Báo cáo nghiên cứu và đánh giá thị trường hong kong của ngân hàng TMCP ngoại thương việt nam (vietcombank) e

Báo cáo nghiên cứu và đánh giá thị trường Hong Kong của Ngân hàng TMCP
Ngoại Thương Việt Nam (Vietcombank)
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

GDP-Real growth rate (annual -2.7

2008

2007

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

1991

(APEC)
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 cooperation. 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 deposittaking 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 wellestablished, 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.