Offshore Companies Leaving HK, With Financial Firms Leading The Exodus
HONG KONG – The number of overseas firms with physical offices in Hong Kong has dropped for the 1st time in 11 years, with a significant decline in financial institutions, as companies flee to other Asian hubs due to worries over social unrests and China’s curtailment of the territory’s political autonomy, reported the Nikkei Asian Review on Saturday (5 December).
For instance, American investment management company Barings announced on Thursday that it will establish an office in Singapore which will function as its hub for operations in the ASEAN region.
The exodus of white-collar businesses is a huge blow to Hong Kong, which has long been a darling of multination corporations (MNC) looking for an Asian base of operations due to the territory’s low corporate tax and English-speaking workforce. Another factor was the “one country, two systems” policy that gave Hong Kong a high level of autonomy, but recent actions by China – like
the implementation of the national security law – has put this into doubt, prompting companies to consider other alternative locations.
Barings is not only the financial institution seeking another Asian hub. Deutsche Bank also started assigning its CEO for Asian operations in Singapore in August instead of Hong Kong.
Based on recently published poll carried out by the authorities in Hong Kong, the number of nonlocal firms with offices in Hong Kong dipped 0.2 percent year-on-year to 9,025 in June 2020 if those firms based in mainland China are included. This marks the first time that this has occurred, and if the mainland Chinese firm are excluded, the decline is higher at 2.8 percent.
Of the 9,025, the number of entities with Hong Kong regional headquarters slid 2.4 percent to 1,504, while those with regional offices in the territory edged down 0.4 percent to 2,479. However, overall workforce of nonlocal companies fell by about 10,000 to 483,000.
Financial institutions made up a sizeable number of firms fleeing Hong Kong, with 52 banks and financial firms, as well as 24 insurance providers exiting the territory. The Motley Fool. The Vanguard Group and others have also announced their departure from Hong Kong since June.
Meanwhile, Barings revealed that it has almost 100 professionals in Hong Kong, and its office there will still remain as its largest office in Asia. Nonetheless, it’s expected to transfer some operations to its new office in Singapore.