ranked #40, #72 and #79 respectively.

Analysis by GuideMeHongKong.com shows that economies with lower tax burden tend to fare better than those with higher tax burden. Hong Kong taxation is one of the lowest in the world. As discussed in our blog on Hong Kong economic freedom, many entrepreneurs, investors and professionals are more inclined to operate in economies like Hong Kong and Singapore because of its low corporate and income tax requirements. The absence of dividends and capital gains taxation are also a boon to shareholders.

2) High monetary and trade freedom, low red tape and corruption
In terms of monetary freedom, Hong Kong was ranked #3. Singapore trailed close behind at #4. Singapore trumped Hong Kong for the least corruption and red tape though, scoring #1 and #4 in each category respectively. Hong Kong, on the other hand, was ranked #13 for corruption and #6 for red tape. Both Singapore and Hong Kong shared the #1 ranking for trade freedom. Since 1989, Hong Kong’s has consistently been strong, averaging 3.8% in GDP growth. Following the financial crisis of 2008, Hong Kong’s GDP took a dip in 2009 before rebounding by 6.8% in 2010.

3) High investor protection
Hong Kong has been ranked #3 on the BCB list for investor protection. This is another area where Singapore supercedes the city (#2). According to the World Bank Doing Business Report, three elements account for the investor protection ranking i.e. the extent of disclosure, the extent of director liability and ease of shareholder suits. Both economies ratcheted the same scores on extent of disclosure and ease of shareholder suits. However, Singapore’s higher ranking is attributed to its higher score on director liability index. Nonetheless, both economies have some of the best procedures in place to safeguard investor interests.

Recently, Chief Executive Donald Tsang has announced a a commitment to economic growth via a $1 billion funding that will go into developing Hong Kong into a creative hub. The funding aims to help companies apply design to move up the value chain and become memorable brands. This news comes on the back of a $30 million  annual funding to the Hong Kong arts scene earlier this year. Plans are also on the way to establish 2012 as Hong Kong Design Year and a Hong Kong Economic, Trade & Cultural Office in Taiwan as well as to allocate more resources to Hong Kong Design Center.

So what does this mean for businesses or anyone considering Hong Kong incorporation? The sluggish economy means that slower growth is inevitably in the cards for Asia as well. However, this prospect should not deter entrepreneurs or investors who would like to make Hong Kong their base. Asia is still the place to be and while growth will be modest, the bottom line is that the prospect is still possible here. As the mouth into a vast Chinese market and as an active ally to economies in the region, Hong Kong will continue to attract investors and talent with regional opportunities.

If you are interested in doing business in Hong Kong, learn more about our Hong Kong company registration services.

If you still aren’t sure about whether to incorporate in Singapore or Hong Kong, learn more in our Choosing Between Singapore and Hong Kong report.

The Heritage Foundation has also ranked Hong Kong as the world’s freest economy for 17 years running. Its Index of Economic Freedom, which rates 183 countries covers across ten
freedoms ranging from property rights to entrepreneurship. Hong Kong scored the highest in business, trade, fiscal, investment and financial freedom as well as property rights.

Analysis from GuideMeHongKong.com shows that Hong Kong has managed to secure top ranking in both economic freedom surveys because it has consistently encouraged an open economy through low taxes, an effective regulatory environment, low barriers to trade and a level playing field for business.

First of all, Hong Kong tax rates are one of the lowest in the world. Hong Kong has a progressive income tax system which starts at 2% and is capped at 17%. Businesses on the other hand are taxed 16.5%. Hong Kong does not impose capital gains or dividends tax. Hence, its tax system is very similar to the Singapore tax system, which is known to be very competitive as well. Additionally, doing business in Hong Kong is easy because Hong Kong employment visa schemes permit qualified entrepreneurs, professionals and investors to work and live in Hong Kong.

Hong Kong also implements regulatory and legal policies that have helped the city tide the effects of the the 2008 global financial crisis without closing itself off. As discussed in our blog on Hong Kong investment, Hong Kong’s low tolerance policy on corruption and high-risk banking has continually drawn investors and high net worth individuals. Its treatment of foreign banks as domestic entities have also strengthened its standing as an international financial hub. Incidentally, there has been speculation that HSBC may shift its headquarters to Hong Kong in a bid to sidestep recently-announced UK banking reforms. If HSBC were to relocate its headquarters to Hong Kong (a move welcomed by Chief Executive Donald Tsang), it could potentially save $600 million per annum in banking levies. The bank however commented that it has a consistent history of reviewing its domicile tri-annually since 1992.

