Why Do Foreign Investors Favor Hong Kong Companies? In-depth Analysis of Reasons and Advantages

In recent years, foreign companies have continued to increase their investments in Hong Kong-based entities, a trend that became particularly pronounced in 2025. Despite the complexities and uncertainties in the global economic environment, Hong Kong has maintained its position as a leading international financial center, attracting numerous multinational corporations to establish offices or regional headquarters in the city.

Why do foreign investors favor Hong Kong companies? What underlying advantages make the city so attractive?

First and foremost, Hong Kong’s legal system and business environment play a crucial role in drawing foreign investment. The city follows the British common law tradition, offering a well-developed, transparent legal framework with strong protections for investor rights. Hong Kong has long adhered to a free-market economic policy, imposing minimal restrictions on foreign capital entry. Its streamlined and efficient company registration process provides solid legal safeguards and development opportunities for foreign firms. According to the World Bank’s Worldwide Governance Indicators, Hong Kong consistently ranks among the top globally in terms of regulatory quality and rule of law.

Secondly, Hong Kong’s unique role as a bridge connecting mainland China and the rest of the world remains irreplaceable. Although some foreign investors have expressed concerns about the uncertainties in the Chinese market in recent years, Hong Kong continues to offer access to China thanks to its distinct One Country, Two Systems framework. Particularly against the backdrop of the ongoing development of the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong's function as a regional financial and service hub has been further strengthened. Many foreign enterprises set up operations in Hong Kong first and then use the city as a gateway to expand into the mainland. This approach allows them to mitigate certain risks while benefiting from the growth momentum of China's economy.

Thirdly, favorable tax policies also contribute significantly to Hong Kong’s appeal. The territory operates under the principle of Territorial Basis of Taxation, meaning only income sourced within Hong Kong is subject to profit tax, while profits derived from overseas are generally tax-exempt. In addition, Hong Kong’s corporate tax rate remains relatively low at 16.5%, offering a clear advantage over many Western countries where rates often exceed 30%. There is no value-added tax, capital gains tax, or withholding tax on dividends-this simplified tax structure substantially reduces operational costs and enhances capital efficiency.

Moreover, Hong Kong boasts a highly open and mature financial market with robust financing capabilities and an internationally integrated financial services system. The Hong Kong Stock Exchange HKEX is one of the most influential stock markets globally, attracting a growing number of Chinese companies returning for listings and new economy enterprises going public. According to the latest data from HKEX, IPO fundraising increased by more than 30% year-on-year in the first half of 2025, demonstrating sustained vibrancy in the capital markets. The banking system is stable, with a well-established currency stability mechanism. The linked exchange rate system between the Hong Kong dollar and the U.S. dollar offers foreign companies a predictable monetary environment.

Equally important is Hong Kong’s talent pool and professional service resources. As a global city, it attracts professionals from around the world across various fields such as finance, law, accounting, and consulting. These high-caliber talents not only understand international business practices but are also familiar with the dynamics of the Chinese market, providing strong support for foreign companies operating in Hong Kong. Additionally, Hong Kong has a comprehensive intellectual property protection system-an essential consideration for technology companies setting up research centers in the region.

It is also worth noting that recent geopolitical shifts have prompted some companies to reevaluate their Asian strategies, and Hong Kong has emerged as a safe-haven option due to its unique status. For example, in July 2025, a major multinational tech firm established its Asia-Pacific data processing center in Hong Kong, citing the city’s legal stability and data privacy protections as key factors. This is not an isolated case; an increasing number of foreign companies are viewing Hong Kong as a core node for regional operations.

Of course, Hong Kong faces challenges too, including intensified talent competition and rising operational costs. However, overall, its institutional strengths and strategic location continue to give it a distinctive edge in the global city competition. Looking ahead, as Hong Kong deepens its integration into national development strategies-particularly through greater investment in green finance and technological innovation-its attractiveness is expected to grow further.

In conclusion, the preference of foreign investors for Hong Kong companies is not accidental. It is the result of a combination of advantages, including a robust legal system, favorable taxation policies, a sophisticated financial environment, a rich talent base, and a strategic geographic position. At a time when the global landscape continues to evolve, Hong Kong still exerts a powerful allure, capturing the attention of the international community.