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1997 Hong Kong Handover to China - Flag Ceremony Video  Hong Kong 10 Years History Slide Show (1997 - 2007)  HK 10 Years - Economy (1997 - 2007)  HK 10 Years - Life (1997-2007)  Lan Kwai Fong tops HK nightlife  Mission successful: PLA Garrison in HK   HK 10 Years - Safety (1997 - 2007)  HK 10 Years - Fashion (1997 - 2007)  Horse racing remains most popular sports in HK   HK 10 Years - Stars (1997 - 2007)  HK 10 Year - Donald Tsang (1997 - 2007)  HK economy looking forward to better future  Born on the 1st of July, growing with the HKSAR - The little girl Leung Sum Mui was born right on July the first, 1997.   Hong Kong Handover - Jiang Zemin's speech June 30 1997  Dining and shopping paradise for travelers   HK Businessmen in Beijing   Prince Charles and former Hong Kong Governor Christopher Francis Patten leave HK after the handover ceremony in 1997

Listen to MP3 Business Beyond the Reef” to discuss the problems with imports from China, telling all sides of the story and then expand the discussion to revitalizing Chinatown - Special Guest: Johnson Choi, MBA, RFC. President - Hong Kong.China.Hawaii Chamber of Commerce (HKCHcc) and Danny Au, Manager, Bo Wah Trading
 Cato Institute on China Trade
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View Video #1/2 View Video #2/2 - Mike Rowse, Director General, InvestHK, Hong Kong SAR Government

BRENDA FOSTER, PRESIDENT OF THE AMERICAN CHAMBER OF COMMERCE IN SHANGHAI; "An Update of the Business Climate in China" to the Hong Kong China Hawaii Chamber of Commerce (HKCHcc) at the Pacific Club 2/14/2008

Hong Kong Businesses Achieves before 2008

December 18, 2007

Higher Threshold for Hong Kong Investment in Mainland Commercial Sector

According to Supplementary Provisions III to the Measures for the Administration of Foreign Investment in Commercial Sector approved by the Ministry of Commerce, the threshold for Hong Kong investors in the mainland's commercial sector has been raised.

The supplementary provisions are directed at the newly promulgated Catalogue for the Guidance of Foreign Investment Industries which sets out strict restrictions on foreign investment in the wholesale and retail sectors. The fact that these sectors remain open to Hong Kong and Macau investors suggests that the central government still encourages Hong Kong and Macau service providers to invest in the commercial sector.

Under Supplementary Provisions III, where the same Hong Kong service provider has opened more than 50 shops on the mainland, this service provider is allowed to hold majority shares with an equity ratio of up to 60% provided that it deals in books, newspapers, magazines, drugs, pesticides, agricultural films, chemical fertilizers, grain, vegetable oil, edible sugar and cotton, with the commodities representing different brands and coming from different suppliers.

The new supplementary provisions have raised the threshold for Hong Kong companies investing in the mainland commercial sector. Under Supplementary Provisions II, where the same Hong Kong service provider had opened more than 30 shops on the mainland, it was allowed to hold majority shares with an equity ratio of up to 65% provided that it dealt in books, newspapers, magazines, drugs, pesticides, agricultural films, chemical fertilizers, grain, vegetable oil, edible sugar and cotton, with the commodities representing different brands and coming from different suppliers.

Although the threshold for Hong Kong investors is higher under Supplementary Provisions III than under Supplementary Provisions II, compared with corresponding provisions for foreign investors in the new Catalogue for the Guidance of Foreign Investment Industries just released, it can be seen that the state is still giving special preferential treatment to Hong Kong investors while restricting foreign investment.

December 4, 2007

Macau gambling on China By Vicci Ho

Macau, the former Portuguese colony that was returned to Chinese rule in 1999, was always the modest cousin to Hong Kong. Its big draw was tourism and gambling that drew locals looking to get away from the big-city buzz. But that was then, and now Macau's gaming biz brings in more than Las Vegas and attracts multinational investors.

The liberalization of the gaming industry in 2002 saw six concessions and subconcessions granted to local and, more importantly, foreign companies. In five years, Macau saw foreign-backed casinos and resorts such as the Crown, Wynn Resorts, Sands, MGM Grand and the Venetian transform the local gaming industry with glitzy Las Vegas-style hotel resorts, while local businesses responded by building new and improved casinos such as the Grand Lisboa and theme park/casino Fisherman's Wharf.

All the investors are banking on the arrival of millions of mainland Chinese tourists, who, armed with cash-filled suitcases, can now travel to Macau under the Full Independent Tour plan with relative ease. The numbers certainly suggest their bets are correct: In 2005, 10.5 million visitors arrived from China alone, and in 2006 Macau overtook Las Vegas in casino revenues as the gaming industry generated $6.8 billion.

"The tourism industry is one of the main pillars of Macau's economy, and last year, a new record of close to 22 million visitors came to Macau, an increase of 17% compared with 2005," says Eng Joao Manuel Costa Antunes, director of Macau Government Tourist Office.

Macau's ascendancy also is threatening Hong Kong's position as an entertainment hub, especially since the opening of the $2.4 billion Venetian Macao. In 2007, the Venetian staged a series of high-profile entertainment events such as sports exhibitions with English soccer team Manchester United, NBA teams the Orlando Magic and the Cleveland Cavaliers plus tennis champs Roger Federer and Pete Sampras as well as perfs by music superstars Beyonce and the Black Eyed Peas.

Hong Kong is beginning to feel the heat. Registered number of visitors for Macau in September was 2.27 million, over 145,000 more than Hong Kong. But Macau still has to pay some more dues before it can call itself a truly international destination: Only 9% of visitors were from outside the region during September.

But Macau investors are pouring in the money with such initiatives as an original production by Cirque du Soleil and a Celine Dion gig skedded for early '08, and more entertainment-themed casinos such as Macao Studio City, which is under construction.

"Most major entertainment events (were) planned with visitors in mind, even before the (recent) boom," says Gary Ieong, an events organizer in Hong Kong whose roots lie in Macau. "The locals are more interested in Cantopop acts than huge international stars."

With luxury hotels, such as the Four Seasons, Sheraton, Hilton and Shangri-La all hoping for a slice of the profits, Macau is certainly getting ready to receive these big-spending visitors in style.

Higher Threshold for Hong Kong Investment in Mainland Commercial Sector

According to Supplementary Provisions III to the Measures for the Administration of Foreign Investment in Commercial Sector approved by the Ministry of Commerce, the threshold for Hong Kong investors in the mainland's commercial sector has been raised.

The supplementary provisions are directed at the newly promulgated Catalogue for the Guidance of Foreign Investment Industries which sets out strict restrictions on foreign investment in the wholesale and retail sectors. The fact that these sectors remain open to Hong Kong and Macau investors suggests that the central government still encourages Hong Kong and Macau service providers to invest in the commercial sector.

Under Supplementary Provisions III, where the same Hong Kong service provider has opened more than 50 shops on the mainland, this service provider is allowed to hold majority shares with an equity ratio of up to 60% provided that it deals in books, newspapers, magazines, drugs, pesticides, agricultural films, chemical fertilisers, grain, vegetable oil, edible sugar and cotton, with the commodities representing different brands and coming from different suppliers.

The new supplementary provisions have raised the threshold for Hong Kong companies investing in the mainland commercial sector. Under Supplementary Provisions II, where the same Hong Kong service provider had opened more than 30 shops on the mainland, it was allowed to hold majority shares with an equity ratio of up to 65% provided that it dealt in books, newspapers, magazines, drugs, pesticides, agricultural films, chemical fertilizers, grain, vegetable oil, edible sugar and cotton, with the commodities representing different brands and coming from different suppliers.

Although the threshold for Hong Kong investors is higher under Supplementary Provisions III than under Supplementary Provisions II, compared with corresponding provisions for foreign investors in the new Catalogue for the Guidance of Foreign Investment Industries just released, it can be seen that the state is still giving special preferential treatment to Hong Kong investors while restricting foreign investment.

Orderly Outflow of Foreign Currency from the Mainland By Joseph Yam - Chief Executive, Hong Kong Monetary Authority

It would be better to help Mainland residents move their foreign currency out of the Mainland in a safe and orderly way than to try to restrict them.

Money, like water, very often finds a way to flow around obstacles blocking its path. When there is strong demand for capital to move across jurisdictions, trying to restrict it will often just drive the flow underground, where malpractices prevail to the detriment of the interests of those having, possibly quite legitimate, needs for the movement of funds. Quoting an old Chinese saying: "the sky wishes to rain and mom wishes to remarry", some people may throw up their hands and say that there is no way of stopping underground flows altogether. I would say that building proper facilities to channel such flows, so that they no longer need to go underground, is a better and more constructive approach than trying to restrict them.

Perhaps I do not have a very good understanding of the regulatory framework governing the mobility of an individual's money on the Mainland. We all have to develop a better understanding of the policies and practices of China's socialist market economy. There are of course complex issues involved, including the all-important macro-economic objective of maintaining monetary and financial stability, protecting the interests of depositors and investors, the legitimate desire of an individual to achieve higher, risk-adjusted return (according to his own calculations) for his savings, and the unquestionable right of the individual to withdraw money from his bank account and spend it.

The maintenance of monetary and financial stability is a very important policy objective, given its importance to the sustainability of economic growth and development. There is scope for difference of opinion about what monetary and financial policies should be pursued at this time on the Mainland. Some still feel that there is a continuing need for fairly tight exchange controls on capital-account transactions. Others point to the enormous liquidity in the financial system on the Mainland, as a result of the large current-account surplus and the rapid accumulation of foreign reserves, and think that now is the time for the relaxation of capital controls. Indeed, the high inflation rate and the appreciation pressure on the exchange rate suggest that relaxation may be overdue. But there is obviously a need to emphasise controllability, gradualism and the ability to take the initiative in financial reform and liberalisation. To the extent that there is consensus, this seems to be in favour of the orderly outflow of capital. It seems, to me at least, that meeting the desire of individuals to invest overseas in an orderly manner is a policy well worth pursuing.

A distinction can perhaps be made between the mobility of capital across different currencies, for example, from the renminbi to the Hong Kong dollar, and the mobility of capital denominated in the same currency across different jurisdictions, for example from the Mainland to Hong Kong. While there is a need for greater care on the former, one should feel a little more relaxed on the latter. After all, for individuals who already have foreign currency, it seems a little harsh to limit them to holding it in the banking system on the Mainland in the form of deposits earning low interest, instead of allowing them to move their own foreign currency to other jurisdictions where there are investment avenues promising a higher rate of risk-adjusted return. Allowing individuals to move their own money, already in the form of foreign currency, for example Hong Kong dollars, into Hong Kong, may of course increase their demand for foreign currency. But this is precisely what we all would like to see on the Mainland, to address the rather unusual macro monetary environment there. Controllability is still high, given the current restriction on conversion from the renminbi into foreign currencies to an amount equivalent to US$50,000 per person per year.

The choice of investment is a matter best left to the individuals. Everyone has a different risk-return preference, and it is not the role of the authorities to decide for individuals how they should invest their money. Such an involvement of the government creates tremendous moral hazard that should be avoided. At the same time, there is no doubt that investors, particularly the smaller ones, do require protection. That is why there are arrangements for the protection of investors, such as the disclosure requirements imposed on fund raisers and financial intermediaries, regulation of financial markets and the supervision of financial institutions. This is an area in which Hong Kong is very strong, possibly at the forefront of international standards, although admittedly against a capitalist, free-market economic background. But I would argue, in terms of investor protection, that what is good for Hong Kong investors should also be good for Mainland investors. If it is considered that Mainland investors making such cross-border investments require more protection, a threshold for the amount of money that an individual is allowed to invest overseas could be imposed so that the channel is only available to larger and more sophisticated investors.

December 1, 2007

Hong Kong Campaign to lure students from boom economies By Winnie Chong

Hong Kong plans to entice students from India, Indonesia and Malaysia in its bid to become the education hub of Asia, it was disclosed on Friday. The campaign kicked off in India last week with the Hong Kong Trade Development Council holding a road show to promote seven universities - Hong Kong, Chinese, City, Baptist, Lingnan, Polytechnic and Science and Technology. TDC assistant executive director Benjamin Chau Kai-leung said 500 students from three Indian universities visited its expos and seminars and showed interest in studying in the SAR.

India, Indonesia and Malaysia have growing economies and an increasing middle class, Chau said, adding the tuition fees in Hong Kong are only about 40 percent of those in Europe or the United States.

