Companies reassessing regional strategies in a more uncertain operating environment continue to view Hong Kong’s legal and financial infrastructure as critical to business planning across Japan and the wider Asia-Pacific. From its Hong Kong office, international law firm Stephenson Harwood supports clients navigating cross-border investment, regulatory change and market entry across sectors where legal clarity increasingly matters.
Bridges: Hong Kong continues to play a pivotal role as a gateway between Mainland China and the wider Asia-Pacific. From a legal standpoint, what are the most pressing developments or regulatory shifts that international investors, particularly Japanese companies, should be aware of today?
Stephenson Harwood: Hong Kong remains an indispensable gateway between Mainland China and the Asia-Pacific, benefitting from recalibrated global capital allocation amid geopolitical and market uncertainties.
For Japanese corporates and international investors, key new updates are set out.
National Security Law
Enacted in 2020, the National Security Law (NSL) has changed Hong Kong’s legal landscape introducing new offences related to secession, subversion, terrorism and collusion with foreign forces. Companies operating in Hong Kong must ensure compliance with the NSL, especially regarding data, speech and activities which could be interpreted as over-stepping or violating national security.
Personal Data (Privacy) Ordinance (PDPO)
The PDPO has strengthened data protection with new rules on doxxing and cross-border data transfers. There is also increasing alignment with Mainland China’s stricter cybersecurity and data localisation rules, which may affect how Japanese firms handle data in Hong Kong.
Sanctions
Ongoing geopolitical tensions have led to new US and Chinese sanction regimes, and HK businesses may face conflicting legal obligations. The Japanese prime minister’s hawkish approach to China over Taiwan has also affected bilateral relationships between the two countries. Sanctions lists need to be monitored carefully to avoid inadvertent violations which may affect the supply chain.
Hong Kong remains an indispensable gateway between Mainland China and the Asia-Pacific, benefitting from recalibrated global capital allocation amid geopolitical and market uncertainties.
Listing Rules changes
In 2025, Hong Kong officially reclaimed its position as the world’s leading IPO venue for the first time since 2019, and the Hong Kong Stock Exchange’s specialized listing chapters for pre-revenue biotech (Chapter 18A) and specialist technology firms (Chapter 18C) offer high valuations for high-growth sectors. Japanese startups in deep tech, robotics, and medical devices that find limited liquidity or lower valuations elsewhere now have a highly viable, well-regulated alternative in Hong Kong.
The Hong Kong Stock Exchange has updated listing rules including stricter requirements for Environmental, Social & Governance (ESG) reporting and corporate governance. Increased disclosure requirements may affect Japanese companies with HK subsidiaries or entities.
Employment Law
Changes to work policies i.e. workplace safety and anti-discrimination and talent admission schemes may affect Japanese expatriates and hiring practices of Japanese companies in Hong Kong.
We are seeing renewed momentum in cross-border investment and regional structuring through Hong Kong. How are Japanese corporates and investors currently approaching this, and what legal considerations are becoming increasingly critical in navigating these opportunities?
Japanese companies have long used Hong Kong as a strategic platform for cross-border structuring and investment.
Cross-border investment via Hong Kong has regained momentum, with Japanese firms adopting cautious yet expansion-minded strategies. As highlighted in The 16th Survey on Business Environment in Hong Kong by the Hong Kong Japanese Chamber of Commerce & Industry, most Japanese businesses are maintaining a wait-and-see stance, while active adopters prioritise a “China for China” approach and broader ASEAN market diversification.
Japanese companies often use Hong Kong entities to invest in Mainland China, taking advantage of the Closer Economic Partnership Arrangement (CEPA) and favourable incentives in the Greater Bay Area (GBA) of which Hong Kong is part.
Many Japanese firms set up their Asia Pacific headquarters in Hong Kong to coordinate regional operations, management and decision making. The use of Hong Kong companies to act as holding companies for Mainland China investments benefit from Hong Kong’s business-friendly tax regime and common law legal system.
Hong Kong has double tax treaties with many countries, including Japan and China, which helps to reduce withholding tax on dividends, interest and royalties. There is also no capital gains tax in Hong Kong.
Sectors such as ESG, sustainable finance, and digital assets continue to evolve rapidly. Where are you seeing the most significant legal complexity or opportunity in these areas within Hong Kong, and how should businesses position themselves?
ESG, sustainable finance and virtual assets represent Hong Kong’s fastest evolving growth sectors, combining substantial opportunities with mounting legal complexity.
Sustainable finance is underpinned by expanded government green bond programmes and extended subsidy schemes, driving wider issuance of tokenised green instruments.
Key updates include new virtual asset and stablecoin licensing regimes, strengthened cybersecurity obligations, and reforms to OTC derivatives and asset management rules. Regulators are also advancing market tokenisation under the Hong Kong Monetary Authority’s Fintech 2030 blueprint, alongside evolving industry guidance for responsible AI adoption and tighter financial crime and data privacy safeguards. All reforms follow the core “same activity, same risks, same regulation” principle, requiring proactive compliance planning from foreign market participants.
Japanese companies have long used Hong Kong as a strategic platform for cross-border structuring and investment.
The Securities and Futures Commission has also introduced a licensing regime for virtual asset trading platforms, requiring compliance with AML/CFT (anti-money laundering/counter-terrorism financing) rules.
The legal treatment of digital assets depends on whether digital assets are classified as securities, payment tokens or utility tokens. New rules aim to protect retail investors, including suitability assessments and risk disclosures. Uncertainty remains for cross-border digital asset transactions and recognition of foreign regulations.
Japanese companies should secure necessary licenses for digital asset activities and ensure ongoing compliance, develop robust systems for customer due diligence and transaction monitoring, and also work with legal advisors to structure digital asset offerings in line with the regulatory environment.
For companies looking to establish or expand their presence in Hong Kong as a regional hub, what practical legal advice would you offer to ensure a smooth and future-proof market entry or expansion strategy?
When establishing or expanding a Hong Kong regional hub, businesses should first select a suitable entity structure to match operational and liability needs. Employment is an important consideration. Updates include the revised “4-68” continuous contract rule, which widens statutory employment protections for workers with irregular hours. The recent abolition of MPF offsetting for statutory severance and long service payments also requires employers to review payroll, staffing costs and termination arrangements. Firms should also embed robust data privacy, anti-harassment and remote work compliance policies, while utilising Hong Kong’s streamlined company registration, low and simplified tax regime and talent admission schemes to build a resilient, future-proof regional footprint.
All-in-all, Hong Kong remains the most practical entry point to China. From a legal point of view, Hong Kong operates under the common law system that provides international corporations with robust, predictable intellectual property protections and independent courts. Economically, it functions as a separate customs territory with zero tariffs on most goods, allowing friction-free capital movement and simplified corporate structuring. Hong Kong also benefits from a number of Greater Bay Area preferential policies. This combination allows global corporations to mitigate mainland regulatory risks while using Hong Kong as a secure, legally compliant hub to manage their Chinese operations.
