According to the Financial Times of the United Kingdom, on August 20, 2023, an increasing number of foreign technology startups have been entering Hong Kong in the past two to three years, primarily driven by the two fastest-growing emerging sectors globally: the Internet of Things and financial technology. Hong Kong is an excellent place for investment in these two fields.
Florian Simmendinger is the founder of a technology company in Germany. Last year, in order to find a suitable engine for a wearable metronome controlled by a smartphone that his company developed, he searched throughout Europe but still could not find satisfactory components. However, after arriving in Hong Kong in November last year, he immediately found an engine in the Shenzhen market that greatly improved his product.“In Shenzhen, you can almost find any component you want. The engine I bought here immediately solved my problem.”
Mr. Simmendinger is just one of the countless entrepreneurs who have flooded into Hong Kong and ventured into the Internet of Things sector. One attraction for them is the geographical advantage of being backed by the vast market and manufacturing base of mainland China, while another is Hong Kong's more comprehensive legal regulatory system and lower tax policies.
Silicon Valley, as a model for attracting technology startups from around the world, has been emulated by countless countries and regions. Hong Kong is also pursuing this trend, hoping to gain a competitive advantage in the technology sector as its tourism and luxury retail industries face immense pressure. The tourism and luxury retail sectors, as traditional pillar industries of Hong Kong, are experiencing a decline in revenue due to a decrease in mainland tourists amid the anti-corruption campaign advocated by Chinese President Xi Jinping and a stricter political environment.
The Hong Kong government built the Hong Kong Science Park and Cyberport around the year 2000 to create infrastructure for the technology industry and enhance its overall competitiveness. However, more than a decade later, Hong Kong has not performed particularly well in the technology sector, mainly due to insufficient venture capital, limitations in the scale of the local market, and a cultural aversion to risk in Hong Kong's financial environment.
However, this situation has been changing in the past year or two, as entrepreneurs and investors from around the world gradually recognize Hong Kong's advantages in the Internet of Things and financial technology sectors. According to data from InvestHK, the number of co-working spaces specifically targeting startups in Hong Kong has increased from 3 in 2010 to 40 now. Some large co-working spaces are operated by existing large companies, such as DBS Bank of Singapore, Swire Group (which is also the parent company of Hong Kong's aviation giant Cathay Pacific), providing not only office space for startups but also financing and consulting services.
David Lynch, the Chief Technology Officer of DBS in China and Hong Kong, stated that Hong Kong, as one of the world's leading financial centers, undoubtedly provides an ideal location for startups seeking funding support in Asia and beyond. Of course, in the financial technology sector, Hong Kong faces competition from other global financial centers such as Singapore and London.
“However, Hong Kong's competitive advantage in the Internet of Things is indeed unique. Due to its proximity to Shenzhen, entrepreneurs can find the components they need and quickly manufacture product prototypes, which is something that places like Singapore cannot match.”
David Chen, an investor from AngelVest, a venture capital firm, said. David Chen is helping the American technology company Hanson Robotics relocate its headquarters from Texas to Hong Kong.
As the headquarters of Chinese technology giants Tencent and Huawei, Shenzhen provides significant support in terms of technology and components for Hong Kong. At the same time, entrepreneurs in Hong Kong are not only facing China but also a broader and more open market.