Chau said students from other countries would also help boost the exposure of local universities. In his policy address in October, Chief Executive Donald Tsang Yam- kuen pledged to promote Hong Kong as a higher-education hub for Asia. To this end, the proportion of non- local students in local universities will be increased from 10 to 20 percent. Currently, the majority of non-local students come from the mainland.

However, Lingnan associate vice president for academic affairs William Lee Keng-mun said his university would not set quotas for non-local students, and enrollment would be based purely on merit. In addition to south Asian countries, the university will conduct promotions in Canada, the United States, Mexico and Europe.

As there are many job opportunities in the mainland for people of all races, SAR universities could attract students from around the world, he said.

HKU student recruitment counselor Queenie Hsu Hiu-fai said the university had already admitted more than 50 Indian students over the past few years. In addition, the number of applicants from South Korea for the current semester was double that of last year.

"Perhaps we attracted attention after it was reported some mainland students had passed up offers to study at Beijing's Tsinghua University and chose Hong Kong instead," Hsu said.

A third-year HKU student from Bangalore, Zaira Ali Khan, said Hong Kong was not a popular choice when she decided to come here. But, she said, she never regretted her decision.

"Many south Indian students choose to study in Singapore as it is closer. But Singapore's education is very India-like, with students only focusing on studying," she said.

"In Hong Kong, teachers from other countries gave me an international perspective. I also enjoy the opportunity of doing summer internships."

Justice experts call for benchmark on mediation services By Polly Hui

Chief Justice Andrew Li Kwok-nang and Secretary for Justice Wong Yan-lung yesterday called on the rising number of mediation service providers to make a concerted effort to develop a common accreditation benchmark. Mr Justice Li also said mediation should be made a compulsory part of the professional qualification course for lawyers, whose current understanding of the mediation process was "very far from satisfactory". He added that students should also be educated about mediation at school. "Time has moved on," Mr Justice Li said. "We are coming to a stage where we need to have a common benchmark ... all mediation bodies should co-operate to develop this benchmark as soon as practicable," he said at a conference on mediation in Hong Kong yesterday.

To ensure the quality and international recognition of local mediators, he said the benchmark should be comparable to those set in major jurisdictions where mediation was a mature process. Mr Wong said training and accreditation were high priorities for a cross-sector working group on mediation that he will head.

Mediation, like arbitration, is an alternative to litigation in dispute resolution. It is widely used in the US, Australia, and Britain. A mediator helps parties establish dialogue and reach agreement. Chief Executive Donald Tsang Yam-kuen pledged in his October policy address to develop mediation services, which are used in matrimonial, construction, building and management disputes. It is believed that mediation will reduce increasingly heavy court caseloads, cut costs, and help create a harmonious society.

Christopher To Wing, secretary general of the Hong Kong International Arbitration Centre, which hosted the conference, said there were about 10 mediation bodies in Hong Kong - including universities and professional bodies for lawyers and engineers - which provide various training or both training and accreditation services.

Mr To said he believed that the best solution for Hong Kong would be to have a common benchmark and a single accreditation body. It should provide a complaints-investigation system for mediation users. "Consumers will only have confidence in mediation when they know that there is a system for complaints to be properly heard and investigated," he said.

Rimsky Yuen Kwok-keung, chairman of the Bar Council and a panel speaker at the conference, expressed his reservations about mediation bodies that both train and accredit. "There should be a separation between the accreditation body and the training provider," Mr Yuen said. "Otherwise, there would be a perception of a conflict of interests."

Chan Bing-woon, chairman of the Hong Kong Mediation Council, said he supported the idea of a unified accreditation system. But he warned that the system should not stop those who, despite not being qualified, were capable of conducting mediation at the community level because of their status in the community or because people trusted them.

November 26, 2007

Shop around for your dream space - The king of Lan Kwai Fong made timely investments and there is no reason why others cannot do likewise By Elizabeth Horscroft

While many of us may dream of becoming the next king of Lan Kwai Fong, there is only one at the moment, Allan Zeman, who made an early investment in a forgotten area of Central and turned it into an empire of eateries and bars.
Many of us would like to emulate Mr Zeman's success in commercial property investment but think it is too late and that we will be priced out of the market. However, some local agents would disagree with that, acknowledging that while limited means would be an impediment, a good return on commercial property in Hong Kong was not the sole domain for the ultra wealthy and established developers.

Even Lan Kwai Fong is not out of reach. Colliers International has 52D'Aguilar Street up for sale by public tender. Because this is a tender offer, Colliers International declined to give a price range, but Dominic Lee Chak-lam, assistant manager, Hong Kong investment at the company, said that a shop in Lan Kwai Fong, not a whole building, recently sold for HK$110million. The firm estimated the net yield at 52 D' Aguilar Street would be about 4 per cent with existing tenants.

Mr Lee said it was possible and viable for someone with a few spare million dollars to buy commercial property as an investment in Hong Kong. "There are some shops available for sale which are worth about HK$10million," he said.

An investor with limited capital will need to go further afield to second tier locations such as Tai Po, Sha Tin and elsewhere in the New Territories. Mr Lee helped a company sell a shop in Tai Po for a lump sum HK$26million two years ago and he said the quality of the property was very good.

For those who feel being on Hong Kong Island is the best bet, there are commercial property opportunities in Wan Chai for about HK$10million. While a lower-end shop could have a good rental income and property appreciation, Mr Lee said there was a trade off. The shop would be small, perhaps of poor quality, off a main street and with a local tenant as opposed to a big-name chain store. "Wan Chai is not a main shopping and entertainment area like Causeway Bay, but it is changing. One day a spot in Wan Chai may be a good location," Mr Lee said.

Others disagree. Citing the high cost of entry in the market, Peter Yuen the head of investment and sales (Hong Kong) at Savills (Hong Kong), thought investing in commercial property was a long shot for most people.

Savills recently concluded the sale of a ground floor shop on Russell Street in Causeway Bay for HK$178million. "This sum is way above the affordability of most people," Mr Yuen said.

But, like most investments, if you have the money it is relatively easy. The process for owning commercial property in Hong Kong is streamlined and similar to buying a residential unit.

Mr Yuen said commercial property was a good investment in Hong Kong because the borrowing cost was low with commercial mortgage rates around 4 to 4.5 per cent. "We are optimistic about [the] retail sector taking into account ... domestic consumption and increasing tourism."

This forecast bodes well for commercial landlords who receive a percentage of their tenant's revenue. The first rule of buying property is to find a good location. Determining where that is, in most cases, takes a pinch of luck. The most common commercial properties considered good investments in Hong Kong are in prime retail districts where there are many tourists. "The demand [for commercial property] is rising, driven by local investors in prime areas such as Tsim Sha Tsui, Causeway Bay and Mong Kok."

But, while the location may be good now, that might not be true in three to five years. Do some research before buying. Investors should examine the physical condition of the property too. Does anything need to be reinstated or are there any illegal structures or title issues? Mr Lee said because prices had risen a lot since 2004, potential investors needed to have a prime location and a quality property for worthy returns.

The best type of commercial property to buy - office, retail or industrial - depended on many factors, but Mr Yuen said office space now seemed to be outperforming the others simply because it had fallen behind for a long time. He said that retail assets were relatively less volatile.

The process of securing a property is straightforward and an agent and lawyer should take care of the details. First, find a trustworthy agent to search for the ideal property and tell the agent your plan for the property. This plan should include your desired yield, expected risk, location and whether this would be a short- or long-term investment. Together you find a site, inspect it and negotiate with the owner.

After agreeing on the price and other commercial terms with the owner, the agent will prepare the provisional agreement for both parties to sign. After that, your lawyer will handle the remaining paperwork and you may apply for financing from banks. With the title in hand you may just feel like the king of your own castle.

November 18, 2007

Four New Areas Open to Individually-Owned Businesses by Hong Kong and Macau Residents Next Year

With the approval of the State Council, starting from 1 January 2008 the business scope of individually-owned businesses established by Hong Kong and Macau permanent residents with Chinese citizenship will be further expanded to cover four more areas.

The four new areas include computer services, software (including computer system services, information processing, public software services and other software services), road transport-related loading, unloading and porterage and other transport services (including loading, unloading and porterage and forwarding services), warehousing (including the storage of farm produce such as grain and cotton, and other warehousing services), and translation and interpreting services (referring to business-related translation services).

The existing business scope includes retailing (except tobacco), catering, hairdressing, beauty and fitness, bath, laundry, photography and photographic processing, repair and maintenance of motor vehicles and motorcycles, repair of home electrical appliances and other daily goods, and import and export of goods and technologies. Franchise operation is not included.

Under state regulations, individually-owned businesses established by Hong Kong and Macau residents applying for permission to engage in loading, unloading and porterage and other road transport-related services may not offer international freight forwarding and courier services. For those applying for permission to engage in warehousing, their business area may not exceed 300 sqm. As for translation and interpreting services, they are confined to business-related activities only.

Hong Kong and Macau permanent residents with Chinese citizenship do not have to go through approval procedures that apply to foreign investment when setting up individually-owned businesses on the mainland in accordance with mainland laws, regulations and administrative rules, and they can only hire a maximum of eight employees. However, the waiver does not apply to franchise operation.

Hong Kong Investment in Sichuan Shifts Weight to Service Sectors

Sichuan's department of commerce and the Hong Kong Economic and Trade Office in Chengdu have jointly published the results of a study on the acceleration of the implementation of CEPA in Sichuan. According to the report, the number of Hong Kong companies in Sichuan has increased to 391 three years after CEPA became effective. Total investment amounts to US$2.267 billion and has been growing at an average annual rate of 64.08%. At the same time, the weight of investment is gradually shifting from manufacturing to services.

Hong Kong companies signed contracts worth a total value of US$735 million in Sichuan between January and July this year, up 16.5% year-on-year and accounting for 38.6% of total contracted foreign investment in the province. Of this, contracted investment in real estate, management consultancy and other service sectors amounted to US$403 million, or 54.83% of Hong Kong's total contracted investment in Sichuan. In the last three years since the implementation of CEPA in Sichuan, Hong Kong investment has seen rapid growth and the investment structure has gradually shifted from manufacturing to services. Economic and trade ties between Hong Kong and Sichuan are characterised by rapid investment by Hong Kong companies in the province, extensive distribution of investment, sectoral concentration of investment, and changing investment structure. The development of Hong Kong companies in Sichuan's service sectors mainly focuses on management consultancy, commercial retailing and wholesaling, logistics, catering, and convention and exhibition, while Hong Kong¡¦s insurance and accounting services have not yet entered Sichuan.

In order to accelerate CEPA implementation in Sichuan, the provincial department of commerce and the Hong Kong Economic and Trade Office in Chengdu have jointly set up a CEPA promotion group in the city. Richard F.C. Luk, director of Hong Kong Economic and Trade Affairs, Chengdu, said the study covered all situations and problems encountered by Hong Kong companies in Chengdu and should facilitate CEPA implementation in future. The Hong Kong Economic and Trade Office will publish a monthly newsletter on its official website around the 10th of each month to provide Hong Kong investors with the latest economic and trade information as well as laws and regulations in Sichuan for the purpose of promoting exchanges between companies in both places.

Management of New Shopping Centres Tightened

Hong Kong businesses looking to invest in shopping malls should note that a new policy is in place. Recently, the Ministry of Commerce (MOFCOM) has formulated the Industry Standards for the Construction and Management of Shopping Centres to be implemented in the first half of next year. The Standards set forth basic requirements in areas ranging from construction, tenant recruitment, customer service system, property management to personnel training.

In addition to the Standards, MOFCOM will also introduce the Norms for Grading Shopping Centres under which shopping malls are categorised into different grades. The Norms aim to control newly built shopping malls in terms of their structure, retail mode and distribution, in order to prevent over-extravagant shopping malls. The Norms will be applicable not only to shopping centres in first- and second-tier cities, but also to county-level shopping centres.

"Shopping centres in the country share no unified standards in terms of type and definition," remarked Xu Linguang, CEO of Uni-Mall at the Guangzhou University City. In China, any structures ranging from 50,000 to 400,000 sqm in area, with a stand-alone or complex design, and operate under a thematic, lifestyle or leisure model are called shopping centres. This is far from the standards on the international scene, and contributes to nonconformity in the market.

Bao Dejian, deputy director of the Shopping Centre Committee under the Federation of Commerce who participated in drafting the Standards, pointed out two chronic problems faced by mainland shopping centres, namely the wrong belief of "bigger is better" and poor business. Last year, the commercial property investigation team under MOFCOM conducted a study on commercial property development in Guangdong, Guangxi, Fujian, Zhejiang, Sichuan, Hubei and Chongqing. The study found that some small and medium-sized cities failed to consider the actual purchasing power of the local residents and blindly went after mere scale of commercial facilities.

