“Tax Cuts and Looser Visa Rules”: Hong Kong-Singapore Battle for Asian Financial-Hub Supremacy Intensifies

Hong Kong’s 0% Tax Gambit Ignites Battle for Financial-Hub Supremacy
Singapore Counters With Expanded Tax Incentives and Eased Visa Thresholds
Chinese Policy Support Widens the Gap, Accelerating Hong Kong’s Lead

Hong Kong and Singapore have entered an all-out battle for control of Asia’s financial-hub landscape. After Hong Kong unveiled a sweeping proposal that would effectively impose a 0% tax rate on fund managers’ carried interest, Singapore countered by expanding tax incentives and easing visa requirements. The rivalry has broadened into a drive to strengthen housing, talent and industrial capacity through the neighboring cities of Shenzhen and Johor. Yet the convergence of Chinese government policy support, major initial public offerings (IPOs) and an influx of overseas financial professionals is shifting the center of gravity in Asia’s financial markets increasingly toward Hong Kong.

Hong Kong Moves to Introduce 0% Tax Rate on Carried Interest

Bloomberg reported on Aug. 19 that the Hong Kong government recently submitted a tax amendment bill to the Legislative Council containing substantial tax reductions for hedge funds and other asset managers. The proposal would revise the preferential tax regime for carried interest, broaden the definitions of funds and qualifying investment assets, and abolish the 5% cap on incidental transactions. Its most consequential provision would effectively apply a 0% tax rate to carried interest, the compensation fund managers receive based on investment performance. The government plans to grant separate tax benefits to carried interest because it constitutes contractual remuneration linked to fund returns, distinguishing it from conventional discretionary bonuses.

If implemented, the overhaul is expected to reduce the already comparatively modest tax burden borne by hedge funds, private equity firms, venture capital funds and private credit managers operating in Hong Kong. Industry participants say the measure could amount to a “Big Bang” tax reform capable of reshaping the city’s asset-management industry. Hong Kong authorities described it as “a measure designed to reinforce the city’s competitiveness as Asia’s leading wealth-management hub.”

More Sweeping Incentives Despite an Already Low-Tax Regime

The shift reverses the direction of migration seen for several years after the COVID-19 pandemic. At the time, tens of thousands of foreign white-collar professionals left Hong Kong for Singapore to escape political turmoil and stringent pandemic restrictions. Hong Kong has now embarked on tax reform to lure them back. The city began reestablishing its position as a financial hub in 2024, gaining momentum as its post-pandemic systems returned to normal and investors reassessed its distinctive role as a gateway for capital flows into mainland China.

Hong Kong’s initiative has already stirred the global financial industry. Hedge funds based in other jurisdictions are closely monitoring the bill’s progress, while family offices—financial firms that manage the assets of ultra-high-net-worth individuals—are watching to see whether they will also qualify for the benefits. According to the Alternative Investment Management Association (AIMA), an industry body representing hedge funds, some hedge funds and private equity firms headquartered in Singapore are considering relocating key portfolio managers to Hong Kong.

Rival Financial Hub Singapore Considers Tax Cuts

As Hong Kong’s tax overhaul shows signs of triggering a migration of financial professionals, Singapore has begun preparing its response. The Monetary Authority of Singapore (MAS) is reportedly reviewing measures to preserve the city-state’s competitiveness as a financial hub, including an expansion of special tax incentives for investment companies. AIMA previously warned Singaporean authorities that highly paid portfolio managers would demand transfers to Hong Kong unless Singapore further reduced its already competitive tax rates.

Singapore also plans to launch a new hedge fund investment program to retain asset managers. It will additionally ease the income requirements for applicants seeking the Overseas Networks & Expertise Pass, or ONE Pass. Applicants were previously required to earn a basic monthly salary of at least $23,600, but the revised system will allow other forms of income to count toward the threshold. MAS Deputy Chairman Chee Hong Tat said, “Singapore’s asset-management industry is a central growth engine for the financial sector, accounting for approximately 15% of financial-sector output and 13% of employment.” He added, “The government will take every necessary measure to preserve and strengthen the competitiveness of the financial-services industry.”

Hong Kong’s Financial Expansion Through Shenzhen

Alongside reforms to their tax and visa regimes, Hong Kong and Singapore are accelerating efforts to reduce settlement costs for financial professionals and operating expenses for asset-management firms. Both cities face acute land constraints, high housing and office rents, and substantial costs for companies seeking to recruit essential personnel. Hong Kong and Singapore are addressing these burdens by integrating adjacent regions into unified residential and industrial zones. Hong Kong is drawing on Shenzhen in China, while Singapore is utilizing Malaysia’s Johor state as its hinterland.

