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How Hong Kong Strategically Attracts International HNWI

How Hong Kong Strategically Attracts International HNWI

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  • Post last modified:April 26, 2024

Hong Kong is reinventing itself as the destination for international capital, capitalising on its advanced regulatory framework and financial schemes. The city’s ambition to reaffirm its status as a global financial hub is embodied in two key initiatives: the growth of its family office sector and the New Capital Investment Entrant Scheme. These efforts are not just about attracting wealth. They aim to nurture sustained investment and growth, underscoring Hong Kong’s determination to regain its eminent status in the global financial arena.

The Family Office

In the past year, the Hong Kong government has been making efforts to create a favourable environment for family offices, which now number over 2,700. Unlike its competitors, such as Singapore, Hong Kong does not have a mandatory licensing regime, making its setup process more flexible and efficient. This regulatory flexibility and substantial fiscal incentives like profits tax exemptions for qualifying family-controlled investment instruments highlight Hong Kong’s attractiveness as a low-friction hub for private wealth management.

A recent incident highlighted the competitive landscape involving Dubai’s Prince Ali. He had planned to establish a family office in Hong Kong, which was seen as a significant endorsement of Hong Kong’s growing stature as a family office hub. Unfortunately, this move had to be postponed due to his “urgent personal matters.”

Later, questions were raised about the viability of Prince Ali’s $500 million investment in Hong Kong, as he had been found to have spent ages and some time in the music industry in the Philippines. Some news outlets also suggested that Singapore had quickly offered favourable terms to attract the prince’s investment after he had left Hong Kong. This incident showcased the aggressive tactics of regional rivals to capture high-value family offices.

The New Capital Investment Entrant Scheme

The New Capital Investment Entrant Scheme complements the family office framework and aims to attract foreign investment directly into Hong Kong’s economy. The scheme has been launched with much anticipation and requires a minimum investment of HK$30 million, primarily directed towards financial assets and non-residential real estate. This ensures that incoming capital has a lasting impact on the local market and aligns investor benefits with Hong Kong’s economic priorities.

What makes the scheme more attractive is that it provides for family relocation and a clear path to permanent residency, which is a critical factor for investors seeking financial returns and a stable and welcoming environment for their families. This thoughtful integration of investment incentives with lifestyle considerations forms a potent combination that significantly boosts Hong Kong’s profile as a destination for substantial foreign investment.

Invest Hong Kong (the government agency facilitating foreign investments) is optimistic about the New Capital Investment Entrant Scheme and expects up to 4,000 applications annually. However, they acknowledge the need for cautious optimism in fierce global competition. This realism is essential as Hong Kong competes with other regions that offer more established or attractive residency options.

Challenges and Global Competition

Hong Kong is currently facing significant challenges despite implementing various aggressive strategies. According to the Henley Residence Program Index 2024, Hong Kong ranks 11th among all “golden visa” programs, notably lower than its Asian counterpart, Singapore, which ranked 7th.

Hong Kong’s strategic initiatives to attract international HNWIs unfold against a backdrop of economic uncertainty and geopolitical tensions. These external factors present risks that could influence potential investors’ confidence and decisions. How Hong Kong adapts to these challenges while maintaining its strategic focus will be key to its continued success in attracting and retaining international HNWIs and their capital.