People in the trade reckon that the Standards to be implemented next year will serve to guide enterprises toward reasonable development and resolve the current structural problem.

November 16, 2007

World’s only flying eye hospital starts tour in Hong Kong

Paul Forrest(R), Director of Global Development of ORBIS, and John Gordon Platt, pilot of the ORBIS Flying Eye Hospital, pose before the plane hospital for a photo on the parking apron of Hong Kong International Airport on Nov. 15, 2007 in Hong Kong of south China. The ORBIS Flying Eye Hospital started the Goodwill Tour in Hong Kong on Thursday, inviting donors and local students to get aboard to visit the world’s only flying eye hospital. Since its first program in 1982, the ORBIS Flying Eye Hospital has traveled to more than 70 countries and regions, saving the sight of millions of people by training local doctors and eye care workers and conducting surgeries for patients with eye disease. ORBIS is an international nonprofit humanitarian organization aimed at strengthening the capabilities of local health care communities in blindness prevention and treatment.

Hong Kong Panorama Promotes HKFDC

The Hong Kong Film Development Council (HKFDC) and HK$ 300 million (US$ 38.7 million) Film Development Fund are being promoted by the Hong Kong government across Europe, most recently with a program of seven post-handover films screened at the Institute for Contemporary Arts in London and presided over by Hong Kong Financial Secretary John Tsang.

"The Hong Kong Government has been playing its part behind the scenes to encourage the film industry. We're promoting 'Hong Kong on location' as a film centre with the facilities, expertise and support for every movie occasion," said Tsang at a screening of "Ordinary Heroes" in London.

Tsang continued, "Our $300 million Film Development Fund, set up to help finance film production and overcome the shortage of talent, will provide all-round support to the local film industry, including training and overseas promotion."

The Hong Kong Film Panorama in London was designed to demonstrate the key role which Hong Kong plays in the international film scene. Prior to the London screenings the program passed through Germany, Belgium, Spain, the Netherlands and Austria.

November 6, 2007

Hong Kong’s GDP averaged 7.4pc 2004-07

Hong Kong’s gross domestic product (GDP) growth over the past three years averaged 7.4 per cent per annum, Secretary for Commerce and Economic Development, Frederick Ma Si-hang said on Tuesday. Mr Ma was discussing the trade between Hong Kong and the United States at a business conference organised by the Hong Kong Economic and Trade Office in San Francisco.

He said: “There are good reasons why the US has such a significant presence in Hong Kong – there are about 1,300 US firms in Hong Kong.

“The trend has continued this year with further growth of 6.1 per cent in the first half of this year. Our performance is a good indication of our sound economic fundamentals. It also points to our unique position and strength as a two-way springboard for overseas companies wanting to access the vast mainland market, as well as for mainland enterprises looking to expand into the global arena.”

Hong Kong is home to some 3,800 international companies with regional headquarters and offices – 50 per cent more since the handover in 1997. Mr Ma added that the US topped the list with about 900 companies having their regional operations in Hong Kong.

“We are also the second largest destination for foreign direct investment [FDI] in Asia, according to the United Nations’ World Investment Report issued just last month.

“Last year, Hong Kong attracted FDI valued at US$42.9 billion [HK$333 billion] – up 28 per cent from the year before. We remain the preferred location in Asia for many foreign companies and for capital,” the commerce secretary said.

Mr Ma also stressed recent developments in Hong Kong, such as tax cuts proposed by Chief Executive Donald Tsang Yam-kuen in his latest policy address.

“The standard rate of salaries tax will be reduced from 16 to 15 per cent, and profits tax will be lowered from 17.5 per cent to 16.5 per cent next financial year.

“According to a recent survey by our investment arm, InvestHK, two out of three foreign companies regard our tax regime as a favourable factor,” he added.

Mr Ma also said the government planned to increase exhibition space for its convention and exhibition industry.

“An extension of the Hong Kong Convention and Exhibition Centre is due to be completed in 2009. This will increase exhibition area by 42 per cent, bringing total space to over 700,000 square feet [about 66,000 square meters].

“At the same time we are working on an early start to phase two of the AsiaWorld- Expo project. This will bring its total exhibition area to over 1 million square feet [about 100,000 square meters],” he said.

Together with the HKCEC extension, the territory will have a total of over 1.7 million square feet of exhibition area.

RFID cashes in the chips by Wilton Fok Wai-tung

Most of us use our Octopus cards to pay fares and to buy goods without a single thought. But do you know the technology that has made our daily lives so convenient? Radio Frequency Identification technology was first used in World War II for differentiating friends from enemies.

Hong Kong was the first city to adopt RFID technology for electronic money. The concept of RFID is very simple. A reader constantly radiates energy in the form of a magnetic or electric field.

An RFID tag, such as an Octopus card, consists of an IC chip and an antenna. When the tag is brought close to the reader, the IC chip draws power from the radiated field and uses it to send information to the reader. Tags can be either active or passive.

An Octopus card is a typical example of a passive tag. As it has no battery, and operates on a frequency of only 13.5 MHz, it cannot read information beyond a very small distance (around 10 centimeters). That's why we sometimes need to swipe an Octopus card more than once.

To increase the read range, we need to use an active tag equipped with a battery. The Autotoll tags sited at the entrances to road tunnels, which need to be able to read information over a distance of at least 10 meters, are active tags.

A tag's read range can also be increased by using a higher operating frequency. Some tags used in logistics and supply chain management operate on a frequency of 900MHz, giving them a read range of between 3m and 5m.

The University of Hong Kong is pioneering the large-scale use of RFID technology in the city's libraries by placing RFID tags in over a million library books.

Readers will be able to quickly check out piles of books on their own using this technology. Library staff, using handheld scanners, will be able to search for lost books and check to see if books are in the proper order on the shelves without even opening a single cover.

They will also be able to automatically provide users with receipts when they return their books and use machines to sort returned books.

Up to now the development of RFID technology has been held back by the high cost of tags. This is about to change, and economies of scale will soon bring down the cost. When this happens, RFID technology will have an increasing impact on our daily lives. Dr Wilton Fok Wai-tung is a teaching consultant with the Department of Electrical and Electronic Engineering, The University of Hong Kong

November 1, 2007

HK reaches new high as preferred location for overseas companies and is the second biggest recipient of Foreign Direct Investment FDI in the region

A record 6,440 overseas and Chinese mainland companies have offices in Hong Kong, according to the results of a survey conducted by Invest Hong Kong, a government agency tasked with attracting investors to the city. "Once again, Hong Kong is one of the most preferred locations for overseas and mainland companies managing their operations in Asia Pacific," said InvestHK's Director-General of Investment Promotion, Mike Rowse.

Of the 6,400 companies representing parent companies located outside Hong Kong, 3,890 are regional offices or headquarters. "This is an all-time high of 60.4 per cent," added Mr Rowse. Regional headquarters manage offices in Asia, while regional offices are defined as co-ordinating regional operations. Local offices oversee business in Hong Kong.

As at June 2007, there were 1, 246 regional headquarters, 2,644 regional offices and 2,550 local offices representing their parent companies located outside Hong Kong. Together, they employ nearly 346,000 people, accounting for about 10 per cent of the working population.

Mr Rowse said he was delighted with the healthy growth trend over the past 10 years. "Since the handover in 1997, the number of regional headquarters and regional offices has increased by 55 per cent. It's certainly silenced a lot of critics who predicted the demise of Hong Kong a decade ago."

The US topped the list of countries/territories with regional headquarters (298), followed by Japan (232) and the UK (124). The major lines of business of regional headquarters were wholesale, retail and import/export trades; business services, transport and related services.

Number 2 in FDI - Hong Kong also retained its position as Asia's second-largest recipient - after the Chinese mainland - of foreign direct investment (FDI), attracting US$42.9 billion last year, up 28 per cent from 2005. The United Nations Conference on Trade and Development said in its "World Investment Report 2007" that FDI to Hong Kong and the mainland together accounted for more than half of FDI inflows into the Asia Pacific region.

On a global scale, Hong Kong ranked seventh in FDI inflows last year – one rank up – supported by a rise in cross-border merger and acquisition activity.

"These results confirm Hong Kong's status an international location in Asia for foreign companies and capital," said Mr Rowse. "The report shows that Hong Kong continues to act as a two-way springboard for overseas companies and capital into the mainland, and for mainland companies expanding into international markets."

Independent arbiter meets global needs - HKIAC's Christopher To explains why arbitration helps maintain a commercial edge

Hong Kong's independent judiciary and pool of professional talent have earned the city a widespread reputation for commercial dispute resolution. During a recent roadshow to cities in the region, a Hong Kong International Arbitration Centre (HKIAC) delegation found Hong Kong's results speak for themselves.

"The business communities we met felt very comfortable with the common law style of arbitration Hong Kong offers," said Christopher To, Secretary-General of the HKIAC. "They view Hong Kong as a cosmopolitan city of international standard, and feel it is the right place to do their arbitration." The delegation went to four cities in five days, visiting Singapore, Malaysia, Vietnam and Bangkok. It came towards the end of another record-breaking year for HKIAC, where the number of arbitration cases continues to rise.

Neutral platform - Increasingly, many of the disputes being settled in Hong Kong do not even involve Hong Kong companies. In other countries worldwide, Hong Kong is regarded as a neutral platform, Mr To said.

"Hong Kong has an international reputation for doing a good job, and meeting the needs of global business. We have the expertise here, and we reinforce that with marketing. They trust us to get the job done."

As more and more countries do business with the Chinese mainland, they need a neutral platform for resolving disputes and Hong Kong has all the right qualifications.

"Hong Kong's system is fair, and there's no language barrier as English is widely spoken. Many Hong Kong people are internationally educated, so they have knowledge of East and West."

Mr To adds that Hong Kong's legal system is progressive in its support of arbitration. "Our judges respect arbitration and if the parties agree (to go to arbitration), they will not interfere," he said.

Incentive to do business - Arbitration is also "an incentive to do business", as it allows parties to air commercially sensitive issues in private, rather than in the public glare of a courtroom, where their competitors may be watching.

"As cross-border trade and interaction increases, the chances are there will be friction that may escalate into disputes," Mr To said. "People feel that if they take their disputes to the courts, their competitive advantage may be lost."

Mobility is another factor, as dispute decisions resolved in Hong Kong are enforceable internationally.

Mr To said the roadshow revealed a widespread interest from countries wanting to use Hong Kong for their arbitration, but with the its caseload already at capacity in its present location, HKIAC needs bigger premises in order to meet demand.

When 2007 figures are finalized, the number of cases arbitrated in Hong Kong looks set to be around 400 – up from 394 in 2006. Mr To said lack of space was hindering HKIA's ability to expand.

"This can be a bit frustrating, as we currently have to turn away cases. If we had more resources in terms of location, the number of cases coming to Hong Kong would increase," he said.

"The best way to ascertain our ongoing sustainability is to form an impartial advisory board to study future needs."

Hong Kong - A new direction for next golden decade - Chief Executive Donald Tsang outlines projects to further boost Hong Kong's competitiveness going forward - Hong Kong Convention and Exhibition Centre's expansion will increase its exhibition space by 42 per cent

Environmental protection, tax cuts and a HK$250 billion (US$32 billion) infrastructure programme were among some of the highlights announced in Chief Executive Donald Tsang's first policy address of his five-year term aimed at setting a new direction for Hong Kong. Mr Tsang stressed the need for Hong Kong people to adopt a new mindset to achieve another golden decade. "Over the next five years, we need to cultivate a new spirit for these new times. We need to become new Hongkongers better equipped to sustain developments in the new era."

The government had earmarked 10 major infrastructure projects which will form the backbone for the city's development – among them the Kai Tak development and the South Island rail - to stimulate economic growth and create 250,000 jobs. "A rough estimate of the added value to Hong Kong's economy brought about by these projects would be more than HK$100 billion (US$12.8 billion) annually, amounting to 7 per cent of our GDP in 2006," said Mr Tsang.

The policy blueprint also pledged to enhance the appeal of Hong Kong as an international convention, exhibition and tourism capital in the midst of regional competition in these sectors. The Chief Executive noted that the Hong Kong Convention and Exhibition Centre's exhibition area will increase by 42 per cent with the completion of the atrium link extension in 2009.

More exhibition space - To cater for longer-term demand, another exhibition venue, AsiaWorld-Expo, is considering the early commencement of its phase II expansion, which will increase its exhibition area to 100,000 square metres. "We are also looking at providing additional convention and exhibition facilities in conjunction with the Hong Kong Trade Development Council. We will also gauge the need for land supply for hotel development," Mr Tsang said.

