Hong Kong, China Market Entry

Hong Kong, China Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Based on the experience of companies already established on the local market, it is clearly recommended to find a local business partner. This procedure will also significantly facilitate further possible penetration into the markets of southern China. In this context, we recommend participation in international fairs organized in Hong Kong.

According to cheeroutdoor.com, the classic model is applied: import – distribution – retail. There is a strong tendency for consumer goods to be imported directly from the manufacturer. Hong Kong firms are relatively small. Their advantage is the ability (often based on traditional long-term business relationships) to find customers and re-export goods to China and other countries in the region.

Park’n’Shop, Welcome, Vangard, 7Eleven and others operate in Hong Kong. Watson’s and Mannings stores have a dominant position in the drugstore and cosmetics sector. The largest electronic portal for the sale of goods is HKTV Mall. In the territory there is a large concentration of stores of luxury fashion brands such as Max Mara, Luis Vuitton, E. Zegna, Prada, etc., despite the counterfeiting of their products imported from mainland China, in the past they generated high profits thanks to the high purchasing power of the local population and (Chinese) visitors to Hong Kong. Social unrest and the subsequent Covid pandemic led to a decline in sales, and the question is how permanent this situation is.

No tariff/non-tariff barriers are applied to trade. The export and import regime is liberal; customs duty does not exist as well as value added tax, consumption taxes are charged on alcohol (with an alcohol content above 30%); then tobacco products and hydrocarbon oils. The usual items (weapons, narcotics, etc.) are subject to import and export controls. A declaration fee applies to all exports, imports and re-exports (HKD 0.2 for the first HKD 46,000 of the declared value of the goods + HKD 0.125 for each additional HKD 1,000), with food a flat rate of HKD 0.2 regardless of volume and value. Imported vehicles are subject to a registration fee as a percentage of the vehicle’s retail price. Notwithstanding the foregoing, each

Forms and conditions of operation on the market

Entrepreneurs can use a variety of forms of representation in Hong Kong. The most used are two forms, i.e. a private limited company (Private Limited Company) or the form of a branch of a foreign company (Branch of Foreign Company). These companies must be registered in the so-called Companies Registry and at the same time must receive a Business Registration Certificate from the Business Registration Office of the Inland Revenue Department every year. A natural person must register within 1 month from the start of business activity, a legal entity within 1 month from the date of registration in the Companies Registry. This also applies to companies registered abroad, which must register with the Companies Registry within 1 month of establishing their Hong Kong branch.

The procedure is very simple and the registration fees are moderate. For Private Ltd. Co., there is no minimum capital or any deposit or advance. The compounded capital must be in cash, but can be used to purchase a franchise, patents or know-how. There is no limit to individual subscribed shares or the currency of these shares. In the case of a public company, the procedure is the same, but in practice a higher paid-up capital is required. The number of co-owners, shareholders of a private or public company can be from 1 to 50, there are no restrictions regarding the nationality or residency of the owners. The entire registration process is easiest to assign to a legal office (the price including other services such as accounting, including taxes, etc. is about 3500 USD/year).

Marketing and communication

The financial burden of marketing activities is significant due to the strong competition and at the same time high price level, but it is necessary. About 300 international conference and exhibition events are held annually in Hong Kong under non-pandemic conditions. Most of the fairs are among the most important in Asia. The toy and gift fairs (twice a year) are the largest in the region, the fashion and accessories fairs are very well-known, and the electrical engineering, household goods and equipment, costume jewelry, jewelry and watch fairs are among the largest in the world.

An ideal form of communication and marketing aimed at the parallel use of multiple channels as part of an omnichannel strategy. The local population is literally hanging on their mobile phones. Investing in ads on FB, Instagram is therefore certainly a good choice. However, it is very difficult to stand out from the crowd of competitors. Therefore, even the use of local influencers may not be a guaranteed path to success.

