Selecting nations for company expansion may be tough. As an ambitious entrepreneur, you may have heard about Hong Kong’s rich business environment and questioned if starting a firm there is worth it. Let’s discuss the 5 main drawbacks of company registration in Hong Kong in this article to help you understand the risks and drawbacks of this business venture and decide if you should do it.
1. Corporate bank account opening difficulty
Establishing business platforms and everyday operations is crucial when starting a Hong Kong firm. A corporate bank account provides financial services that enable company transactions and funding.
Unlike setting up a business in Hong Kong, establishing a corporate bank account is laborious and difficult. First, especially with conventional banks in Hong Kong, setting up an account may be expensive and time-consuming, with no guarantee that your business bank account application will be granted. When creating a corporate bank account, the bank teller must accept your application, but there are other steps. Instead, all company directors must be present for the application to begin processing.
Business owners must prepare documentation and paperwork before visiting a regular bank to create a corporate bank account, unlike a personal bank account.
2. High rent
Hong Kong’s property prices have been among the world’s highest for seven years, so firms that need a physical presence may pay more. Hong Kong’s core region’s commercial property rental rates are 57% more than Tokyo’s, while retail property rental prices are greater than New York’s 5th avenue. Thus, high rental fees may be a drawback for firms establishing in Hong Kong, especially those that need offices and infrastructure.
3. Strict business rules
Financial firms seeking to establish themselves in Hong Kong face severe corporate laws. Hong Kong has even harsher controls on financial enterprises than China, where many financial firms already struggle to establish and operate. Financial businesses’ finance and capital-raising attempts are also restricted, hindering their company operations.
4. Expensive living
Hong Kong’s typical 500ft apartment rents for HKD$15,000. In the Central area, renting an office costs $72 per foot per month.
Hong Kong’s entertainment services, notably bars, are expensive, with a cocktail costing at least HKD$80 per glass, contributing to the high cost of living. This may disadvantage new firms contemplating starting up a company in Hong Kong since its staff will have to suffer from these cost constraints, resulting in higher salaries and higher costs for the business.
5. SME structural barriers
Hong Kong SMEs struggle with cash flow, especially when it comes to consumer payments. Singapore has the largest accounts receivable waiting time at 41 days, whereas Hong Kong SMEs must wait 34 days to receive consumer payments. This can significantly effect capital and cash flow efficiency of the organization.
Given Hong Kong’s liberalized economy, SMEs receive limited government support. Only 16% of company owners surveyed said government policy empowers their operations. SMEs, especially those with significant start-up costs, struggle to get capital.
Conclusion
Managing Hong Kong’s complex business environment can be difficult. Many firms avoid Hong Kong due to high prices, an ineffective corporate banking system, and severe company laws.
This article has helped you understand the main drawbacks to setting up a company in Hong Kong so you can decide if you should do so.
If you are an aspiring entrepreneur who wants to start a business in Hong Kong despite these drawbacks, contact Fintech Harbor to learn more about the process. The dedicated and experienced team will respond within 24 hours! Fintech Harbor Consulting will help you navigate Hong Kong’s regulations, register your company, and provide valuable, nuanced insights into potential issues.
