Let’s start with the basics.   While Hong Kong was ‘handed over’ to China in 1997, because of some unique treaty based obligations embedded in the Sino-British Joint Declaration first initialed in 1984, China and Hong Kong must be considered two separate countries for most business purposes, especially those dealing with outsourced manufacturing of goods.

What about that contract you have with your ‘partners’ in Hong Kong?  Such an English language contract to procure goods over in Mainland China is not worth the paper it is written on if not also backed up with a China compliant contract in Chinese.

And if you do not have a Mainland China compliant contract with your name on it, sending money to your partners in Hong Kong, who buy for you in China, is no more secure or rational than sending money to Bermuda to buy microchips in Shanghai.   That is two different jurisdictions, countries and legal systems with zero cross over between them.

When your Chinese manufacturer tells you they have a trading company over in Hong Kong and they want you to pay them in Hong Kong instead of Guangzhou, you should know that is simply not true.   Chinese companies are not permitted to have off-shore holdings and Hong Kong is considered off-shore so far as Beijing is concerned.

So, here are a few questions to ask your procurement department;

Do you send money to Hong Kong? Are your agreements in English? Do you sign your agreements or are they formalized with company seals on them?

If you are sending funds to Hong Kong, are signing your agreements and they are in English, you are no more doing business in China than you are in Greenland.   But that is avoidable.  All our China compliant contracts grew out of ten years of litigation history here and we know what works and what does not…