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Dear Customers, Partners and Friends,
As you are well aware, the last two and a half years have been quite hectic for everyone but maybe a little more from an Hong Kong point of view. No doubt we all experienced the effects of the pandemic everywhere, but in Hong Kong, you may have noticed we’ve had a “little” extra challenge with the political crisis which started in May 2019. During that time, we were affected by the protests against Mainland China’s new political approach regarding its Special Administrative Region (S.A.R.).
But no need nor use for that matter, to comment on the pros and cons; the fact is that Hong Kong has been changing more in two years than ever !
Many of you have been asking about the consequences for business and/or structures in Hong Kong and Mainland China, and until recently, we have been pretty confident that besides some political changes that mainly affected Hong Kong people, business remained “as usual”. Technically, it is still true today as corporate laws have not suffered any changes. Thus it was not the time to take any decision on and reconsider investments in Hong Kong.
Nevertheless, as of today, our view on the situation is slightly different. Why ? Mainly for four reasons:
1. The way the Hong Kong government is managing the Covid crisis. I personally experienced the three weeks quarantine in a hotel room (where you can’t even open a window!), and I can testify that such a measure does not make much sense except to dissuade people from travelling to and from Hong Kong. If it were my opinion alone, it wouldn’t count, but even scientists have confirmed that it is useless to ask people to quarantine for three weeks leading to an unprecedented blockage for what used to be the biggest caravanserai of Asia !
2. The way China is changing choosing an ideological path beyond any other interests. It is my personal point of view, but I have the feeling that what drives Chinese authorities is no longer, or not only the growth of China but some other goals we don’t know about and may only try to guess. On the other hand, what is not simply a personal point of view, is the fact that China is focusing on its internal market, whereas internationally mainly trying to secure its supplies. Of course, the transfer of technologies remains welcome (but be careful, as they are even more than welcomed), as well as goods that China cannot produce, including famous brands, particularly in the garment and cosmetics industry. But what about the rest ? Will China remain a land of opportunity for foreign companies ?
3. A global trend of western countries understanding that they can no longer depend so much on international sourcing, not to mention the ecological impact. Relocation will take some time and may not be as simple as, nor return to what it was before the 80s, but it is the new trend, isn’t it ?
4. Pressure on international taxation leading the European Union to impose changes in the Hong Kong tax regulation with potential tax penalties for European companies based in Hong Kong (read our related article in our October newsletter). Local authorities could not expect a better opportunity to announce changes in this field too… What precisely ? We don’t know yet, but for the first time, it seems they will submit themselves to European pressure.
No one can tell what will happen, but at least we want to be ready to face any possibility. Singapore appears to be a natural alternative with a very similar legal and tax system inherited from the Commonwealth, and where Orbis has been directly operating since 2018. But it has long been considered a little sister with a little more than 500,000 companies registered (source) compared to almost 1.4 million in Hong Kong (source).
Besides, if we consider the political surrounding, except for a few obvious ideological differences, they appear pretty much the same in terms of leadership and the uncertainties that such type of leadership involves.
Last, independent from circumstances and considering each city’s/state’s size, Hong Kong should remain ahead, at least for some time, considering its history and links with Mainland China. However, Singapore may keep filling some of the gap between the two during the coming years.
In any case, Orbis can assist in both jurisdictions, and we thought it was time to remind you of this. Shall you wish to share your thoughts with us, or if you have already decided to make a move, feel free to contact us. We are ready to help and keep guiding you through your developments in Asia (as well as Spain and Argentina).
Meanwhile, I take the opportunity to wish you all a Happy New Year !
Vincent de Saint-Exupéry, Co-founder & Partner
For a more complete comparison between Hong Kong and Singapore, you may refer to the table we published in our latest newsletter here.