Mainland and Hong Kong forge partnership in architecture business

Integration between Hong Kong and mainland China after 1997 was inevitable. Despite being a global economic powerhouse, China continues to undergo development to catch up with the more established nations in terms of infrastructure and professional standards.

The field of architecture is no exception in terms of developing sectors with plenty of promise. There is fierce competition between developers in tier-one cities and the rapid growth of tier-two cities, as well as an increased demand for mainland architects to provide services overseas.

Despite Hong Kong architects having decades of experience working on the mainland, there's been a lack of consolidated information on the business restrictions, barriers to entry, and differences between mainland provinces.

To address this, the Hong Kong Institute of Architects, subsidised by the government's Professional Services Development Assistance Scheme, engaged Hogan Lovells International and KPMG Advisory (China) to conduct research into taxation, foreign exchange and legislation challenges that Hong Kong architects face when establishing businesses on the mainland.

The research provided insight into the advantages and disadvantages of various business models. Offshore models largely acknowledge significant savings on capital and personnel investment while being accompanied by an array of tax incentives. Onshore models note the advantage of operational flexibility at the expense of steep investment costs. The benefits and limitations of onshore models were noted to be subject mostly to varying legal dynamics.

Figures have varied over time and by province, but the required capital investment for Hong Kong architects in setting up a business on the mainland is generally far higher in comparison to Hong Kong.

For personnel, there is also the more standard requirement of three "PRC Class 1 Architects", three Structure Engineers, and three E&M Engineers; all registered on the mainland. This is a steep investment for many Hong Kong architects, especially when taking into consideration the fact that the natural scale of operations in Hong Kong is smaller.

The mainland and Hong Kong Closer Economic Partnership Arrangement (Cepa) was the first free trade agreement ever concluded by the mainland and Hong Kong. The main text of Cepa was signed on June 29, 2003. Notably, the more recent Cepa Guangdong Pilot Scheme looks to confirm and make public the procedure for Hong Kong architects to set up business in Guangdong province; a major step towards further transparency and smoothing out the cross-border transition process.

Although only applicable in Guangdong province, the Cepa Guangdong Pilot Scheme reduces personnel investment requirements by only requiring three "PRC Class 1 Architects", but with mutual recognition in place with HKIA. This recognition helps integrate both industries from both an operational efficiency and professional standardisation standpoint.

Normal business incentives aside, it is no surprise that many Hong Kong architects wish to expand to the mainland. For the Hong Kong architect, working on the mainland means a significantly higher degree of design freedom. Furthermore, mainland clients are often more receptive to bolder and more creative ideas. This is in contrast to overcrowded Hong Kong, which has significantly more regulations and restrictions on what architects can and cannot do, making the mainland attractive for career development.

From the perspective of the mainland, benefits for hiring Hong Kong architects include the balance of familiarity with international expertise. Hong Kong architects have a history of familiarity with global standards. Sharing a common language and similarities in business culture also makes Hong Kong a comfortable option for Chinese developers looking beyond their border.

Professional practice also comes into play. The standard architecture process as understood in Hong Kong involves inception, feasibility studies, outline schematic proposals, project design, contract document, and finally building construction. On the mainland, an architect's design duties in the latter two processes are often discharged by application of construction templates and reliance on supervisory construction firms who may not share the architects' design visions.

For most of the world, it is standard to offer a full service that covers all stages of the process to ensure the architectural vision is realised from start to finish. When architects on the mainland adopt the provision of full service, it is likely that they will be able to obtain more opportunities to be involved in overseas projects.

Looking ahead, the opportunity for further integration and mutually beneficial arrangements continue to be hopeful, partly thanks to Cepa. Positive integration and competition will elevate the quality and standard of services provided by architects on the mainland and in Hong Kong. The industry should not forget that with integration comes the opportunity for win-win outcomes.

Felix Li is council member and co-chairman of board of mainland affairs, Hong Kong Institute of Architects (HKIA). Rover Cheung is chairman of special projects committee, board of mainland affairs, HKIA