I'm at a start-up in Beijing, and here's my 2 cents:

The internet is broken in China. Rather than an international internet, we've got a really fast domestic intranet. Not only is every cool, important site since 2004 blocked (e.g. Youtube, Facebook, Twitter, Dropbox...), but VPNs are less reliable than they used to be. Gmail is unreliable. Even paying for significant bandwidth, international sites are slow and video is a pain. I've seen an office full of really smart people's unproductive because they can't load a basecamp page or because dropbox transfers through a VPN move at a crawl.

Every time I go to HK, it's like a breath of fresh air having the internet. For this reason alone, I'd say don't do a start-up in China unless your market is China and you plan to be using primarily Chinese services.

I've created a WFOE (Wholly Foreign Owned Enterprise) in Shanghai. The red tape is incredible and it took us almost 6 months to complete the process. Also, in between the law changed and employees became significantly more expensive due to the new social security law...

As a software development consulting company, the pro is that there's a big market but if you want to do your own product then HK is the way to go...

Launching a web based product in China is dangerous because it's very hard to predict what will happen (you could be shut down by the government for one reason or another). Also cost of living and salary wise, Shanghai is anything but cheap (housing is cheaper than hong kong but the rest is not that much cheaper).

For the internet connection, it's manageable when using a ssh tunnel to a private server in the US... But it's a bit of pain (without that and tsocks even doing a bundle install in ruby takes a very long time and often times out)

If you are doing business in China, then Beijing, Shanghai, or Shenzhen would be your best options. You really can't do a business for China from HK effectively, unless part of the business is connecting with the rest of the world in some way.

That being said, big differences are the ease in setting up a company and costs. Ease of getting visas and the general paperwork. Also, HK is much safer than any of the mainland cities. The big cities are probably about similar to New York in terms of safety, but Hong Kong is ridiculously safe in comparison. There are basically no areas that you really shouldn't go to, and the medical system is quite good and reliable vs. mainland.

Also, one nice feature, no corporate tax if the income is from outside of Hong Kong.

My non-expert, second-hand information is that it's very hard to start a business in Shanghai without either a Chinese citizen as cofounder, or a joint-venture arrangement with an existing Chinese company.

Great Fire Wall which blocks Facebook, Twitter, YouTube, Dropbox...

However, I think China Government does welcome startups in Shanghai/Beijing with more goodies and support than Hong Kong's gov.

Now that HK went back to chinese rule years ago - how is HK not behind the same great FW?

Hong Kong and Macau are special administrative regions (SAR). For all intents and purposes, they are independent from China except for two key aspects: military and foreign affairs. They have their own courts, their own law, their own police, their own currency, their own visas, etc, etc, etc. It's known as "one country two systems".

The occupy wall street people in Hong Kong are actually camped INSIDE the HSBC HQ building (granted, it's a special open-ground-floor building). But the sense that you get from HK is one of more freedom than the west, not less.

They still have a (somewhat) separate judicial system and government, which results in a considerably freer media and society; for example, many of the newspapers print anti-PRC editorials that wouldn't be allowed in mainland China, and there are open demonstrations on things like the Tiananmen anniversary.

Also, IIRC you have to have special papers to travel from mainland China to HK.

Thanks! I didnt know.

I spent 3+ weeks in HK in October of 2000 - but most of that time was partying - so I really didnt learn much about the place whilst there.

The Hong Kong Basic Law stipulates that it will have high degree of autonomy at least 50 years after its transfer to Chinese rule. (ref http://en.wikipedia.org/wiki/Hong_Kong)

The Hong Kong Telecommunity Authority is, therefore, not required to implement the GFW.

Even in China, there are some GFW-free spots. You might find some 5-star hotels giving you unrestricted access to the likes of Facebook, Google+ etc

Why not Singapore?