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Hong Kong Special Administrative Region (S.A.R.)
Hong Kong as a Regional Centre
Hong Kong is a popular venue for hosting regional headquarters or representative offices for multinational companies to manage their businesses in the Asia Pacific, particularly the Chinese mainland. Based on a government survey, a total of 3,207 overseas companies had regional operations in Hong Kong as at 2 June 2003, representing an increase of 7% from three years earlier. Of these regional operations, 966 were identified as regional headquarters and 2,241 were regional offices. Among the responded companies, the EU as a whole has the largest total number of regional headquarters and offices in Hong Kong with 925 companies, followed by the US (740), Japan (610) and the Chinese mainland (232). Within three years to June 2003, the number of regional headquarters and offices whose parent companies were from the EU and US increased by 15% and 30%, respectively. During the same period, the number of regional headquarters and offices representing mainland companies grew by 1% while the number of those representing Japanese companies dropped by 1%.
Hong Kong is an important banking and financial centre in the Asia Pacific. There are 215 banks and 87 representative offices operating in Hong Kong. At the end of 2003, total loans to finance international trade amounted to US$ 12.8 billion, and other loans for use outside Hong Kong totalled US$ 26.5 billion. According to the Bank for International Settlements, Hong Kong is the third largest foreign exchange market in Asia and the seventh largest in the world, with the net daily turnover of foreign exchange and derivatives transactions reaching US$ 71 billion.
Hong Kong's stock market ranks the second largest in Asia and the tenth largest in the world in terms of market capitalisation. There were 1,043 companies listed on the stock exchange, including 191 companies on the growth enterprise market (GEM), with a total market capitalisation of US$ 791 billion at the end of February 2004. Hong Kong is also the second largest venture capital centre in Asia, managing 31% of the total capital pool in the region.
Hong Kong is a leading telecommunications hub for the Asia-Pacific region. At the end of January 2004, there were 3.8 million telephone lines and 488,080 fax lines in Hong Kong. IDD telephone services are available to over 230 overseas countries/areas and 2,200 Chinese mainland cities, with the total international telephone traffic growing at an annualised rate of 6.9% to 5.9 billion minutes between 1999 and 2003. Mobile phone subscription also grows to 7.3 million in number, more than the population of Hong Kong. Broadband internet traffic grew five-fold in 2002-03.
Hong Kong's popularity for hosting international conferences and trade fairs also contributes to the rising share of business visitors. Over 300 international conventions and exhibitions are held in Hong Kong each year. The World Bank and International Monetary Fund (IMF) annual meetings were held here in September 1997. Hong Kong hosted the 2001 Fortune Global Forum in May 2001 and the 16th World Congress of Accountants in November 2002. It is also agreed that Hong Kong will host the sixth session of the WTO ministerial conference. The choices indicate Hong Kong as a favourite place in the world to do business and host major conferences.
Economic Relations with the Chinese mainland
Hong Kong is the most important entrepot for the Chinese mainland. About 25% of the mainland's foreign trade is handled via Hong Kong, comprising products sourced on and destined for the mainland. As reflected in Hong Kong's merchandise trade statistics, in 2003, 60% of re-exports were of China origin and 44% were destined for the Chinese mainland. According to China's Customs statistics, Hong Kong ranked the third largest trading partner of the Chinese mainland after Japan and the US, accounting for 10.3% of its total trade in 2003.
Hong Kong is the largest source of overseas direct investment in the Chinese mainland. By the end of 2003, among the 465,277 overseas-funded projects registered in the Chinese Mainland, 224,509 (accounted for 48.3%) were tied to Hong Kong interests. The stock of contracted and utilized capital inflow from Hong Kong amounted to US$ 414.5 billion and US$ 222.6 billion respectively, each accounting for 44% of the national total.
The Chinese mainland is one of the leading investors in Hong Kong. According to the HKSAR Census and Statistics Department, the mainland's cumulative direct investment in Hong Kong was US$ 76.2 billion or 22.6% of Hong Kong's total stock of inward direct investment at the end of 2002. It is estimated that there are over 2,000 mainland-backed enterprises registered in Hong Kong, with total asset exceeding US$ 220 billion. Over 100 mainland-backed and state-owned enterprises are listed on the main board of the Stock Exchange of Hong Kong and its growth enterprise market (GEM).
There are currently 26 Chinese banks and seven representative offices operating in Hong Kong. The Bank of China is now the second largest banking group in Hong Kong after HSBC. In addition, China's other three specialised banks -- the Industrial and Commercial Bank of China, the Agricultural Bank of China and the People's Bank of Construction of China -- also opened their branch operations in Hong Kong. Some other mainland commercial banks such as the Shenzhen Development Bank, China Everbright Bank and China Merchants Bank also have representative offices in Hong Kong.
Hong Kong is also a key offshore capital-raising centre for Chinese enterprises. By the end of 2003, 258 mainland companies (including H-shares, red-chips and other overseas registered Chinese companies) were listed in Hong Kong with a total market capitalisation of US$ 217 billion, or 31% of Hong Kong's total market capitalisation. Total funds raised by these companies amounted to US$ 100 billion. The listing of two Chinese insurers PICC and China Life is a major recent success.