In a recent “Think Asia, Think Hong Kong” symposium organized by HKTDC (Hong Kong’s Trade Development Council), Lord Green, British Minister of State for Trade and Investment and former Chairman of HSBC said, “There used to be the saying, ‘Go West, young man.’ Now it is ‘Go East, young person.’” He also urged British companies to look at opportunities abroad, as well as recognize the opportunities abound in Hong Kong.

Further analysis by GuideMeHongKong.com shows that as Asian economies remain strong in a period of global uncertainty, Asia, by way of Hong Kong presents entrepreneurs the hope of prosperity and tangible access to a vast and growing market. Many Hong Kong incorporated companies are aware of this as well. At the event, Douglas Flint, Group Chairman of HSBC Holdings said that Hong Kong is vital to HSBC’s future growth. According to a report by the Guardian, HSBC earns more than half of its earnings in Asia. Additionally, more than 60 business leaders at the event highlighted Hong Kong’s role as Asia’s services center in the consulting, financing, logistics, technology, accountancy, design, legal and infrastructure development sectors.

The resounding support from Hong Kong’s business community as well as its long-standing reputation as the most free economy indicates that more entrepreneurs, professionals and investors will consider Hong Kong as a place to do business.

It is not surprising that the growth in Hong Kong company incorporation has remained bullish this year in spite of the slew of “bad” news surrounding the city’s political and business climate in recent months. Although Hong Kong currently faces currency depreciation and fluctuations in the property market, it has consistently updated its policies to maintain its reputation as a business-friendly environment for enterprises, local and foreign alike.

For example, the Hong Kong government has recently announced its plans to update the Competition Bill. This move will ensure that the playing field for Hong Kong SMEs is levelled and the abuse of market power by larger companies is eradicated. This effort is therefore a testament to Hong Kong’s commitment to boost its economic competitiveness by way of addressing the needs of Hong Kong’s business community. The Hong Kong government has also announced its move to review the Companies Bill which was introduced into the HKLegCo (Legislative Council) early this year. The updated Bill, which will be presented during the 2011-2012 legislation session, is set to leverage Hong Kong’s already laudable position as a bustling business and financial center.

Additionally, in March this year, HKCR has introduced a new e-Registry platform to ease and speed up the process of company registration. The e-Registry demonstrates a “one face to the customer” approach, enabling businesses to receive both the Certificate of Incorporation and Business Registration Certificate within 24 hours. By the end of June, 5,576 companies have been able to achieve Hong Kong company incorporation via the e-Registry platform.

On top of adopting game-changing business policies, Hong Kong offers attractive incentives for enterprises to set up shop in the city.  Hong Kong offers an irresistible flat corporate tax rate of 16.5% on assessable profits. It also offers a liberal immigration policy that is aimed to attract highly-talented professionals and investors to relocate to the city. In fact, these two factors have been crucial in placing Hong Kong as the second most innovative economy in Asia in INSEAD’s recently published ‘Global Innovation Index 2011’.

Last but not least, Hong Kong’s connectedness to major economies worldwide have inspired business confidence in entrepreneurs who wish to set up a Hong Kong subsidiary or
Hong Kong branch office. Hong Kong has recently signed Free Trade Agreement (FTAs) with European Free Trade Association (EFTA) states – Iceland, Liechtenstein, Norway and Switzerland. The agreement, which will be in effect in mid-2012, will allow Hong Kong-incorporated enterprises to tap EFTA markets and conduct business without having to face discriminatory trade barriers. Hong Kong companies also have the advantage to access mainland China’s vast markets due to the Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA).

Altogether, Hong Kong’s ongoing prosperity in spite of varying odds is a product of a transparent and resilient jurisdiction that continually keeps itself abreast with the needs of its business community. Its zero-tolerance policy on corruption and its intimate partnerships with major economies are added anchors that make it a popular business destination and secure its imminent economic prosperity.

Speaking at an Economic Club luncheon in Toronto two days ago, Mr John Tsang, Hong Kong’s Financial Secretary, highlighted how Canadian companies could benefit from Hong Kong’s proximity and preferential access to mainland China under the Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA) should they set up in Hong Kong. Signed in June 2003, the CEPA is a free trade agreement between mainland China and Hong Kong. It aims to facilitate investment and trade by reducing or doing away with tariffs on all trade as well as discriminatory barriers on trade in services between both parties. This in turn means that Canadian enterprises that choose Hong Kong incorporation are set to enjoy these benefits along with preferential access to 44 services sectors in mainland China.

