Definitive guide to doing business in Hong Kong and Singapore

Many corporates look to Singapore or Hong Kong as strong candidates for their regional centres. Sarah Rundell explores their merits as treasury hubs

As China and Asia-Pacific countries continue to lead global economic growth, so mid-cap and large multinationals are finding more of their cash flow and revenue growth comes from the region.

It means companies are increasingly assessing whether they can still manage their business from single locations or if they should consider setting up, or expanding, regional treasury centres in Asia.

Establishing a regional treasury centre can reduce tax burdens, enable companies to better manage their trapped cash or FX exposures from the right time zone, and give an important ear to the ground.

The choice in the region falls between Singapore and Hong Kong, both of which offer strong regulatory environments, and access to capital markets and treasury talent pools.

As Hong Kong increases its bid to attract regional treasury centres and steal Singapore’s crown, the difference between the two regions is narrowing.

A tale of two cities

Both cities offer similarly competitive tax advantages.

Hong Kong has a low headline tax rate of 16.5%, no withholding tax on interest and dividends, in addition to a concessionary tax rate of 8.25% on qualifying treasury income under the corporate treasury centre incentive, explains Harvey Koenig, tax partner at KPMG in Singapore.

Koenig notes that the corporate treasury centre incentive is in the process of being amended to comply with the Organisation for Economic Co-operation and Development (OECD) guidance on preferential tax regimes.

In 2016, Singapore reduced its tax rate on treasury centres from 10% to 8% on fees, interest and gains from qualifying services and activities, albeit with an increase in qualifying criteria.

Singapore’s key advantage lies in the island’s finance and treasury centre (FTC) incentive already complying with the OECD guidance on preferential regimes, says Koenig. “This provides certainty to multinational companies setting up their regional or global FTCs in Singapore,” he says.

Singapore’s extensive tax treaty network also gives it an edge.

“Hong Kong has made big efforts here and is trying to catch up, but Singapore has a broader network of treaties,” says Damian Glendinning, treasurer at Chinese computer manufacturer Lenovo, which bases its international treasury operations in Singapore.

Given the similarity in tax regimes between the two regions, other factors have become increasingly important for corporates deciding where to locate. Moreover, the influence of taxes in deciding location is muted because treasury centres do not tend to be major profit centres, notes Glendinning.

It’s one reason why Singapore makes much of its long-established relationships with the nine other ASEAN territory members and the preferential investment, regulatory and policy benefits membership brings.

 As Hong Kong increases its bid to attract regional treasury centres and steal Singapore’s crown, the difference between the two regions is narrowing 

Proximity to India, Australia and New Zealand also help position Singapore in Asia-Pacific, in contrast to Hong Kong’s more China-centric approach, says David Blair FCT, managing director of Singapore-based consultancy Acarate: “Traditionally, Hong Kong has been preferred by corporates focused on China for its proximity. Singapore has a better coverage for Asia-Pacific as whole.”

Indeed, Singapore’s wider Asian gateway status is increasingly attracting Chinese investment.

There are now around 6,500 Chinese companies in Singapore, many of which have set up regional treasury operations, out of a total 12,000 multinationals registered on the island. Singapore and China are also fostering cooperation like the Chongqing Connectivity Initiative, which aims to build connections between the southwestern Chinese city’s economy and Singapore.

As of 2016, $4.5bn worth of deals had been brokered between Singapore banks and Chongqing companies under the initiative.

Hong Kong is also wooing Chinese companies looking to expand outside China with its international connections.

China Huaneng Group, State Power Investment Corporation and China Three Gorges Corporation are the latest in a swathe of companies to express their intention to establish or expand their corporate treasury centres in Hong Kong, says Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA).

Chan’s organisation is actively positioning Hong Kong as the preferred gateway for Mainland capital to ‘go global’, particularly among infrastructure and energy groups involved in China’s Belt and Road Initiative.

Hong Kong is also an obvious location for companies planning to establish business operations in Mainland China, seeking the benefit of proximity and the preferential policies Hong Kong has with China.

Yet for some companies, Hong Kong’s historical and social relationship with China and that impact on the rule of law in Hong Kong is a deterrent. By positioning itself as a gateway to China for foreign companies, Hong Kong also brushes up against rival Shanghai, vying to become a global financial centre by 2020, say treasury experts.

“Shanghai 2020 poses a real challenge to Hong Kong as a treasury location – if a corporation wants to base a treasury centre in Greater China, why not go all the way and locate in Shanghai?” asks Blair, although he does note Shanghai’s small number of linguists is a barrier to attracting foreign companies.

The number of companies with business operations in Hong Kong with parent companies overseas and in Mainland China climbed to just under 8,000 in 2016, according to a joint survey conducted by Invest Hong Kong and the Census and Statistics Department.

As of March 2017, there were nearly 4,000 Mainland enterprises in Hong Kong with total assets amounting to HK$20 trillion, says the HKMA.

The renminbi market

Hong Kong’s status as the largest offshore renminbi business centre and payment and settlement hub could also draw companies. At present, around 70% of global renminbi payment transactions are handled via Hong Kong, with its renminbi real-time gross settlement system’s turnover averaging ¥900bn daily.

But Singapore has also entered the renminbi market, establishing itself as a regional gateway for cross-border renminbi arrangements, and treasury experts are circumspect as to whether renminbi settlement capabilities is really a deciding factor when choosing a location, since trade is still mostly settled in dollars.

Moreover, if China’s objective is to make the renminbi an international currency, it will need the currency to trade and settle in as many different countries as possible. “If it is an international currency, by definition you should be able to settle and trade in renminbi anywhere,” says Glendinning.

Both cities have easy access to financial markets. Hong Kong offers corporate treasurers world-class financial services and deep capital markets with more than 2,000 listed companies – more than double the number of companies listed in Singapore.

Hong Kong’s recent Bond Connect programme links Hong Kong’s debt capital markets with those in Mainland China in an added draw for companies looking to raise capital.

Singapore is ranked the largest FX trading centre in the Asian time zone, and the third-largest globally after London and New York, according to the Bank for International Settlements’ OTC derivatives Triennial Survey in 2016.

It is also ranked second overall in The World Bank’s Doing Business 2017 report, after New Zealand.

As previous British colonies, both islands operate common legal systems that are akin to that of Britain. This means that Western multinationals looking to relocate to the region will find themselves operating under a familiar legal code.

Perhaps the deciding factor is Singapore’s deeper talent pool.

“Singapore has a better depth of talent because it has been the leading Asian treasury city for 30 years,” says Blair. The education and training environment in Singapore is also bolstered by world-class Asian institutions, which contribute to the talent pool.

With its better air quality, Singapore is often cited as providing a higher quality of living when compared with Hong Kong, too.

Hong Kong vs Singapore: relative advantages

Hong Kong

  • corporate treasury centre incentive with an 8.25% concessionary tax rate for qualifying treasury income – currently being amended to comply with OECD guidance;
  • strong links with China; and
  • largest offshore renminbi hub.


  • an 8% tax rate on fees, interest and gains from qualifying treasury services and activities, plus an FTC incentive already in line with OECD guidance, and an extensive tax treaty network;
  • strong links with ASEAN members; and
  • deep treasury talent pool.

About the author

Sarah Rundell is a freelance financial journalist who specialises in investment and corporate treasury

This article was taken from the August/September 2018 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership

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