Since late 2015 the Hong Kong government has been pushing its corporate treasury centre (CTC) initiative in the hopes of promoting the territory as an international financial centre on the global stage.

“We are keen to attract more multinationals to set up their regional or global treasury centres in Hong Kong. The reason is that corporates are the end users of financial and professional services. Attracting more treasury activities to Hong Kong will ultimately help the growth and development of Hong Kong’s financial market,” explains Sara Yip, senior manager, market development division at the Hong Kong Monetary Authority (HKMA).

Hong Kong, whilst often competing with regional-rival Singapore for financial business, still stands out for several reasons. First, the city is an ideal location for businesses wanting to enter the Chinese market. Information from the Chinese Ministry of Commerce shows more than half of foreign direct investment into Mainland China originates from Hong Kong. Moreover, in 2015 approximately 62% of overseas direct investment from China came to Hong Kong.

Second, the city has a very attractive tax regime that reduces tax levied on profits from specified treasury activities by 50% for qualifying CTCs, from 16.5% to 8.25%. Moreover, treasury centres can take advantage of a deduction of interest expenses, under specified conditions.

Third, Hong Kong has a good track record of economic liberty. The city was ranked number one in economic freedom by the Heritage Foundation and The Wall Street Journal in 2016. Under Article 112 of Hong Kong’s constitution, the Basic Law, “no foreign exchange policies shall be applied in the Hong Kong Special Administrative Region. The Hong Kong dollar shall be freely convertible.”

“We are seeing a growing number of corporates setting up their CTC and centralizing their treasury operations for better operational efficiency as well as risk management,” says Yip. “In terms of structure, each corporate should structure their own CTC in accordance with their stage of development and business needs.”

HKMA says that there are around 8,000 multinationals that have a presence in Hong Kong, with over 50% of them choosing Hong Kong to be their regional office or headquarters.