To maintain competitiveness, profits tax would be lowered by one per centage point to 16.5 per cent while the standard salaries rate is reduced to 15 per cent in the financial year ending March 2009, along with a waiver on property rates for the fourth quarter of the year.

The government would help Chinese mainland enterprises to participate in Hong Kong's stock market through the Qualified Domestic Institutional Investors Scheme (QDII) and help in the promotion of international arbitration services. To further enhance the city's financial hub status, the government would study the need to develop an Islamic bond market to attract Middle Eastern investors who want to invest in the mainland.

"We should actively leverage on this new trend by developing an Islamic financial platform in Hong Kong," said Mr Tsang.

Environmental package - The Chief Executive's environmental agenda included a HK$93 million (US$12 million) injection into cleaning up Hong Kong-owned plants in the Pearl River Delta in southern China; plans for motorists to switch off idling vehicles and laws on replacing industrial diesel with ultra-low sulphur diesel in industrial and commercial processes.

October 30, 2007

Hong Kong's window of opportunity By Hong Liang

Hong Kong's Chief Executive Donald Tsang has called on fellow citizens to abandon their "island mentality" and adopt a new mindset to face challenges and take advantage of the opportunities presented by the mainland's rapid economic development. Nobody can argue with that. Our "island mentality," supplemented by our "refugee mentality", has manifested itself in our mad pursuit for quick gains and instant satisfaction in many things we do. As the center of wealth is slowly shifting toward various major mainland cities, speculative savvy alone is not going to help Hong Kong business people in gaining a meaningful share of the economic pie, despite its fast expansion.

Some economists and politicians have strongly recommended that the Hong Kong government take the initiative in setting a new direction for the economy. Such an economic policy would almost inevitably draw the government into greater involvement in the allocation of resources in favor of certain economic activities over the others. This policy would represent a sharp departure of the guiding principle of "small government, big market" with the professed aim to preserve Hong Kong's free economic environment. What is more, in an open economy like Hong Kong, government influence on corporate investment decisions and bank lending policies is very limited, as it should be. But the expanding services sector of the mainland economy is offering almost unlimited opportunities for Hong Kong service providers who enjoy a distinct advantage in terms of management expertise over their mainland counterparts.

To be sure, the standard of service in major mainland cities, particularly Guangzhou, Shenzhen and Shanghai, has improved greatly in the past several years. But it still seems to lag behind that of Hong Kong in terms of consistency and attention to detail. This window of opportunity is closing fast. Hong Kong service providers should make haste to exploit the gap before they lose their competitive edge.

This is where the Hong Kong government can help. The mainland offices of the government-sponsored Trade Development Council, or TDC, should be charged with the additional responsibility of identifying investment opportunities in the services sector of the cities where they are based. This information should then be promoted vigorously to Hong Kong entrepreneurs through the various trade associations, professional bodies, chambers of commerce and other public channels.

Just posting the information on the government website is not enough. It may be possible for the TDC, or some other government agencies, to establish some sort of advisory service to handle queries about investment opportunities in the services industry in mainland cities.

Hong Kong expertise in the services industry, especially in the retail and hospitality sectors, has earned considerable recognition on the mainland. The turnaround of an ailing shopping mall in Shanghai's Pudong district by a Hong Kong consultant became a well-known success story after it was featured in a local TV program.

Indeed, Hong Kong companies as well as individual professionals are well represented in such areas as the media, catering, entertainment, real estate, financial services, tourism and other professional services. As the mainland's economic growth is set to be more consumption-led in coming years, the demand for higher quality services is expected to become increasingly urgent. So, instead of fretting about the looming competitive threat from Shanghai and other mainland cities, our entrepreneurs and professionals should think of them as places for new opportunities.

Hong Kong's lofty goals are achievable

Tax cuts and ambitious development programs do not go together very well. Doing both at the same time while trying to maintain a budgetary surplus seems to defy conventional economic wisdom.

But that is exactly what Donald Tsang Yam-kuen, Hong Kong's chief executive, proposed in his policy speech last week. With his vast experience in managing Hong Kong's economy, he obviously knew what he was talking about.

Lofty it may seem, the goal set by Tsang for Hong Kong in the next five years is achievable because the bulk of the expenditure in the proposed HK$250 billion ($32.24 billion) program, consisting of 10 different transport and development projects, is expected to come from the private sector.

This ambitious program can be seen as a declaration of confidence in Hong Kong's future by the private sector that is expected to put its money at stake. Tsang said the projects would add value amounting to a combined HK$100 billion a year to the economy, or 7 percent of GDP. In addition, they would create a total of 250,000 jobs. As such, the proposed development program could help underpin the sustained recovery of the Hong Kong economy from 2004 after a six-year slump. Since then, the economy has been moving along at a brisk pace, generating annual budgetary surpluses that have boosted the government's fiscal reserves to an estimated HK$400 billion.

Expecting a continuous strong flow of revenue into the government coffers, Tsang proposed a series of social and environmental initiatives costing a total of HK$14 billion in the next five years. Central to these initiatives was the proposal to extend free education for children from nine years to 12.

Optimism about Hong Kong's economic future has apparently prompted Tsang to propose cutting rates for both salary and corporate taxes, with the promise of further tax relief if the economy stays strong. Based on Tsang's optimistic note, the Hong Kong stock market staged a strong rally on Friday, pushing the benchmark index to an all-time high. The stock market performance is widely seen as a reliable indicator of public sentiment in a commercial town like Hong Kong.

But lurking in the shadows of this rosy outlook is the nagging concern of Hong Kong's long-term relevance to the mainland's economic development when major mainland cities, particularly Shanghai, are rapidly establishing themselves as business centers and commercial hubs. Entitling his policy speech "A new direction for Hong Kong", Tsang obviously recognizes that fresh thinking is needed to meet the challenges we now face.

"Over the next five years, we need to cultivate a new spirit for these new times," Tsang said. "We need to become new Hongkongers, better equipped to sustain development in the new era."

Urging fellow citizens to adopt a new mind-set, Tsang said people should drop their "small island mentality" so that they can begin looking at themselves in a new perspective. "Only through leveraging the strengths of our country can we position ourselves globally to create a better future," he said.

October 26 2007

Content is king with new clothes as Hong Kong firms embrace multi-media - report from MIPCOM 2007, Cannes
 

Hong Kong cartoon calls at the show.

Although the theme of the 23rd annual MIPCOM, held in Cannes, France 8th to 12th October, was "content is on the move", keynote speakers and delegates were just as preoccupied by the ongoing development of new media over the past few years.

Hong Kong companies Celestial Pictures, Asia Animation Ltd and Agogo Entertainment Ltd were among those showing some of the territory's strengths that include adaptation and packaging of existing movies, creative presentation, sales and distribution - with plenty of interest from global visitors to the fair.

MIPCOM is billed as the leading international television audiovisual and digital content market, and duly attracted 12,509 participants from around the world to the Palais des Festivals this year (up 7% compared to 2006).

New approach to kung fu TV.
MIPCOM has light-hearted touch.

The buzz at the conference for television programming was about the Internet, mobile phones, mobisodes, TiVo, iPods and other new media, with their effect on the industry. The overwhelming consensus was that companies will have to adapt in this rapidly evolving entertainment world.

Leslie Moonves, president and CEO of US giant network CBS Corporation, spoke of "content" (known as programming in the language of older TV executives) and the new "platforms", including how to make them pay and how to share the advertising revenue.

"Content is everything, and we are going full ahead in digital content," Moonves told a press conference at the Palais. However, he stressed that viewers were getting their content in many ways. "People want what they want, when they want it," he said. "Young people are impatient, demanding. We have to be open to anything."

Moonves: CBS as content provider.

Moonves explained that CBS was becoming a content provider through TV, cable, the Internet and other media. "We are getting the first years of the digital video recorder (DVR)," he added. "The business will get more diverse, and we have to be ready for that. It is an age of great experimentation, with the Internet, shorter clips and new promotional material."

Interest in Hong Kong content and distribution

Hong Kong-based Celestial Pictures proved especially adept at blending the old and the new. The company was at Cannes selling old kung fu classics, in various forms of media. Terry Mak, the company's executive vice president, distribution & TV networks, manned the large booth in a busy section of the Palais.

Hong Kong booths see plenty of enquiries.

"We bought the Shaw Brothers' library of martial arts films years ago, and these have universal appeal," said Mak. "There is no other film library like this." Martial arts continue to have worldwide appeal, and Celestial's classics go to every corner of the world, including the UK, the US, Canada, France, Germany, the Netherlands, South Africa, Iran and other countries.

"This is the place to market to overseas buyers," Mak said. "We had close to 100 appointments before we left Hong Kong. We have started many discussions here, and many are moving on to the next stage."

Celestial was talking to all forms of new media and bringing mobile products such as mobisodes (short episodes of a few minutes to be displayed on mobile phone screens), video messaging, video clips, ringtones, wallpaper and games to MIPCOM. It also offered classics such as The Flying Guillotine and The 36th Chamber of Shaolin in high definition (HD) format.

"We do not want old stuff for old people. We want to attract young people, so we introduce it on new media," Mak explained. "We adapt some of our programmes to short clips for mobile phones."

To do this, Celestial produces a comic treatment, re-editing classic kung fu fight scenes into short two-to-three-minute episodes and enhancing them with modern, wham-bam comic book animation to create its mobisodes.

"Kids find this cool," Mak said, as he showed the action-packed The King Boxer sequence on a laptop at the Celestial booth. So, apparently, did the judges, as the episode was a finalist in the competition for best mobisode.

Elsewhere in the massive, frenetic convention, Hong Kong's strength was in graphics entertainment, and exhibitors were successfully marketing their many products.

Leslie Chin, distribution manager, Asia Animation Ltd, which had a booth near the HKTDC pavilion, said that buyers seemed interested in his products. "We have had lots of enquiries."

Chin: MIPCOM well organised.

Asia Animation Ltd is the sole Hong Kong and overseas distributing agent for Shenzhen-based Puzzle Animation Studio. The studio creates and produces high-quality 2D and 3D animated films and TV series featuring Chinese themes and characteristics.

The company is producing two animation movies and has completed four TV series, with four now in production.

"MIPCOM is a really well-organised event," said Chin, adding that Asia Animation was there to show that it was not a small company, but had a number of productions. "Our animation has a Chinese theme, but we have one show on soccer," he said. "It is a world game and our story about children who control soccer-playing robots is very interesting."

Another production, Storm Rider Clash, an animated movie based on the popular, on-going comic series, is the first-ever animation based on real martial arts, not fantasy, Chin said, so it is more like a cartoon movie. It will most likely be released in 2008, he expected.

Asia Animation Ltd showed Sparkling Red Star, an animation adaptation for children from a well-known film about a boy during the war against the Japanese. It was released in China on 1st October, and is expected to be released in Hong Kong on the 25th of this month. Famous local celebrities, including the pop duo Twins, dubbed some of the voices.

One potential buyer, Rizoota, executive of content aggregation for India On Line Broadband, was impressed after viewing the movie at the Asia Animation booth. The buyer was looking for all genres, especially looking at animation sites.

"It is my first time here, and it has been very successful," she said. "I just saw the film Sparkling Red Star. I saw the 3D content. It was nice, good quality, cutely done." Animated material is always popular, she added.

"This culture is different from India, so the stories are different," Rizoota explained. "In India, stories are more historical, but here, they use more comic characters. It is appealing if you like the characters."

Another Hong Kong company at the fair was Agogo Entertainment Ltd, with 15 years experience producing animation for other companies, especially in Europe and the US.

Ma: Agogo specialises in films for children.

"Animation is very strong in China, because a lot of universities cultivate artists," explained producer Louisa Ma. "There is a real tradition of animation in China. It has a long history, and a lot of experienced animators."

The company specialises in production, sales and distribution of TV animation programmes targeted to children and teenagers. It co-produces some shows with international companies, and is now creating its own productions on the Chinese mainland, with studios in Shanghai, Nanjing and Hangzhou. Since 1997, it has produced more than 50 animation series, for a total of 1,000 half-hour episodes.

Ma also endorsed MIPCOM. "We have been coming here for more than 10 years," she said. "We meet a lot of people, a lot of buyers and international contacts here."

Done deals and marketing at the show

Pudney: signed up deals.

Gary Pudney of Typhoon Media International was selling Hello Kitty, the classic cute Japanese icon.

"We have been very successful and signed a number of contracts," he said, indicating a pile of paper on the corner of his desk. "These are contracts, signed up deals."

Typhoon, a distribution company, sells Hello Kitty in all formats for its client, Sanrio Digital. This includes selling broadcast rights, home entertainment (DVD) and publicity rights.

