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Thanks to its industrial upgrading program, Beijing has become a hot destination for investments from Hong Kong.
The program includes backing for services, cultural and high-end technology sectors, which is expected to give the Chinese capital an edge over other cities that also compete for overseas investment.
Hong Kong companies invested $9.52 billion to establish 606 businesses in Beijing in the first three quarters of this year, up 97 percent year-on-year, and accounting for 77 percent of the foreign direct investment in the city, data from the Ministry of Commerce showed.
Hong Kong investment focused on finance, scientific research, technology services, geological prospecting, leasing and business services.
Sun Tong, director-general of the department of Taiwan, Hong Kong and Macao affairs at the Ministry of Commerce, said the services sector has been Beijing's main attraction for investment in recent years.
Companies from Hong Kong, Singapore and the United States are eager to diversify their investments, and have looked at the sector, especially the outsourcing businesses in it.
The central government has been trying to open up a wide range of segments in the services sector to FDI. Foreign companies were allowed to establish joint-venture hospitals with local partners this year, while investment from Hong Kong and Macao can be used to run hospitals independently in some cities, including Beijing, Shanghai and Shenzhen.
Beijing's gross domestic product reached 1.06 trillion yuan ($166 billion) in the first half of this year, up 7 percent year-on-year, according to the National Bureau of Statistics.
Elaine Lo, chairwoman of the Asia operations of Hong Kong-based law firm Mayer Brown JSM, said as China is promoting the Belt and Road Initiative, the firm has augmented staff in Beijing as many giant State-owned enterprises' headquarters are located in the capital city.
Globally, the firm employs more than 1,500 lawyers. It has offices in 22 cities across Americas, Europe and Asia. "We have seen that these SOEs have surging demand for legal consultancy services to carry out direct investments, and merger and acquisition activities in various overseas markets," Lo said.
The initiative, proposed by President Xi Jinping in 2013, aims to build a Silk Road Economic Belt and 21st Century Maritime Silk Road, forming a trade and infrastructure network that will connect about 4.4 billion people in more than 60 countries and regions in Asia, Europe and Africa.
Lo said unlike mature markets such as the United States or the United Kingdom, merger and acquisition activities in certain developing markets along the Belt and Road may entail bigger risks. Many Chinese companies are not familiar with local legal and commercial environment, and profitability models.
By the end of September this year, Hong Kong had 13,946 enterprises in Beijing, with their real investment reaching $43.27 billion, accounting for 43.3 percent of the capital's foreign investment in actual use. Hong Kong ranks first among all countries and regions that invest in Beijing.
Yu Yan, deputy director of the Beijing Investment Promotion Bureau, said the municipal government will continue to improve the business environment for investment from Hong Kong. For example, administrative approvals and taxes will be simplified, he said.
Lin Guijun, vice-president of the University of International Business and Economics, which is based in Beijing, said because companies from Hong Kong have rich experience in operating businesses in the financial, information technology, insurance, consulting and legal sectors, the municipal government should encourage them to merge with more local enterprises through public-private partnerships.
