Explainer | Hong Kong launches ambitious plan to land family offices for the super-rich, but how does it stack up against competition for the lucrative market?
- Secretary for Financial Services and the Treasury Christopher Hui says he is confident scheme a credible rival to Singapore’s Global Investor Programme
- Government says scheme could bring in HK$120 billion to city and boost business for professional services firms
Hong Kong on Tuesday announced a new investment scheme to promote the growth of family offices and attract the super-rich to set up in the city, which officials said could bring in up to HK$120 billion (US$15.4 billion) in annual capital flows.
Secretary for Financial Services and the Treasury Christopher Hui Ching-yu revealed details of the New Capital Investment Entrant Scheme, which he said would lure more investors and boost business at the city’s professional services firms.
Residence by investment initiatives, also known as golden visa programmes, provide high-net-worth individuals with the option to relocate and the right to live, work, study and receive healthcare in their new countries.
Here the Post takes a look at the benefits and how the city’s latest scheme compares with those on offer around the world.
Hong Kong scheme to lure capital, talent could reel in ‘HK$120 billion annually’
What does the new scheme entail?
Foreigners, Macau and Taiwanese residents, as well as mainland Chinese people who have permanent residency in another country and who are aged over 18 are eligible to apply for the new scheme.
They must make a minimum investment of HK$30 million (US$3.8 million), including HK$27 million in financial assets excluding residential real estate, such as equities on the Hong Kong stock exchange, debt securities, cash deposits, subordinated debts, eligible collective investment schemes and limited partnership funds.
The remaining HK$3 million must be investments related to the development of Hong Kong’s innovation and technology (I&T) sector and strategic industries.
Investments must be held for at least seven years.
Hui estimated 4,000 people a year could join the scheme, based on trends from an earlier, similar programme, with each applicant bringing HK$30 million in investment, generating HK$120 billion every year.
Applicants must meet normal immigration and security requirements and the government will accept applications in mid-next year.
What are the benefits?
Potential investors and their dependents may first enter the city for up to 180 days as visitors to make preliminary investment arrangements before they are granted an initial two-year right to stay.
They will be allowed to apply for extensions at three-year periods until they reach the seventh year, when they will be eligible to become permanent residents.
Applicants will have their buyer’s stamp duty and new residential stamp duty suspended when they buy a home in Hong Kong.
The programme, alongside a tax break introduced in May and other incentives such as an art storage centre at Hong Kong International Airport, is part of Chief Executive John Lee Ka-chiu’s pledge to attract another 200 family offices on top of the more than 400 already in the city.
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How does this scheme stand out?
Hui said the programme was different from the city’s other talent schemes, such as the Top Talent Pass Scheme or Technology Talent Admission Scheme, which were mostly aimed at boosting the city’s workforce.
The talent schemes only have requirements related to applicants’ educational qualifications or income, but not their assets.
The government introduced a Capital Investment Entrant Scheme in 2003 but suspended it in 2015.
The old scheme, which required applicants to invest at least HK$10 million, excluded Chinese nationals without foreign residency.
How does it compare with the rest of the world?
Hui said he was confident that the new scheme would be a credible rival to Singapore’s Global Investor Programme, which has a minimum investment of S$10 million (US$7.5 million), twice that of Hong Kong’s.
Singapore has also burnished its image as a centre for family offices, with the number rising from 400 in 2020 to 1,100 in 2022 because of incentives offered by the city state’s government.
Applicants for Singapore’s scheme, together with their spouse and children under 21, can get immediate permanent residency and apply for citizenship after two years.
The US’s EB-5 Immigrant Investor Programme is one of the most popular ways for foreign investors to gain permanent resident status – a green card – in a short time.
Applicants must have a net worth of more than US$1 million and provide proof that their funds come from legal sources.
They have to either invest US$1.05 million into a non-targeted employment area project, or US$800,000 into a targeted employment area project in a rural area or an area with high unemployment and create at least 10 permanent full-time jobs for qualified workers.
Hong Kong ideally placed to be family office hub
After the successful applicants have received a green card, the funds must stay invested until permanent resident status is granted, which takes about five years.
Nearly 100,000 applicants have obtained residence permits in the US over the last decade through the scheme.
Taiwan offers permanent residency almost immediately to foreign nationals who invest NT$15 million (US$479,240) in businesses on the island, or NT$30 million in government bonds, for three years.
South Korea’s investor visa allows foreigners to obtain permanent residency immediately by investing KRW$1.5 billion (US$1.15 million) into a public fund run by the Korea Development Bank, or designated projects in rural areas.
Australia’s golden visa scheme requires foreigners to invest A$2.5 million (US$1.69 million) in venture capital and growth private equity funds which invest in start-ups, and managed funds that invest in companies listed on the Australian Stock Exchange.
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How are businesses and lawmakers reacting?
The Hong Kong General Chamber of Commerce said the city’s new scheme would enrich the talent pool and attract more capital.
Human resources expert Alexa Chow Yee-ping said the scheme’s conditions were much more favourable than Singapore’s, noting that except for pure investments, the city state also required candidates to set up businesses and hire dozens of local staff.
“Setting up a business is much more complicated, and it keeps out those who are only interested in investing and do not want to run a company,” she said.
The Hong Kong scheme is likely to attract Chinese nationals abroad, or those interested in entering the mainland market and using the city as a springboard, according to Chow.
Legislator Doreen Kong Yuk-foon said the new scheme would be more attractive to investors than the previous version as permissible investment assets had been expanded to include non-residential real estate, and many were attracted to the city’s stable property market.
Hong Kong’s appeal to global investors lay in its connection to the mainland market, an advantage over other cities, she said.
