Hong Kong Investment Benefits can be described in different ways. Chinese official statistics on foreign investment in China have indicated that Hong Kong has been the biggest source of inbound foreign investment in the mainland China. In addition to the common advantages of having an offshore structure, namely, easier transfer of equity interests in the Chinese entity, better financing access and higher appraisal of Chinese assets, the decisive factor for considering Hong Kong over other offshore hotspot like Cayman and BVI is the income tax favorable treatment made available to HK by the mainland China, a unique advantage enjoyed only by Hong Kong.

Hong Kong Investment Benefits - Invest in Hong Kong-Tax benefits
Hong Kong also has the lowest corporate income tax rate in China at 16.5 per cent. In comparison, the PRC has a standard corporate income tax rate of 25 percent. By using transfer-pricing techniques, a PRC foreign-owned factory can sell its products to its Hong Kong holding company at a low price, which in turn can sell the products to third-party foreign customers at a higher price. By this means, a larger portion of the profits can be realized in Hong Kong and will therefore be taxed at the lower Hong Kong rate. In terms of the repatriation of profits from the foreign company’s perspective, the repatriation of profits from China to the foreign jurisdiction is generally the same whether the profits flow directly from the PRC entity or through a Hong Kong intermediary. The foreign parent company with a Hong Kong holding company, therefore, has the option of keeping the profits in Hong Kong; such funds can be reinvested for other offshore purposes by the Hong Kong Company. Another benefit is that HK company is not required to declare taxation to HK government for its dividends made from China company.

Hong Kong Investment Benefits - Invest in Hong Kong-Legal system benefit
A JV or WOFE established in China, will, of course, be subject to PRC law. If a Hong Kong holding company is used, agreements with third parties can be signed by the Hong Kong holding company which will be governed by Hong Kong law. Companies may find that new customers may also take comfort in the fact that agreements are signed in Hong Kong as opposed to China, as Hong Kong is seen as a lower risk jurisdiction. Hong Kong’s legal system remains based on the rule of law. Its courts are independent of the government and are open to the public. Another unique opportunity may soon arise as Hong Kong; the mainland authorities are currently negotiating a reciprocal enforcement of judgments agreement that, when adopted, will be an additional advantage to executing contracts in Hong Kong. The result will be that Hong Kong judgments, unlike those of any other jurisdiction, will be recognized and immediately enforceable in the PRC.

Hong Kong Investment Benefits - Invest in Hong Kong-Liability issues
Inserting a holding company between the parent and the WFOE also affords the parent company some protection from liability. On the mainland, the corporate veil is lifted much more easily than in western jurisdictions. By using a holding company between the foreign parent company and its PRC WFOE or JV, the foreign company can insulate itself to some degree if problems arise at the WFOE or JV level. In this situation, the Hong Kong holding company will be held responsible rather than the foreign parent company.