Báo cáo nghiên cứu và đánh giá thị trường hong kong của ngân hàng TMCP ngoại thương việt nam (vietcombank) trong việc xác định mục tiêu đầu tư e

Báo cáo nghiên cứu và đánh giá thị trường Hong Kong của Ngân hàng TMCP Ngoại
Thương Việt Nam (Vietcombank) trong việc xác định mục tiêu đầu tư

Research reports and Hong Kong market assessment of the Bank for Foreign Trade of
Vietnam (Vietcombank) in determining the investment objective to expand the network
of the Bank in this market.

I. Executive summary
I am working for Joint stock commercial Bank for Foreign Trade of Vietnam
( Vietcombank). The report has been written because the General Director of ACB wants
to expand business by opening new branches abroad, therefore, he asked me to provide a
report to advise him to invest in one particular country.
After taking both the target of company and its capital ability to set up new branches
outside Vietnam into consideration, it is recommended that Hong Kong would be the most
suitable place.
II. Introduction
Purpose
The purpose of this report is to analyse the main economic features of Hong Kong,
particularly in banking sector.


Scope
This report has considered about two main parts: The first part will cover the overview of
Hong Kong economy, as well as the future prospect. The second part of this report will
point out attraction as well as advantages of opening new bank branches in Hong Kong.
Methods
The report, which has been done, based on a number of the theories such as: International
Trade Policy, Economic Integration and Foreign Direct Investment.
III. Findings
Basic country data
Location: Eastern Asia, bordering the South China Sea and China

Land: 1,104 sq km
Population: 7,089,705 (6/2010)
Official language: Chinese and English
Currency: Hong Kong dollar (HK$)
Hong Kong economy overview and future prospect
Introduction
Asian Markets have been attracting the attention of many investors over the last decade.
Since 2002, The Asian/Pacific Region’s Economic Margins and Growth have far exceeded
the world, especially Hong Kong (seeking alpha, 2009). Hong Kong is one of two special
administrative regions (SARs) of the People’s Republic of China. According to a report of
APEC, “Hong Kong- China has been a small and open trade port for more than 200 years.
It is externally oriented and it fully open to foreign capital and technology for its growth
and development”. Although the recent global recession had negative impacts on Hong
Kong, but its increasing integration with China helped it recover from the downturn more


quickly than many observers anticipated offer tremendous opportunities for businesses
looking to explore the Asia Pacific region.

The outlook for Hong Kong economy
As other economies in the world, the Hong Kong economy has been affected badly by the
global economic crisis since 2008, but clear signs of improvements have been observed
due to its increasing integration with China helped it recover from the downturn more
quickly (Consulate Genaral of Switzerland in Hong Kong, 2010). For 2009 as a whole,
GDP fell by only 2.7%. The corruption index is always very high over years, means the
transparency in government (Hong Kong is ranked 13 th in the world) (HKSAR
Government, 2010)
Table 1: Main Economic data
2009

2008

2007

GDP-Real growth rate (annual %)

-2.7

2.5

6.4

GDP- per capita (US$)

29,900

30,800

29,900

Corruption perception index

8.2

8.1

8.3

Unemployment rate (%)

5.2

3.5

4.0

Source: HKSAR Government, IMF
Chart 1: Hong Kong dollar exchange rate against USD


Source: CIA World Facebook
Hong Kong dollar has become stronger (compared with USD) since 2005. It is a good sign
for domestic consumers but it could be a changeling for export. In 2007, we see a slightly
depreciation of HKD because of the trade-weighted index down by 0.5%.
Chart 2: Hong Kong inflation rate

Source: tradingeconomic.com
As we can see in the chart, Hong Kong experienced a deflation in 2009 due to the recession
recently. During a recession, competition among businesses for customers becomes more
intense, and so retailers are no longer able to pass on higher prices to their customers. One
other possible reason was the increasing export cheap products from Mainland China. As
the economy recover, Hong Kong inflation rate increased 2.6 in the third quarter of 2010.


