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Tuesday, June 28, 2016, 22:30

HK ups the ante in race for corporate treasury crown

By Oswald Chan

Giving the Lion City a run for its money

The cut-throat race between Hong Kong and Singapore for the jewel crown as Asia’s premier CTC (corporate treasury center) will intensify after Hong Kong’s recent enactment of legislative changes.

According to market estimates, more than 100 multinational corporations have established CTCs in the SAR with varying scopes and sizes of treasury functions. Last year, there were 1,401 overseas companies that had set up their regional quarters in Hong Kong, according to the Census and Statistics Department.

The figure is staggeringly lower than Singapore’s as the city state currently boasts 4,000 regional headquarters, according to market estimates. This may be partly explained by the tax incentives offered by the Singaporean government toward regional headquarter establishment.

In Singapore, multinationals which established approved CTCs are able to enjoy a concessionary corporate tax rate of 10 percent as opposed to the ordinary rate of 17 percent, and exemption of withholding tax for a period of five to 10 years is subject to renewal.

In addition, Singapore is still ahead of Hong Kong in terms of double tax agreement (DTA) negotiations, whereas the city state has ratified more than 70 DTAs — more than double the number in Hong Kong.

However, Hong Kong still possesses some unique niches in CTC activities, including its proximity to the Chinese mainland and its position as a premier offshore renminbi center, to compete with the Lion City.

Hong Kong boasts having the world’s largest offshore yuan deposits of more than 880 billion yuan ($132.4 billion) as of March this year, with 340 billion dim sum bonds outstanding in April and 282 billion renminbi-denominated loans outstanding in March. Renminbi-denominated trade settlement handled by banks in the city totaled 1.1 trillion yuan in the first three months of this year, according to the Hong Kong Monetary Authority.

As mainland corporations go out and multinational companies expand into the mainland, the dire demand for more sophisticated treasury management is expected to surge in the near future.

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