Perhaps surprisingly, Hong Kong has benefitted from the ongoing ambiguity surrounding long-term relations between the US and China. While Chinese companies had typically favoured listing on the Nasdaq in the US, strained China/US relations and uncertainty over US investor regulations has meant that listing in the US is no longer as attractive as it once was.
US President Joe Biden is expected to continue a hard stance against China and sanctions against Chinese companies could well continue. The result is that many Chinese companies are looking to list closer to home, and Hong Kong has emerged as a new front-runner for IPOs.
Although there were fewer listings on the Hong Kong stock exchange in 2020 than in 2019, a recent Deloitte report noted that 2020 saw a 26% YoY rise in IPO proceeds, which came in at just under HKD 400 billion. 2021 may well see the trend continue, bringing new business to Hong Kong.
Why set up operations in Hong Kong?
Hong Kong as the leading international finance, trade and logistics hub in the Asia-Pacific region. Hong Kong remains an attractive jurisdiction and is still considered a steppingstone between international markets and China.
While China’s economy grows, the world’s largest free trade agreement “Regional Comprehensive Economic Partnership (RCEP)” will come into effect as early as the second half of 2021. Companies producing in RECEP members countries set to benefit from the lower tariffs, simplified rules and procedures, and better market access. With China as a key member of the agreement, Hong Kong could reap substantial benefit from deeper economic integration under RCEP and play a significant role as a hub connecting the ASEAN region.
While some businesses may set up operations in China, for others. Hong Kong provides an ideal location to do business as a kind of ‘half-way point’ between China and international markets.
Establishing a presence in Hong Kong and working with a trade or treasury services partner like ZEDRA can be an ideal way to ensure clients don’t incur excessive overheads when the global markets are still unpredictable as a result of the COVID-19 pandemic.
‘We handle local regulatory requirements, reporting, compliance, payroll or HR administration on behalf of our clients. Setting up operations in a new location can be challenging at the best of times. Working with an expert provider like ZEDRA who has local knowledge and expertise helps streamline working in a new jurisdiction. We take away a lot of the stress of setting up operations in a new location. Practically, we work with our clients to identify how we can help them, and our clients can cherry-pick the services they require, rather than opting for set packages that aren’t personalised. This approach is highly appreciated by our clients,’ says Fiona Chan, Executive Director, ZEDRA Hong Kong.
By choosing to outsource their operations, ZEDRA’s clients are potentially able to streamline their operations and create cost efficiencies compared to setting up their own office.
‘Our clients want to focus almost exclusively on their expansions, benefitting from their new location, the strategic oversight of their business, analysing cash flow and maintaining supply chains. Working with an outsourcing partner like ZEDRA, the business can do this, while we handle entity management, compliance, payroll, reporting and the time-consuming tasks that come with setting up and managing an entity,’ explains Fiona.
Cash flow and credit protection are more important than ever for businesses – especially small and medium-sized companies that have fought hard to survive over the past 12 months. Through ZEDRA’s network of banks and financial institutions, we help our clients to source and establish trade credit insurance and financing for their business transactions. They can then leverage the risk of running their business and improve cash flow for further business expansion.
Our trade and treasury services in Hong Kong
ZEDRA provides several services in relation to trade and treasury operations, which includes the establishment of trading companies and general advice on the setup of trading operations and processes. We also offer order processing, logistics management, trade documentation, transaction monitoring, treasury services, payroll services, trade financing advisory services, factory inspection, and audit services.
‘Hong Kong remains a jurisdiction that is ideally situated as a steppingstone in and out of China. RCEP will have a far-reaching impact on the Asia-Pacific Region. We expect to see more interest in Hong Kong structures for grasping the opportunities arise with the new agreement and the continuous grow economy in China.” adds Fiona in conclusion.