Moye White has been a part of Ally Law for over 15 years. This membership allows us to use the expansive network of more than 70 firms across the globe to provide our clients with local intelligence with a global breadth. In 2022, we are partnering with fellow Ally Law member firms across the globe for our International Insights blog series. Every other month, one of our Ally Law partner firms will share insights and tips for doing business in their home country.
Our second international guest blog resides from Hong Kong. Boase Cohen and Collins is an established law firm with a diverse range of knowledge and experience, including civil litigation, wills & probate, immigration law, business & corporate law, and much more. This independent law firm has been successful in their line of work for over 35 years and continues to make a valiant effort in helping those in Hong Kong and across the globe.
-Paul Franke, President of Ally Law
Form is temporary, class is permanent. This old sporting adage is equally relevant to the world of business and is worth bearing in mind as Hong Kong seeks to shrug off pandemic-related problems and stride toward what is undoubtedly a bright future. A world-class business hub in its own right, with rule of law and judicial independence, a low and simple tax regime, advanced infrastructure, a robust financial system and sound regulatory frameworks, Hong Kong also remains the single most important financial gateway to China.
There is little doubt this dynamic and exotic city, my home for more than four decades, has endured a turbulent three years, pummelled by domestic unrest in 2019, caught between the U.S. and China in their trade war, and isolated by strict COVID-19 quarantine regulations. Yet even as we tackle the so-called fifth wave of coronavirus infections that is testing our medical systems and residents’ patience – a stressful situation from which we will soon emerge, I’m sure – there is reason for optimism.
After two consecutive years of decline, Hong Kong’s economy saw a visible recovery in 2021 with growth of 6.4%, Financial Secretary Paul Chan reported in his annual budget on 23 February. He forecast growth of up to 3.5% for 2022 and said the outlook in the medium term is positive. Despite various one-off pandemic relief measures granted during the year, Hong Kong’s fiscal reserves remain strong at an estimated US$121 billion. We continue to be recognised as one of the world’s most competitive economies, being ranked No. 7 globally in the International Institute for Management Development’s World Competitiveness Yearbook 2021.
Since its handover from British to Chinese rule in 1997, Hong Kong has maintained its own currency, political and legal systems. This has allowed us to continue to flourish as an international business city while enjoying the benefits of access to opportunities in mainland China. Under this “one country, two systems” arrangement, there are no foreign ownership restrictions; English remains the preferred language for business, and we enjoy free movement of capital, talent, goods and information.
Hong Kong’s airport, opened one year after the handover, is the gleaming, high-tech first impression visitors have of our city. Before COVID-19, it ranked No. 4 in the world for the number of international passengers it carried. Even during the pandemic, its status as the world’s business cargo hub remains unchallenged. With all of Asia’s key markets less than four hours’ flight away, it is natural that over 9,000 businesses and companies should make Hong Kong their home. For many, it is their regional headquarters. Over 100 airlines offer easy and efficient travel to 190 locations, while half of the world’s population can be reached within five hours.
Hong Kong’s fortunes, of course, are closely tied to those of China. This city is the mainland’s largest source of realised foreign direct investment, accounting for about 55% of the national total. There are more than 230 companies from the mainland with regional headquarters here. The mainland’s share of Hong Kong’s global trade has rocketed in the past four decades – from just 9% in 1978 to around 52% today.
Such close ties and interdependence are reflected in Hong Kong’s stock market. Excelling in its role as the international gateway to China, this city has been a listing venue for Chinese companies since the 1980s. It was in 1993, however, when the first Chinese state-owned enterprises (SOEs) listed in Hong Kong, that the floodgates opened. The results can be seen today. Mainland interests – namely SOEs, so-called red chip listings (that is, under foreign holding companies) and private enterprises – make up around 52% of Hong Kong’s Main Board listings. In 2020, mainland firms accounted for an astonishing 80% of our stock market’s US$6 billion total market capitalisation.
Moving forward, there are two major strategies which point to Hong Kong’s further development. First, China’s 14th Five Year Plan, approved in March last year, outlines a clear vision for this city, seeking to enhance its status as an international financial, transportation and trade hub, as well as a centre for international legal and dispute resolution services.
Second, there are massive opportunities awaiting in the Greater Bay Area, truly one of the world’s most exciting and ambitious economic development initiatives. Comprising Hong Kong, Macao and nine cities in Guangdong province, the region has a population of 86 million and a GDP of US$1.7 trillion, making it about the same size as the world’s ninth-largest economy, Canada. Respective governments and regulatory authorities are working closely to turn this vast area into a high-tech megalopolis and global innovation hub.
Accelerated development of the Greater Bay Area will also underscore Hong Kong’s status as a global arbitration venue. Last year, this city was ranked as the third-most-preferred place for arbitration in the world in a survey by Queen Mary University of London and White & Case International Arbitration. The Hong Kong International Arbitration Centre’s caseload has increased significantly in recent times, culminating in a record-breaking year in 2020 when it received 318 arbitration filings. The total amount in dispute was US$883 million, a record high since figures were first published in 2011. Almost three-quarters of the cases were international, featuring parties from 45 jurisdictions.
Like Moye White, my firm Boase Cohen & Collins has been a member of Ally Law – the global network of independent law firms – since 2005. We are looking forward to visiting Zurich on 24-28 May for our first in-person AGM for three years. I will relish the chance to remind colleagues, including my good friend from Moye White and Ally Law President Paul Franke, that Hong Kong is very much alive and kicking.
By Colin Cohen, Senior Partner of Boase Cohen & Collins
Co-founder of Boase Cohen & Collins in 1985 and Senior Partner since 2004, Colin Cohen has vast experience in the highest levels of Hong Kong’s legal system, leading teams in complex corporate crime cases, high-conflict civil litigation, dispute resolution, landmark judicial reviews and Court of Final Appeal hearings. He also has vast experience in commercial litigation, securities regulatory issues and cross-border work. Colin was awarded the Hong Kong Medal of Honour in 2012. He can be contacted at colin@boasecohencollins.com.