New Business Trends in Hong Kong
8 minute read
Have you ever wondered why so many high-profile investors choose to set up their business in Hong Kong? Why is Hong Kong so special?
One of the reasons why Hong Kong attracts so many entrepreneurs is because it’s especially good at following the latest trends. Hong Kong is always at the top when it comes to innovation and new business trends.
From the political environment and economy to the ease of doing business, this city regularly has some of the best innovations in the business world.
Let’s take a look at the business trends that are booming in Hong Kong. Who knows, maybe that will sway you towards making the right decision and starting a business in Hong Kong.
And while there are different ways to amass funds that will help you get started, one of the most prominent methods is venture capital financing. But what is Venture Capital and how can you acquire funds through venture capital firms? Is your business even suitable for venture capital funds?
We will answer these and many more questions in this guide.
Overview of Traditional Industries
Hong Kong takes pride in its four huge industries that drive other sectors forward.
These four industries include:
- Trading and logistics
- Banking and financial services
- Professional and producer services
These are the main economy sectors in Hong Kong. According to various studies, these industries have generated more than $1,500 billion and employed over 1,780,000 individuals in 2018.
The foundation for doing business in Hong Kong is its free and open market. The government maintains this great tradition along with the rule of law and judicial independence. In addition, the taxes are considerably lower when compared to the rest of the world too.
Trading and Logistics
This is the largest of the four cornerstone Hong Kong industries.
The logistics industry includes planning, executing, and regulating the movement and storage of goods and services from the origins to final consumption.
The goods can be raw materials, in-progress products, and finished commodities.
Freight transport, storage, postal, freight forwarding, and courier services are the types of activities that fall under this type of industry. Trading firms are also associated with logistics activities.
Hong Kong’s financial sector is the second-largest industry and it covers a wide array of services:
- Asset management
- Stock brokerage
- Other financial services
The city is considered to be one of the biggest financial hubs in the world. In 2018, Hong Kong was ranked third in Asia and fifth in the world regarding market capitalization of the stock market.
Professional and Producer Service
The third most important pillar of Hong Kong’s economy is likely to keep growing because of new business opportunities.
Professional services in Hong Kong include:
- Technical testing and analysis
- Legal activities
- Engineering activities
- Scientific research and development
- Management and management consultancy activities
- Information technology-related services
- Specialized design
Furthermore, producer services include the services for use by other business enterprises in the local economy along with exports of services to companies and individuals.
These industries generate somewhere around 12.0% of the total GDP and provide around 14% of jobs in the city of Hong Kong.
The fourth and the final major contributing sector of the Hong Kong economy is the tourism industry (4.5% of the total GDP), which can be categorized into two subsectors:
- Inbound tourism
- Outbound tourism
The first category (inbound tourism) includes all the accommodating services, food and beverage services, retail trade, transport, and personal services.
Outbound tourism includes reservation services and its related activities, cross-boundary passenger transport services, and travel agency. This only pertains to what is provided to Hong Kong residents going abroad.
New Business Trends in Hong Kong
Hong Kong is an area with numerous profitable industries for good investments. If you have a great business idea accompanied by a good plan, you should most definitely try to set it up in the city.
Let’s take a look at some new business models that are slowly taking over in Hong Kong.
The FinTech industry in Hong Kong has been booming in recent years. The number of fintech startups in Hong Kong increased almost four times in 3 years – from around 130 in 2016 to more than 500 in 2019.
That is why Hong Kong is the world’s number six when it comes to the most significant FinTech hubs. This was published in Connecting Global FinTech: International Hub Review by Deloitte in 2017.
Artificial intelligence is a huge driving force of the fourth industrial revolution. This trend is known for its automation and connectivity traits.
In 2017, Hong Kong ranked third in the world when it comes to field-weighted citation impact on AI. This was published by Times Higher Education. Hong Kong also has many prominent AI technology companies such as SenseTime.
Hong Kong is an attractive testing ground for a lot of smart city applications. Seeing that it is one of the most densely populated cities in the world and that it has top-notch ICT infrastructure and internet connectivity, this is perfectly understandable.
The government of Hong Kong is always there to support promising trends and ideas. Moreover, it introduced the Hong Kong Smart City Blueprint in 2017. This was an initiative that aimed at making Hong Kong a world-class smart city. It mapped out development plans for the following five years with the aim of making every corner of the city ‘smart.’
Hong Kong is one of the world’s leading startup hubs too. The city takes pride in the fact that it has more than 2,000 startups while almost one-fifth of them are US businesses. This is a clear indicator that Hong Kong is a more attractive environment for new businesses when compared to the US.
Franchise operations are not required to register with the HKSAR government or any other trade association. This means that there is no official record of the total number of operators in Hong Kong.
There are approximately 75 franchise operators in Hong Kong. Of these franchise operators, 56% are local franchises.
Other profitable business models that will most likely continue to grow in Hong Kong include:
- Healthcare products
- Fitness boot camps
- Housework service
- Delivery services
Hong Kong Startup Ecosystem
Hong Kong is excellent if you want to set up your new startup in a business-friendly environment that stimulates further growth. The startup ecosystem in Hong Kong is great if you want a place with ease of doing business. To be precise, Hong Kong has been ranking in the top 5, since it has a fast-growing entrepreneurial ecosystem.
One of the most important aspects of every business environment is its infrastructure. The region of Hong Kong boasts over 50 innovation labs, incubators, accelerators, and co-working spaces, even though only a few years ago there was only one – Cyberport.
After the Cyberport, two new co-working spaces were launched – The Hive and CoCoon. These spaces are pretty impressive, each having the open-concept workstations and high-end design.
When it comes to the funding environment of Hong Kong, it is entirely controlled by huge foundations such as Horizons Ventures. However, things are slowly changing for the better. There are many rising star VC firms such as Vectr Ventures and Mindworks Ventures. These firms have overshadowed the once tightly-held oligopolies.
On top of that, there is a huge corporation from Mainland China that helps both local and foreign startup businesses in Hong Kong. This is the well known Alibaba Entrepreneurship Fund.
In general, there has been a big change in the risk appetite of about five million high net worth individuals within Asia. They are now much more supportive and helpful for new businesses.
Finally, Hong Kong is a great talent pool for both local and foreign businesses. If you decide to hire locally, you can rest assured that communication will not be a problem. On top of that, Hong Kong residents are up to date with new technologies and are generally well-educated.
One simply cannot deny that Hong Kong is a great place for business. As you could read in this article, there are so many factors that contribute to this.
Hong Kong is an international business hub that stays up to date with all important business trends. Therefore, you won’t make a mistake if you decide to set up your new business in Hong Kong.
If you are, however, interested in basing your business in Hong Kong, do not hesitate to contact us for custom-tailored help and consultancy.