On top of China’s potential growth, there is additional reason for Canadian businesses to have faith in Hong Kong’s long term prosperity. The city has been named the world’s freest economy by the Heritage Foundation and proved to be the second largest source and recipient of foreign direct investments in Asia. Last year, its economy grew by 7% and in the first quarter of this year, the economy grew by 7.2% vis-a-vis 2010. The city anticipates a growth of 5 – 6% this year.

Additionally, Hong Kong offers Canadian companies the opportunity to be publicly-listed. The desired status comes with irresistible perks such as the ability to promote one’s company across an extensive market as well as amplified visibility to wealthy investors from mainland China and regional markets in Asia. For example, SouthGobi Energy Resources, a subsidiary of Canada’s Ivanhoe Mines, raised approximately CAD$423 million through its secondary listing in Hong Kong last year.

Currently, there are over 100 Canadian firms from the financial, IT, professional services, retail and hospitality, transportation and education sectors in Hong Kong. Some of the major Canadian companies that have set up their regional offices in the city include Air Canada, Bank of Montreal, Manulife International, Four Seasons Hotel and University of Western Ontario. There are also approximately 300,000 Canadians residing in Hong Kong.

According to Foreign Affairs and International Trade Canada, Canadian direct investment in Hong Kong amounted to over CAD$6 billion in 2008. The amount of investment persisted in 2010, indicating that the global city which has no limits on investments, received more than double the amount of investments than that made in Japan and 72% higher than its neighbour, mainland China. Additionally, between 2009 and 2010, bilateral trade between Hong Kong and Canada grew by approximately 13.5% and chalked CAD$4.4 billion in 2010. Hong Kong also contributed to over 10% of total trade between Canada and mainland China worth a sweet CAD$3.7 billion. Groups such as the Hong Kong-Canada Business Association (HKCBA), Hong Kong Economic and Trade Office Canada (HKETO) and the Canadian Chamber of Commerce in Hong Kong are geared to enable bilateral trade between the two economies.

In spite of recent news about the city, Hong Kong remains as an attractive destination for business incorporation. The city offers a tax system  that businesses cannot turn away from. It imposes no VAT, no sales or capital gains tax and profits are taxable at 16.5% only. The city is also well-connected with extensive road, rail and sea links, making it easy for entrepreneurs to run a business. Additionally, the city is backed by a transparent and efficient jurisdiction that does not tolerate corruption or abuse of market power. Recently, the government has announced its plans to review the Competition Bill and in turn, level the playing field for small to medium enterprises in Hong Kong. For the long term, Hong Kong’s inclusion in China’s 12th five-year plan is encouraging as it underscores the central Chinese government’s overarching commitment to contributing to Hong Kong’s prosperity.

On the back of the recently-signed FTA with the EFTA states, Hong Kong is making tangible efforts to invest in its economic future. Canadian businesses are well-positioned to tap  Hong Kong’s current and impending prosperity as well as China’s growth.

The two innovation output factors are:
1) Scientific output (knowledge creation, impact and diffusion), and
2) Creative output (creative intangibles as well as goods and services).

Hong Kong scored high points for having flexible employment regulations in place. In order to attract and retain top talent in the city, Hong Kong offers three unique visa schemes for professionals and investors – the Admission Scheme for Mainland Talents and Professionals (ASMTP), the Quality Migrant Admission Scheme (QMAS) and the Capital Investment Entrant Scheme (CIES). Between February 2008 and December 2010, the HK Immigration Department reported that it granted 1,486 applicants the QMAS approval. The applicants contribute to Hong Kong’s thriving sectors such as commerce, IT and telecommunications, arts, culture, broadcasting and entertainment sectors.

Hong Kong’s open door policy also gives way to more investors and enterprises to operate in the city. This then contributes to a high net inflow of foreign direct investments (FDI), stock market capitalization as well as high volume of and increased value in goods and services trade. These factors are salient in boosting Hong Kong’s innovation input index. As discussed in the previous blog, Hong Kong has received an inflow of HK$535 billion in FDI last year, up 32% from 2009. Within the last decade, the value of its goods and services trade has grown by 104% and its stock market capitalization has multiplied by more than four fold. Additionally, Hong Kong’s air and port cargo have increased by 153% and 36% respectively.

