Aussie SMEs urged to consider expanding into Hong Kong

  • April 1st, 2021 at 2:21 pm

The Australia-Hong Kong Free Trade Agreement (A-HKFTA) came into force on 17 January 2020 and after a tough 12 months since, the time is now ripe for Australian SMEs to set up shop in the Pearl of the Orient, according to Dr Luca De Leonardis, Head Investment Promotion: Australia & New Zealand at Invest Hong Kong. 

Timing right to explore opportunities in Honkers

Despite calls midway through 2020 to axe the trade agreement in the wake of political crackdowns in Hong Kong, Luca maintains that after the trials of COVID-19, robust commercial opportunities await Australian companies that drop anchor in the famous harbour city. “A few companies left Hong Kong because of the impact of COVID rather than for other reasons,” said Luca. “These departures included food distribution companies supplying hotels affected by COVID-19 lockdowns.”

As for SMEs considering a commercial foray into Hong Kong, Luca says service firms supporting the city’s robust financial sector and businesses operating in the information technology and professional services are in demand. “There are also opportunities for retail and food and beverage companies in Hong Kong.”

The business case for Hong Kong

For Australian SMEs considering expanding into China and South East, Hong Kong is the perfect platform where western and eastern business interests meet. “People come to Hong Kong from all over the world to facilitate business with Mainland China,” said Luca. “Lots of companies also choose Hong Kong as the city has a pro-business ethos, one of the freest economies in the world and a low tax rate.”

The full corporate tax rate is 16.5% compared to the company tax rate of 30% or 27.5% in Australia. “The tax rate in Hong Kong is tiered,” explains Luca. “Those with a profit of 2 Million HKD ($A332,000), for example, pay tax at 8.25%. This company rate is an excellent incentive for Australian startups, while those who wish to raise capital also gravitate to Hong Kong because it’s a major financial hub.”

SMEs can also solve Australia’s tyranny of distance by establishing a commercial foothold in Hong Kong, advises Luca. “For local companies, Australia’s isolation makes it difficult to do business globally. On the flipside, Hong Kong is the ideal location to do business in Asia.”

Virtual teams or local presence 

In the past, Australian companies were advised a physical presence in Hong Kong was vital to commercial success. A fly-in/fly-out approach was frowned upon and, at worse accelerated business failure. However, Luca says that a physical presence is not as critical since COVID. “Most business operations have gone online, and I have noticed that companies have teams in Hong Kong and Australia working virtually. 

“Having said that, a presence in Hong Kong is essential as the government supports local companies with a wide range of financial support, particularly startups. For example, they have waived registration fees.”

He continues, “Trying to run a business in Hong Kong from Australia is exceedingly difficult as you are so far away from the local markets. So, having a couple of people on the ground in Hong Kong will help.”

Language is also no barrier to doing business in Hong Kong. As a former British colony, English is spoken extensively across the city. Luca adds, “Also, you can easily find people speaking English, Cantonese, and Mandarin, which is especially useful if you are seeking to approach Mainland China.” 

Working with InvestHK

InvestHK operates from Hong Kong House in Druitt Street, Sydney and is a representative office of the Hong Kong Special Administrative Region’s Government. Its remit includes assisting businesses in Australia and New Zealand establish commercial interests in the global city. InvestHK also works hand in glove with the Hong Kong Private Development Council, which is focused on trade and taking Australian companies to trade shows. 

As part of its broad range of services, InvestHK offers sector-specific business opportunities, tax and business regulations guidance. It also provides advice about employment legislation, immigration and visa requirements, networking opportunities, business incorporation procedures, cost of business models, recruitment and trademark registration and trade regulations. Luca adds, “All Invest HK’s services are entirely free of charge.

“We work hard to grasp a company’s needs and help them in the initial stage to understand the Hong Kong market. Then when they are ready to expand, we put them in touch with their counterparts in Hong Kong, and we help with some marketing and promotions using our channels.”

InvestHK will be joining us at the SBAA International Small Business Summit 2021 to help create more B2B opportunties.

To find out more about InvestHK call (02) 9286 2358 or visit www.investhk.gov.hk

To find out more about becoming a member of SBAA, call us today on 1300 413 915.