Luring the affluent with a tinge of cultural dynamics

With Hong Kong's revamped Capital Investment Entrant Scheme having been in force for a month by late March, the city has seen burgeoning interest from wealthy people outside the Chinese mainland.

The program, which offers residency to entrepreneurs investing HK$30 million ($3.8 million) in the city, received 70 applications from its launch on March 1 through the end of the month, with 40 percent of them from non-Chinese nationals, according to a source close to the government. The government has not yet published related figures.

According to the Hong Kong Immigration Department, over 90 percent of the 35,262 applications approved under the program's previous version from 2003 to 2015 were from Chinese nationals with foreign permanent residency status.

The new program's appeal to a more diverse group of investors highlights Hong Kong's strengths in its common law system, as well as a low, simple taxation system, that have long been a magnet for business titans to park their offshore wealth in the city.

But Kavi Harilela, business director of Payment Asia Ltd and FGA Trust Ltd, says, "Hong Kong's financial system is accustomed to standardized big corporations from the United States, Europe and the Chinese mainland, sometimes, overlooking the needs of emerging markets."

He says Hong Kong's homogeneous cultural system may be a drawback for people from diverse backgrounds aiming to settle down and build up businesses in the special administrative region.

As global tensions ramped up the pressure on Hong Kong's financial sector - the linchpin of the local economy - the international financial hub "faces challenges in adapting to the complex demands of emerging markets, encompassing a wide range of languages, cultures, religions and legal systems across multiple countries", says Harilela. "What new wealthy individuals primarily want include a proficient management team well-versed in industry nuances and cultural dynamics."

According to a spokesperson for InvestHK - the SAR government department responsible for foreign direct investment - a growing number of affluent families from Southeast Asia have been planning to set up family offices in Hong Kong in recent years. There has also been a "noticeable trend" of European and Middle Eastern families seeking to diversify their portfolios and establish a foothold in Hong Kong amid geopolitical uncertainties.

Wealthy families from Australia and the United Kingdom have also shown keen interest in parking their wealth in Hong Kong, the spokesperson added.

A market study published by global professional services firm Deloitte in March showed that Hong Kong had $30.5 trillion in assets under its management by late 2022. The city was also home to more than 12,500 ultra-high-net-worth individuals in the same year, topping the list among world cities.