Other factors that have upped Hong Kong’s innovation input are its sophisticated infocommunication technology and flat corporate tax rate of 16.5% on assessable profits.  Combined, these two factors are potent in contributing to the inception of a high volume of businesses in Hong Kong. In the first half of this year, Invest Hong Kong had reported that record-high of 198 companies had opted for Hong Kong incorporation, many of which are in IT and telecommunications as well as broadcasting and entertainment sectors.

Last but not least, Hong Kong has made it as the fourth most innovative economy owing to its creative outputs, particularly in its film industry and exports. As a global city, Hong Kong is home to a thriving fashion, arts and film industry. According to data from the Hong Kong Film Development Fund, 15 projects of various genres ranging from animation to kung-fu have been approved with a total funding of approximately HK$42.75 million since 2007. The Hong Kong Trade Development Council has also detailed that the city has played host to many international events that showcase the city’s fashion, literary, culinary and environmental strengths.

As mentioned by Ben Verwaayen, CEO of Alcatel-Lucent in the foreword of the Innovation report, the world needs open innovation and innovation is an important element in the success of societies. Hong Kong’s high position in this study is testament to its ability to create an environment that is conducive for prosperity and innovation and develop its niche creative industries.

Interested in setting up a Hong Kong subsidiary? Learn more about our Hong Kong company incorporation services.

However, as discussed in the previous blog, it cannot be ignored that Hong Kong has been receiving-less-than-glowing reviews in the press recently. Most recently, Bloomberg reported that Mr Tsang’s popularity has suffered a blow as he struggles to curtail the effects of skyrocketing property prices and narrow the wealth gap in the city. Nonetheless, data from Hong Kong’s Census and Statistics Department shows another side of the story. Last year, the city has received an inflow of HK$535 billion in FDI, up 32% from 2009. Within the last decade, Hong Kong’s air and port cargo have increased by 153% and 36% respectively. The value of its goods and services trade has grown by 104% and its stock market capitalization has multiplied by more than four times.

The growth followed into the first half of this year. Invest Hong Kong reported that as many as 198 companies from Mainland China and worldwide opted for Hong Kong incorporation to date. This volume represents a record high for the city. Analysis from GuideMeHongKong.com shows that a bulk of the investments come from Asia Pacific (44%), followed by Europe (33%) and North America (19%), highlighting the city’s strong trade connectivity.

Altogether, this growth could not have been possible without enabling factors such as a transparent legal framework, liberal immigration policies, low corruption, low taxation and sophisticated infrastructure. Hong Kong’s jurisdiction has given investors the confidence to channel their assets into the city. Hong Kong’s zero tolerance policy towards corruption and low taxation have also contributed to the city’s 11th position in the World Economic Forum’s Global Competitiveness Index 2010 – 2011.

Hong Kong is home to the highest density of high net worth individuals in Asia who invest in the city’s luxury market. As a result, widening wealth gaps is a reality for open and global cities such as Hong Kong and Singapore. However, Hong Kong’s issues may not be chronic as the city has recently inked its inaugural Free Trade Agreement (FTA) with European Free Trade Association (EFTA) states – Iceland, Liechtenstein, Norway and Switzerland. The agreement, which will come into force in mid-2012, will bolster Hong Kong’s economy by creating more business opportunities catalysed by increased investment flows and trade.

Ms. Jacqueline Low, the Director of Janus Corporate Solutions – the parent of the GuideMeHongKong.com site opined that the FTA will give Hong Kong’s economy a considerable leverage as traders and investors from both parties will get access to each others’ markets without having to face legal or discriminatory barriers. The agreement will also be an added incentive to investors and entrepreneurs considering Hong Kong company formation.

On the surface, it appears that Hong Kong is on a downward spiral. However, the influx of HNWIs and investors are pushing the economy forward and the trickle down effects will be felt in years to come. At its core, Hong Kong’s legislative framework remains business-friendly. Therefore, there is little reason to shun away from Hong Kong as a business destination.

If you are interested in doing business in Hong Kong, learn more about our Hong Kong company registration services.

According to Capgemini and Merrill Lynch Global Wealth Management’s 2011 World Wealth Report, Hong Kong has led the boom in the number of millionaires in Asia Pacific (3.3 million), superceding that of Europe (3.1 million), which has long been thought of as a playground for the rich. Asia Pacific’s current standing as the top region behind North America (3.4 million) was in fact catalysed by a 33.3% year-on-year growth in the volume of high-net worth individuals (HNWIs) in Hong Kong, from 76,000 in 2009 to 101,300 HNWIs in 2010. Further analysis from the report also showed that the city’s resilient economy following the global recession as well as gains in the equities and real estate markets have contributed to this phenomenon.