Hong Kong’s multifunctional Convention and Exhibition Center has a long and successful tradition in organizing trade fairs, which is one of the largest exhibition complexes in Asia (5 exhibition halls, 2 conference halls, 2 first-class concert/theatre halls, 52 meeting rooms of various sizes, 2 large foyers and others background). Due to the great interest of exhibitors, an extension was completed in 2009, which increased the total exhibition area to 83,000 m2. In December 2005, a second exhibition center was opened in Hong Kong – Asia World Expo, which is built on Lantau Island near the airport.

Issues of intellectual property protection

Hong Kong has been a member of the WTO since 1 January 1995 and a signatory to the GATT since 23 April 1986. The importance of intellectual property protection in Hong Kong can be illustrated by the fact that it is firmly enshrined in the local mini-constitution (specifically in Articles 139 and 140). The Hong Kong government is very careful about the protection of intellectual property, but in many cases it is necessary to properly register your product, patent, or trademark in Hong Kong, so that the level of protection guaranteed to the local authorities is full-fledged.

An important aspect of the protection of intellectual property is also the issue of preventing the counterfeiting of trademarks and the illegal reproduction of works of art. Hong Kong has a large concentration of high-end stores of well-known consumer goods brands that thrive on the purchasing power of visitors and Hong Kong residents alike. “Counterfeit” consumer goods (watches, handbags, DVDs, textiles, etc.) are occasionally offered in markets and their sale is suppressed by the local police. Considering the huge amount of goods crossing the border between Hong Kong and the PRC, the Hong Kong Customs is quite successful in fighting the importation of counterfeit products. Since 2006, Hong Kong Customs has been using the Fast Action Scheme (FAS) to combat the misuse of registered trademarks at Hong Kong trade fairs. This program is applied at the largest fairs,

The Intellectual Property Department of the HK Government is responsible for copyright, trademark and software registration in HK.

In addition, there is a free EUIPR Helpdesk service for SMEs.

Overview information is available here.

Public procurement market

The legal basis for autonomous public procurement is contained in Hong Kong’s mini-constitution. Hong Kong is a signatory to the Government Procurement Agreement and all procedures are in accordance with standard international rules. Government contracts worth more than HKD million (for goods and general services), HKD 3 million (for consultancy services) and HKD 7 million (for construction and engineering services) are usually carried out through open and competitive bidding with with the aim of obtaining the best price-quality ratio. Limited tenders are only permitted under certain exceptional circumstances. The Government Logistics Department is the main government procurement body.

Calls for tenders are published in the Government Gazette. If necessary, they are published on the Internet or in local and / or international press and magazines. Contracting authorities are obliged to provide in the procurement documentation all necessary information that will help bidders with the preparation of their bids. When drawing up tender documentation for goods or services to be tendered, procuring entities are obliged to ensure that the characteristics set for the products or services are based on functional and performance requirements. Where standards are referred to, they should be international standards where possible.

The procurement documents usually contain standard contract forms covering general aspects of the tender and contract requirements, special contract conditions, detailed price schedules, other information and instructions relating to the specific contract. Tender documentation is usually issued free of charge, but contracting authorities may request the costs of tender documentation from bidders. Basic information on the public procurement market is available here.

Payment terms, payment ethics and resolution of commercial disputes

Hong Kong is a mature, liberal and highly competitive market with a quality legal environment with standard business risks in the case of market development investments. There are no risks of restrictions regarding transfer, exchangeability, national debt, etc. The Czech Republic does not have an agreement with Hong Kong on the mutual protection and support of investments.

Based on the experience of Czech entities, the payment conditions are good. Recently, GK Hongkong has noticed an increased frequency of cases where a Czech customer paid for goods that were not delivered. As part of the investigation, it was found that it was always a Chinese company that had a virtual company established in Hong Kong without any physical presence of its representative. This model is common in Hong Kong because this method greatly facilitates payment transactions with foreign partners for Chinese companies and provides them with other advantages, for example in the tax field. Checking the bank’s headquarters before sending the payment can be a partial prevention against fraudulent behavior. As a general rule, it should be a bank based in Hong Kong and not in mainland China.

