With a population of over 4 billion and growing, things that happen in Asia will increasingly shape the rest of the world – but not all countries will benefit equally. As more money is made and invested throughout Asia, the financial hubs of the region will facilitate the flow of capital and profit the most.
Singapore and Hong Kong are arguably the biggest contenders for the title of Asia’s main financial center and the rivalry between them can at times be intense.
It’s easy to see why because the two cities have many things in common with each other. Both are the gateways between their region and the rest of the world (Singapore for ASEAN, Hong Kong for Mainland China), and both lure in an immense amount of FDI.
Both jurisdictions are doing many things right and continuously score near the top of several rankings, Singapore has placed first in The World Bank’s Ease of Doing Business Index since 2006, while Hong Kong has been in the top four since 2007.
Similarly, and despite their small sizes, each is home to one of the top five busiest container ports in the world. The total value of Singaporean exports is higher than any other country in Southeast Asia despite being the smallest in the region. Much of this is because of re-exporting, and high value products such as refined petroleum and pharmaceuticals.
Which is Best for Banking and Asset Management?
You can’t be a financial center without excellent banks, market-makers, and other financial institutions, and neither Singapore nor Hong Kong disappoint. A yearly report by Bloomberg lists Hang Seng Bank, one of Hong Kong’s largest, as the most well-capitalized bank in the world.
Even though Singapore and Hong Kong combined have only around 0.5% percent of the world’s population, each grabbed two spots on the list and claimed four out of the top ten strongest banks. The entire continent of Europe only has three, while all of Asia has six.
Along with stable banks and transparent legal systems, tons of foreign capital has flown into Hong Kong and Singapore because of low taxes – sometimes even too much. Singapore’s real estate market, for example, needed government intervention to cool it down and property in Singapore is arguably in a bubble.
If structured correctly, it’s possible for an offshore company in Hong Kong or Singapore to pay zero percent tax if they are not serving local customers. If they are, tax is still very low for both individuals and corporations at under 20% in the highest bracket.
Neither jurisdiction has estate or capital gains tax, making both a great choice for investors or wealthy retirees.
Singapore vs. Hong Kong? There May Not Even Be a Fight
Both Hong Kong and Singapore are obviously doing things very well, but their similarities lead many to wonder if one is a better place to invest and conduct business in. Some people even say one will even overwhelm the other and make it obsolete over the long term.
There’s no easy answer to this question and it depends on what you’re looking for. For example, Singapore is a hub for entrepreneurship. People in venture capital find the legal environment in the country easier to navigate and safer for a risky investment in a new company.
Hong Kong, on the other hand, specializes in investment and finance. A new link with the Shanghai Stock Exchange along with a larger presence of multinational banks, brokerages and other financial institutions give it an edge over Singapore.
It doesn’t stop there. Singapore is best at wealth management, Hong Kong at investment banking. Singapore for Forex, Hong Kong for equities.
It’s much more likely that the two jurisdictions will complement each other – similar to the way London and Frankfurt do – than for one to “win” over the other. Regardless, the world is watching Hong Kong and Singapore, as they are shining examples of Asia’s rise as a whole.