Hong Kong – Story for Entrepreneurs Expanding to China

The Entrepreneurial Story

Imagine, your e-commerce business is on-track and booming. You have attracted many customers globally, especially from Asia and China. Satisfied customers are coming back for more of your goods and services. You might have experienced a struggle here and there, but as a fierce entrepreneur, the money headed your way far surpasses the business challenges you have faced.

One day, you watch the news about the government cracking down on a major e-commerce due to alleged violation of anti-trust regulation. This raises your eyebrows but not enough to worry you about this happening to your business as you think the government would never pay attention to an SME like your own. This seems to be imposed on only big players to level the playing field, which is better for the industry.

Fast forward half a year later, you read a news article online about the ride-hailing company that is in some serious regulatory probe regarding data privacy and is told not to accept any new users during the investigation. You wonder how this will affect your brother’s income as he is a driver for the ride-hailing app. It bugs you a little, but you recognize the importance of user privacy in the interest of the public.

Shortly, the government declared the introduction of industry-wide regulations on the whole off-campus tutoring and training services. This is not good as a chunk of your income comes from this side-hustle as an online tutor during the weekend. As you read the official statement from the authorities, you somewhat understand why the regulations are put in place, but it still gives you a big nudge.

You understand the government is doing all that it can to ensure healthy competition in industry, protect user privacy, and restructure the educational ecosystem. However, you cannot help but feel a chill down your spine as you are concerned about the future of your online tutoring service that you have spent years building.

Reflection

The context of the story might sound familiar to you because it is exactly what entrepreneurs are facing in China right now. Don’t get me wrong. Government involvement in the market is not necessarily a bad thing.

It is often justified for the greater good of China’s socialist economic system. This system, according to Investopedia, aims to maintain the “balance between pure capitalism and social welfare”. In other words, capitalism cannot be the dominating element in China’s society, which is somewhat concerning to offshore businesses.

Aside from fears of government interventions, the level of freedom on the internet and its related services are just as important to many businesses. For example, if you are a foreign business looking to expand your online presence in China with your existing content (e.g. your website, social media content), it might be a challenge because many basic internet engines and social media, such as Google, Facebook, and Instagram, are all banned in China.

Although the URL of your website might still be accessible directly through manual URL input, it is likely unsearchable through the banned Google Engine in China, limiting your reach to potential customers. Furthermore, the promotional content that you have created in social media platforms, such as Facebook, Instagram, Twitter, and Pinterest would be unviewable in China due to the bans. In other words, most of the promotional contents would need to be redesigned to fit the social media platforms in China.

You think to yourself, the pie in China is too big and too costly to give up. At the same time, the continual reforms that the government consistently introduces and puts forward keep you up at night. The dilemma is real, but the solution has always been there – Hong Kong.

The Business Solution – Hong Kong

In a Skype call with Get Started HK, a leader in the company registration industry in Hong Kong, its chairman emphasizes that “Hong Kong has always been the bridge to China while having its own economic environment.” Since very early on, Hong Kong has been a Special Administrative Region (SAR) of China that has a separate government and economic system from the country. Some of Hong Kong’s defining characteristics of the city that differs from China and attracts more foreign investors and entrepreneurs include free trade and freedom of the internet.

Characteristic 1 – Free Trade

In the 2020 Index of Economic Report, Hong Kong has been ranked as the world’s second freest economy. D. Tsang, the former Chief executive of Hong Kong stated that the principle of “Big market, small government” had not deviated from the city’s core values. This principle mainly refers to the beneficial tax rules, low government involvement, and free market facilitation for entrepreneurs.

Furthermore, Hong Kong’s connections to China with its key services industry, such as trading, logistics, and financial services, has attracted many foreign entrepreneurs to look to Hong Kong and jump-start their expansion in China. All of which makes Hong Kong the perfect intermediary between China, international investors, and business owners.

Characteristic 2 – Specialized Services for Internet, Marketing, and Beyond.

In terms of the internet, the level of control on the internet by the Hong Kong government is much more lenient than those in China. Internet users in Hong Kong are still able to browse and create content on search engines and social media platforms that are otherwise banned in China.

In fact, if you are setting up in Hong Kong for its free trade environment, but still have a customer base where their countries allow for western platforms like Google or Facebook, there are many consulting firms in Hong Kong that can provide you with superior SEO and Digital Marketing services for retain and grow its western customer base.

If you are registering your offshore business in Hong Kong to penetrate the consumer market in China, you can find Hong Kong digital marketing firms that specialize in Chinese social media marketing. There are Chinese substitutes that replace banned sites and applications like Google, Facebook, and Instagram.

For example, Baidu is a Chinese search engine, which, much like Google, has its own algorithms for SEO and results generation. In terms of instant messaging app, WeChat is the equivalent of Facebook and WhatsApp, but with more extended capabilities in social media and mobile payment.

Finally, Xiaohongshu is the Chinese equivalent of Instagram, with the signature photo collage view and e-commerce capabilities. All the Chinese social media sites and apps mentioned above require a different set of expertise that Hong Kong digital marketing professionals can provide.

In the long run, to reap the benefits that the business environment in Hong Kong provides, whether it be the free trade environment or the gateway to the Chinese market, you would want to register your offshore business entity in Hong Kong.