(Bloomberg) — Companies involved in China’s electric car industry are setting up shop in Hong Kong to leverage the city’s financial system for their global expansion, investing over $1 billion so far and creating hundreds of jobs.
Most Read from Bloomberg
The world’s largest battery maker, Contemporary Amperex Technology Co. Ltd., said earlier this month it plans to open its international headquarters in Hong Kong with some HK$1.2 billion ($154 million) and hire 500 employees.
Read more: CATL to Spend Over HK$1 Billion on HK Headquarters, R&D Center
It’s a welcome development for the embattled Asian hub after its banner financial industry took a hit from years of Covid restrictions and an economic slowdown in China, leading to firms cutting staff or relocating people out of the city.
Hong Kong’s sophisticated financial sector, along with its free capital flows and the world’s largest offshore yuan market, can help Chinese EV companies where mainland banks cannot, according to Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers (CAAM).
“China’s big four banks aren’t yet able to directly support the needs of our automakers overseas, including for consumer auto loans, fundraising by dealerships or foreign direct investment to build factories,” Xu said at an event in Hong Kong on Dec. 14. “Chinese carmakers have arrived at the stage of expanding internationally, and this needs financial support. Hong Kong is a good starting point.”
As overseas sales grow, China’s EV makers and associated companies are expanding at pace. BYD Co. said it will build an EV factory in Hungary last week, its first on the continent, while other Chinese auto manufacturers including SAIC Motor Corp. and Great Wall Motor Co. are looking to localize production in Europe.
Read more: BYD Car Investment Affirms Hungary as China’s EU Bridgehead
Due to foreign exchange controls in China, money can’t move freely in or out of the country. Businesses repatriating capital or profits usually face layers of inspection and restrictions from Beijing, with foreign direct investment requiring sign off from authorities such as the country’s central economic planning agency the National Development and Reform Commission and the Ministry of Commerce. Hong Kong, as a Special Administrative Region, doesn’t fall under these rules.
Other companies that have set up in Hong Kong recently include Hozon New Energy Automobile Co. and autonomous driving outfits Black Sesame Technologies and Beijing Horizon Robotics Technology R&D Co. To date, Chinese EV-related firms have pledged HK$8.6 billion ($1.1 billion) in investments and announced plans to hire 1,300 local workers, Hong Kong’s Office for Attracting Strategic Enterprises told Bloomberg News.
CATL and Hozon are also considering going public or conducting a secondary listing in Hong Kong, whose stock exchange already hosts BYD and Geely Automobile Holdings Ltd., the listed arm of Hangzhou-based Zhejiang Geely Holding Group Co.
CAAM meanwhile is planning an Overseas New Energy Research Center in Hong Kong, which will also act as a service hub for its members.
Outside of its financial appeal, Hong Kong, a former British colony that drives on the left side of the road, is also often the first market for Chinese carmakers when launching right-hand drive models. Brands like XPeng Inc. and Geely-owned Zeekr are bringing their first right-hand drive cars to the city, for example.
Hong Kong even has strategic importance for SAIC, one of China’s largest state-owned automakers.
The Shanghai-based manufacturer sells electric and plug-in hybrid right-hand drive models from MG Motor and Maxus brands there and views the city as a stepping stone to Southeast Asia, where key emerging EV markets like Indonesia, Malaysia and Thailand are also right-hand drive, according to Chen Gang, SAIC’s director of international branding and sales.
“Hong Kong as a market isn’t very large but its strategic position is high for us,” Chen said. “We see Hong Kong as a bridgehead for Southeast Asia, a window to showcase our products and our brand.”
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.