The company has 52 12-minute episodes, targeted to pre-schoolers of four-to-seven-year-olds, especially girls, but with some appeal to boys as well. The shows are 100% Hong Kong products, including creativity, animation, and distribution, Pudney said.

Lisa Hui, general manager for animation distributor Muse Communications (HK) Ltd, was also active at MIPCOM. "We license to TV stations all over Asia," she explained, pausing between appointments. Muse is also a merchandiser, and grants licenses to toy and T-shirt companies.

Hui meets suppliers from Japan.

"We meet a lot of suppliers from Japan here," she added. "We buy programmes and sell them to our clients." MIPCOM is a good meeting place because people from all over the world attend, she said. "It's a place to finalise some deals already discussed, as well as to get information for new programmes."

New trend in US entertainment

CBS's Moonves noted that Americans were becoming more open to entertainment from other countries, to importing more, with a real change in attitude over the past decade. "While the corporation is looking at franchising shows, it finds that transferring reality and game shows is easier, but drama is more difficult."

"We have been watching with great interest Hollywood making movies in India," Moonves said. "Since film works there, TV will as well."

As to investing in countries outside the US, Moonves noted a large, and growing market in India, China and Brazil. "We are not Rupert Murdoch [chairman of News Corporation, the owner of Fox News Channel and other global media], but we are exploring all sorts of possibilities," he added. "We are looking all over the world. We are very respectful of our international market."

Silverman: more global content for the foreign market.

Ben Silverman, co-chairman of giant US network NBC Entertainment and NBC Universal Television Studio, agreed that the broadcast industry was changing. "The international market is a huge part of our operation," he told the audience at the Palais' Grand Auditorium. "More global content will be built for the foreign market."

Wagner: growth from new media.
from special correspondent Garry Marchant, Cannes

October 19 2007

Hong Kong Shopping Sprees Mean Big Business for Retailers - Are American firms missing out? By Swee-keng Cheong

“ We see Asia as a big territory and in a few years we believe it will play the part Europe does today for company growth,” Carlos Alberini President and Chief Operating Officer, Guess.

While shopping in any shopping mall or shopping district in Hong Kong, I can’t help but ask, where are the American brands? Sure, there are a few brands here and there, but they are overshadowed by the plethora of Italian, French, Japanese and other Asian and European brands.

Hong Kong is an important – yet often overlooked – market-entry point for retail in Asia.

Hong Kong’s tax-free status means shopping is cheaper here than in neighboring markets – like mainland China or Japan. Hong Kong was visited by 21 million tourists in 2006, including 13.5 million from mainland China, who shop, shop, shop!!!

Hong Kong’s vibrant music, movie, television and print media continue to influence fashion trends throughout Asia Hong Kong’s domestic population of 7 million has one of the highest average disposable incomes in the region.

Hong Kong’s retail market is vibrant. Retail sales valued at US$28 billion at the end of 2006 were up 7.3%, boosted by domestic expenditures and tourist spending. A Tax Free World Association (TFWA) survey conducted in 2005 found Hong Kong, followed by Macau, to be the two most popular destinations for Mainland Chinese outbound travelers. The survey also revealed that “shopping is definitely considered to be a ‘must-do’ by most outbound Chinese travelers, especially when they travel to Hong Kong.” Fashion goods (purchased by 53% of the Chinese travelers,) cosmetics (50%,) and confectionery (50%) were ranked among the top 3 shopping purchases for the Chinese travelers in the survey. The 13.5 million Mainland Chinese tourists that visited Hong Kong in 2006 spent an average of US$584 per person (Source: 2005 TFWA-ACNielsen Chinese Traveller Study).

To tap the lucrative Mainland Chinese consumer spending market, several of the world’s leading luxury brands such as Louis Vuitton, Prada, Bvlgari, and Giorgio Armani have opened flagship stores in Hong Kong. Miuccia Prada, owner of the Prada selected Hong Kong for the location of its second largest store in Asia (after Japan) as Hong Kong “increasingly represents a launch pad into the Chinese market; it creates the trends and acts as a showcase for this market.” A Hong Kong presence paves the way for expansion into China.

H&M’s recent Hong Kong store opening should serve as a wake-up call for American retailers. With queues that stretched for blocks down Hong Kong streets, shoppers waited for hours to enter H&M on their opening day. The buzz around this high profile opening was carefully orchestrated with city-wide marketing blitz featuring advertisements on almost every available space in the city.

Stefan Persson, H & M’s Chairman said at the store opening that they had kept Madonna’s line of clothing especially for Hong Kong as “…this is an important moment for us because Hong Kong is such a fashionable city.” Nils Vinge, Head of Investor Relations at H&M reiterated that “Hong Kong is fashion-oriented and the people are big fashion spenders…” H & M chose Hong Kong as the first city to launch its Asia stores.

Macau: The Next Retail Wave - Just 25 miles away from Hong Kong and an hour’s ferry ride is Macau, “Asia’s Las Vegas.” Las Vegas Sands Corp. is developing Cotai Strip in Macau modeling it on the Las Vegas Strip. The Cotai Strip is anchored by the 3,000-suite Venetian Macau Resort-Hotel and 7 other hotels (Conrad, St. Regis, Shangri-La, Holiday Inn, Four Seasons, Regal, Renaissance,) are under construction. Add to that, a 20,000-seat entertainment center, a convention and exhibition center, and over a million sq. ft. of retail space, and

the stage is set for some serious shopping. Macau visitor arrivals are expected to increase from 16.67million in 2004 to 23.61million, following the opening of the Venetian Macau and its convention and exhibition center in July 2007. Macau is less than 5 hours away from almost two-thirds of the world’s population, and almost the whole of Mainland China.

For companies who are targeting Chinese consumers, Hong Kong and Macau present exciting and unique opportunities. Formats for market entry include finding a local distributor /licensee, setting up an office to run the stores (and leveraging Asia sourcing offices) or franchising. The U.S. Commercial Service in Hong Kong can help American companies identify possible partners/licensees, and investors, and provide customized research information for all market entry needs: information on local tastes and spending patterns, logistics and supply chain support services, retail real estate services, and marketing and advertising strategies.

Check this website on our services www.buyusa.gov/hongkong/en/servicesforus.html or contact Ms Swee-keng Cheong at swee-keng.Cheong@mail.doc.gov for more information. Telephone: (852)2521-5233

Hong Kong's Current Economic Situation

1. Latest Developments

Hong Kong has experienced strong and broad-based economic growth in recent years. Real GDP expanded by 7.5% in 2005, 6.9% in 2006 and 5.6% year-on-year in the first quarter of 2007. Domestic demand has resumed its growth momentum since the start of 2005, and is playing an important role in the current economic upturn. Following a 5.2% growth in 2006, private consumption perked up further by 5.6% in real terms in the first quarter of 2007, on the back of firmer employment prospects, mild increase in real wages and the gradually increasing asset prices. Fixed investment grew robustly at 7.9% in 2006, and 3.9% in the first quarter of 2007, with corporate spending on machinery and equipment being the main driver. As for the external sectors, exports of goods and services sustained a robust growth at 8.2% and 8.2% respectively in real terms in the first quarter of 2007, compared to 10.0% and 9.7% respectively in 2006. The government forecast a GDP growth at 4.5-5.5% in real terms for 2007 in the latest round of forecast exercise in May 2007.

Amid better consumer sentiment and improving employment prospects, retail sales grew by 7.3% in 2006 and another 9.4% in the first quarter of this year. After more than five years of deflation, consumer prices have been gradually edging up along with the solid economic recovery, rising by 2.0% in 2006 as a whole, and 1.6% year-on-year in the first four months of 2007. Meanwhile, Hong Kong continues to see signs of an improving labour market. The seasonally adjusted unemployment rate dropped to 4.3% in April 2007, from the peak of almost 9% in 2003.

Hong Kong's external sector showed robust growth in 2006, and the outlook remains optimistic for 2007. In 2006, tourist arrivals rose by 8.1% year-on-year (visitors from the Chinese mainland and the rest of the world rose by 8.4% and 7.8% respectively). Tourists from the Chinese mainland reached 13.6 million (54% of the total tourist arrivals), of which 6.6 million travelled under the individual visitor scheme. In the first quarter of 2007, tourist arrivals reached 6.6 million, up 6.6% year-on-year. As for the flow of goods, please refer to the section on Latest Trade Performance and Issues below.

The four pillar economic sectors of Hong Kong are: trade and logistics (28.6% of GDP in terms of value added in 2005), tourism (3.2%), financial services (12.7%), and professional services and other producer services (10.6%).

2. Budget and Government Initiatives

Fiscal balance has been restored for the fiscal year 2006/07, amid higher tax revenue from salaries and profits stemming from the better-than-expected economic growth, and government's restrained spending. While restoring a fiscal balance is no longer the main focus of fiscal policy, more focus is now placed on promoting the economy and employment, and improving people's livelihood. To name a few, the Financial Secretary has proposed to expedite the implementation of major infrastructure projects, which would create about 23,000 jobs for the construction industry in the fiscal year 2007/08; provide a seamless system for cargo movements and customs clearance; and allocate HK$900 million to help the disadvantaged and HK$20.3 billion for several tax relief and one-off rebate measures.

In his Policy Address delivered on 11 October 2006, the Chief Executive highlighted the government's new and ongoing initiatives for Hong Kong's economic development. On promoting Hong Kong's financial services, the government will amend the listing rules to enable well-established foreign enterprises to list in Hong Kong; prepare to launch new renminbi business in Hong Kong; study development of commodity futures market; and seek to attract offshore securities investment business of mainland insurance agencies. On trade and logistics, Hong Kong will enter into more arrangements with trading partners; introduce multiple entry permits for river trade vessels, streamline procedures and lower fees; expand air services network as well as the airport's air cargo and passenger capacity; and work with mainland authorities to enhance cross-boundary cargo flows. Besides, the government will earmark HK$100 million over five years for Hong Kong Design Centre to help trades and industries to improve designs and build brand names, and provide support to the cultural and creative industries.

On top of the provisions granted in earlier phases of the Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA), further liberalisation measures were announced on 29 June 2006, covering ten services sectors: legal, construction, information technology, convention and exhibition, audiovisual, distribution, tourism, air transport, road transport, and individually owned stores. These measures, to be effective from 2007, are expected to help expand the business scope allowable in China for Hong Kong companies and lower the thresholds for them to set up business or provide services there. The CEPA was first concluded in June 2003, and supplemented with further liberalisation measures in subsequent years. At present, all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff free under the CEPA. There are also liberalisation measures spreading across 27 service areas.

3. Investment Flows

According to the UNCTAD World Investment Report 2006, Hong Kong was Asia's second largest destination for foreign direct investment (FDI) in 2005, with FDI inflows increased by 5.6% to US$36 billion. On a global scale, Hong Kong ranked the sixth. In terms of FDI outflows, Hong Kong was the second largest source of FDI in Asia. According to UNCTAD's Outward FDI Performance Index, which compares an economy's share of world outward FDI against its share of world GDP, FDI from Hong Kong was 10 times larger than would be expected, given its share of world GDP.

According to a recent government survey, Hong Kong's total stock of inward direct investment was estimated at US$520 billion at the end of 2005, corresponding to 293% of GDP in that year. One distinct feature of such direct investment was the indirect channelling of capitals from non-operating companies in tax haven economies. Against this background, British Virgin Islands, Bermuda and Cayman Islands accounted for 31.3%, 6.7% and 1.6% of the total stock of inward direct investment in 2005. Excluding tax haven economies, the Chinese mainland was the most important source of direct investment in Hong Kong (accounting for 31% of the total), followed by the Netherlands (8.1%), the US (5.1%) and Japan (3.2%). The majority of the stock of investment was related to service industries including investment holding, real estate and business services; wholesale, retail and trading; banking, finance and insurance; and transport and communications.

 

October 18 2007

There's rich, and then there's Hong Kong rich By Fox Yi Hu

It's no secret Hong Kong has more than its fair share of wealthy people - more than 9,000 joined the ranks of its US-dollar millionaires last year - but it is also home to some 1,330 "ultra-millionaires" with net assets of more than US$30 million, a survey shows. The mainland, with a population 185 times as big as the city's, has 4,900 ultra-millionaires, the annual survey by professional services group Capgemini and investment bank Merrill Lynch found.

Gregory Smith, vice-president for wealth management of Capgemini Australia, said the region had seen a sharp rise in the number of ultra-millionaires. "This is particularly evident in China, where that country's phenomenal economic growth is reflected in a high concentration of ultra-high-net-worth individuals," Mr Smith said. According to the report, the mainland accounted for some 28 per cent of the 17,500 individuals in the region with more than US$30 million.

