Hong Kong Has Put a Zero-Tax Proposal for Fund Managers Before Its Legislature. Singapore Answered Within Days.

The competition between Asia's two financial centres has moved from positioning to legislation.

Hong Kong's government recently submitted a tax amendment bill to the Legislative Council containing substantial reductions for hedge funds and other asset managers, according to Bloomberg reporting on 19 August. The proposal would effectively apply a zero rate to fund managers' carried interest — the performance-based share of investment profits that constitutes the bulk of a successful manager's compensation.

Singapore responded by expanding its own tax incentives and easing visa requirements.

The rivalry has since broadened beyond financial services into housing, talent and industrial capacity, drawing in the neighbouring cities each hub relies on — Shenzhen for Hong Kong, Johor for Singapore.

What Hong Kong is defending

The scale of the business at stake explains the legislative effort.

Hong Kong manages more than HK$35 trillion in assets and wealth, and ranks second globally by number of ultra-high-net-worth individuals — those holding more than US$30 million — at 12,546 according to Altrata's World Ultra Wealth Report.

The government has been building toward this for several years. Since 2023 it has introduced eight measures aimed at developing the city as a family office hub, including the Capital Investment Entrant Scheme, which offers fast-track residency to those investing HK$30 million, roughly US$3.8 million. A new corporate re-domiciliation regime has been encouraging corporate groups and private wealth structures to migrate entities into the city.

The pipeline is heavily mainland-weighted. Industry research from PWMA and KPMG China projects that more than half of wealth asset inflows into Hong Kong will come from mainland China this year.

Singapore's position, and how it was built

Singapore did not acquire its standing accidentally. It was constructed through two decades of policy explicitly designed to attract capital, talent and family offices, and it remains the top-ranked global destination for wealth relocation and personal migration among entrepreneurs.

Its advantages are consistently described in terms of predictability: political stability, consistent rule of law, low corruption, and a regulatory environment many advisers regard as more foreseeable than Hong Kong's.

Hong Kong's counter-arguments are structural rather than reputational — proximity to mainland China, unmatched access through Stock Connect, Bond Connect and Wealth Connect, a simple territorial tax system with no capital gains tax, VAT or inheritance tax, and a deeper pool of professionals with China expertise.

Both cities are also now competing against a wider field. Dubai has been drawing capital from multiple directions with zero personal income tax, and Tokyo has begun courting the same pool.

The families are not choosing

The framing of a two-city contest may be the least accurate part of how this is usually covered.

Industry practitioners describe a shift toward multi-booking-centre and multi-custodian models, in which the priority for ultra-wealthy families is combining centres intelligently rather than selecting one. Hong Kong, Singapore, Switzerland and the UAE each offer different strengths across investment access, risk management, family mobility, regulatory efficiency and generational planning.

In practice this often means a division of labour: Hong Kong for China-facing deal sourcing, Singapore for international structuring and compliance. Many family offices now maintain a presence in both.

On that reading, the tax competition is less a battle for exclusive custody of Asian wealth than a contest over which functions each city captures — and how much of the associated fee income stays.

The talent squeeze is the binding constraint

Whatever the tax code says, both cities face the same shortage.

Recruitment specialists at Elpis Search have expected demand for experienced relationship managers to outstrip supply by at least 20% this year, with candidates commanding compensation increases of up to 25% even as banks push back internally on costs. China Construction Bank (Asia) has aimed to hire 100 wealth management professionals through 2027, and KGI Securities' Hong Kong and Singapore wealth arm planned to add up to 30 client advisers.

Brian Cheng, co-founder of Elpis Search, described this year's competition for senior talent as the most intense in years.

A zero rate on carried interest attracts fund managers. It does not create relationship managers, and the pipeline for those takes years.

What to watch

The bill's passage through LegCo is the immediate question, along with whether the zero-rate provision survives in the form submitted.

The second is Singapore's next move. The pattern so far has been rapid reciprocal response, and a competitive tax dynamic between two jurisdictions tends to run until one concludes the revenue foregone exceeds the business won.

The third is whether mainland inflows hold. Hong Kong's wealth management growth is substantially a function of capital moving out of mainland China through a channel Hong Kong is uniquely positioned to offer — and that flow is subject to policy decisions made in Beijing rather than in either competing city.