Hong Kong:

Key in your Asia sales strategy!

Paula Kant, Head of Investment Promotion

YOUR!

Wassenaar, December 13, 2017

The three topics of today

1. Hong Kong: still relevant?

2. Latest developments and focus sectors

3. HK as a key piece of your Asia Mkt & Sales strategy

Even though HK’s position in Greater China has changed,.........

1980: HK represented 50% of China’s GDP

2016: HK represented 2.85% of China’s GDP

Hong Kong plays a key role in 2 major Chinese policy initiatives:

1) “One Belt, One Road” Inititative

2) Greater Bay Area or GBA

Is Hong Kong still relevant?

One Belt One Road Initiative

Greater Bay Area (GBA) initiative

Development of the Greater Bay Area

• Concept dates back to 2011 in a study on coordinated development of the city

cluster in the Pearl River Delta

• The Greater Bay Area was first brought up in the 13th FYP (2016-2020)

• Announced as national policy in Premier Li Keqiang’s report to the NPC

meeting in March 2017 on the work of the government

• Aim to promote deeper integration between the two SARs and the mainland

cities to form a global city cluster and facilitate China’s economic integration with

the world

Key Areas of collaboration in the GBA MoU

• Promote infrastructure connectivity

• Enhance market integration

• Build a global Technology and Innovation hub

• Create a system of modern industries through synergistic development

• Build a quality living circle ideal for living, working and travelling

• Foster international cooperation

• Support the establishment of major collaboration platforms

Hong Kong,……means Business…

in line with CE’s 2017 Policy Address!

Priority Areas 2018 covered by NINE SECTOR TEAMS

Nine Sector Teams Priority Sub-sectors 2018Four Traditional Pillar

Industries

Business & Professional Services (BPS)

• Education •Professional services

Creative Industries (CI) • Design

Consumer Products (CP) • E-retail •Trading & logistics

(trading)

Financial Services (FS) • Aircraft Leasing •Financial services

Financial Technology (FinTech)

Innovation & Technology (I&T) • Biomedicine

Information & Communications Technology (ICT)

• Big Data / AI

Transport & Industrial (T&I) • Maritime•Trading & logistics

(logistics)

Tourism & Hospitality (T&H) • Food trading (Green, Sustainable) •Tourism

Creative Industries

The value added of Cultural and Creative Industries (CCI) was $108.9 billion

and the contribution to GDP of Hong Kong was 4.7% in 2015, with 213,880

employment, which was 5.6% contribution to the total employment of Hong

Kong in 2015. (Source: Hong Kong Monthly Digest of Statistics in June 2017)

Policy Address 2017:

Creative Industries are recognised as

‘a powerhouse that will drive the economy,

add value and make Hong Kong a more

attractive international city.’

It is among the most dynamic economic

sectors in Hong Kong, contributing to both

economic growth and job creation.

Priority Sector: Design

Why Hong Kong?

Quotes from our design clients:

“Hong Kong’s low tax rates, reliable legal system and

proximity to other Asian hubs are attractive, the

presence of a select group of premium global clients in

Hong Kong is key to our business success.”

Experience the Pulse

(Immersive experience design/creative studio)

“The easy recruitment of highly skilled, well educated

local talents and the proximity to strategic markets such

as Mainland China, Japan and the ASEAN countries

have been key factors in the choice of Hong Kong as our

regional head office.”

Gruppo Pozzi (Interior, retail design)

Key Areas of Design

Branding and Communications:

Analog Folks, R-CO Brand, Agence 1969, RFI Daylight, Jump Willy

Multimedia/Interactive Design:

The Pulse, Spinifex, GoAnimate, Indestry, Shadow Factory

Architecture:

Jet Architecture, CallisonRTKL, Buro Ole Scheeren, K plus K, Zaha Hadid Architects

Interior/Spatial:

Gruppo Pozzi, Studio X, Alt254

Product:

Studio Dott, Mabu Design, Do It- Ideas into things

Lead 8SpinifexMichael Young StudioStartJG

Aircraft leasing,.....special tax break

1) First: the tax rate.

Profit tax rate cut by half, meaning from 16.5% to

8.25%

2) Second: the taxable amount.

Only 20% of qualifying aircraft leasing activities

will be chargeable to profits tax after deducting

allowable expenses

Effective tax rate for aircraft leasing activities in

Hong Kong will be down to 3.37%

© Copyright Invest Hong Kong, HKSAR

Dedicated Tax Regime for Aircraft Leasing

Key Features Aircraft Lessor Aircraft Leasing Manager

Profits tax rate 50% of corporate tax rate, i.e. 8.25% 50% of corporate tax rate, i.e.

8.25%

Aircraft

depreciation

Nil Not applicable

Tax base

concession

Tax base = 20% x (gross rentals –

deductible expenses)

No such concession

Qualifying entity Special Purpose Vehicle engaging in

qualifying aircraft leasing activities only

Standalone corporation engaging

in qualifying aircraft leasing

management activities, with safe

harbours

Qualifying

activities

• Leasing to aircraft operators

• Tax ownership incl. funding lease,

hire-purchase, and conditional sale

Management activities carried our

for qualifyling aircraft lessors (providing finance, procuring aircraft,

marketing leases, managing leases, etc.)

