Many investors are becoming more optimistic about the economic outlook after the full resumption of normal travel between Hong Kong and the mainland post‑pandemic. Huang Zeyan [1], partner of JD Investment Management Ltd, a company that provides cross‑boundary investment and financing management services, and a mainland lawyer in his own right, pointed out that while investors remain cautious in the short term in view of global economic uncertainties, Hong Kong as an open economy will continue to be an important bridge connecting the mainland and overseas markets, due to its economic links with international partners and excellent geographical location. In addition to re‑exporting mainland products to overseas markets, the city also offers a wide range of professional services to help mainland enterprises develop international business, and serves as the preferred service platform for foreign companies venturing into the mainland. With the mainland economy gradually returning to normal, Hong Kong will see a surge in business opportunities across the border.

Investors increasingly optimistic

In an interview with HKTDC Research, Huang said that quarantine measures for inbound travellers in the past three years significantly affected travel between Hong Kong, mainland China, and other countries. The lack of face‑to‑face meetings to discuss potential co‑operation impacted the overseas investment activities of some mainland and Hong Kong companies, and the professional service providers in Hong Kong saw reduced business. However, following Hong Kong's gradual easing of border control measures and mainland China's full resumption of normal cross‑border travel in January 2023, investors and companies have begun to feel cautiously optimistic about the market outlook. Nonetheless, Huang reckoned that investors would continue to play safe in the short term. In view of the sluggish global economy, high inflation and consequent interest rate hikes by central banks around the globe, he believed it would take a while for overseas investment activities to return to normal.

Controlling risk

Investors are concerned not only with economic factors but also with global geopolitical developments. In Huang’s opinion, although Hong Kong is an independent economy under “one country, two systems”, geopolitical tensions and China’s growing friction with some of its trading partners in recent years have inevitably affected those conducting overseas business activities via Hong Kong. The difficulty in predicting geopolitical developments adds risk for overseas investments and slows down the progress of some cross‑boundary investment projects. Therefore, when “going out”, both Hong Kong and mainland enterprises need to enhance due diligence and risk assessment to ensure that their projects meet the compliance requirements of relevant overseas markets. Huang noted that it may be necessary to include an exemption clause when entering into co‑operation arrangements with overseas partners, to protect against geopolitical uncertainty.

Hong Kong service platform

Mainland China is one of the world’s biggest consumer markets, offering business opportunities neither domestic nor foreign enterprises can afford to overlook, and Hong Kong is an important springboard for foreign investors eyeing the Chinese market. While investors may choose between Hong Kong and other centres as the most suitable investment service platform when targeting Southeast Asia and other overseas countries, Huang observed that Hong Kong is undoubtedly the preferred option if their target market is mainland China. Professional service providers in Hong Kong know the mainland well and can assist foreign investors with mainland laws and regulations. For market development, Hong Kong may reach across mainland cities in the Greater Bay Area to help foreign companies expand into the entire mainland market and find better investment opportunities.

Hong Kong is also an important service platform for mainland enterprises “going out”. In Huang’s opinion, overseas enterprises generally only consider commercial factors in their business operations and seldom think about matters such as foreign exchange control, government regulations and record‑filing for overseas investments. However, mainland enterprises may need to submit information to the mainland government for approval before making overseas investments. To avoid contract breaches when signing agreements with overseas companies, they may need to include clauses addressing failure to get the go ahead from the relevant authorities for a project, record‑filing or currency exchange. Many mainland enterprises first set up a company in Hong Kong before venturing overseas in order to leverage on the city’s professional services to make more appropriate business arrangements. Huang stressed that while there are differences in business environment between overseas countries and the mainland, Hong Kong’s professional service providers, banks and law firms can help companies comply with mainland laws and regulations. Hong Kong has a law‑abiding environment, multiple languages and a business culture aligned with international practices, all of which help mainland enterprises to develop their overseas business more effectively. Therefore, Hong Kong should see a surge in business as foreign enterprises progress their ventures into China and mainland enterprises step up their efforts in “going out”.  

[1] Huang Zeyan (registered as a foreign lawyer (mainland China) with The Law Society of Hong Kong) is a China law consultant with the Hong Kong law firm Henry Yu & Associates . He is also a partner of JD Investment Management Ltd, which mainly provides solutions and services in areas such as investment, financing, initial public offer and acquisitions and mergers to mainland and Hong Kong companies.

[2] Huang was interviewed jointly by HKTDC Research and the China Business Adviser (seconded from the Shanghai Municipal Commission of Commerce to HKTDC) in the first quarter of 2023.