Chapman, Hext & Co., P.C. represents a number of Clients who have operations in China, or manufacture in China. Consequently, we wanted to send out an update on several current issues in Hong Kong and China.
Before China opened its doors to the west in the early 1980s, Hong Kong was one of the most important “middlemen” in China’s international relationships. Hong Kong is now greatly suffering from the US-China trade war and China’s economic slowdown. The 2019 Hong Kong anti-extradition bill protests are making these issues even worse.
Anti-Extradition Bill Protests
It has been estimated that over 2 million of the 7 to 8 million total population of Hong Kong have participated in Anti-Extradition Bill Protests at some point during the last 4 months. The purpose of the protests have been to prevent the passing of a bill which allows the Chinese government to extradite anyone they don’t like in Hong Kong without the protection of the Hong Kong judiciary.
How trade is effected
Hong Kong has always been treated as a separate contracting party to the World Trade Organization (WTO), from the Chinese mainland. Hong Kong has been considered a major option to circumvent the increased tariffs between China and the United States (U.S.). What the Chinese government tried to pass as law with the Extradition Bill could also affect Hong Kong’s free trade status with the West.
What is happening in Hong Kong could be just another one of the Chinese triggers because of the close U. S. and Hong Kong relationship. Within the ongoing United States-China trade war, China has focused US tariffs on labor intensive products exported to the United States, but the domestic real estate and infrastructure development, has also shown signs of the economy slowing down. To avoid paying the 10-25% tariff, many manufacturing business owners are looking at Mexico, India, Vietnam and other Asian countries as alternative options. These names include Apple, Google and other giants, as well as middle-market manufacturers.
Let us know if we can assist with any discussions of changes in manufacturing locations, as well as the related financing, tax and financial reporting implications.
