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Country Commercial Guides for FY 2000: Hong Kong Report prepared by U.S. Embassy Hong Kong, released July 1999

CHAPTER VIII:   TRADE AND PROJECT FINANCING

A.   Description of the Banking System

Hong Kong has an open financial system, with no controls on currency movement. A more complete description is contained in VII (I) above.

B.   Foreign Exchange Controls affecting trading

The local currency, the Hong Kong Dollar (HK$), is freely convertible and there are no foreign exchange controls.

C.   General Availability of Financing

Commercial trade financing is available in Hong Kong for qualified customers. All licensed banks are authorized to provide loans to residents and non-residents in the currency of their choice. Letters of credit and other financial instruments are widely used to protect participants in trade arrangements. All banks maintain close working relationships with correspondent banking institutions. The financial system is highly developed and efficient.

D.   How to Finance Exports/Methods of Payment

The preferred method of quoting is "CIF" or "C and F" in HK$. The U.S. dollar and other freely convertible currencies may be accepted for bids and pro forma invoicing. Terms of payment depend on the relative negotiating strength of the buyers and sellers. U.S. suppliers should seek to obtain letters of credit or sight draft terms when dealing with buyers who are not well known to them. Asking for a letter of credit is a standard business practice, and your potential customer will not generally interpret this as a sign of mistrust.

The importance of trade finance to Hong Kong has resulted in a high level of bank efficiency in providing import payment services. Letters of Credit, document collection and international remittance are widely available. All licensed banks are authorized to provide loans to residents and nonresidents. The risk of financing receivables can be readily evaluated via locally available credit information. Prospective exporters should make use of banking relationships to determine credit risk.

E.   Types of Available Export Financing and Insurance

The U.S. ExIm Bank offers both trade financing and insurance for U.S. exports. Commercial vendors are also readily available.

F.   Availability of Project Financing, Including OPIC and Eximbank Project Finance, and Lending from Multilateral Institutions

Hong Kong and Macau are not recipients of official development assistance. Projects are financed on commercial terms. U.S. Trade and Development Agency programs are available for Hong Kong and Macau. Hong Kong is also a major center for commercial project financing for China.

G.   List of Banks with Correspondent U.S. Banking Arrangements

The list of Hong Kong based banks with correspondent U.S. banking arrangements is too large to include here. Appendix E(f) provides a list of U.S. banks licensed in Hong Kong. Hong Kong's five largest local banks are indicated in Section VII (I), above.

H.   The Asian Development Bank

The Asian Development Bank (ADB) is headquartered in Manila, Philippines. The Bank maintains resident offices in Bangladesh, Cambodia, India, Indonesia, Nepal, Pakistan, Sri Lanka, Vietnam, and Vanuatu. The Bank also maintains representative offices in Tokyo, Washington, D.C., and Frankfurt. The U.S. Department of Commerce maintains a Commercial Liaison Office in Manila which offers assistance to American companies wishing to take advantage of lucrative commercial opportunities from ADB projects. About 70 percent of a loan project goes to the procurement of goods, civil works and services. In 1998, American companies won $644 million worth of contracts under ADB projects for a wide range of equipment and services.

To carry out its mission of developmental aid to member countries, ADB lends to 33 active borrowers in the region including South Asia, the Pacific Islands and four countries in Central Asia (Kyrgyz Republic, Kazakhstan, Uzbekistan and Tajikistan). Total ADB lending in 1998 reached US$5.9 billion. The largest borrowers were Indonesia (30%), the PRC (20%), and the Philippines (14%).

The ADB is active in all sectors but is focusing increasingly on social infrastructure projects such as education, health, housing and environmental projects. In 1998, owing mainly to the financial crisis in Asia, the largest share of lending went to the financial sector (28%). The transport and communications sector ranked second (25%); multisector third (15.7%) and social infrastructure fourth (11.7%).

The Bank also promotes private sector participation in development through its Private Sector Group and offers loans and equity investments for projects that have a developmental impact. The Bank's private sector operations are meant to catalyze additional capital input into these projects.

The U.S. Commercial Liaison Office works with the Commercial Service posts in the region to assist its clients. Interested parties should contact: Denny Barnes, Director, FCS/ADB, tel: (632) 804-0460/0353, fax: (632) 804-0357. E-mail: Denny.Barnes@mail.doc.gov or csadb@pacific.net.ph. For detailed information on ADB projects, the ADB's website is: www.adb.org.