As a home to many HNWIs, Hong Kong incorporation is proving to be a natural choice for luxury brands catering to these individuals. Recently, global luxury brands such as Prada and Samsonite have made their bullish debut on the Hang Seng in spite of high fluctuation risks indicating their interest to tap into the goldmine that is believed to lie in the China market. High-end brands do not sway in the face of fluctuations in the stock market and do not see them as impediments to growth. Instead, having a presence in Hong Kong means being at a vantage position to tap mainland China’s consumer market as well as the surrounding markets that are churning more affluent consumers. Vice versa, Hong Kong has seen an influx of wealthy mainland cousins investing and setting up homes in the city.

Data from the 2011 World Wealth Report shows that the bullish attitude of many luxury brands have contributed to their success and growth in Hong Kong. Termed as investments of passion, the report outlines that the super rich in Hong Kong have spent their money on high worth collectibles such as jewellery, gems, watches, luxury vehicles and fine wines last year.

Christie’s International, an established company that offers art auctions and private sales to global clients, announced that it has seen an exponential growth in buyer participation from Asian markets last year, led primarily by China and Hong Kong. It also set a record of HK$3.65 billion in sales of high value items such as historical artifacts of Chinese origin and Patek Philippe watches. Sotheby’s,  the world’s fourth oldest auction house, had also reported a whopping 268% growth in wine sales from its Hong Kong auction.

Big spenders in Hong Kong were also big on luxury vehicles in 2010. According to the report, Mercedes-Benz had announced a 112% increase in sales in China inclusive of Hong Kong last year. Ferrari has also reported a healthy sales growth of 50% in 2009 from Greater China  (including Hong Kong and Taiwan), making the region one of its top five international markets and 2010 its best sales year ever.

Altogether, the growth of the luxury market in Hong Kong signal that these brands and HNWIs will remain comfortably lodged in the city. There is also little reason for them to move. Ranked as the world’s most competitive economy by IMD, Hong Kong has demonstrated economic stability and financial prosperity that gives the super rich little incentive to move away. Its transparent and efficient legal system coupled with its preferential access to the China market under the China-Hong Kong FTA are also high points to the super rich entrepreneurs and investors in Hong Kong.

Interested in setting up a Hong Kong subsidiary? Learn more about our Hong Kong company incorporation services.

The Immigration Department of Hong Kong (HKID) offers three unique immigration schemes to facilitate the entry of persons into Hong Kong who wish to add value to the city and in turn boost its competitiveness in the global market. They are the Admission Scheme for Mainland Talents and Professionals (ASMTP), the Quality Migrant Admission Scheme (QMAS) and the Capital Investment Entrant Scheme (CIES).

The ASMTP, which was implemented in July 2003, is exclusive to professionals from mainland China and was designed to attract skilled labour to Hong Kong. As this scheme allows for intra-company movement, it is highly-attractive to professionals so much so that by the end of 2010, the HKID received 47,471 ASMTP applications. Of these applications, the HKID approved 40,933, representing an 86% approval rate. Data from HKID also showed that the number of approved applications increased by 14.3% between 2009 and 2010. This is a clear indication that Hong Kong values skilled talent from mainland China and that it remains a business-friendly city with prospering education, arts and culture and commerce sectors.

Hong Kong also offers the Quality Migrant Admission Scheme (QMAS). Under the QMAS, highly-skilled people from both mainland China and globally may apply to migrate to Hong Kong without securing an offer of employment. In January 2008, the HKID has increased the age ceiling and relaxed the general points test marking scheme to allow more young professionals with significant achievements to qualify under the QMAS. Between February 2008 and December 2010, the HKID reported that the average monthly QMAS applications have increased to 105 (from the initial 67 before the relaxation came into effect) and resulted in 1,486 approved QMAS applications. 25.6% of the applicants approved were aged 25 – 29 while 48.6% were aged 30 – 39. This data proves that the adjustments have drawn more quality migrants who contribute to Hong Kong’s commerce, IT and telecommunications, arts, culture, broadcasting and entertainment sectors.

More recently, the HKID has sped up the approval process of 270 one-year work visas for high-level professionals in the finance sector seeking to move away from Japan since the March 11 tsunami and earthquake struck. The process which would typically take 6 – 8 weeks has been reduced to 2 days to attract and retain professionals with high net worth for the long term. This indicates that Hong Kong is flexible enough to adjust its processes to ensure that it retains the right talent for its commercial sector.

