Bilateral flow between HK and Russia tipped to soar

Bilateral trade and investment flows between Hong Kong and Russia are expected to expand over the next couple of years as Russia shifts its economic focus to Asia, and the conclusion of the comprehensive double taxation agreement (CDTA) between the two parties. Russia’s signing of the CDTA with Hong Kong in January last year was followed by Russia’s eastward shift in economic after the European Union and the United States imposed sanctions on the country, leading to a Russian push to consolidate economic ties with the Chinese mainland and other Asian economies.

“Hong Kong will be Russian enterprises’ first choice of capital-raising venue in Asia as it is more difficult for them to fund-raise in the European and US capital markets,” said Ilya Bolotnov, a partner at Pepeliaev Group, a Russian law firm advising on how to conduct business in Russia. “Singapore could be an alternative but Hong Kong is geographically closer to the Chinese mainland whereas Russia currently encourages its firms to invest more in the region, and through the city’s capital market. Russian enterprises can reach the vast majority of Asian investors,” Bolotnov added.

Besides fund-raising, Russian companies also establish holding structures or subsidiaries in Hong Kong which are convenient for Russian firms, said Rustem Ahmetshin, a senior partner at Pepeliaev Group. Ahmetshin also said the CDTA signing between Russia and Hong Kong should enhance bilateral trade and investment flows. “The agreement ensures Russian and Hong Kong companies will not be taxed for the second time,” he said.

Read more: China Daily