The structure of economy
Chart 3: Contribution to GDP by sectors in 2009

Source: CIA World Factbook
Agriculture plays a very small part in the economy of Hong Kong, it makes only a
miniscule contribution to GDP (0.1% in 2009) due to the scarcity of arable. Therefore,

Hong Kong heavily depends on agricultural imports.
Industry is a significant sector, but Hong Kong mainly re-exports goods produced in China.
This sector is small, accounting for 8% of GDP in 2009. “Hong Kong has a small utility
industry such as: water, gas and electricity, a relatively significant construction industry,
and a more important export-oriented manufacturing sector. As a small territory with
limited land and a very large population, Hong Kong cannot support heavy industries,
which are land- intensive by nature. Nor can it have large labour-intensive industries”
(Encyclopedia of the Nations, nd).
Being the largest and dominant sector (contribute 91.9% to GDP), the service has always
been driving force of Hong Kong’s economic. Financial services, trading and logistics,
tourism, and producer and professional services are the Four Key Industries in the Hong
Kong economy. Banking is the heart of Hong Kong’s financial services.


International and regional economic agreements
Table 2: Organisations which Hong Kong belongs to
Organisations

Year became a member

The Asia-Pacific Economic Cooperation (APEC)

1991

The Pacific Economic Cooperation Council

1991

(PECC)
The Trade Committee of the Organization for

1994

Economic Cooperation and Development
(OECD).
World Trade Organisation (WTO)

1995

The World Customs Organization (WCO).

2005

Hong Kong has so far concluded two free trade agreements with Mainland China (the
Closer Economic Partnership Arrangement CEPA) and New Zealand. At present, Hong
Kong is negotiating with the EFTA States (including Switzerland) for a free trade
agreement.
Closer Economic Partnership Arrangement (CEPA).
Under the CEPA, all product of Hong Kong (goods and services) origin can be imported
into the mainland China tariff free. CEPA has been an important mechanism that Hong
Kong government have employed to enhance financial co-operation. CPEA offers a good
platform and lower the thresholds for Hong Kong products and services to have an
effective access to China.
Framework Agreement on Hong Kong and Guangdong Co-operation


Under this Agreement, both sides will facilitate the flow of key factors such as people,
goods, information and capital across the boundary.
Overall trade balance
According to the HKTDC, Hong Kong is the world’s 13 th largest trading economy. Because

of the recent global crisis, the merchandise export fell 12.6% in value term from 2008.
Moving to the second half of 2009, export of services likewise weakened because of falling
offshore trading activity and transportation services. For 2009 as a whole, export of service
fell by 6.6%. Imports of goods and services also declined 11% and 6.1% respectively.
Taken together, there was an overall trade surplus of 7.2% of GDP in 2009, in comparison
with a surplus off 10.2% of GDP in 2008.
Chart 4: Overall trade balance and export growth (in nominal term)

Source: Census & Statistics Department
Chart 5: Hong Kong current account


Source: tradingeconomic.com
Current account is the difference between a nation's total exports of goods, services and
transfers, and its total imports of them. Hong Kong has recorded a current account surplus
from 2006-2010, it means that Hong Kong economy has been very strong. However, it has
been decreased nearly 400% from 2009 to 2010 mainly due to an increase in the visible
trade deficit and decrease in the net inflow of external factor income.
Regulations:
Hong Kong is a free port and there is no tariff on general imports except duty on strong
liquors, tobacco, hydrocarbon oil and methyl alcohol.
In Hong Kong, there is neither restriction on inward and outward investments nor
nationality restrictions on corporate or sectorial ownership.
Hong Kong future prospect
Hong Kong has a very strong economic base, which has helped it get over periods of
economic hardship. Its economic strength enabled it to survive the recent financial crisis
with minor damage, in comparison with other economies in the world.

This strong

economic base will help Hong Kong to recover and expand its economy to achieve a
stronger position in global market. Hong Kong‘s access to China has opened a very
promising economic opportunities for Hong Kong and will enhance its international status.


