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Hong Kong is cheaper than Beijing, Shanghai, and Singapore

Carol Ko | Dec. 30, 2011
What a difference a strong currency can make.

There is a downside. "While this is good news for many companies who have international assignees in Hong Kong, sending staff out of Hong Kong could become more expensive for businesses if allowances designed to protect an employee's purchasing power whilst on assignment need to be increased," notes Quane.

Other factors

Still, said Quane, some companies would rather keep their business operations in Hong Kong than in Shanghai or Beijing, for example, even though they consider China to be the major market for them. "Companies may prefer to be in Hong Kong for a better quality of living, the availability of better staff and the rule of law," he said. "And the ability to carry out business is actually easier [in Hong Kong] than across the border."

Those are the same business conditions that you find in Singapore, except the proximity to China. But Singapore is closer to Malaysia and Indonesia, whose credit rating has just been upgraded to investment-grade, and to India (some companies base their India-facing regional function in Singapore rather than in India itself).

Quane also notes that being a cheaper place to live in does not mean that a location is automatically more attractive to employees. "For example, Shenzhen ranks lower [cheaper] than Hong Kong, but not everybody wants to relocate from Hong Kong to Shenzhen. And while Singapore is more costly to live in than Hong Kong, some find Singapore can provide a better lifestyle and higher standard of living than Hong Kong," he added.

Personal safety is an important factor as well. Islamabad (ranked 236) and Karachi (No. 237) in Pakistan are among the cheapest cities for expatriates, but civil unrest and the presence of terrorists there -- Osama bin Laden was found and killed in Pakistani territory -- will figure into company calculations as well.

Where's the market?

If Hong Kong once again surpasses Singapore as a more expensive city to live in, will CFOs still prefer to expand their businesses in Hong Kong rather than Singapore? "Yes," Quane opines. "One of the reasons why multinational companies continue to remain in Hong Kong, in comparison to Singapore, is due to its proximity to mainland China."

Quane confirms that "proximity to China" is the "very key" consideration for businesses when considering where to put their China-facing staff overseas. By implication, proximity to Malaysia, Indonesia and India should also be a key factor for companies setting up in Singapore rather than in Hong Kong.

The attractiveness of a market is an important consideration for businesses, Quane said. "For example, Japan is the most expensive to live in, but still, MNCs are sending their staff to Japan because the market there remains attractive to them." According to ECA's cost of living survey, the strong Japanese yen has made Tokyo the most expensive location in Asia, and for the second consecutive year, the most costly to live in globally. Nagoya, Yokohama and Kobe take the 4th, 6th and 10th places globally, respectively, followed by Seoul at No. 21.


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