Australia, Japan, and several other nations in the Asia region are creating incentives to attract asset managers, banks and other finance related enterprises in Hong Kong, that are worried about the impact of the deepening US – China trade war and the new security law imposed by mainland China, but Hong Kong financial industry experts said that if they move, it will be to Singapore.
Singapore has many similarities to Hong Kong, including an advanced IT infrastructure, which gives it an advantage, while bloated bureaucracies, cultural differences, high costs and taxes present challenges to these destinations and make them less attractive to Hong Kong’s financial enterprises.
On July 1st, Beijing imposed a tough national security law on Hong Kong, which is the regional home to many global financial groups and has prompted companies to reassess their operations there and begin contingency plans for moves to other domiciles.
Australian Senator Andrew Bragg wrote to Australia's Treasurer this month, proposing policy changes and said, "The political upheaval in Hong Kong has created an opportunity for Australia and Sydney to become a stronger regional financial center."
Following news that HK financial companies were considering moving, Japanese officials issued an economic policy roadmap this month that includes attracting "excellent human resources" to the country so that it can create a global financial center. Policy proposals include streamlining approvals for financial industry and investment management licenses and visa support for employees who may be assigned to Japan.
Japan’s negatives include complicated administrative regulations, higher labor costs, poor English language skills by most workers and high corporate taxes.
Hong Kong's corporate tax rate of 16.5% profits is only 50% of Australia and Japan's tax rates, and among the lowest in the region and is one of the key factors that make it such an attractive regional hub for many banks and finance companies.
Other regional destinations, including Busan and Taipei are also looking at the incentives that they could offer, including free office spaces, reimbursement of many relocation fees and various tax breaks. However, most of these incentives do not offset what are the negatives in each destination.
Cultural differences and language barriers also make many destinations less attractive when compared to Hong Kong and convincing managers and senior staff to give up an international lifestyle in Hong Kong is another challenge.
Sally Loane, the CEO of the Financial Services Council said that cultural issues are less of an issue in Australia but that the country needs to implement greater tax reform and make regulatory changes to align its fund management industry with other Asian jurisdictions to attract Hong Kong business.
Many financial industry experts say that at the end of the day, Singapore is the most likely destination to benefit from relocation, thanks to its corporate tax rate of 17%, a business friendly environment, and its standing as a financial center.
Jason Salim, a Singapore-based analyst at risk consultancy Control Risks notes that, "Everyone is competing for talent but in terms of population, economic profile, and ease of doing business, Singapore is the most similar to Hong Kong."