In a globalised world, all economies will inevitably be affected by the global turmoil, and China and Hong Kong are not excluded. However, China has been relatively less affected, and most agree that it has led Asia out of further depression. So China is still a major focus for the business world. Why is the whole world so captivated by the China story? Annual Growth Rate 10.5% over last 10 years (2001-2010) – this is unprecedented in world history. And the long-term outlook on China is good. In the first nine months of 2011, China’s GDP grew by 9.4%. Why? Firstly, o n the external economy, China is transforming its manufacturing as well as export structure, by expanding along the value-added chain. They are moving from assembly of imported parts to the production of higher value-added parts and accessories. Such development can be evidenced by (a) the rising share of electronic products in China’s exports, (b) China turning from a net importer to net exporter in certain key electronic components, (c) and more foreign companies setting up R&D centres in China. Secondly, domestically, China has a huge population. As the general income level continues to rise, this is turning into a huge consumer market. One of China’s policy directions is to have more growth stimulated by domestic demand, and domestic consumption will therefore continue to grow at a faster pace. Total trade growth average 21.1% over the last 10 years (2001-2010). ~ While China’s exports are certainly affected by a sharp slowdown in overseas demand, forceful fiscal and monetary stimulus policies can cushion the external shock, i.e. creating effective demand to sustain output growth. Expanding bank loans is vital to sustain investment growth and China has the means to orchestrate that. 33 years ago, in 1978, China was ranked 28th in world trade. It is now the world’s 2 nd largest economy .
In the past, China was a base for production. Now, it ’ s a market for consumer goods – especially branded consumer goods. Chinese people are earning more . They want to raise their standard of living. Despite global woes, domestic consumption is still growing. China’s domestic retail sales of consumer goods went up 15.5% i n 2009 and 18.4% in 2010 in nominal terms. Continued growth in disposable income has contributed to the steady increase in retail sales. In the first nine months of 2011, retail sales grew by 17% Middle class of over 300 million – & growing steadily according to a recent Deloitte report. (This is more than the entire population of Japan!). The Deloitte report also estimates that if China's GDP continues to grow by 8-9% annually, the size of middle class population can grow by as fast as 15-20% every year. (Definition of middle class = families with an annual household income of US$10,000, according to a definition by Deloitte. )
With increasing wealth, Chinese consumers have more money to spend on the latest gadgets and technology. There were 906 million mobile phone subscribers as at June of 2011. This is more than eight times that of Germany , which has an estimated 110 mn mobile phone subscriber base. China had some 457 million internet users , as of end 2010. This represents a rise of 73 million compared to end 2009, or a 19% increase. China became the largest car market according to the China Association of Automobile Manufacturers. As at June 2009, sales of 6.1 million automobiles, surpassed that of the US and of course Germany, representing a growth of 17.7% from the year earlier. In 2010, total sales of automobiles grew by 32% to 18 million. In the first nine months of 2011, sales of automobiles grew by 3.6% to 13.6 million According to a report released in Feb 2011 by HK-based investment bank CLSA Asia-Pacific Markets, mainland consumers will snap up 44 per cent of luxury goods sold in the world by 2020, up from 15 percent in 2010. This growth momentum, driven by rising personal incomes, social aspirations and more stores on the mainland, means a compound annual growth rate of 23 per cent in the current decade. And the Chinese are travelling more – prediction 100 million Chinese travelling abroad by 2020. (Starting from Feb 2009, China has implemented the “electrical household products for rural areas” project, subsidizing rural households to buy electrical household products in the coming four years. The project is projected to stimulate consumption by Rmb 920 billion.)
Rising number of MPEs mean there is a growing demand for business services and technologies – especially in the PRD. Chinese Government is determined to upgrade the country’s manufacturing industry with new technology, especially to make the sector more environmentally friendly. Chinese companies have huge needs in areas such as accounting and legal, logistics and technology, design and packaging. Many of these 8.4 million Mainland Private Enterprises (as at end 2010) are also looking to ‘go out’ and do business internationally. Around 948,202 of these are based in Guangdong Province, neighbouring Hong Kong. Only 43% of China’s GDP (2010) is made up of the service sector, and the Government is keen to expand this proportion to more than 50% by 2020 (according to a Chinese State Council Paper). So there is a large gap to fill. According to the 12th Five Year Programme, the share of service will be expanded to 47% by 2015.
Hong Kong is well placed and well prepared to reap the rewards of the technology trade. Hong Kong is a natural hub through which technology streams to and from the mainland. Mainland China’s high-tech production has quadrupled from 2000 to 2006 to US$507 billion and has set targets for developing its own proprietary technology and importing designated technology from overseas, as stipulated in its 11th Five-Year programme. Hong Kong has three critical factors necessary to create and support an elite technology trading centre: the right location, the right economy and the right people. Let me expand on these points.
