5 Challenges of Doing Business in Hong Kong in 2024

Hong Kong’s strategic location and business-friendly environment make it an attractive destination for company setup and business expansion. But while the jurisdiction offers many advantages, its business landscape comes with a set of challenges you should be prepared for. 

If you are new to doing business in Hong Kong and feel overwhelmed by the information out there, this guide is for you. We will walk you through the 5 common challenges of doing business in Hong Kong and provide tips and solutions for each to help your company grow confidently. 

High operating costs are a significant challenge for businesses in Hong Kong. From expensive office rents and high wages to the rising prices of utilities and services, these factors can strain a company’s budget and reduce profit margins. Let's look at each factor in detail.

Real Estate Prices

Renting a private office in Hong Kong, especially in prime areas like Central, can be a significant expense for your business. The average office rental rate in Central is around HKD 954 per square metre, with the total monthly rent easily exceeding HKD 500,000 for larger spaces.

Other areas like Wan Chai and Tsim Sha Tsui may offer more affordable options, with average rents of HKD 637 and 498 per square metre, but depending on your budget, they can still be costly. 

In addition to the location, factors like the economy, the building's age and size, and amenities like lifts, parking spaces, and security can also influence the rental costs. 

If your business does not require a private space for operations, you might want to consider co-working spaces or virtual offices as more cost-effective options:

• Co-working spaces: Shared offices with flexible lease terms, often including amenities like meeting rooms, high-speed internet, and communal areas
• Virtual offices: Business addresses without a physical office space, suitable for businesses that primarily operate remotely or do not require a physical office presence in Hong Kong

Labour Costs

Hong Kong’s high cost of living and a strong economy have led to relatively high salaries across various industries. If you are planning to hire local employees, this is definitely another cost to consider. 

While the minimum wage is currently HKD 40 per hour, the median monthly income of Hong Kong employees is around HKD 29,715, with the information technology and ecommerce sectors offering the highest average salaries. 

Moreover, Hong Kong has been facing a talent shortage, meaning that companies may have to compete in offering attractive salaries and compensation packages to attract and retain skilled workers. 

Opening a business bank account in Hong Kong usually involves a lot of paperwork and supporting documents to comply with the anti-money laundering (AML) regulations. It usually takes several weeks to get your new account, and most banks require an in-person visit as a part of their Know Your Customer (KYC) process.  

Despite thorough preparation, bank account applications can be rejected because of reasons like insufficient documents, suspicious business activity, or an unclear business plan within Hong Kong.

However, while traditional banks may impose these hurdles, Hong Kong’s thriving fintech sectors offer flexible and convenient financial solutions, including multi-currency accounts, for SMEs and start-ups. If you hold an HKID, you can also benefit from online-only virtual banks. 

Hong Kong’s dynamic financial landscape and supportive government policies have attracted a surge of investors and entrepreneurs. In the first half of 2024 alone, over 300 new businesses were established or expanded in the jurisdiction.

This influx has created a highly competitive business environment, especially in core sectors like financial services, technology, and trading, making it increasingly challenging for new companies to attract and retain customers.

Although Hong Kong is known for its favourable tax system, navigating taxes and ensuring financial reporting compliance might be overwhelming when you’re getting started, particularly when it comes to audit obligations.

Companies incorporated in Hong Kong are required to conduct a yearly statutory audit of their financial statements. These audited financial records and an auditor’s report must also be submitted when filing the profits tax return (PTA), including those of SMEs with a gross income of under HKD 2 million.

Moreover, audits must be conducted by auditors registered with the Hong Kong Institute of Certified Public Accountants (HKICPA). It’s crucial for companies in Hong Kong to follow these regulations to maintain good standing and avoid potential legal and financial consequences. 

Doing business in Hong Kong means strictly complying with local regulations. From getting your Certificate of Incorporation to following employment practices, businesses may face several challenges to ensure regulatory compliance.  

Ensuring that your company operates according to the Companies Ordinance and other obligations, such as labour laws and consumer protection regulations, is crucial for maintaining legal standing and avoiding potential penalties. 

While doing business in Hong Kong may present some challenges, the advantages significantly outweigh them. The most beneficial one is its strategic location with direct access to China, making it an ideal base for expanding into the Asia Pacific region. 

Another key benefit is that Hong Kong allows for offshore companies. This means that you can set up a Hong Kong company but operate without a physical location, offsetting unnecessary operational costs.

Ready to start your business in Hong Kong? Statrys offers a company registration package that includes incorporation, company secretary services, and a registered business address. We can also assist you in opening a Hong Kong business account to get your business up and running quickly.