Hong Kong

Originally published: Feb-23-2005

Chinese National Flag

Hong Kong Regional Flag

Government

Special administrative region of the People’s Republic of China with limited democracy.

Legal System

Based on English common law. The Basic Law, approved in March 1990 by China's National People's Congress, became Hong Kong's "mini-constitution" after sovereignty was handed over by Britain to mainland China in July 1997. The Basic Law pledges to maintain Hong Kong’s economic, social and political distinctiveness for a period of 50 years after the handover to the PRC, under the principle of ‘one country, two systems’.

Economy

Currency: Hong Kong Dollar (HKD)

HKD per US dollar: 7.7998 (as of 2/22/05)

(e) estimate (f) forecast

Leading Markets: China, USA, Japan, UK, Germany, Singapore

Leading Exports: clothing, textiles, yarn and fabric, footwear, electrical appliances, watches and clocks, toys, precious stones

Leading Suppliers: China, Japan, Taiwan, USA, Singapore, South Korea

Leading Imports: foodstuffs, transport equipment, raw materials, petroleum

Top Industries: textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches, clocks

General Economic Situation

Hong Kong has a free market economy highly dependent on international trade. While Hong Kong, Singapore, Taiwan and South Korea all started out as low-cost, labor-intensive manufacturing bases. Singapore, Taiwan and South Korea have developed high-technology industries, whereas Hong Kong has grown into a services and trading center, particularly for companies doing business in China. Thus, the structure of the economy has changed dramatically over the last ten years, as the manufacturing sector has been replaced by a rapidly expanding services sector.

The country has virtually no natural resource base and is dependent on imports for raw materials, food and fuel. Domestic demand, although gaining in importance, is limited by the size of the population. The government is attempting to diversify the economy and has subsidized the construction of a "Cyberport" - an office and residential accommodation aimed at the information technology industry. It has launched a technology index in the stock market, called the Growth Enterprise Market (GEM), as a supplement to the Hang Seng Index, which is primarily made up of financial institutions and property companies. It is also focusing on tourism as a revenue source.

Even before Hong Kong reverted to Chinese administration in 1997, it had extensive trade with the PRC. Hong Kong has been further integrating its economy with the mainland due to increased competitive pressure on its service industries and re-export business as China opens itself to the world economy. Hong Kong is counting on even greater integration with China via the bilateral free-trade agreement CEPA (Closer Economic Partnership Agreement) that went into effect in early 2004.

Business Climate

Hong Kong has a good legal environment and sound banking system together with a good communications network, free port status, excellent infrastructure and a favorable taxation system. Its geographical location is ideal for companies seeking to do business in the region (East Asia).

According to a Business Outlook Survey done by the American Chamber of Commerce in Hong Kong, member companies are optimistic about their businesses. Based on the strength of the economy and favorable business climate they anticipate a favorable business environment for the next three years.

Credit and Collections

• Collection Experience: Fair
• Exchange Delays: 3 months or less
• Preferred Credit Terms: Unconfirmed Letter of Credit
• Minimum Credit Terms: Unconfirmed Letter of Credit

Risk Assessment

Country Risk Rating Coface: A1 - The steady political and economic environment has positive effects on an already good payment record of companies. Very weak default probability.

[Note: Coface’s statement of "good payment record" is somewhat more optimistic than the "fair" Collection Experience rating above.]

Standard & Poor’s gives Hong Kong an A+ (stable) rating; Moody’s rating is an A3 (positive); and Fitch-IBCA gives an AA- (stable) rating.

Sources for further information on doing business in Hong Kong

Business-in-Asia.com - Hong Kong: Provides a variety of information on doing business in Hong Kong including links to other important sites and interviews with executives of companies doing business in Hong Kong.

Business Stat Online: The most authoritative Hong Kong trade statistics system, developed by the Hong Kong Trade Development Council with assistance from the Hong Kong SAR Government Census & Statistics Department.

Hong Kong Business Directory: Listing of more than 56,800 Hong Kong companies.

 Hong Kong Economic and Trade Office USA: Information regarding the functions and services of the three HKETOs in the US, news and information about Hong Kong, and useful links to Hong Kong Government's main web site.

Australian Chamber of Commerce: Provides information on the economy and doing business.

British Chamber of Commerce: Provides information on the economy and doing business.

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Hong Kong. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating.

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," February 2005.