LCQ13: Attracting foreign companies to Hong Kong

     Following is a question by the Hon Chan Kin-por and a written reply by the Secretary for Commerce and Economic Development, Mr Algernon Yau, in the Legislative Council today (December 14):

Question:

As revealed by the 2022 Annual Survey of Companies in Hong Kong with Parent Companies Located outside Hong Kong released by the Government last month, as at mid-September this year, the total number of regional headquarters (RHQs), regional offices and local offices in Hong Kong with parent companies located outside Hong Kong (collectively referred to as foreign companies) was 8 978, representing a decrease of 71 companies compared with the same period last year, and it was also the first time since 2019 that such number fell below 9 000. Among these foreign companies, 1 411 were RHQs in Hong Kong with parent companies located outside Hong Kong, representing a decrease of 46 companies compared with the same period last year. There are views that such situation is worrying. In this connection, will the Government inform this Council:

(1) whether it has gained an understanding of the reasons for the slump in the number of foreign companies in the past year; if so, of the details; if not, the reasons for that;

(2) as the aforesaid survey has pointed out that three per cent of the foreign companies surveyed planned to phase out or relocate outside Hong Kong part or all of their businesses in Hong Kong, and 16 per cent of the foreign companies surveyed indicated that they were uncertain about their business plans in Hong Kong, whether the Government will endeavour to retain these companies, including providing them with one-stop services and concessions that better suit their needs;

(3) whether it will expedite the establishment of the Office for Attracting Strategic Enterprises (OASES) and expeditiously switch to a proactive strategy to attract enterprises, with a view to consolidating Hong Kong's status as international financial and trade centres; and

(4) given that OASES is temporarily only focusing on attracting industries of strategic importance (such as life and health technology, artificial intelligence and data science, as well as financial technology) to Hong Kong, whether Invest Hong Kong will concurrently adopt, in respect of industries other than those of strategic importance, a more proactive approach for attracting their investors to Hong Kong?

Reply:

President,

My consolidated reply to the four parts of the question is as follows:

Under "one country, two systems", Hong Kong has the distinctive advantage of enjoying strong support of the Motherland and being closely connected to the world, and is an important gateway to attract foreign investment and assist Mainland enterprises to go global. With the most facilitating business environment worldwide, Hong Kong is an international financial, trade and shipping centre. Hong Kong is located at the heart of Asia, with advanced infrastructure in both hardware and software, a sound legal system and top-notch talents from all over the world, which makes Hong Kong the most preferred destination for multinational corporations to set up their operations in Asia. Key national strategies including the National 14th Five-Year Plan, the development of the Guangdong-Hong Kong-Macao Greater Bay Area, and the Belt and Road Initiative provide Hong Kong with unlimited opportunities.

In the past five years, Hong Kong experienced unprecedented challenges. The persistence of the COVID-19 pandemic has dealt a strong blow to the global economy. Meanwhile, trade disputes, geopolitical tensions, as well as travel restrictions imposed earlier due to the pandemic have also inevitably affected the investment and expansion plans of non-local companies in Hong Kong. Nevertheless, according to the surveys conducted by Invest Hong Kong (InvestHK) and the Census and Statistics Department in the past five years, the number of companies in Hong Kong with parent companies located outside Hong Kong (overseas and Mainland companies) has remained around 9 000 in the five years between 2018 and 2022. As regards business plans of surveyed overseas and Mainland companies, we note that the percentage of companies expanding businesses in Hong Kong or having their business plans unchanged stayed around 73 per cent on average in the past five years. The percentage of companies that were uncertain about their business plans steadily dropped from around 18-21 per cent to 16 per cent, whereas the percentage of companies phasing out or relocating outside Hong Kong remained at a low level of around three per cent in the past five years. These findings fully demonstrate that overseas and Mainland companies are confident about the business environment in Hong Kong, and at the same time reflect the solid fundamentals and core strengths of Hong Kong, and that our city continues to be an open, competitive and attractive place.

Since the new term of the Government, we have been implementing various measures to boost the confidence of overseas and Mainland companies in Hong Kong's business environment, and at the same time actively promoting our advantages to overseas business sectors and investors, so as to tell the good stories of Hong Kong. For example, the Government has relaxed anti-epidemic measures since late September, including the lifting of compulsory quarantine requirement for inbound persons from overseas places or Taiwan, the extension of the Return2hk and Come2hk Schemes to cover all places in the Mainland and Macao with no quota restriction; and adjustments of the restrictions for persons with Amber Code for entering venues by allowing them to participate in business-to-business conventions and exhibitions, enter club houses, event premises and places of public entertainment. Hong Kong also successfully organised multiple major international events, including the Hong Kong Sevens, Hong Kong FinTech Week 2022 and Global Financial Leaders' Investment Summit, which is a clear sign of Hong Kong's rapid recovery and fully demonstrates to the world that Hong Kong is back on the global stage. We believe that these events help promote business confidence and attract more overseas and Mainland companies to invest and set up regional headquarters or regional offices in Hong Kong.

Moreover, the Chief Executive announced in October in his Policy Address an array of new initiatives for attracting enterprises and investment more proactively and aggressively with a view to enhancing our competitiveness. The Government will establish the Office for Attracting Strategic Enterprises (OASES) within this year, led by the Financial Secretary, for attracting strategic enterprises from the Mainland and overseas by offering them special facilitation measures and one-stop services. After its establishment, OASES will spearhead the work of attracting enterprises and investment at full speed and actively attract high-potential and representative strategic enterprises from around the globe to Hong Kong.

The industries of strategic importance highlighted in the Policy Address, which include life and health technology, artificial intelligence and data science, financial technology, and advanced manufacturing and new energy technology, are important building blocks for the medium-and-long term economic development of Hong Kong. The Government will set up the Advisory Committee on Attracting Strategic Enterprises, inviting representatives from relevant business sectors and social leaders to advise the Financial Secretary, so that the Government can appreciate from different aspects the developments and demand of strategic enterprises around the globe.

Separately, the Government has allocated additional recurrent provision of around $90 million in phases from 2022-23 to InvestHK in the 2022-23 Budget so as to strengthen Hong Kong's investment promotion network overseas and in the Mainland; step up investment promotion work in the innovation and technology sector to complement Hong Kong's role under the National 14th Five-Year Plan; and step up efforts in attracting enterprises with leading carbon neutrality technologies and solutions to develop in Hong Kong by leveraging Hong Kong's commitments to achieve carbon neutrality before 2050. InvestHK will continue to strengthen the provision of one-stop support services to all overseas and Mainland enterprises (regardless of their fields) interested in setting up or expanding their businesses in Hong Kong, as well as enhancing its global investment promotion efforts, with a view to promoting the advantages of Hong Kong to the international business communities.