Hong Kong - Country Commercial Guide
Hong Kong & Macau - Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2022-01-20

The situation in Hong Kong, including its business operating environment, has become more challenging for some of the 1,200-plus U.S. companies currently in the city.  While Hong Kong remains a desirable location for many companies seeking to sell into China or in the broader region, developments over the last year in Hong Kong present clear operational, financial, legal, and reputational risks for multinational firms operating there. Policies implemented by the Chinese government and the government of Hong Kong have undermined the legal and regulatory environment that is critical for businesses to operate freely and with legal certainty in Hong Kong.  On July 16, 2021, the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security, issued a business advisory to U.S. businesses regarding potential risks to their operations and activities in Hong Kong.

Following the sharp 6.1 percent contraction in 2020, Hong Kong’s economy started to rebound in 2021 as the Covid-19 pandemic has been gradually brought under control in the territory.  In real terms, GDP increased by 7.9 percent in the first quarter of 2021.  However, Hong Kong’s economy remains largely hobbled due to the ongoing Covid-19 controls that severely limit non-Hong Kong ID holders to travel to the territory.  Nevertheless, and despite the imposition of the National Security Law (NSL) by Beijing, significant curtailments in individual freedoms, and the end of Hong Kong’s ability to exercise the degree of autonomy it enjoyed in the past, Hong Kong remains a popular destination for U.S. investment and trade.  Even with a population of less than eight million, Hong Kong is the United States’ twelfth-largest export market, thirteenth largest for total agricultural products, and sixth largest for high-value consumer food and beverage products.  Hong Kong’s economy, with world-class institutions and still comparatively robust regulatory systems, is bolstered by its competitive financial and professional services, trading, logistics, and in normal non-pandemic times, tourism. 

According to Hong Kong government statistics, in 2020, there were 1,283 subsidiaries of U.S. parent companies in Hong Kong, making the United States the third-largest source of international subsidiaries in Hong Kong.  Among those U.S. firms, 690 are regional headquarters or regional offices.

Hong Kong’s key characteristics include its open trade and investment climate, its geographic proximity to Asian markets, and its attraction as a tourism destination.

· Population: 7,474,200 (end-year 2020)

· Visitors: 3.57 million (2020)

· Total GDP: US$344.7 billion (2020)

· GDP Per Capita: US$46,701 (2020)

· GDP Growth: -6.1 percent (2020)

· Trade to GDP Ratio: 305 percent (2020)

· U.S. Exports: US$23.99 billion (2020)

Major trading partners:  Mainland China, United States, EU, Japan, South Korea, Taiwan, India, and ASEAN countries.

Key Characteristics:

Hong Kong is a Special Administrative Region of China. There are numerous business opportunities given Hong Kong’s finance and marketing talent base, sophisticated infrastructure, and access to mainland China’s manufacturing centers. A large number of Hong Kong manufacturers have production facilities in South China’s Greater Bay Area, with Hong Kong functioning as the region’s services and trade hub. Mainland China is Hong Kong’s largest trading partner. The city is also known for its world-class infrastructure; lack of restrictions on inward or outward investment; lack of foreign exchange controls; no nationality restrictions on corporate or sectoral ownership; a simple, low-tax regime; and its reputation as a global financial hub.

Hong Kong’s economy is increasingly tied to the mainland. The Closer Economic Partnership Arrangement (CEPA) offers Hong Kong’s products and firms preferential access to the mainland market. CEPA goes beyond China’s World Trade Organization (WTO) commitments, eliminating tariffs and allowing earlier or preferential access to some services sectors. Overseas companies can also benefit from CEPA. For trade in goods, foreign investors can set up production lines in Hong Kong to produce goods that meet the CEPA rules of origin requirements. For trade in services, companies incorporated in Hong Kong by foreign investors can make use of CEPA as long as they satisfy the eligibility criteria of a “Hong Kong Service Supplier”.  For example, they must be engaged in business operations in Hong Kong for three to five years or partner with or acquire a CEPA-qualified company.

