C1 Ch.1 Hong Kong’s Business Environment Flashcards
What are the roles and importances of business in the Hong Kong economy?
- Providing employment opportunities. Firms hire staff for business operations.
- Producing income. By engaging in high value-added services, Hong Kong people can earn higher income. Business thus help raise raise the living standard of the people.
- Promoting economic growth. Growth of the industry will create opportunities for related and supportive business.
- Earning foreign exchange to pay for imports. By way of exports and re-exports, Hong Kong earns foreign exchange to pay for imports for consumption and production.
- Raising government revenue.
What are the major tax revenues?
- Profit tax on businesses.
- Stamp duties on property and stock transactions.
- Salaries tax on employees.
What are the characteristics of the Hong Kong economy?
- Lack of primary industries and concentration of tertiary industries.
- Dependence on external trade.
- Free trade.
- Simple taxation.
What is the definition and examples of primary sector?
Economic activities that extract natural resources, like agriculture, fisheries, mining.
What is the definition and the examples of the secondary sector ?
Economic activities that turn raw materials into semi-finished to finished goods like manufacturing, construction, electricity.
What is the definition and examples of the tertiary sector?
Economic activities that provide service to customers like financing and insurance.
How is the importance of the 3 sectors of an economy measured?
- Contribution to GDP.
- Employment distribution.
Explain on dependence on external trade.
- Hong Kong lacks arable land and natural resources, so needs to import food stuffs, fuel, raw materials, consumer durables from foreign countries.
- Hong Kong’s external trade is much higher than GDP.
Explain on free trade.
- Hong Kong is a free market economy with little government intervention.
- There are no trade barriers. Only a few commodities are subject to duties.
- There is no foreign exchange control. The free flow of capital allows businesses to move capital in and out of Hong Kong to tap into investment opportunities.
What are the main roles of the Hong Kong Government?
- Maintaining law and order.
- Maintaining open and fair competition in the market.
- Promoting free trade.
- Providing infrastructure.
- Providing education and training to Hong Kong people.
Explain on simple taxation.
- 3 direct taxes.
- No capital gains tax and sales taxes or value-added tax.
- Tax rates are low.
- Simple taxation and low tax rates make Hong Kong an attractive place to do business.
What are the objectives of the Closer Economic Partnership Agreement (CEPA)?
- To reduce or eliminate barriers on substantially all the trade in goods between Hong Kong and Mainland.
- To achieve liberalisation of trade in service through reduction or elimination of substantially all discriminatory measures.
- To promote trade and investment facilitation.
Explain on the details on trade in goods.
All goods originating in Hong Kong meet the CEPA rules of origin can enjoy zero tariff preference when being imported into the Mainland.
Explain on the details on trade in services.
- Hong Kong service suppliers can enjoy preferential treatment when setting up businesses in various service sectors in the Mainland.
- There is mutual recognition of professional qualifications and exemptions of examination papers.
Explain on the details on investment.
- Hong Kong investors can enjoy national treatment when investing in non-service sectors in Mainland.
- Investment protection and facilitation measures are provided for Hong Kong investors. A mechanism for settlement of investment disputes is provided.