The collision happened in the early hours of the morning near Po Toi Island which lies on the edge of Hong Kong's territory, a fire department spokesman told AFP.
"Two cargo ships collided and one of them sank," a police spokeswoman told AFP.
"Later one male was rescued and was sent to the hospital," she said, adding that rescue operations were underway to find the other crew members.
"There are 12 people missing," a fire department spokesman told AFP, adding that they were crew from the cargo ship from mainland China which had collided with a container vessel.
The fire department spokesman said the accident happened three miles (nearly five kilometres) south of Po Toi, just outside Hong Kong maritime territory.
Hong Kong’s waters are notoriously crowded. Hundreds of vessels, from wooden sampans to enormous container ships, ply the shipping routes that criss-cross the territory every day.
A collision in October 2012 between a high-speed ferry and a pleasure boat claimed 39 lives in the city's worst maritime disaster for over 40 years.
The tragedy shocked the Asian financial hub, one of the world's busiest ports, which prides itself on its good safety record.