Hong Kong is situated right next to the PRD, where approximately 31 per cent of China’s high-tech development takes place. It is uniquely placed to oversee regional project management while initiating and coordinating cross-boundary R&D, technology transfers and manufacturing processes. Secondly, Hong Kong also offers a commercially sophisticated technology platform. Its banking and financial services are among the most advanced in the world. The city is a major centre for project financing and fundraising, supported by a robust stock exchange and a strong US$51 billion venture capital market, which is essential for funding technology projects. This platform already supports such companies as Samsung, Microsoft, Motorola, Philips, IBM, Hitachi and Ricoh. Substantial investment has also been made in R&D and incubator centres such as those at the Hong Kong Science & Technology Park. Thirdly, our people are well educated, with a large pool already dedicated to the pursuits of innovation and technology. Hong Kong people are also born traders, with the necessary mainland networks Hong Kong speaks the language of international business – and we speak your language! With 300,000 SMEs, Hong Kong has one of the largest percentages of entrepreneurs anywhere in the world Unrivalled experience with China – more than 30 years of doing business, as well as language and cultural ties Tech savvy population blending East and West culture– ideal test bed Highly educated workforce .
Hong Kong’s industries excel at certain areas like innovation, commercialisation, application and industrial engineering, which are backed by a technology cluster composed of local as well as foreign enterprises. Coupled with robust demand from the Chinese mainland for various kinds of technology, Hong Kong’s role as a centre for technological cooperation and integration in the region is set to develop further in the medium term.
Hong Kong companies are engaged in different kinds of technology transfer and cooperation with mainland and foreign companies. While technology licensing is a typical means, other transfers include: Sharing of proprietary know how for system integration and software development Rendering of engineering services in provision of equipment and components Providing consultancy in supply of parts/ components for product development.
Hong Kong's total exports of high-tech products in 2007 was HK$1,013.7 billion (US$ 130 billion), up 18.7% y-o-y. Major export destinations were mainland (58.2%), USA (8.8%), Japan (3.4%), Taiwan (2.9%), Singapore (2.9%) and others (23.9%). Some 4,644 establishments have undertaken R&D acitivities in 2006, approximately 1.7% of all establishments in the business sector in Hong Kong.
The Chinese mainland is both the major source and the major destination of Hong Kong's technology products. China is seeking advanced foreign technology to meet environmental standards, and they are taking the environment very seriously indeed. The 11 th Five-Year Plan has laid out standards for nationwide and urban environmental protection. It has enacted its Cleaner Production Promotion Law (CPPL), closing down outdated production facilities, and requiring manufacturers to design and construct pollution-control facilities together with production facilities, and requiring them to adapt their processes and product designs for minimal impact to the environment. It is also beginning to strengthen its enforcement of such regulations. These new clean production policies are demanding new technologies. Energy conservation and environmental protection have emerged as a high priority issues. HK companies are especially skilled at identifying niches in various markets . Foreign companies can use the Hong Kong platform to adapt their technologies for the China market, and achieve sales growth. With Hong Kong’s strengths in sales, marketing and sourcing appropriate technologies for local application, local companies are experts in commercialising technologies and providing innovative, commercial solutions to their clients. Hong Kong offers a wide range of trade supporting services for the transfer and trading of high technology on the mainland.
The Pearl River Delta is a leader in terms of production of technology-intensive products in the Chinese mainland – esp. for consumer electronics. Hong Kong has been instrumental in the transfer of technology to the PRD through direct investments of Hong Kong factories in the region since the late 1970s and 1980s Since the mid-1990s, Hong Kong has shifted from that of direct provider to that of an intermediary sourcing technology on international markets Increasingly, the most advanced technology into the PRD comes from foreign investments using HK as a base of operations e.g. Canon, LG, Nokia, Ericsson, IBM HK and Shenzhen signed a Memorandum of Understanding on new and high technology cooperation on 23 June 2006. Under this MOU, the 2 cities will share information, update each other on the latest developments, and jointly promote their technology achievements to the global market.
Hong Kong is the world's 12th largest trading entity, leading not only in consumer goods but high-tech products as well. Hong Kong's high-tech exports have been growing rapidly. Valued at US$130 billion in 2007 , high-tech exports account for more than one-third of Hong Kong's total exports. The mainland is our largest market for high-tech products. HK companies are experts in technology trading and transfer between overseas and mainland partners. HK technology oriented service providers provide consultancy to mainland and foreign clients . HK continues to play a relevant role in the emerging technology marketplace.
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With HKTDC Business Matching, we connect business partners with each other. Its global databank includes about 1.3 million business contacts Since its launch in May 2006, our customised Business Matching service has been handling some 3,000 cases every year. An enquiring overseas company is referred to pre-screened HK companies in response to its needs. Full contact details of three recommended companies, along with corporate profiles, are included. The service has a nominal fee of USD 100 to 300 per enquiry, depending on the nature of the request.
HKTDC organises more than 30 international trade fairs per year. Three of these are the largest in the world (Electronics Autumn + Gifts and Premium + Watch and Clock) And ten of these are the largest of their kind in Asia ( Toys, Fashion Week Fall / Winter, Electronics (Spring), Houseware, Gifts and Premium, Watch and Clock, Electronics (Autumn), Lighting (Autumn), Licensing Show and FILMART) Our fairs attracted some 711,848 buyers in 2010, with more than 345,034 from overseas, which includes more than 132,709 buyers from the Chinese mainland. Open to exhibitors from around the world, attracting more than 30,482 in 2010.
