Hong Kong remains the choice location for international companies to oversee and manage their regional operations, with US companies once again leading with the most number of regional headquarters and regional offices.

According to the “2004 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong,” the United States topped the list of countries/territories with companies with the most number of regional headquarters in Hong Kong, with 256. Japan was next with 198 and Mainland China placed third with 106.

These regional headquarters include such businesses as wholesale, retail and import/export trades, business services, transport and related services, finance and banking and manufacturing.

The United States also topped the list of countries/territories with companies having regional offices in Hong Kong, with 557. Japan was second with 515 companies, followed by the United Kingdom, with 211 companies. The regional offices were involved in such businesses as wholesale, retail and import/export trades and business services.

The report defines a regional headquarters as an office that has control over the operations of offices in the region and manages the business without frequent referrals to its parent company outside Hong Kong. A regional office is an office that coordinates offices/operations in the region and manages the business but with frequent referrals to its parent company outside Hong Kong or its regional headquarters.

The total numbers of both regional headquarters and regional offices in Hong Kong reached all-time highs this year while the number of local offices also recorded an increase. According to the report, 1,098 companies had regional headquarters in Hong Kong while 2,511 companies set up regional offices as of June 1.

In 2003, there were 966 regional headquarters and 2,241 regional offices.

Director-General of Investment Promotion at Invest Hong Kong Mike Rowse said it is encouraging that Hong Kong remains international businesses’ preferred location to manage their regional operations.

“The figures reflect that our city continues to attract investors from traditional markets, including the U.S. and Japan,” said Mr. Rowse. “The results also tell us that Hong Kong’s traditional advantages ’ including a simple and low tax regime, absence of exchange controls and free flow of information ’ keep Hong Kong competitive among neighboring markets in Asia.”

Mr. Rowse added that there is a trend of Mainland Chinese enterprises setting up operations in Hong Kong as a springboard to expand overseas and that the new investment facilitation policy announced by the Ministry of Commerce will encourage more Mainland enterprises to invest in Hong Kong. At the same time, foreign companies also make use of Hong Kong as the gateway to access the growing Mainland market.

“The importance of Hong Kong as a two-way platform will continue to grow,” said Mr. Rowse. “We also expect to see the initial effect brought along by the Closer Economic Partnership Arrangement in the next 12 months, with foreign investors forming or expanding their Hong Kong operations to enjoy the preferential treatment.”

Mr. Rowse said the outlook for inward investment in the region is positive and Hong Kong is one of the strongest magnet for foreign direct investments in the regions. “We are working with many foreign and Mainland companies to establish and expand their operations in Hong Kong, and are expecting a 40% year-on-year increase in our investment projects this year,” he said.

Respondents to the survey cited the territory’s free flow of information as the most important factor in their selection for regional representations.

Other factors included low and simple tax system; corruption free government; and absence of exchange controls.

This year’s survey also reported 2,334 local offices in Hong Kong that were established by companies incorporated outside Hong Kong. The corresponding figure in 2003 was 2,207.

A local office is defined as an offic