Situated on the southeast coast of China, Hong Kong was under British rule for over 150 years before the sovereignty over Hong Kong was transferred from the United Kingdom to the People’s Republic of China on 1 July 1997. According to the Heritage Foundation 2011, Hong Kong remains one of the most competitive financial and business centres in the world, and the second largest FDI destination in Asia. Hong Kong is a duty-free port except for four types of commodities, which are liquor, tobacco, hydrocarbon oil and methyl alcohol. The services sector in Hong Kong has grown rapidly over the past two decades and in 2009, the sector contributed to over 90% of Hong Kong’s GDP. The four traditional pillars of the Hong Kong economy, according to the UK Trade and Investment Doing Business in Hong Kong 2011, are trade & logistics, financial services, tourism and professional services. Overall, bureaucratic procedures and red tape are minor and are equally transparent to local and foreign investors, as reported in the US Department of State 2010. According to the World Economic Forum Global Competitiveness Report 2011-2012, the surveyed business executives give a score of 5 on a 7-point scale to the burden of government regulations, (1 being ‘extremely burdensome’ and 7 ‘not burdensome’), representing a competitive advantage for doing business in Hong Kong. Business executives from the same survey also rank the property rights in Hong Kong as strong, and the legal framework in settling disputes and in challenging the legality of government actions as highly efficient.

Corruption does not seem to be an impediment to foreign investors, and according to the US Department of State 2010, Hong Kong has an excellent track record in fighting corruption. Business executives in the World Economic Forum Global Competitiveness Report 2011-2012 rank corruption as the second least problematic factor for conducting a business in Hong Kong, while inflation, inadequately educated workforce and inefficient government bureaucracy are ranked as the top three most problematic factors. Furthermore, Transparency International’s Bribe Payers Index 2011 ranks 28 economies by the likelihood that their companies will pay bribes abroad; Hong Kong ranks 15th out of 28 economies. According to the World Bank & IFC Doing Business 2012, starting a business in Hong Kong requires only 3 days and 3 procedures at a cost of 1.9% of GNI per capita, which is less complicated, less time-consuming and less costly compared to the East Asia & Pacific region’s and the OECD’s averages.

The Basic Law of Hong Kong was adopted in 1990 and came into effect on 1 July 1997. The most prominent feature of the Law is the underlying principle of 'one country, two systems', meaning that Hong Kong has its own legal and judicial systems, which are based on the common law. Separate trade and customs territory, amongst others, remain unchanged until 2047. According to the US Department of State 2010, the legal system in Hong Kong is firmly based on the rule of law and the independence of the judiciary. The local court system provides for effective enforcement of contracts, dispute settlement and protection of rights. The Government of Hong Kong accepts international arbitration of investment disputes between itself and investors, and the government also applies provisions of the International Center for Settlement of Investment Dispute (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Furthermore, Hong Kong has also adopted the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration. Access the Lexadin World Law Guide for a collection of laws in Hong Kong.