In February 2019, the PRC central government promulgated the Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) Initiative.   The Outline Development Plan aims to “define the core principles, strategic positioning, development goals, and targets that will leverage the strengths of each city within the GBA region in a synergistic manner to drive trade and economic growth”. The GBA Initiative also intends to use Hong Kong’s robust financial regulatory regime to promote cross-border businesses operating in insurance, securities, and wealth management sectors and expand internationalization of the Chinese currency, renminbi (RMB). The Hong Kong government established a GBA Development Office in November 2020.

Macau is also a Special Administrative Region of China that shares many structural similarities with its close neighbor Hong Kong, yet it offers U.S. suppliers a market with distinct characteristics and opportunities. In this guide, Macau is treated under each chapter following Hong Kong, with emphasis placed on those areas where the business climate diverges.

Formerly a Portuguese colony, Macau became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) upon reversion to China on December 20, 1999. Macau maintains a high degree of autonomy except in foreign affairs and defense, and retains its own currency, laws, and border controls. Macau does not use common law, but rather code law patterned on the Portuguese system.

Macau’s GDP contracted by 56.3 percent in 2020. The economic setback was mainly driven by the Covid-19 pandemic and associated economic shutdown since March 2020, causing the gaming and tourism sectors significant financial losses. Although PRC authorities resumed issuing tourist visas allowing the mass return of gamblers tourists from mainland China to the city since September 2020, the tourism and gaming sectors’ recovery is taking longer than expected due to the sudden resurgence of Covid-19 cases in Guangdong province and local sporadic outbreak cases with Covid-19 cases. The tourism-dependent economy has shown slight improvement starting in 2021 on the account of the gradual lifting of travel restrictions for Chinese visitors. Macau’s GDP growth in the first half of 2021 recorded a 23.7 percent increase compared with the same period last year, but also represented a record 47.4 percent slump compared to the first six months in 2019, long before the pandemic began.

Like Hong Kong, Macau is a free port with low taxation. Since liberalizing the gaming industry in 2002, industry experts calculate that Macau has received US$23.8 billion in U.S. foreign direct investment in the gaming industry (through 2016), spurring visitors and consumption. Other growth areas have typically included finance, insurance, construction, real estate, retail, and meetings, incentives, conferences and exhibitions (MICE) industry. Macau’s exports include textiles, garments, machines and apparatus, footwear, tobacco, food and beverages, and consumer goods. The main export markets are Hong Kong, mainland China, EU, United States, and Japan, while imports originate primarily from mainland China, Hong Kong, EU, Japan, United States, and Switzerland.

Macau’s huge gaming sector dominates the economy. Taxes on gaming revenues accounted for 64.8 percent of the Government of Macau’s (GOM) revenues in 2020. For the first nine months of 2021, the Macau government has collected approximately US$ 3.4 billion in gaming tax, accounting for 69.44 percent of the Treasury revenue during the period.

Macau’s key characteristics are its tourism potential and inbound investment.

  • Population: 682,300 (at the end of September 2021)
  • Visitors:   3.93 million (as of the first half of 2021)
  • Total GDP: US$14.48 billion (as of the first half of 2021)
  • GDP Per Capita: US$36,350 (2020)
  • U.S. Exports: US$1.067 billion, 8.99 percent of Macau’s imports (2020)

Source: Macau Statistic and Census Service

Trading Partners: Mainland China, Hong Kong, Japan, EU, Switzerland, and United States.

Macau also enjoys a Closer Economic Partnership Arrangement (CEPA) with mainland China. Macau’s 2003 agreement with mainland China – largely parallel to the arrangement Hong Kong enjoys with the mainland – has enhanced its economic integration with the PRC.  In October 2017, Macau and Hong Kong signed a CEPA to strengthen economic and commercial relations between the two cities. On January 1, 2018, the CEPA between Macau and Hong Kong became effective.