Foreign Investment Enterprise Law in Hong Kong Key Highlights Recent Updates

Foreign Investment Law in Hong Kong Key Elements and Recent Developments

As global economic integration continues to deepen, Hong Kong’s status as an international financial center and a free port has become increasingly significant. Despite the challenges posed by the pandemic and geopolitical factors in recent years, Hong Kong has demonstrated strong economic resilience and maintained an open, inclusive investment environment. Particularly in the area of foreign direct investment FDI, Hong Kong continues to attract global investors due to its unique legal system, efficient regulatory framework, and close economic ties with mainland China.

I. Overview of Hong Kong's Foreign Investment Legal Framework

As a Special Administrative Region SAR of China under the One Country, Two Systems principle, Hong Kong maintains its own judicial authority and final adjudication power. In terms of foreign investment access, Hong Kong has long adhered to the principles of a free market economy, imposing minimal restrictions on foreign capital. According to the Basic Law, Hong Kong enjoys a high degree of autonomy, and the central government does not interfere in its economic policies. As a result, Hong Kong’s foreign investment legal system is relatively independent and highly market-oriented.

In setting up businesses, foreign investors are primarily governed by laws such as the Companies Ordinance and the Business Registration Ordinance. Certain regulated sectors-such as finance, healthcare, and education-are subject to additional specialized regulatory frameworks. Overall, Hong Kong offers a transparent and efficient business environment, consistently ranking among the world's most competitive economies.

II. Key Factors for Foreign Investors

1. Low Market Entry Barriers

Compared to other major economies, Hong Kong imposes very few restrictions on foreign investors. With the exception of a small number of controlled industries, foreign investors can freely establish wholly-owned or joint ventures without prior approval. The process for registering limited companies, branches, or partnerships is straightforward and user-friendly.

2. Favorable Tax Regime

Hong Kong operates on a territorial basis of taxation, meaning only profits sourced from within Hong Kong are taxable. The corporate profits tax rate stands at 16.5%, while the top personal income tax rate is 17%. There is no value-added tax VAT, capital gains tax, or inheritance tax, making Hong Kong particularly attractive to multinational corporations and high-net-worth individuals.

3. Well-Developed Financial Infrastructure

As Asia's leading international financial hub, Hong Kong boasts a mature and robust financial system. It hosts globally recognized institutions such as the Hong Kong Exchanges and Clearing HKEX, along with comprehensive banking, insurance, and asset management services. These advantages provide strong support for foreign enterprises in areas such as financing, settlement, and cross-border fund management.

4. Strong Intellectual Property Protection

Hong Kong has a comprehensive legal framework protecting intellectual property rights IPR, covering patents, trademarks, copyrights, and more. It has also signed multiple bilateral and multilateral IP protection agreements. This ensures that foreign firms operating in technology cooperation and brand management have their rights adequately safeguarded.

III. Recent Developments and Trends

Despite the rise of global trade protectionism in recent years, Hong Kong remains committed to promoting free trade and multilateralism, continuously improving its business environment to attract foreign capital. In 2025, the Hong Kong SAR government launched the Attract Enterprises and Talent strategy, offering a series of preferential policies to draw in multinational companies and high-level professionals. Measures include rent subsidies for eligible enterprises, streamlined visa procedures for expatriate employees, and the establishment of an innovation and technology fund to support startups.

Meanwhile, Hong Kong is actively fostering the growth of emerging industries such as fintech, green finance, and the digital economy. For example, in September 2025, the Hong Kong Monetary Authority HKMA introduced the Green and Sustainable Finance Grant Scheme, encouraging companies to issue green bonds and advance sustainable development projects.

With the continued advancement of the Guangdong-Hong Kong-Macao Greater Bay Area initiative, Hong Kong's collaboration with mainland cities like Shenzhen and Guangzhou has grown closer. Increasingly, foreign-invested enterprises are choosing to establish regional headquarters in Hong Kong, leveraging its strategic position as a gateway to both China and the world.

IV. Challenges and Strategic Recommendations

While Hong Kong possesses numerous strengths in attracting foreign investment, it also faces certain challenges. For instance, sanctions imposed by some Western countries on Chinese-related entities have indirectly affected the operations of certain foreign firms in Hong Kong. Additionally, the ongoing global supply chain reconfiguration has prompted some companies to consider diversifying their investment destinations.

To navigate these complexities, foreign investors should focus on the following strategies

1. Ensure Compliance While Hong Kong’s legal environment is generally liberal, investors must still adhere to local regulations, especially in areas such as data privacy, anti-money laundering AML, and tax reporting.

2. Manage Geopolitical Risks Businesses should establish risk assessment mechanisms and adopt diversified asset allocation strategies to mitigate potential losses caused by external uncertainties.

3. Leverage Local Resources Make full use of Hong Kong’s international platform, professional service networks, and convenient cross-border channels to enhance operational efficiency.

4. Monitor Policy Changes Stay informed about new supportive policies introduced by the Hong Kong SAR government, and actively apply for benefits such as fiscal subsidies and tax incentives.

Conclusion

Hong Kong remains one of the world’s most attractive destinations for foreign investment. Its stable rule-of-law environment, high level of market openness, and well-developed service ecosystem create a favorable foundation for foreign enterprises. In the face of a complex and evolving global economic landscape, Hong Kong is strengthening its position as an international financial center through continuous innovation and reform. For foreign firms seeking to expand into the Asian market, understanding and keeping pace with Hong Kong’s legal environment and policy dynamics will be crucial steps toward achieving long-term success.