Finance

International Business: Hong Kong

Tracey Urban

Mr. Lester Wills

Colorado Technical University

December 17, 2014

The official languages in Hong Kong are English and Chinese Cantonese, with Mandarin being used on a regular basis. There are a various religions in the country with majority of the people followers of the Confucian doctrines and Buddhism; however, there are still hundreds of thousands of people who are Protestants, Muslim and Catholics (Aswathappa, 2006). As such, it is easy for anyone of whatever religion to fit into the society.

Most people within the country claim Hong Kong Chinese nationality with over 50% having British nationality. The divulgence of various cultures has made it easy for people from various backgrounds to easily fit into the country and operate their businesses. The education system in the country is well developed with education seen as the only way by which the lower class can rise into the middle class within the society. As such, there are schools and various universities that offer world class services to learners (Mapp, 2006). The challenge can arise in the course of interactions with people within the country, although most understand English, most conversations are held in Cantonese, and this can cause problems with American staff members.

Political and legal systems

Although Hong Kong does not have a democratic government, the executive is headed by a Chief Executive, who is elected by an electoral committee consisting of 1200 members. Over the years, there has been political unrest for the authorities to adopt a democratic form of government but this is yet to be done (Genzberger, 2004). The legal system in Hong Kong is under the authority of judges who uphold the authority of the law. According to the law, there are provisions for vulnerable groups within the society by providing them with public housing and free health care facilities. As a result, there are low crime rates and the legal system ensures businesses operate legally, and all laws are upheld.

Government intervention in the private sector

Within Hong Kong, there is minimal government intervention in the private sector. The country is known as a haven for free trade and enterprise, and all this has been made possible by a free private sector. Government’s role is limited to ensuring that essential services are available to the private sector, and there is a conducive environment for their growth. Some of the services it provides are infrastructure in the form of telecommunications, healthcare, education and an efficient transport system (Verbeke, 2013). The government has eliminated any barriers of trade.

Any legislation that impeded, complicated or prohibited economic activities in the country have been removed. Additionally, the government has ensured that the registration process for economic entities is simpler, making it easier to get licenses and transfer funds into and out of Hong Kong. Additionally, the taxes imposed by the government are low and do not deter foreign businesses. The effect on this in the financial institution is the process of registration and setting up is easier. There are fewer hurdles to be crossed while establishing the organization and within a short period, the business will be operational.

The economic system in Hong Kong

Hong Kong has a capitalist economy, as such; there is private ownership of production facilities, accumulation of capital, creation of services and goods for profit, competitive markets, wage labor, and voluntary exchange. Interest rates within Hong Kong are determined by banks operating within the country, this ensures that it is market driven. All this is made easier by the efficient banking system within the country, solid legal system, anti-corruption measures and sufficient foreign exchange reserves (Mapp, 2006). Capitalism emerged from mercantilism that was dominant in the sixteenth centuries. There were oversea traders who engaged in trade across various continents to attain profits. With time, it led to industrialization that reinforced the fundamentals of capitalism economic systems.

Hong Kong’s involvement in international trade

The main economic activity of Hong Kong is international trade; the government has adopted various policies that have made it a center of free trade. As such, there are minimal restrictions and the market forces regulate the imports and exports. Whenever there is a possibility of balance of trade benefits, there are protective measures introduced by the government in the form of tariffs and quotas (Verbeke, 2013). The country is a major importer and exporter of services and goods in the Asian region. The exports consist of goods produced from its many industries within its territory and in China. Most of these industries produce consumer goods such as clothing, electrical machinery, telecommunications equipment, plastics and toys. Main trading partners of the country are China, Japan, and the United States.

Government involvement in trade issues is to a minimal, and it only occurs to ensure there is continuity of economic activities within the country. Such intervention will help my financial institution since there is a guarantee that any adverse effect of international trade such as a financial crisis does not affect the operations within the country (Genzberger, 2004). Our presence in Hong Kong is helpful in an attempt to invest in other developing countries. Hong Kong is located strategically and is often referred to as the gateway of Asia. Once our operations are successful within Hong Kong, it will be easy for the financial institution to obtain clients from within the region.

The region will provide an insight of the cultures and business practices of Asian countries and as such, the financial institution will be able to penetrate easily into other countries. To ensure the organization is successful in its ventures, staff can be trained in Hong Kong who will be used in establishing branches in other developing countries (Jarvis, 2003).

Regional integration

Hong Kong is involved in various regional integration efforts to boost trade between the country and it trading partners. The World Trade Organization has resulted in increased trade across member countries (Aswathappa, 2006). It has led to the implementation of an open door policy where member countries such as China, Japan, and Hong Kong can trade more efficiently. The integration has led to increased migration of industries from Hong Kong to mainland China where the production is more effective; this is attributed to the large population that offers affordable labor to various industries. As a result of integration, regional production chains have been developed which have led to specialization among the Asian economies. Although there is significant growth in each Asian country, the main factor that had increased production in the region is the integration among the countries in the area. There is free movement of labor and resource, and these have ensured continued production.

Hong Kong was chosen because of its strategic location in regards to world trade. Asia is opening up and has the fastest growth rate across the world. As such, there are many opportunities the bank can explore. The high growth rate of the economy has a direct impact on the need for financial services (Chu, 2000). Businesses will need banks to provide capital to conduct their activities, and people will require financial institutions to enable them to store their earnings. Foreign exchange services are also in high demand, and these are services easily provided by the bank. Ideally, the country is also located at a viable location from where one can easily gain access to several countries in the region. It, therefore, shows it is in the best interests of the bank to have a branch in Hong Kong.

Overall assessment

Based on the economic situation in Hong Kong, the financial risks are worth taking. Asian countries have become more active in international trade with huge volumes of goods worth billions of dollars transacted on a regular basis. This has created enormous opportunities for organizations willing to invest in the region (Jarvis, 2003). Asian economies such as China are emerging as leading players in the world economy with impressive growth rate; Hong Kong is one of the countries neighboring China and is benefitting from its presence next to the sea. Although the financial costs may be high at the moment, all indicators show it is a worthy investment that will pay off in the future.

Opening a new office in Hong Kong will be beneficial to all the stakeholders. The main stakeholders in the financial institution are shareholders, employees and the clients. Due to the expected increase in the volume of trade, shareholders will get increased profits in the long run. Clients of the financial institution who have oversea businesses will have increased accessibility to services from the institution over a wider area. The institution can serve clients who have operations in the Asian region or those who want to open operations within the region in the future (Chu, 2000). Employees will also have the opportunity of getting a global outlook of business operations. Some of the initial staff will have to be sourced from the parent company, and this will be an opportunity for them to see how business is transacted in other parts of the world.

To ensure success in the region, the organization must adopt a laid-back presence. It should seek for partnerships with established financial institutions operating in the area. They will help the bank to understand the ethics and guidelines when conducting business in the region. Strategies used by the bank in the United States may not be applicable in the regions, as such; these partnerships will ensure the bank can learn the right operating strategies before venturing on its own.

References

Aswathappa, A. (2006). International business. New Delhi: Tata McGraw-Hill.

Chu, Y. (2000). The triads as business. London: Routledge.

Genzberger, C. (2004). Hong Kong business: The portable encyclopedia for doing business with

Hong Kong. San Rafael, Calif.: World Trade Press.

Jarvis, D. S. L. (2003). International business risk: A handbook for the Asia Pacific Region.

Cambridge: Cambridge University Press.

Mapp, A. (2006). Hong Kong: The world city and international business centre. Cambridge,

[England: Cambridge Academic.

Verbeke, A. (2013). International business strategy: Rethinking the foundations of global

corporate success.