1. Hong Kong:Helping Manage Opportunities and Challenges in China Bridget Lee, Director, Chicago McHenry, ILLINOIS December 7, 2012
2. The China Opportunity All eyes are still on China! Here’s why: Annual GDP growth at 10.5% over 10 years Annual trade growth at 21.1% over 10 years Massive annual FDI: US$105 billion (2010) World’s 2nd largest economy
3. The China OpportunityNo longer “just” a production base:Growing middle class – 300 millionProjected urban population – 350 million more by 2025Domestic consumption on the rise (18.4% growth in 2010)*According to a March 2009 report by McKinsey Global Institute
4. The China OpportunityGrowing consumer marketMore than 900 million mobile phone usersMore than 457 million internet usersGrowing demand for imported wine –average of 63% p.a. (2006 to 2010)Largest car market in the worldOne of the world’s largest luxury goods markets100 million Chinese tourists expected by 2020Growing rural consumer market
5. The China OpportunityIndustry moving up the value chainUpgrading industrial processes8.4 million Mainland Private Enterprises (end of 2010)Growing demand for business services and technologiesR&D expenditure increased by average of 22.8% per year from 2003 to 2010
6. Hong Kong AdvantagesTechnology Marketplace• Focus on technology in China’s 11th Five Year Programme• Hong Kong: a natural hub for technology flows to and from Chinese mainland• Hong Kong: a technology trade centre with the right location, right economy, and right people
7. Hong Kong AdvantagesTechnology Marketplace Location Situated next to Pearl River Delta, where 30% of China’s high- tech production takes place Economy Commercially sophisticated technology platform with excellent project financing and fundraising options People Well-educated talent pool dedicated to the pursuit of innovation and technology
8. Hong Kong AdvantagesCEPAOne country, two systems“Closer Economic Partnership Arrangement” (CEPA)Acts as a free trade agreement with the mainlandWTO-plus market access for service providersTariff-free access to the mainland for productsOverseas companies can easily benefit!
9. Hong Kong AdvantagesTechnology MarketplaceHong Kong industries’ technology strengths:• Innovation• Commercialisation• Application• Industrial engineering
10. Hong Kong AdvantagesTechnology MarketplaceHK companies are engaged in different kinds oftechnology transfer:• Sharing of proprietary know-how for system integration and software development• Engineering services• Providing consultancy
11. Hong Kong Advantages Technology Marketplace• Fast Facts:• HK’s total high tech exports exceed US$130 billion per year (2007)• 4,600+ HK companies undertaking R&D activities• 16,000 companies engaged in innovation activities
12. Hong Kong Advantages Technology Marketplace The China factor• Growing demand for advanced technologies in manufacturing and management• Seeking advanced technology to meet new environmental standards• Chinese technology companies eager to explore international markets• Hong Kong – a partner for foreign technology companies
13. Hong Kong AdvantagesTechnology Marketplace• Main driver of technology transfer in PRD• The most advanced technology comes from foreign companies using Hong Kong as a base• Hong Kong Shenzhen Technology Alliance PRD HK
14. Hong Kong Advantages:Technology Marketplace• Sourcing and selling high-tech products• Hong Kong offers:• International experience in technology trade• Experience in selling to Chinese mainland markets• Strong IP protection• Funding and finance options• Preferential treatment on goods under CEPA
15. Pacific Bridge InitiativeUS-Hong Kong Business Partnership Program• Hong Kong:• www.hktdc.com/pacificbridge• Find Opportunities in China & Asia• HKTDC Integrated Marketing Platform• Find the Right Partner via HKTDC Business Matching• ITA Certified HKTDC Tradeshows• U.S. Partners:• USDOC – USEAC/ Commercial Service• State Agencies - STEP Grant Funding• USDA ATO FAS Hong Kong• USDOC CS Hong Kong• Trade Associations
16. Hong Kong TradeDevelopment CouncilCreating opportunities in international trade Matching Providing Connecting Business Information Customers Partners
17. HKTDCProviding Information11 offices in Chinese mainland, more than 40 worldwide Frankfurt Beijing New York Tokyo Dubai Hong Kong Bangkok
18. HKTDCProviding InformationResearch publicationsAnalysis on topical issues and specificindustriesExcellent sources for developing businessmodels
19. HKTDCProviding Information Subscribe for free at www.hktdc.com
20. HKTDCMatching Business PartnersConnect with 120,000+ qualitysuppliersNearly 1 million registered buyerswww.hktdc.comProduct Magazines:15 titles from a variety of industriesWorldwide readership of 5 millionannually
21. HKTDCMatching Business PartnersHKTDC Business MatchingA customized service tailored to your business needs
22. HKTDC30+ International Trade FairsConnecting Buyers and Sellers through:Ten of the largest fairs in AsiaThree of the largest fairs in the world
23. Chicago OfficeBridget Lee, DirectorTel:1 (312) 726 4515Email: email@example.com