Hong Kong's about-face
Updated: 2013-09-13 07:13
(HK Edition)
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Hong Kong is always the first stopover destination for the majority of the "going-out" mainland enterprises' as the bulk of mainland companies' overseas foreign direct investment (OFDI) stops over in the city before moving on to other countries and regions.
"Hong Kong must continue to do better in what they currently excel at, for example, in terms of corporate governance and management standards," PricewaterhouseCoopers (PwC) Advisory Partner Christopher Chan says. "Acquiring Hong Kong business assets can bring synergistic values to the mainland corporate acquirers through the business technology and know-how transfer process."
According to China CITIC Bank International Ltd (CNCBI)'s China Economic Report in June, Hong Kong possesses an irreplaceable role in providing a bridge for mainland firms "going out".
Close geographical proximity, economic integration and linguistic connections with the mainland makes Hong Kong a natural choice for mainland enterprises to go out as many of them are unfamiliar with the outside world.
The city's absence of capital control, low-taxation regime, openness in investment policies, sound legal and regulatory system, transparent and free information flow, robust capital market networks, stringent intellectual property protection and sophisticated infrastructure, also contributes to the superior business setting for mainland "going out" companies.
Thirdly, Hong Kong boasts a comprehensive professional services system that furnishes all-round, highly efficient and top quality services to mainland corporations heading toward internationalization
Lastly, the Hong Kong market operates within a framework in compliance with international protocols, laying the groundwork for "going out" mainland enterprises to train their insights on internationalization.
"The mainland enterprises should further leverage off this bridging role of Hong Kong for their large-scale "going-out," CNCBI's Chief Economist Liao Qun says.
"Meanwhile, Hong Kong should enhance its role as the bridge, by steering clear of negative elements that are unfavorable to the city's economic development and becoming more open, freer and more efficient." Liao says.
According to CNCBI, Hong Kong contributed 47.8 percent and 61.6 percent of the investment flow and investment stock of mainland overseas foreign direct investment (OFDI) in 2011, making the city the biggest investment destination for "going out" mainland enterprises.
The bulk of mainland companies' OFDI into Hong Kong goes into the leasing and commercial services sector, accounting for 38.1 percent and 35.7 of the investment flow and stock respectively in 2011. The second major sector is wholesale and retail trades, in which mainland companies' OFDI accounts for 24.7 percent and 15.6 percent of the investment flow and stock respectively.
More than half of the mainland's OFDI in Hong Kong, or more than 70 percent of the non-financial OFDI in Hong Kong, eventually flows into other countries and regions.
Looking ahead, the CNCBI report recommended that Hong Kong should strengthen its global investment and service platforms for mainland companies anticipating hoping to expand, in order to maintain its competitive edges in both sectors, given that other financial centers like London, New York and Singapore are all gearing up to challenge for the lucrative business of serving expanding mainland companies.
(HK Edition 09/13/2013 page6)