Hong Kong is first expanding housing and industrial land simultaneously in the Northern New Territories bordering Shenzhen. The Northern Metropolis project promoted by the Hong Kong government spans 30,000 hectares, equivalent to approximately one-third of the city’s total area. Seven land checkpoints connect the area with Shenzhen. Once development is completed, the project is expected to add approximately 500,000 homes and 650,000 jobs. The large-scale innovation and technology hubs San Tin Technopole and the Hong Kong-Shenzhen Innovation and Technology Park will also be located there. The Hong Kong government intends to combine the city’s financial and legal services with Shenzhen’s research and development (R&D) workforce and manufacturing base within a single economic zone.

This division of functions is also becoming more concrete in the recruitment of financial and fintech professionals. Qianhai, a financial and services special economic zone in Shenzhen adjacent to Hong Kong, currently hosts more than 11,000 Hong Kong-invested companies and over 10,000 Hong Kong professionals. The Qianhai Authority plans to provide 1,000 jobs and 800 internships this year for young people from Hong Kong and Macao in finance, technology, supply chains and professional services. It has also launched Qianhai FinanceNet, which connects technology companies with investors and supports fundraising, negotiations and contract execution.

Hong Kong has also introduced measures to reduce the settlement burden on financial professionals. Qianhai will supply 500 move-in-ready talent apartments and provide integrated immigration, social security and career-development assistance through a single service channel. Asset managers will consequently be able to base investment decisions, financing and regulatory functions in Hong Kong while recruiting fintech, data analytics and operational support personnel in Shenzhen. The arrangement disperses Hong Kong’s high housing costs and labor shortages across Shenzhen’s workforce and housing supply.

Table 1. Comparison of Metropolitan Economic-Zone Development Strategies in Hong Kong–Shenzhen and Singapore–Johor

Singapore Expands Economic Zone in Partnership With Malaysia

Singapore has institutionalized its division of functions with Johor. The Johor-Singapore Special Economic Zone (JS-SEZ), established under an agreement signed by Singapore and Malaysia in January last year, covers more than 3,500 square kilometers—four times the size of Singapore. The zone will foster 11 industries, including financial services, the digital economy, logistics and manufacturing, across nine areas that include Johor Bahru, Iskandar Puteri and Forest City. Singapore will host regional headquarters and financial and R&D functions, while Johor will provide expansive sites and a cost-competitive workforce. Companies will be able to conduct major decision-making and financial operations in Singapore while locating manufacturing and logistics facilities in Johor.

Transport infrastructure linking the two countries is also expanding rapidly. Scheduled to open in January next year, the Johor Bahru-Singapore Rapid Transit System (RTS) will connect Woodlands North in Singapore with Bukit Chagar in Johor Bahru, covering the four-kilometer distance in approximately five minutes. During peak commuting hours, it will carry up to 10,000 passengers per hour in each direction, while travelers will be able to complete immigration procedures for both countries at the departure station. The system is expected to make cross-border commuting considerably easier for people working in Singapore while living in lower-cost Johor. Leading Singaporean business associations estimate that the RTS will increase annual visits by Singapore residents to Johor Bahru by 11.2 million and raise local spending by approximately $826 million a year.

Capital and Deal Flow Converge on Hong Kong’s Stock Market

Singapore is nevertheless unlikely to overtake Hong Kong. The gap is already widening in the IPO market. After reclaiming the global top position last year, Hong Kong maintained rapid growth during the first half of this year. According to Hong Kong Exchanges and Clearing (HKEX), 87 companies completed new listings during the period, raising $27.2 billion—an increase of 94% from a year earlier. Last month, Chinese optical communications component manufacturer Zhongji Innolight raised $6.85 billion, marking Hong Kong’s largest IPO in seven years. As Chinese AI, semiconductor and advanced-manufacturing companies successively choose Hong Kong listings, investment banks, law firms and accounting firms are securing a growing volume of business.

The listing boom has translated directly into employment growth and talent migration. Hong Kong issued 31,278 employment visas to foreign nationals last year, more than double the figure recorded five years earlier. South Korea and Japan ranked among the leading countries of origin for recipients, while visa issuance in financial services rose 17% year over year to its highest level since 2022. Hong Kong’s low tax rates and abundant deal flow from Chinese companies are emerging as a pathway for career advancement among South Korean and Japanese financial professionals, whose opportunities to handle major international transactions in their home markets remain limited. Global financial institutions, including Bank of America and HSBC, are also rebuilding their senior-level operations in Hong Kong.

Mainland China provides the driving force behind this trend. Chinese securities regulators have explicitly pledged policy support for Hong Kong listings by leading mainland companies, while the Hong Kong government is simultaneously pursuing tax reform, easing listing regulations and deepening industrial integration with Shenzhen. As mainland companies generate large transactions, global financial institutions expand capital deployment and employment, accelerating the return of overseas talent to Hong Kong. Even if Singapore revises its tax rates and visa requirements, it will struggle to assemble a similarly vast corporate base, industrial hinterland and policy-mobilization capacity within a short period. With talent flows now turning toward Hong Kong alongside companies and capital, the balance in Asia’s financial-hub rivalry is shifting rapidly in the city’s favor.