The judiciary works independently and quickly. In addition to the general courts, commercial disputes are settled at the Hong Kong International Arbitration Centre. The matter must first be dealt with by the local police before starting legal proceedings. Criminal reports can be lodged with the local police (Commercial Crime Bureau) in person or by email at [email protected]

Visas, fees, specific conditions for traveling to the territory

Hong Kong is the aviation hub of Asia with a flight distance to all major Asian cities in less than 5 hours. Traveling from Europe is also quite convenient. None of the airlines currently offer direct flights from the Czech Republic, but with one transfer it is possible to fly comfortably with most of the main European airlines – KLM, FinnAir, Lufthansa, Air France, British Airways. Flights from Prague to Hong Kong are also offered by Quatar Airways, Turkish Airlines and Emirates. However, it is necessary to expect a significant reduction in the number of flights due to the prevailing strict arrival measures in HK. Unfortunately, during the ongoing coronavirus pandemic, Hong Kong airport operations are severely restricted. The number of connections is limited due to the strict conditions and the relatively small number of passengers.

Currently, everyone is allowed to enter the territory without restrictions, but under the condition of passing a weekly hotel quarantine. As a rule, airlines do not allow boarding without proof of booked quarantine equipment. A valid PCR test is still required upon arrival. At the same time, it is necessary to take into account that it is currently almost impossible to use services (restaurants, fitness centers, shopping centers, supermarkets) without using a local tracking application and without completing the vaccination cycle.

Under normal circumstances, there is a bilateral visa-free regime for a tourist stay of up to 90 days. Hong Kong is a safe territory with a very good public transport network. We do not recommend renting a vehicle, as it is only possible with a local driver’s license. Your international driver’s license will not be recognized without an on-site check. The local taxi service will take you anywhere in the city at an affordable price. A taxi is very easy to recognize, the cars are red, green or blue and clearly marked. There is no fraud. It is possible to use Uber services in the territory.

Employment of citizens from the Czech Republic

If you are considering moving to Hong Kong for the purpose of employment or business, the first step is to obtain a work visa. Hong Kong has several regimes that allow the granting of a work visa subject to the fulfillment of prescribed criteria. More specifically, these regimes are explained on the website of the Immigration Department, which is the responsible authority in the field of migration to Hong Kong.

The basic regime for employees is called the General Employment Policy, which is in no way limited by sector or number. The total number of these work visas granted in 2020 was 14,617. A specific scheme is the Technology Talent Admission Scheme (TechTAS), which focuses on specialists in technical fields. This is a scheme that allows local companies to attract talented specialists who are interested in participating in research and development in HK. An eligible company must first apply to the Commission for Innovation and Technology to be allocated a quota. Only after the quota has been allocated can the work visa application process begin. Another special regime focuses on entrepreneurs and investors. Specific conditions also apply to students and persons who want to complete qualification programs lasting 12 months, so-called training.

Since May 2011, a minimum hourly wage has been set by law in Hong Kong. This was gradually increased to the current value of HKD 37.5 per hour. Healthcare is of a high standard in Hong Kong. The health care system itself is divided into two options: public health care and private medical care. If you opt for the public health care option, you do not need private Hong Kong health insurance. Public medical care is administered by the Hong Kong Ministry of Health together with the Hospital Authority.

Fairs and events

It is still true that a number of fairs are canceled, converted to an online format, or take place in a hybrid format. The problem is the prevailing strict measures, which, for example, in the F&B segment make product tasting impossible. It is also necessary to take into account that, due to quarantine measures, participation in fairs is still very local.

  • HOFEX – this is one of the largest Asian fairs in the field of food and hospitality.
  • InternationalTravel Expo – a trade fair focusing on the tourism industry.
  • ECOExpo Asia – environmental technology fair.
  • Wine& Spirits – a specialized trade fair for wineries and alcoholic beverages.
  • AsiaSummit on Global Health – this is the first edition of the summit, which is expected to be attended by personalities from the government and business.

Hong Kong, China Market Entry