U.S. and Hong Kong (1997)

U.S. Department of State

Hong Kong Country Commercial Guide for FY 95-96

Office of the Coordinator for Business Affairs

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CHAPTER VIII. TRADE AND PROJECT FINANCING

A. Brief Description of Banking System Hong Kong has an open financial system, with no controls on currency movements. A more complete description is contained in VII (O)

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 Financing Availability Commercial trade financing is readily available in Hong Kong for qualified customers. Bank loans have been increasing at double digit rates over the past five years. 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 interpret this as a sign of mistrust.

The importance of trade finance to the territory 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. 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. Project Financing Availability Hong Kong is not a recipient of official development assistance. Projects are financed on commercial terms. U.S. Trade and Development Agency programs are available for Hong Kong. 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 (O), above.

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