LCQ22: Measures to attract companies located outside Hong Kong to establish operations in Hong Kong
Following is a question by the Hon Jimmy Ng and a written reply by the Secretary for Commerce and Economic Development, Mr Edward Yau, in the Legislative Council today (November 15):
Some people of the commercial sector have relayed to me that the rapid economic development and the ever-increasing competitiveness of the cities in the Asia-Pacific Region have posed challenges to Hong Kong's position as a financial hub. According to the Reports on Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong released by the Census and Statistics Department, the number of the regional offices in Hong Kong representing their parent companies located outside Hong Kong has dropped from 2 516 in 2012 to 2 339 this year (a decrease of about 7 per cent). The percentage of those regional headquarters, regional offices and local offices in Hong Kong planning to expand business in the coming three years has dropped from 22 per cent in 2012 to 20 per cent this year. In this connection, will the Government inform this Council:
(1) whether the authorities have studied (i) the reasons why some companies located outside Hong Kong withdrew from Hong Kong and (ii) the improvement plans; if so, of the details; if not, the reasons for that;
(2) apart from the one-stop, free and customised support services offered through Invest Hong Kong to companies which intend to invest in Hong Kong, of the authorities' new measures to attract companies located outside Hong Kong to invest and establish operations in Hong Kong; and
(3) given that some cities or countries in the Asia-Pacific Region have introduced tax concession schemes (e.g. the "Pioneer Certificate Incentive" and "Development and Expansion Incentive" in Singapore) to encourage companies located outside such cities or countries to set up global or regional headquarters there, whether the authorities will consider offering similar tax concessions to attract companies located outside Hong Kong to set up regional headquarters and regional offices in Hong Kong; if so, of the details; if not, the reasons for that?
My reply to the three parts of the question is as follows:
(1) The Census and Statistics Department (C&SD), in collaboration with Invest Hong Kong (InvestHK), conducts an annual survey on the number of overseas and Mainland companies with business operations in Hong Kong. This survey, the response to which is voluntary in nature, gathers statistics on the profile of the regional headquarters (RHQs), regional offices (ROs) and local offices (LOs) in Hong Kong representing their parent companies located outside Hong Kong, as well as collects views on the attractiveness of Hong Kong as a location for setting up RHQs/ROs/LOs. In the 2017 survey, a total of 8 225 companies in Hong Kong with parent companies overseas and in the Mainland responded, including 1 413 RHQs, 2 339 ROs and 4 473 LOs. Compared with the same period last year, the total number of these companies increased by 239 (3.0 per cent). Except for a drop in ROs by 13 (0.6 per cent), the number of RHQs and LOs increased by 34 (2.5 per cent) and 218 (5.1 per cent) respectively.
Since 2012, the total number of companies in Hong Kong with parent companies overseas and in the Mainland has been on the rise, registering an increase of 975 over the past six years, that is 14.3 per cent. There was also an increase in the number of RHQs and LOs in 2017 as compared to last year. Therefore, there is no evidence indicating a general trend of overseas and Mainland companies retreating from Hong Kong. As regards the drop in ROs in 2017, it does not necessarily mean that all the companies involved have moved out of Hong Kong. There could be various reasons for the drop, including the ROs upgrading to RHQs, converting to LOs, not responding to the survey, etc.
Apart from attracting new companies to invest in Hong Kong (see the reply to part (2) below), InvestHK has been stepping up liaison with overseas and Mainland companies operating in Hong Kong to understand their needs and provide better aftercare support services to them, including keeping them abreast of the latest sector-specific information for doing business in Hong Kong, assisting them in publicity and marketing, and inviting them to attend thematic seminars and networking activities, etc. These will not only help the companies resolve possible problems in their operations in Hong Kong, but also facilitate expansion of their businesses here.
(2) InvestHK is strengthening its efforts to promote Hong Kong as a prime investment destination, and to encourage enterprises and investors to establish operations in Hong Kong by capitalising on the business opportunities available. Enterprises are also encouraged to leverage on Hong Kong's professional services, particularly by using Hong Kong as a centre for fund-raising, financing, bond issuance and wealth management. These will in turn establish Hong Kong as a two-way development base for "going global" and attracting foreign investment. InvestHK is also liaising closely with the relevant bureaux, departments and overseas and Mainland Economic and Trade Offices, to identify potential enterprises in specific sectors, including start-ups, and attract them to set up operations in Hong Kong. In addition, InvestHK will continue to step up its promotion efforts overseas and in the Mainland to underline Hong Kong's edge as an ideal investment destination for enterprises.
In addition, the Government is introducing sector-specific policy measures to attract more enterprises to Hong Kong. For example, to encourage enterprises to conduct more research and development (R&D) projects in Hong Kong, it was announced in the Policy Address last month that enhanced tax deduction for local R&D expenditure will be introduced. The first $ 2 million of qualified R&D expenditure will be eligible for a 300 per cent tax deduction, and a 200 per cent tax deduction will be provided for the remaining balance. The measure not only can boost the development of innovation and technology (I&T) in Hong Kong, but also can enhance the attractiveness of Hong Kong to overseas and Mainland I&T enterprises.
(3) The current-term Government attaches great importance to tax policies. The Chief Executive announced in the 2017 Policy Address that the Government will strive to implement the proposed two-tiered profits tax rates regime in 2018, under which the profits tax rate for the first $2 million of profits of enterprises will be lowered to 8.25 per cent, while profits above that amount will continue to be subject to the tax rate of 16.5 per cent. We believe this measure can reduce the tax burden on enterprises, especially small and medium enterprises. It will also help promote Hong Kong as a preferred investment destination. Also, the Government will continue to actively consider other tax measures conducive to the development and diversification of Hong Kong's economy, thereby bringing more valuable job opportunities.
Ends/Wednesday, November 15, 2017