Doing Business

(English Version Only)

A common phrase suggests that the world is "getting smaller". Although this may be true in that it is easier to travel to and communicate with the rest if the world, it is hard to argue that this has led to greater synergy in how to do business globally. Cross cultural differences in the way we meet, greet, communicate, negotiate and build relationships still exist.

This guide to doing business in Hong Kong presents some useful tips on some salient points relating to etiquette, protocol and cross cultural communication.

The major influence on the business (and social) environment is the fact that Hong Kong is overwhelmingly populated by Chinese. The Chinese population are primarily drawn upon the five major groups of Southern China: 1) The Cantonese, 2) The Fukkien, 3) Hainan, 4) The Chui Chow and 5) The Hakka. Cantonese and English are the two languages of use on the island.

Meeting and Greeting

Although the traditional Chinese way of greeting is the bow, as a foreigner you would not really be expected to do so. A simple handshake would suffice, possibly combined with a slight bow. Strong handshakes are not really the norm and many an American or European has commented on the limpness of the Chinese handshake.

If greeting a group it is important to greet the most senior member first. As a hierarchical society it is important to constantly recognise seniority.

Most people you meet should be addressed with their title and surname. If you do know of a professional title (President, Doctor, Engineer, etc) simply use Mr or Mrs followed by the surname. It is always a good idea to try and find out if a title is used.

You will soon notice that many Hong Kong Chinese who do business with foreigners will use a "western" name that is easier for them to remember and pronounce.

Cultural Notes

You may see members of the sex holding hands. This signifies friendship but would not be seen between members of the same sex. Women can cross their legs when seated but men should try and keep their feet on the floor. Physical contact is rare so avoid patting people on the back or holding someone's shoulder.

Gift Giving Etiquette

Gift giving is part and parcel of doing business in Hong Kong. It helps establish and maintain relationships. Gifts are always exchanged between business associates at Christmas and Chinese New Year. A common gift is known as hong boa. This is when a gift of money is given in a red envelope to children and non-governmental staff. New bills are given in even numbers and amounts.

Gifts that are advised to avoid giving are clocks, books, blankets, anything unwrapped or wrapped in blue and green hats. When gifts are received do not open in the presence of the giver. When giving and accepting gifts use both hands. Gifts should be reciprocated.

Entertainment

Entertaining is a critical part of doing business in Hong Kong. Restaurants and banquet halls are usually where one will encounter an eight course meal over which a new alliance is built or a business deal celebrated. In fact, a meal can also be considered a gift so should be reciprocated.

Pay attention to seating etiquette. The guest of honour will always sit opposite the host. The next most important guest will sit to the left of the guest of honour; the third ranking guest sits to the right of the guest of honour.

Chinese tables are usually round and seat twelve people. The guest of honour will sit furthest from the entrance. The host will sit closest the entrance; this is to allow them to better deal with waiting staff.

Meetings and Negotiating

Appointments in Hong Kong should be made well in advance. Times of the year to avoid are around Christmas, Easter and Chinese New Year. Business trips are best scheduled for October, November and March to June. Most offices usually work from 09:00 to 18:00, Monday to Friday.

When meeting with a group of business associates always ensure to greet the most senior member first and then the next senior, working your way down the ranks. Ensure you bring plenty of business cards with you. These should be presented when meeting. It is a good idea to have one side of the business card translated into Chinese. Using red and gold is considered auspicious. Present and accept business cards with two hands and always inspect and comment upon cards.

Make sure you come prepared with materials and presentations as these will be expected. Facts and figures are crucial as supporting evidence but will not be the be all and end all. Remember to always keep calm, patient and modest in all your behaviour. Avoid confrontation or aggression as this will lead to you losing face and causing a loss of face. Use language diplomatically at all times. Similarly try to avoid directly saying no to anyone, try and use alternative expressions such as, "I will see", "I will try" or "It may be difficult."

Negotiations can be long, protracted affairs as details are slowly poured over and analysed. This is normal and rather than trying to add pressure see if more details would be useful. Be aware that during negotiations a senior member of the company may attend but simply as a ceremonial attendee. It is usually the lower ranking attendees who will do the negotiations with you so pay most attention to them.

Spirit of Contract

The legal system in Hong Kong is similar to the common law systems used in England and Wales and other Commonwealth countries. Its judiciary has had a very good reputation for its fairness and was recently rated as the best judicial system in Asia by a North Carolina think tank.

Under this efficient jurisdiction system, most companies operating in Hong Kong have good spirit of contract.

Business Registration in Hong Kong

Start doing business in Hong Kong requires a registration in The Companies Registry. There are hundreds of accounting firms and solicitor firms in Hong Kong which help their clients to do the business registration at an all inclusive cost ranging from HK$6,500 to HK$15,000. If you choose do it yourselve, the following are the registration procedures:

Step 1. Select a unique company name and apply for a certificate of incorporation in the Companies Registry
Time to complete: 7 days
Cost to complete: HKD 1,720 application fee + 0.1% of authorized share capital, capped at 30,000
Remarks: A company name can be searched online free of charge at the Companies Registry. Applying for a certificate of incorporation requires that the memorandum and articles of association (unnotarized is acceptable) and a statement of compliance be filed with the Companies Registry. Companies are refunded HKD 1,425 for unsuccessful applications. According to the Companies (Amendment) Ordinance 2003, Hong Kong companies are no longer required to have at least two subscribers, directors, and shareholders. They can now have one each. Moreover, companies are no longer required to file a statutory declaration of compliance with the Companies Registry. Instead, a standard government form (a statement of compliance) must be completed and filed with the Companies Registry.

Step 2. Obtain a business registration certificate (Inland Revenue Department)
Time to complete: 1 day
Cost to complete: HKD 450
Remarks: A business registration certificate must be obtained within a month of starting operations, by filing an application form (Form 1[b]) and a copy of the certificate of incorporation.

Step 3. File notifications regarding company details with the Companies Registry
Time to complete: 1 day
Cost to complete: no charge
Remarks: Within 14 days of the effective date of incorporation, the company is required to file with the Companies Registry notifications on the secretary and director(s), the location of the registered office, and the consent(s) to act as a director. Standard notification forms are available.

Step 4. Sign up Employee Compensation Insurance and Mandatory Provident Fund (MPF) Schemes with a private company or a bank
Time to complete: 1 day
Cost to complete: no charge
Remarks: Under the Employees’ Compensation Ordinance, an employer must possess a valid insurance policy to cover its employees (both full- and part-time) who are fatally injured or disabled due to accidents arising out of and during employment. In addition, all employees ages 18–65 and employed for 60 days or more under an employment contract (regardless of the number of work hours) must be covered by the Mandatory Provident Fund (MPF) Schemes Ordinance (except for persons exempted from the scheme) and be enrolled in an MPF scheme. The employer is also required to display the participation certificate issued by the Mandatory Provident Fund Authority at the work premises. The employer can arrange this insurance and the MPF scheme with any insurance company or bank in Hong Kong.

Step 5. Make a corporate seal and company rubber stamp
Time to complete: 1 day
Cost to complete: HKD 215