Does companies from Hong Kong have the same rights as ones registered in Mainland China?
People often ask about companies from Hong Kong and if they have the same rights to operate in China as, for example, companies registered in Beijing or Shanghai? In a word:
No. Hong Kong, even though it is controlled by China, is an SAR (Special Administrative Region), and it has a separate legal, economic, and monetary (Hong Kong Dollar) system.
Why are companies incorporated in Hong Kong instead of in China?
Hong Kong is ranked as having the highest level of economic freedom in the world, which makes registering a company there much simpler than in China (China is barely at position no. 137). Although the difference seems obvious, people that import from China frequently treat HK and China as one and the same. This is a mistake and can lead to negative consequences. Hong Kong companies are not entitled to transfer goods from Mainland China, as well as trade in China.
What consequences might we encounter if we trade with a Hong Kong-based company?
Unfortunately, scammers often open companies in Hong Kong with the same names as companies from the People’s Republic of China. They also use the same bank accounts as such companies, and they wheedle money out of unsuspecting foreigners (Hong Kong is even more difficult to recover money from than China). If you have a dispute with a Hong Kong-based company, HK law will apply.
How can we protect ourselves against problems with a company from Hong Kong?
If a Chinese company has a subsidiary in HK, then you should investigate actual capital ties between them. It is worth asking the company for both registration licenses. You should also confirm that the company has a valid registration.
Unfortunately, many companies from HK are registered by scammers. Often, on websites, they declare that they are a large manufacturer (for example, an e-cigarettes supplier from China), but after checking the documents, it turns out that they don’t even have a physical address but only a post office box (this method of registration is popular in HK).
Do not become paranoid when dealing with Hong Kong; just be careful.
In conclusion, if you are dealing with a company from Hong Kong, be aware that this is not a company registered in China. You should also check the links between the company from HK and China (if the company claims such links). You should not become paranoid upon seeing that a company is from Hong Kong, as some companies are registered there for tax or business reasons.