The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. To access the ICS, visit the U.S. Department of State Investment Climate Statement website, including ICS for Hong Kong and Macau.
Executive Summary
Hong Kong
Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on July 1, 1997, with its status defined in the Sino-British Joint Declaration and the Basic Law. Under the concept of “one country, two systems,” the People’s Republic of China (PRC) government promised that Hong Kong would be vested with executive, legislative, and independent judicial power, and that its social and economic systems would remain unchanged for 50 years after reversion. While there remain differences between Hong Kong and mainland China in some areas, including commercial and trade policy, internet freedoms, and freedom of religion, the PRC’s imposition of the National Security Law (NSL) on June 30, 2020 undermined Hong Kong’s autonomy and introduced heightened uncertainty for foreign and local firms operating in Hong Kong. As a result, on March 31, 2023, the Secretary of State again certified that Hong Kong does not warrant treatment under U.S. law in the same manner as U.S. laws were applied to Hong Kong before July 1, 1997.
The U.S. Government has taken measures under Executive Order 13936 on Hong Kong Normalization to eliminate or suspend aspects of Hong Kong’s differential treatment, including issuing a suspension of licenses under the Arms Export Control Act, giving notice of termination of an agreement that provided for reciprocal tax exemption on income from the international operation of ships, establishing new marking rules requiring goods made in Hong Kong to be labeled “Made in China,” and imposing sanctions against former and current Hong Kong and PRC government officials.
On July 16, 2021, the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security, issued an advisory to U.S. businesses regarding potential risks to their operations and activities in Hong Kong. These include risks for businesses following the imposition of the NSL; data privacy risks; risks regarding transparency and access to critical business information; and risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals.
Hong Kong is the United States’ eighteenth-largest goods export market, twenty-third largest for total agricultural and related products, and tenth largest for consumer-ready food products. The United States enjoys a trade surplus of goods and services of $22.5 billion with Hong Kong in 2022, according to the Bureau of Economic Analysis at the U.S. Department of Commerce. Hong Kong’s economy, with its advanced institutions and regulatory systems, is bolstered by competitive sectors including financial and professional, trading, logistics, and tourism. Hong Kong provides for no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Foreign firms and individuals can incorporate their operations in Hong Kong, register branches of foreign operations, and set up representative offices without encountering discrimination or undue regulation. There are no restrictions on the ownership of such operations. Company directors are not required to be residents of or in Hong Kong. Reporting requirements are straightforward and not onerous. On economic issues, Hong Kong generally pursues a free market philosophy with minimal government intervention. The Hong Kong government (HKG) welcomes foreign investment, neither offering special incentives nor imposing disincentives for foreign investors.
While Hong Kong’s legal system had been traditionally viewed as a bastion of judicial independence, authorities have over the past year continued to place pressure on the judiciary in some cases. Rule of law risks that were formerly limited to mainland China have now increasingly become a potential concern in Hong Kong.
The service sector accounted for more than 90 percent of Hong Kong’s gross domestic product (GDP) in 2022. According to the Hong Kong Census and Statistics Department, Hong Kong hosts a large number of regional headquarters and regional offices, though the city’s changing political environment and COVID-related travel restrictions which now have been lifted, have led some firms to depart. The number of U.S. firms in Hong Kong fell over the previous decade from a peak of 1,388 in 2012 to 1,258 in 2022, according to Hong Kong’s 2022 census data. Out of that number, more than half are regional in scope. Finance and related services companies, such as banks, law firms, and accountancies play a large role in Hong Kong’s economy. Seventy of the world’s 100 largest banks have operations in Hong Kong.
The 2024 Hong Kong Investment Climate Statement.
Macau
Macau became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on December 20, 1999. Macau’s status since reverting to Chinese sovereignty is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law (the SAR’s de facto constitution). Under the concept of “one country, two systems” articulated in these documents, Macau enjoys a high degree of autonomy in economic matters, and its economic system is to remain unchanged for 50 years following the 1999 reversion to Chinese sovereignty. Macau, a separate customs territory from mainland China, describes itself as a liberal economy and a free port. Tourism is the basis of the Macau economy. The Government of Macau (GOM) maintains a transparent, non-discriminatory, and free-market economy. The GOM is committed to maintaining an investor-friendly environment.
In 2002, the GOM ended a long-standing gaming monopoly, awarding two gaming concessions and one sub-concession to consortia with U.S. interests. This opening encouraged substantial U.S. investment in casinos and hotels and has spurred rapid economic growth in the tourism, gaming, and entertainment sectors, among which the gaming industry constitutes the most important pillar of Macau’s economy. The GOM collected gaming tax revenue of $2.4 billion in 2022, accounting for less than 20% of the total government expenditure of $12.4 billion that year. In 2007, Macau surpassed Las Vegas in annual gaming revenues to become the world’s biggest gaming center. Prior to the pandemic Macau’s gaming revenues were roughly seven times higher than Las Vegas’. However, in 2022 Las Vegas once again outperformed Macau largely because the SAR continued its strict border controls to contain the Covid-19 pandemic by adhering to the PRC’s Zero COVID Policy for a third year.
Macau recorded $5.3 billion in full-year casino gross gaming revenue in 2022, a 51.4 percent decrease from the previous year’s total and the lowest since 2004. U.S. investment over the past decade is estimated to exceed $24 billion. In addition to gaming, Macau aspires to position itself as a regional center for incentive travel, conventions, and tourism, though to date it has experienced limited success in diversifying its economy. In 2007, business leaders founded the American Chamber of Commerce of Macau.
Macau also seeks to become a “commercial and trade cooperation service platform” between mainland China and Portuguese-speaking countries. The GOM has various policies to promote these efforts and to create business opportunities for domestic and foreign investors. Many infrastructure projects are currently underway, such as the expansion of the city’s light rail system and airport, new hotels, and the 4th Macau-Taipa harbor crossing that started construction in August 2020, and which is expected to be completed in the first quarter of 2024.