It's basically a scene that could have been filmed pretty much anywhere in the waters of Hong Kong, but for some reason the location chosen was the relatively difficult-to-get-to (especially for a film crew) Jin Island aka Tiu Chung Chau.
What appears to be a secluded channel from where the baddies boat emerges from is actually the small gap between the southern tip of Jin Island and a rocky pinnacle called Tiu Chung Pai. The only thing I can think is that the film makers wanted us to believe it was some sort of entrance channel.
The following shots were taken at sea level as we see the grenade being thrown into the fishing boat. In the background you can see the part of the Clearwater Bay peninsula that is home to Lung Ha Wan (Lobster Bay) and surrounding area with High Junk Peak clearly poking up behind on the right. The second picture shows the small islets around that area including Trio Island which happens to be a favourite diving spot of mine.