The mainland also has 340,000 people with net assets of US$1 million or more. In Hong Kong, 87,000, or 14 in every 1,000 people, is a US dollar millionaire - one of the highest concentrations of high-net-worth people - and their average net assets are the highest in the region, at US$5.4 million. The average millionaire in the Asia-Pacific region held US$3.3 million, compared with a global average of US$3.9 million.

The survey defines a US-dollar millionaire as an individual with more than US$1 million in net assets, excluding his or her primary residence and consumables. The city's 87,000 millionaires held a combined US$460 billion in financial assets at the end of last year, up 12.2 per cent from 2005. They held 34 per cent of their assets in investment properties and 26 per cent in stocks.

The key drivers of wealth in the Asia-Pacific region last year were growth in economic output and stock market returns, the report said. The mainland and India drove the region, with real GDP growth of 10.5 per cent and 8.8 per cent respectively. Additionally, savings rates, as a percentage of GDP, were higher in the region than in most developed markets. The mainland, Singapore and Hong Kong all had domestic savings rates in excess of 40 per cent.

Stephen Corry, Asia-Pacific investment strategist for Merrill Lynch, said the rise in Hong Kong's wealthy population had been driven by the strong economy and rising stock market. "Economic conditions in Hong Kong remained buoyant in 2006 on the back of China's continued expansion," said Mr Corry.

"The twin drivers of higher real estate prices and robust stock market returns fuelled the double-digit increase in the number of high-net-worth individuals in the city."

October 17 2007

United Nation report: Hong Kong a "front-runner" economy

Hong Kong has retained its position as Asia's second largest destination for foreign direct investment (FDI), according to a report released on Wednesday by the United Nations Conference on Trade and Development. The report, named World Investment Report 2007, highlighted Hong Kong as a "front-runner" economy, following high rankings in both its Inward FDI Potential and Performance Indexes.

Hong Kong attracted FDI valued at 42.9 billion U.S. dollars last year, up 28 percent on 2005.

Together with the Chinese mainland, which was the largest FDI recipient, the two economies accounted for over half of FDI inflows into the region last year.

Hong Kong Director-General of Investment Promotion Mike Rowse said here Wednesday the report confirms Hong Kong's position as a highly attractive market for FDI. To be second in Asia and seventh in the world is an impressive feat for a city economy of 7 million people, he added.

"These results confirm Hong Kong's status as an international location in Asia for foreign companies and capital. Equally, the report shows that Hong Kong continues to act as a two-way springboard for overseas companies and capital into the Chinese mainland, and for mainland companies expanding into international markets," Rowse said.

"Beyond the numbers, this investment also brings new skills, products, services and job opportunities that contribute substantially to our economic development and competitiveness," he added.

The FDI inflow into Hong Kong soared more than 30 percent on a year earlier, to 27.1 billion U.S. dollars for the first half of this year.

On a global scale, Hong Kong ranked seventh in FDI inflows last year, up from the eighth place in 2005, with cross-border merger and acquisition activity fueling the rise.

For the third consecutive year, global FDI inflows rose substantially. Total FDI flows reached 1.306 trillion U.S. dollars, up 38 percent from 2005, and approaching the peak of 1.411 trillion U.S. dollars reached in 2000. The rise was driven by increasing corporate profits worldwide and buoyant stock markets that raised the value of cross-border mergers and acquisitions.

The report predicted that FDI flows would continue to rise this year, although at a slower pace. Mergers and acquisitions would drive cross-border investment, with such activities in the first half of this year already valued at 581 billion U.S. dollars, up 54 percent on last year.

October 11 2007

Hong Kong $250 billion (US$30+ billion) backbone By Scarlett Chiang and Nishika Patel

Ten mega infrastructure developments will form the backbone of the city's development long past the 2012 expiry of Chief Executive Donald Tsang Yam- kuen's term in office. The projects will create 250,000 jobs and cost in the region of HK$250 billion, much of which will come from the private sector, and which will add HK$100 billion annually to the economy.

In his 110-minute policy address, entitled A New Direction for Hong Kong, Tsang explained he is pushing ahead with the 10 projects because investment on infrastructure in the past 10 years had been decreasing. "A rough estimate of the added value to our economy brought about by these projects, from commissioning to a mature stage, would be more than HK$100 billion annually, amounting to some 7 percent of our GDP in 2006," he said. The projects, Tsang added, will not just create jobs. After the projects are done, we will see the economic benefits.

The 10 infrastructure schemes planned by the government include three transport, four cross-border and three urban redevelopment projects.

They include the HK$7 billion South Island Line for Hong Kong Island proposed by the MTR Corporation that will start in 2011 and be commissioned no later than 2015.

A detailed plan for the Sha Tin to Central Link will be ready for public consultation early next year with construction expected to begin in 2010.

The Tuen Mun Western Bypass and Tuen Mun-Chek Lap Kok Link, linking Deep Bay in Shenzhen, the Northwest New Territories and Hong Kong International Airport in Chek Lap Kok is expected to be completed in 2016.

The Guangzhou-Shenzhen-Hong Kong Express Rail Link will use a dedicated line to link West Kowloon with Guangzhou and work will start in 2009. Three cross-border projects - the Hong Kong-Zhuhai-Macau Bridge, Hong Kong-Shenzhen Airport Cooperation and Hong Kong-Shenzhen Joint Development of the Lok Ma Chau Loop - are under feasibility studies.

Tsang also envisaged some new urban development areas in the city, including the West Kowloon cultural district, Kai Tak Development plan and some parts of northern New Territories.

Chinese University financial professor Raymond So Wai-man said spending HK$250 billion for the 10 infrastructure projects "is a smart investment as it can create jobs for the grassroots."

"The grassroots cannot enjoy the benefits of economic recovery. That's why the bar-benders went on strike," he said. "Now these projects can create jobs to satisfy them."

The chief executive also handed back wealth to residents, by cutting salaries tax and profits tax by one percentage point to 15 percent to 16.5 percent respectively. Economic integration with the mainland, through cross-boundary projects, also featured in his list. While Tsang outlined policies to power the SAR economy into a new era, he also focused on a fresh holistic approach for the future, which he coined as "progressive development."

He described this as overall progress in the areas of culture, society and the environment to make Hong Kong a quality global metropolis. Part of this vision includes revitalization of historic buildings such as the Central Police Station Compound in Hollywood Road and removing Central School from the list of sites for sale.

Tsang's environmental agenda includes a HK$93 million injection into cleaning up Hong Kong-owned plants in the Pearl River Delta; plans for motorists to switch off idling vehicles; and laws on replacing industrial diesel with ultra-low sulfur diesel in industrial and commercial processes. But Tsang avoided such issues as minimum wage and a roadmap for democracy.

Capital rushing to HK stock exchange By Ding Qi

As much as US$200 billion will go to the Hong Kong stock market within a year under a new investment plan from the mainland, according to a research report released Tuesday from BOC International. The State Administration of Foreign Exchange's plan, known as the "through-train to Hong Kong stocks," allows mainland individuals to invest stocks listed in the Hong Kong stock exchange directly, considering certain requirements. The program, announced in August, still awaits the government nod.

The report, composed by Luo Zhiheng, chief of the research department of BOC International, also expects that along with the "through-train" scheme, the Hong Kong stock market will also welcome US$50 billion from qualified domestic institutional investors (QDII) funds. Money outflow from the above sources, together with the returns on red chip stocks, will result in a substantial amount of money contracted away from the domestic A-share market. The report forecasts the bullish trend to wane in the fourth quarter.

On the other hand, the report noted valuation of H-shares will benefit from the huge capital inflow from the mainland. Investment opportunities are sure to follow.

October 4, 2007

HK Film Development Council reveals funding terms Written by Vicci Ho

Hong Kong put a surprising emphasis on experience over youth Tuesday when the newly established Film Development Council unveiled details of its plans to dish out first government cash to the movie industry.

At a press conference Tuesday, FDC said that main purpose of the HK$300 million ($38.5 million) on offer is to encourage production, especially of movies with commercial appeal. Gov't approved establishment of the fund in April this year (Variety, April 16, 2007.)

"It is most important to resuscitate the Hong Kong film industry, therefore priority has to be given to more experienced filmmakers," FDC chairman Jack So said. "We can't risk too much experimentation." Other committee members said that young talent could still access the fund by teaming with an experienced producer."

To qualify, applicant must be a Hong Kong registered company, helmer or producer that has produced and released at least two films in the last ten years. Movies supported need to have budgets less than $1.55 million and can receive a maximum of 30% of their production budget from the fund. Additionally, three of the five key creative elements (director, producer, scripter, male lead, female lead) must be permanent Hong Kong residents.

Applications can only be made by projects with a completed screenplay and other elements in place, such as post production contracts or 50% of budget sourced from private sector.

While FDC members made it clear that funding is to be considered an equity investment, they were notably vague about terms of investment, profit participations and whether proceeds would be repaid back into the common funding pool.

FDC said that secondary purpose of the fund will be more general measures to support the Hong Kong industry. These include "efforts to promote HK films on the Mainland and overseas, initiatives to train talent in the various aspects of the film production and distribution; and measures to enhance the interest and appreciation of the HK films by the local audience.” In addition to the main fund vetting committee, FDC said it has established a 'support services committee' and a 'mainland market committee.'

Mainland efforts will especially promote distribution of the Hong Kong's small and medium-budget movies beyond the neighboring Cantonese-speaking Guangdong province.

Coming two days after the closure of the historic Queen's Cinema in Central District, FDC said that it will even encourage private sector and real estate developers to preserve old cinemas.

September 28, 2007

China's Foreign investment fund ‘to launch on Saturday

A government fund that is to invest part of China’s US$1.3 trillion (HK$10 trillion) in foreign currency reserves is due to be officially launched on Saturday, according to news reports. Financial analysts are watching the agency closely to see where it invests and its possible impact on financial markets. It is expected to be entrusted with US$200 billion, which would make it one of the world’s richest investment funds.

The agency was likely to be called the China Investment Corp, Dow Jones Newswires and the mainland’s Securities Journal reported on Thursday. Both quoted unidentified sources. A mainland official who was involved in setting up the fund said he could not confirm the reports. Foreign reporters would be barred from the official opening ceremony, said Jesse Wang, chairman of state-owned Jianyin Investment. The central government created the fund in an effort to earn higher returns on its currency reserves, which have soared amid a boom in export revenues. A large portion of the reserves have been invested in safe but low-yielding United States Treasuries.

Its creation comes at a time of tensions with the US over China’s swelling trade surplus and unease in the United States and elsewhere over Beijing’s growing economic and military might.

Authorities said the agency would be modeled in part on Singapore’s government-owned Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere. A key question has been the possible impact of the new strategy on the market for US Treasury securities.

The central government is a big buyer of Treasuries, helping to finance the American government budget deficit. Mainland officials have given no details of how much money might be diverted to other assets. The Chinese agency agreed in May to pay US$3 billion for just under 10 per cent of American investment firm Blackstone Group.

Mr Wang, who was involved in negotiating the Blackstone purchase, told The Associated Press in May that the mainland agency was expected to try to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.

Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC (SEHK: 0883)’s attempt to acquire US oil and gas producer Unocal CNOOC dropped its bid after American critics said it might endanger energy security.

September 21, 2007

Toy Enterprises Face Challenge from Stricter Export Control

According to TDC's Hangzhou Office, the Yiwu entry-exit inspection and quarantine bureau has stopped inspecting the products of enterprises without the Quality Certification of Toys for Export after 21 August and has stopped inspecting export toys purchased on the market after 5 September this year. Due to historical reasons, only 14 of the toy manufacturers in Yiwu have Quality Certification of Toys for Export, which means the majority of manufacturers and dealers cannot export their products. Thus, Yiwu's toy industry is facing the danger of losing their clients or even perishing as a whole.

Through the joint efforts of relevant local government departments, the government of Zhejiang province has now granted a grace period for toy exports: toys produced by manufacturers without the Quality Certification of Toys for Export or purchased from the market may still be exported before 1 December after completing the necessary procedures and passing commodity inspection. However, it is necessary to adhere to the current policy after 1 December. In other words, manufacturers must apply for inspection by presenting the quality certification while toys purchased from the market may not apply for inspection.

Under the new policy, small enterprises and enterprises with poor quality control will have to face elimination. Meanwhile, the cost of quality control and cost of inspection will increase substantially. In light of this, enterprises will have little room for survival if they do not increase the value-added of their products.