Other

requirements

* Central management and control exercised in HK (CMC requirement)

* Profit generating activities carried out in HK (Substantial activity

requirement)Source: Inland Revenue Department, HK

Dedicated Tax regime for Aircraft Leasing:

A calculation example

Source: PwC

• Convergence of information and healthcare /

Digitalization of Healthcare

– Preventive care and Health Informatics

• Health Data

• Preventive care (vaccines, nutrition)

• Smart well-being / medical device

• Advanced therapies (gene editing, stem cell therapy)

• OMICs Diagnostics (genomics, behaviors)

I&T Priority Sector: Biomedicine

Tele-health (Heartisans, Rehab Robotics)

Smart Pill / Personalised Drug

(Given Imaging, Roche)

Genetic Test / DNA screening

(Xcelom, Angsana,

Sanomics, BGI)

Advanced Medical Equipment, like 3D Holographic Diagnosis

Tissue Engineering(living Tissue, Novoheart)

Biomedicine

R&D in HK: Government support 2018-19

$500MMTechnology Talent

Scheme

R&DGDP

Double spending on R&D

as percentage of GDP in

WITHIN 5 YEARS

Including the set-up of a Postdoctoral Hub, to fund

enterprises to recruit postdoctoral talent for R&D

$1.5 BillionInnovation and

Technology Fund

Offered through 10+

funding schemes. HK$13

Billion funding approved

since launch

300%for first $2m

Additional tax deduction

for R&D expenses by firms

200%for remainder

$2 BillionInnovation & Technology

Venture Fund

Co-invest in start-ups with

selected VC partners,

targeted matching ratio of

1:2 (Government/VC)

GOVERNMENT SUPPORT > R&D investment

funding

Strong government funding support at different stage of product development, from direct funding to tax incentives to encouraging technology adoption

ESS – up to $10M

matching support to

private sector R&D

investment; IP rights

retained with recipient

ITSP – fund up to 50% of

project R&D

Internship – 2 sponsored

interns

R&D Cash Rebate – up

to 40% company R&D

expenditure

Hong Kong-Shenzhen I&T Co-operation Zone

Shenzhen I&T Zone 167 hectares

Adjoining Areas 182 hectares

Lok Ma Chau Loop 87 hectares Ready by 2021

Shenzhen

Hong Kong

Economic and Technical Targets

• Land area: 87 hectare

• Total floor area: 1,200,000 sq meter

• Land use: Research,Education (basic and translational

research), Culture and Creative Industries (digital media)

• Working population: around 50,000

• Development works: 2018 Q2

• First Batch completion: 2022 Q2

Hong Kong-Shenzhen I&T Co-operation Zone

Hong Kong’s role in your Marketing & Sales strategy

1) Selling in the Hong Kong market

- 7.5 million inhabitants

- 57 million visitors per year (75%) from mainland China

2) Hong Kong as a Gateway to China,..........

- using HK to showcase your products & services

- taking time & hiring staff for China market entry

3) Hong Kong as a Regional Marketing & Sales hub

Services of HKTDC and InvestHK

Creating opportunities for

international trade.

Assist companies with potential to

contribute to HK’s economy to set

up a company and expand in HK.

Hong Kong Trade Development Council.

Invest Hong Kong

HOW

WE CAN HELPNetworking events,

introduction to

service providers

Facilitation of visa

applications, schooling

PR and marketing

support for launch/

expansion

Information to aid

planning and evaluation

GET IN TOUCH

Tel: (32) 473 97 81 96

www.investhk.gov.hk

Email: paula_kant@hongkong-eu.org

Hong Kong Economic & Trade Office

Brussels

Rue d'Arlon 118

B-1040 Brussels

BELGIUM

www.flickr.com/photos/investhk

www.linkedin.com/company/invest-hong-kong

#InvestHK

www.youtube.com/user/investhk

https://be.linkedin.com/in/paulakant

THANK YOU!

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Hong Kong

Investment Promotion Units inHong Kong Economic and Trade Offices

Consultants

Note:1 Beijing Office2 Hong Kong Economic, Trade and Cultural Office (Taiwan)

Office locations are subject to change. For the latest version, please refer to InvestHK’s website.

INVESTHK’S WORLDWIDE

NETWORK

• InvestHK Overseas: 30 country offices

• InvestHK HQ: 9 sector teams

• InvestHK’s services are free!

5 STEPS to set up in Hong Kong

1) Select Company Type and Company Name

2) Register and Incorporate a Company- Shareholders can be foreigners, company secretary must be HK resident

3) Open a bank account

4) Choose a business premises

5) Immigration and Visas

,…………………InvestHK can help every step of the way!

BUSINESS-TO-

CONSUMER

5.1Min Asia Pacific

142,000 HNWIs in HK,

up 281% (2009-2015)

42.8Mfrom Mainland

56.7 million visitors

in 2016

HK is ranked as

the 2nd most

attractive global

destination for

luxury retailer(Jones Lang LaSalle,

2016)

US$56bnTotal retail sales in value

(Census and Statistics Department, 2016)

61 Michelin-starred

restaurants in HK

(Apr 2017)