China’s abundance of land and raw materials and its low cost of labour have addressed the
major limitations of Hong Kong manufacturing sector as well as agricultural sector.
Mainland China has also offered its huge and strong market for investment and exports and
it put Hong Kong economy well ahead of many other developed economies which have
been trying to gain extensive access to China.
Hong Kong economy will surely expand, but the service sector will remain the largest and
most dominant sector. This is partly because of the strength and the phenomenal size of
that sector. It is also because of its important role in the re-export of goods produced in
China, including their packaging, shipping, handling, and marketing, as well as financing
their production.
The advantages of doing business in Hong Kong
Overview of Banking System
Hong Kong does not have a central bank, but the Hong Kong Monetary Authority (HKMA)
assumes some of the functions of a central bank. The banking system in Hong Kong is
characterized by its 3-tier system, which is formed by 3 types of banking institutions,
namely licensed banks, restricted licensed banks and deposit-taking companies. Only
licensed banks and restricted licensed banks can be called banks.
The attraction of location
Hong Kong is one of the most favourite places for business because of several factors.
Firstly, Hong Kong is located halfway between Japan and Singapore, which are very
developed economy in Asia and are potential investment and export market. Secondly, it
lies astride the main shipping and air routes of the Western Pacific. Thirdly, it can access to
China, a huge and potential market. Finally, its favourable time zone location enables
foreign exchange dealing to continue 24 hours a day around the world. Hong Kong’s
services sector is among the most developed in East Asia

The government’s perspective:


The HKSAR adopts a pro-market economic policy in accordance with the principle of “Big
market, small government” in order to create a business-friendly environment; build Hong
Kong as an international financial centre.
Wonderful Business Environment
 Hong Kong has a high degree of liquidity of financial market and operates under
effective and transparent regulations as well as government, which meet
international standards.
 Its policy of low and simple taxation (The tax rate on corporate profits stands at
16.5%, no capital gain tax, no tax on offshore derived income)
 There are no barriers of access to the market by foreign business means accessing
the Hong Kong market is simple.
 There are no restrictions on capital on capital flows into and out of Hong Kong and
no exchange controls.
 Hong Kong is a top-ten securities market globally and the second largest in Asia
after Tokyo.
 English as the business language.
Because of the policy of simple regulation, no barrier and transparency government, I
suppose it could be no problem for our bank to operate a new branch in Hong Kong. The
corporate tax in Hong Kong is much lower than in Vietnam (the corporate tax in Vietnam is
28%), therefore we could earn much money on reducing taxation in order to reinvest
elsewhere and it allows maximum room for business initiatives and innovation. The policy
of no restriction on capital inflow and outflow Hong Kong enable our bank to transfer
capital unlimitedly.
Potential markets
Hong Kong is international trade centre and its access to China provides Hong Kong a
large and potential investment and export market.

Hong Kong is one of the most densely populated in the world. With a population of 7
million people and GDP per capita is 29,900USD (in 2009) (Hong Kong people are
becoming richer), Hong Kong itself provides a large number of potential customers.
High- skilled labour
With the flexible and high-skilled labour market, our bank can employ workers without
training them; therefore, we can reduce the initial expense. Besides, workforce is highly
motivated, which has been stimulated an innovative, prosperous economy. Employees in
Hong Kong can work under pressure for longer time than in Vietnam.
Close distance from Vietnam to Hong Kong
Due to the close distance from Vietnam to Hong Kong, we can travel easily and quickly
between these two places. Therefore, I suppose, the director or managers can take care both
places, in Vietnam and Hong Kong.
Limitations
Foreign banks could only set up maximum 3 branches in Hong Kong.
High competition, 71 of the world’s 100 largest banks have a presence there.
IV. Conclusion
In summary, Hong Kong banking sector appears highly favourable. In the domestic side,
Hong Kong has number of unique qualifications. Firstly, Hong Kong has a policy of low
and simple tax and a world class regulatory as well as a well-established, deep and liquid
market, enable it become one of the most an interesting and healthy business environments
in the world. Secondly, its favourite time location and physical location is advantages for
bank companies which enable banks to deal with customers around the world 24 hours per
day. On the external side, Hong Kong’s close economic ties with the Mainland are highly
beneficial for Hong Kong. It offers an opportunity for foreign companies like our company
can reach an enormous number of customers not only in Hong Kong, but also in the


Mainland. In addition, Hong Kong has strong potential to develop further as an
international trade, business, and financial centre. For all these reasons, Hong Kong

appears to be well positioned to mature further as a services-based economy with
development of trading and financial links both to the rest of China and to the rest of the
world. Therefore, it is highly recommended that Hong Kong would be the most suitable
place for our company to open a new branch abroad.