Why You Should Set-Up Your Business In The Greater Bay Area via Hong Kong

The Greater Bay Area (GBA), a region in the Southern coastal area of China (depicted below), with a population of roughly 86 million and one of the highest GDP (gross domestic product) regions throughout the world, receives investments from all over the globe. Meanwhile, the 56,000 square kilometers land area, which is home to over 9 major cities in China, including Hong Kong and Macau, receives nearly 73% of all its investments from Hong Kong. We unravel what could become the new goldmine of the East.

Innovation Corridor

Over time, Hong Kong has been known to be used as a steppingstone to tap into the Mainland Chinese market, leading Hong Kong to attract global businesses, mainly multinational enterprises (MNEs), of which 9,000 were recorded in 2021 from outside of Hong Kong. The potential and growth of the GBA is no secret anymore due to its geographical location, and well-developed infrastructure as one of its key factors.


A map outlining the individual regions of The Greater Bay Area


Throughout the area, with a complete supply chain, innovation and technology is the main industry businesses find themselves in. Potential of up-and-coming businesses is immense within high-tech, advanced manufacturing, biotech and medicine. Hong Kong plays a key role in this area, as it is the entrance of the STIC (Science and Technology Innovation Corridor), an industrial belt which connects Hong Kong and Guangzhou, where either destination can be reached in 47 minutes with the Hong Kong Express Rail Link that includes stopovers in Shenzhen and Dongguan.


The bigger, the better

Industries in nearly all areas of business are grabbing the attention of most investors due to the ongoing rapid growth. High-tech innovations, with high manufacturing capabilities and a new generation in the IT industry, are pumping 160bn US Dollars into the economy itself.


''Potential of up-and-coming businesses is immense within high-tech, advanced manufacturing, biotech and medicine.''

Financial Services, such as HKSE (Hong Kong Stock Exchange) and SZSE (Shenzhen Stock Exchange) are priority boards for listing, especially when it comes to innovation companies. Other industries, such as trade and commerce, advanced manufacturing and biotech and medicine, are added to the list and are gaining the interest of many investors across the globe. Additionally, for the companies to create more qualitative products, the subsidiaries may benefit from the Western manufacturing accuracy and other related innovation fields which are relevant to upgrade operations and stand out in its designated market.


Across the counter

Setting up a business or creating a business expansion in the GBA is usually acquired through Hong Kong, due to its simplistic and fast-track procedures. A company can be established in less than 7-9 business days and is now even available through online submissions. Although, to achieve maximum efficiency, it is advised to stay traditional and visit the Companies Registry and Business Registration Office in person where documents are certified across the counter after only thirty minutes. Worldwide, setting up a business in Hong Kong is one of the easiest locations to do so, proven by over 9,000 current parent companies from outside of Hong Kong and nearly 1,500 regional headquarters set up in the ‘’Fragrant Harbour’’.


With ongoing developments of social and residential infrastructures, such as Lantau Tomorrow Vision and the Northern Metropolis Development scheme, as well as experimental business zones to facilitate logistics, financial and IT services in the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and Guangdong-Macau In-Depth Cooperation Zone, Hong Kong, Shenzhen, and the other cities are becoming a megaregion, providing nearly endless investment opportunities.


''Worldwide, setting up a business in Hong Kong is one of the easiest locations to do so, proven by over 9,000 current parent companies from outside of Hong Kong.''

The Main(land) attraction

The GBA has not only grown thanks to overseas countries interested into tapping into the Chinese market but also due to the high support it has received from its central government.


However, the main problem that Hong Kong residents and Hong Kong companies are facing when considering moving their operations or part of their operations to the GBA is that every Hong Kong resident that considers working in Mainland China requires a proper Chinese working permit, even if the individual holds a PRC (People’s Republic of China) passport. Obtaining a working permit for Mainland China can be quite cumbersome and time consuming so that many companies do not wish to take these additional operational costs into consideration.


''Hong Kong’s tax system may be replicated similarly in the GBA by relaxing the income tax calculation by abolishing the ‘’183 days’’ threshold and providing subsidies to Hong Kong residents.''

Further, while Hong Kong’s tax system is simple with low rates, its counterpart in the Mainland is complicated and with high tax rates. Corporate Income Tax (CIT) in Mainland China is usually 25% (compared to not more than 16.5% in Hong Kong) and Personal Income Tax (PIT) raises progressively to up to 45% (compared to no more than 15% in Hong Kong). In addition, Mainland China is taxing income that is completely tax free in Hong Kong, such as dividends, interest, or capital gains, making a move from Hong Kong to the GBA rather unattractive for Hong Kong individuals as well as corporate entities.


Therefore, the central government has implemented more supportive measures and is looking to add more benefits to avoid the doubts of companies and residents that are looking into expanding into the GBA. To deepen the integration between the regions, work permit requirements are expected to be abolished with an introduction to the Greater Bay Area's ‘’Green Cards’’, which in return leads to an introduction of residence permits.


Additionally, the footsteps of Hong Kong’s tax system may be replicated similarly in the GBA by relaxing the income tax calculation by abolishing the ‘’183 days’’ threshold and providing subsidies to Hong Kong residents that move to the GBA, helping them to match their local Hong Kong tax rate for their income generated in the GBA. It appears that this has already been successfully implemented in two regions and aims to extend the scope of tax subsidies. Further supportive measures which are planned to be implemented by the central government for Hong Kongers to pack their bags and relocate are:


➢ Promoting green financial corporations in the GBA

➢ Mutual recognition of professional qualifications

➢ Streamline immigration clearance procedures

➢ Reduce and waive mobile roaming charges

➢ Cross-border e-wallet services

➢ Boost cross-border investment and financing

➢ Recruiting Hong Kong and Macao citizens by public institutions

➢ Supporting the use of mobile electronic payments by Hong Kong residents on the Mainland


More and more companies and individuals are looking to migrate to the GBA, be it due to its resources or its business profitability. The development of individual areas, especially with many strategies of development in place, is expected to be a matter of time until it becomes the innovation hot spot of the world.


Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.


For specific advice about your situation, please contact:


Stefan Schmierer

Managing Partner

+852 2388 3899

sschmierer@rs-lawyers.com.hk


In May 2021, we issued an article about Special Acquisition Companies “SPACs”, which can serve as an accelerated way to publicly list a company and raise further capital, compared to a traditional IP