It is understood that many of the 3,000-plus Chinese enterprises with Quality Certification for Toy Exports are processing products for foreign brands. In China's toy industry, 80% of the enterprises mainly rely on orders from a single client and the dependency ratio of enterprises on a single client is as high as 80%. As a consequence, suppliers are forced to cease production once their clients do not approve the products or cancel the orders.

New Processing Trade Policy Impacts PRD and YRD Differently

The hefty increase in processing trade export cost is going to have a great impact on Hong Kong companies operating in the Pearl River Delta (PRD) and Yangtze River Delta (YRD) regions, according to the Ministry of Commerce (MOFCOM).

Enterprises in YRD have invested considerable resources in proprietary R&D and pollution control in recent years. As a result, many have diversified from the business model of total reliance on processing trade. Compared with their counterparts in PRD, YRD enterprises are in a better position to adapt to policy changes.

For the many processing trade enterprises operating in PRD and YRD, 23 August 2007 was an important deadline. Under Announcement No.44 issued by MOFCOM, with effect from that date, the 1,800-plus items listed in the new Catalogue of Products under the Restricted Category in Processing Trade are subject to "actual payment" of customs duty deposit. At the same time, no new processing trade activities involving products under the restricted category will be approved in the eastern region.

How significant are the impacts of these two new measures, i.e. implementation of "actual payment" of customs duty deposit and banning of new processing projects involving the 1,800-plus restricted products in eastern China?

First, processing trade enterprises may encounter cash flow problems. Prior to the new rule, most of the law-abiding processing trade enterprises did not have to make "actual payment" of customs duty deposit, i.e. only "nominal payment" of customs duty deposit was made.

Under the new policy, starting from 23 August 2007, processing trade activities involving products under the restricted category are subject to "actual payment" of customs duty deposit. Although the deposit plus interest will be paid back to the enterprise eventually, the whole process starting from the import of raw materials to the export of finished goods may take as long as one year, as in the case of textiles processing enterprises, which means the deposit money will be locked for one whole year. Some people in the industry estimate export costs could go up by 30% as a result. For instance, processing trade enterprises in the textiles, garment, footwear and bags industries alone are expected to pay a total of Rmb20 billion in customs duty deposit.

According to the Shanghai Cotton Spinning and Weaving Industry Association, the impact will ripple through the whole industry chain affecting upstream and downstream enterprises. For instance, in garment processing, upstream industries such as cotton spinning are affected, while in plastic, metal and other raw materials processing, downstream activities such as electronics manufacturing are impacted.

Moreover, the new policy may affect the employment situation. A study conducted by the Association of Taiwanese-invested Enterprises in Guangzhou has found that production cost will rise dramatically under the dual effect of lower export tax rebate rate and changes in processing trade policy. Under normal circusmtances, enterprises would raise their export price to offset production cost increase. However, right now, only about 20% of the processing trade enterprises are in the position to do so. Others have to cease operation or undergo transformation. This will result in many workers losing their job.

Indeed, PRD is not the only region facing these challenges, YRD is also hard hit. According to Ge Hua, director of the foreign trade management department under the Suzhou foreign trade and economic cooperation bureau, more than 650 enterprises in Suzhou alone have been affected. "The total sum of customs duty deposit to be locked is estimated at Rmb6 billion," said Ge. In Ningbo, Zhejiang, 370 enterprises have also been hit by the new processing trade policy, affecting close to US$1 billion worth of exports.

The latest change in processing trade policy has triggered a flurry of concerns in PRD. Hong Kong companies found the new policy too harsh and the transition period too short. According to the latest study by Hong Kong's Greater Pearl River Delta Business Council, more than 10,000 Hong Kong-invested enterprises in PRD may have to cease or scale down their operation under the new policy. To help alleviate the pressure faced by Hong Kong companies concerned, different groups from Hong Kong are lobbying hard on this issue.

A task force was set up by the HKSAR Government and Guangdong authorities at the first meeting of the processing trade working group. The task force will assist Hong Kong-invested enterprises in seeking transformation and upgrade, as well as negotiate with the Hong Kong Association of Banks to lobby support from Hong Kong banks in assisting Hong Kong companies. At the same time, the task force will do its best to identify locations in the central and western regions on the mainland suitable for setting up factories and assist Hong Kong enterprises in relocating.

Unlike PRD where the impact of the new policy is strongly felt, YRD seems largely unscathed. So far, no industry association from the YRD region has made any public statement about the "damage" done by the new policy, and no government authorities are doing any liaison work. The impact of the new policy is less significant on YRD.

This is attributable to the differences between PRD and YRD in terms of the nature of their manufacturing activities and industry mix. In general, PRD is more reliant on processing trade and is heavily oriented towards export processing trade orders. As for YRD, although there are a large number of processing trade enterprises operating in the region, their contribution to the local economy is relatively less significant due to the strong presence of large-scale, heavy industry enterprises.

Moreover, many YRD enterprises which used to deal in foreign trade have diversified into domestic sale. Hence, they are less affected by the new export-oriented processing trade policy.

According to MOFCOM, Announcement No.44 has two major objectives: first, to guide the eastern region in industrial restructuring; and second, to relocate processing trade activities involving low value-added, high pollution and high energy consumption products to the central and western regions. In a nutshell, transformation and upgrade are the key objectives.

Meanwhile, with the emergence of the Bohai Rim economic region, revitalisation the old industrial base in the northeast, and further development of the central and western regions, other regions in China are beginning to attract the attention of foreign investors. In fact, quite a number of Taiwanese-invested enterprises in YRD relocated northward around year 2005. During the present round of policy change, Hunan province was the first to announce that incentives will be offered to processing trade enterprises relocating there from PRD. Attracted by preferential policies, processing trade enterprises may very well relocate to areas offering the right incentives.

September 10, 2007

Shooting guide: Hong Kong Written by Vicki Rothrock

While Hong Kong doesn't offer a rebate program or favorable exchange rates for international film crews, it does have a simple tax regime -- 17.5% for corporations and 16% for unincorporated businesses. Only those profits and income made in Hong Kong are subject to the tax; and if you're working in Hong Kong from overseas for not more than 60 days in a tax year, then there's no need to pay a salary tax. If you're an overseas crew member, you might not even need an entry visa or permit while working in Hong Kong, but it's best to check with immigration.

There's also the Closer Economic Partnership Arrangement (CEPA), which allows filmmakers to distribute films in China on a quota-free basis as opposed to falling under the foreign-film category. However, it only applies to Hong Kong filmmakers, and films must have a strong Hong Kong element.

Bonus: If you need a local crew, those in Hong Kong are "famous for their professionalism, and they work within your budget," says a representative from Hong Kong's Film Services Office (FSO). For filming in public places within the city, a general-purpose filming permit isn't required, but an OK is needed for filming on government land or on Hong Kong waters.

It's always a good idea to give the TV and Films Liaison Section of the Hong Kong Police a heads-up. The FSO has all the contact information you'll need and can answer other film-related questions.

Shot there: "Irreversi," helmed by Michael Gleissner; Olivier Assayas' "Boarding Gate"; "My Wife Is a Gangster 3," helmed by Jo Jin-gyu

Hot spot: The Shaw Group's Shaw Studios has been slow to open its doors -- the $180 million film production and digital post-production facility was originally slated for a summer 2006 launch -- but its five soundstages have been completed and are mostly booked through the year. Ang Lee did a few weeks of interim work on "Lust, Caution" there last October. Post-production studios won't be ready until the end of this year, and the new lab will open before Chinese New Year, which is in the first quarter of 2008.

Link: Hong Kong Film Services Office: http://www.fso-tela.gov.hk 

September 6, 2007

The Fruitful Result of "The Magic Gourd" Part II: Successfully Defeating Shrek in Mainland Due to Cultural Identification By Arthur Chin

"The Magic Gourd" was released across the Chinese Mainland in late June this year, with its cumulative box office passing 23 million RMB in mid August. The investing companies of the film, namely Centro Digital Pictures Ltd, Walt Disney Pictures and China Film Group Corporation, are all very content with such successful result.

Box office Passing 23 million RMB

"The film has hit up Mainland's box office, generating over 23 million RMB earnings there. In other words, it has defeated its strong competitor 'Shrek 3', which was released in Mainland at about the same time. How exciting it is!" Mr. John Chu, Chairman of Centro said with pleasure. Explaining the success of "The Magic Gourd", Mr. Chu pointed out that besides the large scale promotion campaigns circumspectly planned by the distribution companies, audience's cultural identification for the Magic Gourd storyline is also a significant winning factor.

The animation with live action is an adaptation of "The Secret of the Magic Gourd", a much loved Chinese fairy tale written by Zhang Tianyi, one of the most celebrated authors of children's literature in China. It was first published in March, 1958, and soon gained overwhelming popularity among teenage readers. Highly recommended by teachers and parents, it has become the one of the best sellers in the whole nation. In 1963, it was adapted by Tianma Film Studio (Today's Shanghai Film Studio) for producing a monochrome film - the first time the story being shown in big screens across China. Consequently, among the Chinese parents today there are plenty of Magic Gourd's fans. Like the lead of the film, children may have also heard of the story of the Magic Gourd from their grandpas or grandmas. So, it is not hard for them to welcome the film.

The Start of a New Franchise - Being familiar with the story of the Magic Gourd allows the Mainland audience to enjoy the film more easily. To match up the craze created by the film, Disney has launched various franchised products of the Magic Gourd on more than 4,200 retail locations in Mainland. These products include online games, toys, stationery, and even daily commodities such as water pots and slippers. "The production departments of Centro, China Film Group and Walt Disney have authorized Disney's merchandize team to produce these products under Disney's brand. Concerning the actual production process, Centro only played a small part, except for a few products like online and mobile games. Our designers did offer help in making such games more appealing." Mr. Chu explained.

"Disney's merchandize team was mainly responsible for design, promotion and sales, and they have really done a good job as the products are selling very well in Mainland." He continued. Without doubt, the strategic partnership between Walt Disney, Centro and China Film Group has led to a very promising franchise business in the Chinese Mainland.

"We have also negotiated with Mr. Zhang's descendants for authorizing Disney to publish some new version children books of the Magic Gourd. Now we have already launched six publications including comics and novels, which are all adaptation of the film version." Mr. Chu added.

"The Magic Gourd" is a successful case worthy studying. Facing the fierce competition from other media and entertainment providers, to overcome the challenges, film production companies should consider film production as a part of the larger cultural industry, and make attempts to promote cross-media synergies. Such synergies would then facilitate the promotion of the films in return, creating a virtuous circle that may pave a new way for the saving the decaying film industry.

September 6, 2007

More Hong Kong Films Enter Guangdong Quota Free

The PRD Cities Film Development Work Meeting took place in Dongguan on 27 July. According to the Guangdong Culture Department, the State Administration of Radio, Film and Television (SARFT) has authorized Guangdong to select and import Cantonese films from Hong Kong to be shown in the province. Not only is the number of films imported not subject to quota restriction but the content can be newer than that in the rest of the country and culturally more suited to Cantonese-speaking viewers.

According to an official of the Guangdong Culture Department, SARFT has granted official approval to delegate to Guangdong the power of selecting and importing certain Cantonese films from Hong Kong. This means viewers in Guangdong not only can watch Hong Kong films centrally imported into the mainland for screening, but they can also watch more Hong Kong films made available to them through a special "green channel". It can be expected that in future some of the latest Hong Kong films may be shown in both Hong Kong and the mainland simultaneously.

Agencies authorized to choose and recommend Hong Kong films include GD Film, City of Guangzhou Film Company, and Shenzhen Film Distribution Centre. They can select from films recommended by Hong Kong those that suit the likings of Guangdong viewers, and then send them for review by SARFT via China Film Import & Export Corporation. Upon approval, they would be granted the right of distribution within Guangdong province. The number of Hong Kong films thus imported is not subject to quota restriction. The film "The Heavenly Kings" shown in March marked the first Hong Kong-produced Cantonese film officially imported into Guangdong for distribution.

September 5, 2007

The missing link in economic relations By Bernard Chan

The media and other observers in Hong Kong closely follow the ups and downs in economic relations between mainland China and the United States, for obvious reasons. We want to know what the impact on Hong Kong will be. We ask how our economy will be affected, and how our locally based companies will do - on both sides of the border. But there is another part of the story we are probably missing.

The local media has paid close attention to the Strategic Economic Dialogue (SED) between China and the US. That is a high-profile gathering at least partly intended to convince the US Congress that the Bush administration's policy on the economic relationship with the mainland is bringing results. The lawmakers are threatening to impose tariffs on goods imported from countries using currency manipulation.

