China firms keen to set up treasury centres in Hong Kong after tax law change, says HKMA

HKMA chief executive Norman Chan hints 30 mainland firms considering similar move after three giants set up corporate treasury centres in the city

PUBLISHED : Monday, 28 August, 2017, 4:30pm
UPDATED : Monday, 28 August, 2017, 11:04pm

The head of the Hong Kong Monetary Authority said a tax law change last year has encouraged at least three mainland Chinese giants to set up corporate treasury centres in the city while another 30 are considering the move.

“At least three central state-owned enterprises, including China Huaneng Group, State Power Investment Corporation and China Three Gorges Corporation, have expressed their intention to establish or expand their corporate treasury centres in Hong Kong in the near future,” said Norman Chan Tak-lam, chief executive of HKMA, in an article posted on the authority’s website on Monday.

China National Petroleum Corporation, China General Nuclear Power Corporation, SAIC Motor Corporation and TCL Corporation are also considering similar moves, he said.

“In the past year or so, we have reached out to hundreds of Chinese and foreign enterprises, more than 30 of which are actively considering establishing or expanding their corporate treasury centres in Hong Kong,” he added.

Chan, who said he learnt about the company plans during a trip to Beijing in July, credited their decision as the result of tax rule change last year.

Corporate treasury centres work like in-house banks to manage international fund flows, foreign currencies, and hedging activities of the companies.

Hong Kong is seen as an ideal location for mainland enterprises to set up their corporate treasury centres due to the city’s strong financial network and its geographical proximity to mainland China.

Under the former tax system companies had to pay tax on interest income generated by the intra-group financing activities of the corporate treasury centres, which is why few mainland firms have set up such operations in Hong Kong, Chan said.

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In June last year the Hong Kong government changed the tax law to reduce by 50 per cent the profits tax rate on specified activities of qualifying corporate treasury centres.

After that, HKMA established a special team to lobby mainland firms to set up their corporate treasury centres in Hong Kong.

“Such positive responses are undoubtedly a strong stimulus to our efforts in expanding the scope for further development of Hong Kong’s financial industry,” Chan said.

“As mainland enterprises are actively expanding in the international market under the ‘Go Global’ initiative, the transfer and allocation of funds overseas has become even more important,” he said.

Chan added that the growing popularity of Hong Kong as a hub for corporate treasury centres will help attract more mainland and international companies to set up Asian headquarters in Hong Kong, which in turn will boost the city’s economy.