The Capital Investment Entrant Scheme (CIES) was implemented in October 2003 to allow capital investment entrants, i.e. persons who make capital investments, to reside in Hong Kong without establishing, joining or running a business. It may seem logical to conclude that when the CIES investment threshold was raised from HK$6.5 million to HK$10 million in October 2010, investors would be turned off. On the contrary, Hong Kong received 16,600 entrant applications. Out of these, 8,924 applicants had already made the requisite investments, which totalled to approximately HK$63.31 billion and were granted approval to reside in the territory.

The above-mentioned data only points us away from the perception that Hong Kong’s migration policies are impediments to business. Today, countries around the world are waking up to the fact that highly-talented professionals and entrepreneurial investors are mobile. A country’s economic prosperity is inextricably linked to its immigration policy; a case in point being Singapore. Singapore has long been known as Hong Kong’s key competitor in the region and has been steadily attracting investments, foreign capital and talented professionals. One of the key factors driving the economy forward is its open immigration policy. There is no denying that the open-door policy is a red hot political issue attracting criticism from the local community, but the reality is that it has worked to Singapore’s advantage. Hong Kong’s flexibility in adjusting its schemes only prove that maintaining economic competitiveness and robustness are its key priorities.

The Asian economy is flourishing and most investors and entrepreneurs are looking eastwards. The good news is that Hong Kong’s visa schemes such as the Hong Kong employment visa and Hong Kong investment visa are welcoming foreign professional talent and entrepreneurs.

Thinking about doing business in Hong Kong? Learn more about Hong Kong Incorporation.

Hong Kong was ranked in the top spot for its business and government efficiency while it was accorded the fourth position for economic performance. Hong Kong’s competitiveness is most evident in its business climate and national environment. Buoyed by strong economic and financial fundamentals, the Hong Kong economy exhibited a high degree of resilience to the economic typhoon that hit that world during 2008-2009. Hong Kong spent close to $11.2 billion, i.e. 5.2% of its GDP on economic stimulus measures during the economic downturn. It also lent a helping hand to small and medium enterprises and provided support to the banking sector. It outperformed economic forecasts for 2010 and clocked a GDP growth rate of 7%. Furthermore, the unemployment rate of 3.4% is now at the pre-crisis levels and the labor market outlook remains positive.

The economy maintains a high degree of business efficiency by enforcing an efficient regulatory framework. Factors such as ease of Hong Kong company formation, low taxes, availability of talent, and excellent infrastructure not only ensures but also continually encourages entrepreneurial activity. There have been as many as 47,663 company incorporations from January to April 2011 alone and the numbers are set to increase. Hong Kong also strongly encourages foreign investment by imposing no restrictions on foreign ownership of Hong Kong companies and by treating foreign and domestic investors equally. Moreover, there are no foreign exchange controls and nor is foreign sourced income taxed in Hong Kong. Hong Kong was the fourth largest recipient of FDI in 2009 according to the ‘2010 World Investment Report’.

With an efficient and transparent bureaucracy in place, Hong Kong tops the charts as far as government efficiency is concerned. Corruption is perceived as minimal and businesses are free from red-tape and other bureaucratic hurdles. According to IMD Professor Stéphane Garelli, Director of IMD’s World Competitiveness Center, “In a new world of ‘state capitalism’, government efficiency will become a key determinant to competitiveness.”

Commenting on Hong Kong’s top ranking, Suzanne Rosselet, deputy director of the IMD World Competitiveness Centre, said,

“Well, Hong Kong has always had a very strong performance in competitiveness ranking, in the top ten for several years. And slowly, but surely, working its way up to the very, very top. It has very good performance across all of the categories of competitiveness. And we’re really looking at twenty very small categories of competitiveness that are spread across four major factors. Hong Kong …has a very good balance between the effectiveness of its environment, the regulatory environment or the tax legislation or environmental concerns is not hindering the ability of companies to compete. And strikingly, we did a much bigger gap for the United States, a gap of I believe, nine places. So we have the business sector of the United States was outperforming the efficiency of its government sector. But here in Hong Kong, we have a very nice balance between the two.”

Hong Kong’s position as the world’s most competitive economy is a feather in its cap and serves to reinforce its dominance as a leading global business and commercial hub.

Interested in setting up a Hong Kong subsidiary? Learn more about our Hong Kong company incorporation services.