Successfully investing in Hong Kong (S.A.R.)


published on May 16, 2018


How do you assess the current economic situation in Hong Kong?

Hong Kong is close to mainland China not only in geographical but also in economic terms. Because the economy in China has somewhat stabilised again, this has also added impetus to the economy of Hong Kong. At the end of 2017, Hong Kong's economy was flourishing. The real Gross Domestic Product (GDP) grew by 3.9 per cent in the first three quarters of the year compared to the same period of the previous year. By contrast, the 2016 growth was only 2 per cent (source: Hong Kong Trade Development Council). Based on the economic indicators, it is expected that the positive economic development will continue in 2018. 

How would you describe the investment climate in Hong Kong? Which sectors offer the largest potential?

Currently, businesses are investing heavily in the infrastructure and the Revenue Department is focusing on Hong Kong's construction industry. The new head of government Carrie Lam has put the provision of affordable housing quite high on her agenda. Coupled with the infrastructure expansion, such as a new railway line between Hong Kong and Guangzhou or the Hong Kong-Zhuhai-Macao Bridge (HZMB) construction project, this will result in further sustained growth of the construction activity. Furthermore, the city should develop into a location for innovations and start-ups; also incubators and accelerator programmes have sprung up in the city. Some start-up and up-and-coming businesses from the high- and fin-tech sector have already made a name for themselves on global markets.


As regards e-commerce, a survey published recently by a renowned consulting firm indicates that demand for on-line shopping in Hong Kong continues to grow rapidly, although the base level was lower than in the Chinese mainland.
In addition, the survey results show that accelerated and more cost-effective delivery processes could encourage Hong Kong consumers to switch from offline to online shopping even faster. Furthermore, consumers call for more customised products and a better shopping experience, e.g. with showrooms, where they could have a closer look at the offered products before deciding whether to buy them.


What challenges do German companies face during their business ventures into Hong Kong?

It is not always easy to find and also to retain highly qualified local staff. The cost of living – especially rental fees – is extremely high in Hong Kong. The salaries have therefore sky-rocketed, putting foreign companies under enormous pressure. In addition, neighbouring Chinese cities – such as Shenzhen – have developed into megalopolises, becoming a rival market to Hong Kong's employers. Tech giants like Huawei and Tencent are headquartered there and have become a particularly hip workplace especially for the younger generation (keyword GenY). As elsewhere, also here it is important to overcome mentality differences and cultural barriers, which requires greater social skills from companies' expert and managerial staff.

Is Hong Kong suitable as a location for e-commerce with China?

As China's Special Administrative Region exempt from VAT and customs duties, Hong Kong is an attractive market, especially for e-tailers looking to break into Asian market. Hong Kong is a perfect location for e-commerce businesses since it is free of Chinese restrictions typically in place in mainland China. Although Alibaba and similar companies dominate the market in China, they often struggle with low quality products and counterfeits. Therefore, foreign e-commerce vendors have the opportunity to assert their position on this market as "gateway providers" of high quality products.  

In your opinion, how will Hong Kong develop?

Hong Kong will remain the banking centre; also Hong Kong's port will not lose its importance as a transshipment point. Since capital and information are flowing here more freely than in mainland China, a business venture into Hong Kong offers investors certain advantages. The connection to the Pearl River Delta offers abundant business opportunities, and Hong Kong's involvement in the Chinese “Belt and Road Initiative” will bring a breath of fresh air for businesses in this port metropolis.


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Dr. Thilo Ketterer


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