Two rounds of SED talks were held, in December and May, involving heavyweight meetings between top officials like Vice-Premier Wu Yi and US Treasury Secretary Henry Paulson. Hong Kong certainly paid attention to the discussions on intellectual property and yuan revaluation, among other issues.

There is a lot at stake for Hong Kong here. Lobbyists for US manufacturers and unions appear to be winning the argument for serious, short-term action against China's trade surplus. But tariffs would damage the Hong Kong economy. They would reduce demand for our trade-related services and, of course, hurt many companies on the mainland. Such action could also lead to broader conflicts over trade in other places, leading to greater protectionism around the world.

Hongkongers have also taken a lot of interest in Beijing's new corporate tax system, announced after the first round of the SED. The new laws scrap tax breaks and other privileges for foreign-invested exporters. More recent measures are aimed especially at lower-value manufacturers. The aim is to dampen exports of cheap goods, and that has hit some Hong Kong-owned mainland factories, which is obviously a big story here.
Following the first SED meeting, Beijing announced measures to tighten legal protection for intellectual property and improve market access in financial services. Again, this was something Hong Kong followed because some local companies, like banks, have been among the first to take advantage of these measures.

Sometimes, Beijing's moves to open markets do not help Hong Kong companies much. In my own industry, insurance, many local institutions cannot take advantage of these measures because they do not qualify on grounds of the size of their worldwide business. Such restrictions open doors for major multinational corporations but not smaller, regional players. This is something we have to live with: these restrictions apply to all companies in the industry, wherever they come from.

But strangely, our media gave this less coverage than the other changes. Possibly they thought there was no local angle. That assumption, however, is not true. Even if our local companies do not benefit, Hong Kong as a whole can. In the insurance industry, for example, new entrants from the US or Europe will want skilled workers - people with world-class general skills like human resources management, and industry-specific expertise like actuarial skills.

Ideally, these people will also know Chinese and have a good understanding of the mainland as a business environment and market. Where can you find such people? The answer, of course, is Hong Kong. This is the part of the story we are missing. We often forget that overseas companies moving into the mainland offer a growing range of opportunities for the Hong Kong workforce. For recent graduates and other people aiming at developing a career in management, it is one of the biggest stories in town.

Aug 31, 2007

Marked Increase of "Zero-Tariff" Hong Kong Imports Entering Shanghai

According to Shanghai's latest customs statistics, 697 shipments of Hong Kong goods enjoying zero-tariff under CEPA entered the port of Shanghai during the first five months of 2007, an increase of 22.28% over the same period in 2006. The total value of the shipments and tax concessions were up by 26.81% and 31.18% to US$43.04 million and Rmb33.54 million respectively.

As Shanghai customs authorities pointed out, practically all kinds of goods produced by Hong Kong are now eligible for zero tariff in entering the mainland under CEPA. In May 2007 alone, US$7.14 million worth of Hong Kong products in 114 shipments were imported into Shanghai under CEPA, with tax concessions reaching Rmb5.14 million. The products mainly consisted of drugs, garment, colouring agent, polystyrene, aluminum alloy plates and polyurethane. Among these, Amoxicillin and other drugs containing Cefazolin, akaloid and their derivatives were worth close to US$2.93 million; men's and women's garments, US$1.01 million; juice beverages, condiments and dough for making pastry, US$60,000; and skincare products, US$30,000.

29 June 2007 marked the fourth anniversary of the signing of the first CEPA (Mainland-Hong Kong Closer Economic Partnership Arrangement) agreement. Economic ties between Shanghai and Hong Kong have grown closer during the past four years as Shanghai customs have liaised proactively with government departments and enterprises concerned and stepped up publicity of the policies concerned through announcements and on-the-spot consultation. To ensure the smooth customs clearance of goods under CEPA, verification of electronic data against information contained in the Certificate of Origin under CEPA (including quantity, unit, product name and commodity code) has also been strengthened.

Aug 30, 2007

Mainland China investors have shown strong interest in buying Hong Kong stocks after individuals got approval to directly invest in the market last Monday.

Over a thousand mainland investors have registered with four wealth management centers at Bank of China's (BOC) Tianjin branch to enable them to buy Hong Kong stocks, according to a client service hotline at the branch. "And thousands of individuals have made phone enquiries about the process and how to apply," the hotline said.

Investors will be able to buy Hong Kong stocks directly five days after they open an account with BOC. They will be charged fees for buying and selling Hong Kong stocks at 0.718 percent of the transaction volume - lower than the rate for buying and selling A shares, according to the hotline.

The bank is yet to receive approval from the regulator to get the ball rolling. But as the initial gateway for the pilot scheme, the bank has 17 wealth management centers at its Tianjin branch ready to provide the service once it's approved, the hotline said.

Xiao Gang, chairman of BOC, said last Thursday that the bank is expected to publish details and start accepting applications from customers in Tianjin from this week. "The bank will gradually extend the service to 40 major cities," the chairman said.

But a BOC source who did not wish to be named said yesterday that risk control concerns might prevent the bank from starting the service this week.

"The regulator expects BOC to improve its risk control before it starts providing the new service. There is no clear timetable for that to happen," he said.

"The pilot program is a significant part of China's forex administration reform. The regulator needs to fix many details before it starts the business. These include determining whether applicants are qualified, which financial institutions can provide the services and how to protect investors' interests," said Zhao Xijun, a professor at Renmin University of China.

Zhang Jianguo, president of China Construction Bank, said yesterday that it had applied to regulators and expects to be involved in the new business soon.

Aug 28, 2007

Hong Kong move opens up new challenges

The government's move to allow mainland residents to directly invest in the Hong Kong market opens up many challenges - not only for investors, but also for the regulators. The State Administration of Foreign Exchange (SAFE) initiated a pilot program last Monday that for the first time permitted mainlanders to use their own foreign exchange or buy an unlimited amount of foreign currency to invest in the Hong Kong market. The move marks a major step in the opening up of the mainland's capital account, a reform the government has vowed to pursue but at a gradual pace to avoid risks.

With the latest move, "the pace of opening up has been faster than expected", said Chen Xingdong, chief economist of BNP Paribas Peregrine Securities in Hong Kong. Apart from opening a window for mainland individual investors to invest overseas, analysts said the move will divert some of the ample domestic liquidity. "There are not many options left given the excess liquidity," Chen said.

In the beginning, mainlanders' investments in Hong Kong will be channeled through Bank of China in Tianjin's Binhai New Area and the Bank of China International Securities in Hong Kong. Some other banks and securities firms in other regions may be allowed to conduct the business later.

Chen forecast the program will extend to other international markets besides Hong Kong. "Individual investors may be allowed to invest in other markets within a year."

Policymakers need some time to develop expertise in managing outbound individual investment, Chen said. "Challenges such as lack of experience of mainland investors, potential legal disputes in overseas markets and protection of investors' interest may arise."

Another challenge that may arise from opening up the investment channel is the influx of speculative capital, or hot money. Hot money is hard to regulate given their various disguises, said Yi Xianrong, a researcher at the Chinese Academy of Social Sciences. "The program is being conducted on a trial basis because policymakers fear hot money may sneak into the country," he told China Daily.

Policymakers may also need to strengthen monitoring of outbound capital flows to thwart investment of tainted funds, said Yang Fan, an economist with the Business School of China University of Political Science and Law. Relevant regulations should be put in place to ensure the money invested has been legally earned, he said.

If these measures are not implemented, the new investment channel may facilitate transfer of assets illegally accumulated, Yang said.

"What should get special attention is that individuals may take advantage of public assets to invest for themselves by such channels as raising mortgages on public assets," he said.

Aug 21, 2007

Alarm bells ring at dodgy toys debacle By Fanny Fung and Winnie Chong

The recent wave of recalls of China- made products by US and European retailers has sounded alarm bells among Hong Kong industrialists and officials. Local manufacturers are worried about a potential crisis following the string of recalls of products, particularly toys, as there are some 5,000 toymakers registered in the SAR, most of which have factories in the Pearl River Delta.

Paul Yin Tek-shing, vice president of the Chinese Manufacturers' Association of Hong Kong, admitted yesterday that, apart from possible financial losses, the recalls have unveiled the lack of quality control by local manufacturers. He said some companies have not been working properly to ensure the safety of their products. "Did these unsafe products emerge just now? Were there no problems last year or the year before?" he asked, noting that the dangers of these products had not been reported earlier only because importers were more lenient. The flaws had always been there and producers could not deny their faults, Yin told The Standard. He said some of the companies did not even have a quality control department and, to shorten production time, they would skip the appropriate steps of checking, hoping that, with some luck, the faults would not be detected by importers. He said multiple-level outsourcing of production processes was also to blame, saying Hong Kong manufacturers often outsourced their work to mainland companies which, in turn, passed the job to others, making it even more difficult to monitor the manufacturing processes. He called on the entire industry to take active steps to safeguard quality control.

In the first half year of this year, Hong Kong's total exports to the United States amounted to US$4.92 billion (HK$38.38 billion) - up 34 percent over the same period last year - while toys exports alone reached US$1.33 billion - an increase of 12.4 percent.

The Hong Kong Trade Development Council has warned that the product safety issue would lead to a decrease, especially in toys exports, in the second half of the year. A council spokesman said the effect of the toys recalls on the entire exports sector had remained small, as toys accounted for only 3 percent of the territory's total exports.

A source, who requested anonymity, told The Standard that, in some cases, Hong Kong businessmen had their unsafe products pass through checks while being exported from China because of malpractices and corruption. The source said while most Hong Kong manufacturers were clean, such behavior had tarnished the image of the whole sector.

As Secretary for Commerce and Economic Development Frederick Ma Si-hang began a three-day official visit to Beijing yesterday, the Liberal Party urged the SAR government to raise the problem of product safety with the central authorities.

A leading Germany-based accreditation laboratory in Hong Kong said it is not uncommon to detect harmful chemicals and other hazards in mainland-produced toys exported to Europe and the United States.

Candy Chow Fung-yee, an executive with TUV Rheinland Hong Kong - a Germany-accredited laboratory in Hong Kong that has conducting safety tests on toys for 18 years in the territory - said most of the mainland toys had chemical and physical hazards. For physical hazards, they found that, for instance, 50 percent of the toys tested had choking and 10 percent laceration hazards as they were either too small or had pointed or sharp edges. She said the launch of the "China Compulsory Certification" scheme launched by the mainland earlier was a good move as it can help improve toy safety.

A toys trade insider also welcomed the scheme. "The mainland has taken the first step in ensuring the safety of its toys," he said.

The scheme is a basic requirement and is not difficult to follow, especially for factories which are used to producing toys for export to Europe and the United States.

He found some Hong Kong factory owners do not keep themselves updated on market information and demand.

Thomas Chan Man-hung, China Business Centre head at Hong Kong Polytechnic University, said the "CCC" scheme is in line with international standards. He believed there will be more stringent requirements on toys, such as environmental protection measures.

Aug 18 2007

Thai film industry scopes HK's animation success - New perceptions for better animation.

Hong Kong's Centro Digital Pictures Ltd was both the producer and developer of striking animation on the Disney China Film Group's foray into Chinese-language movie-making in May 2007 - and the popularity of the result, The Secret of the Magic Gourd co-venture, is making itself felt in Thailand.

Apparently so much so, that Thailand's Software Industry Promotion Agency (SIPA) and the Ministry of Information and Communication Technology are making moves to support local digital companies.

Official weight is being put behind the Thai Animation and Computer Graphics Association (TACGA).

Four cartoon movies, Spooky Imaginary Friend, Bloody Bunny, Fuzzy Adventure and Fruity Town are in production for showing on local TV channel MCOT from September 2007.

Concentrating their minds is the fact that the Thai animation market generates revenues of US$129 million at present, of which 90% was raised by Thai firms and 10% by foreign companies. There's a strategy in place to push revenues to US$194 million in 2008, promoting local digital content in overseas markets.

Khan Kluay was the first computer graphics animated feature made in Thailand by Kantana Animation company - receiving the country's highest box office take of 2005.

There've been quite a number of Thai animation series produced since then, including Pang Pond: 3D Animation, The Adventures of Mistress Kaew and Zon 100%.

These animated series are broadcast via local TV channels, with the prospect that they will resonate with overseas viewers.

But Hong Kong's Centro Digital Pictures has seen a new higher level of success with its Gourd movie. The film is based on a novel by Zhang Tianyi, abut a boy who discovers a gourd that grants him several wishes. The story has already been adapted for TV on the Chinese mainland.

Thai producers recognise that a similar set of effects as in the Gourd movie can be brought about by outsourcing digital imagery with huge advantages as to cost, consistency, quality and efficiency by using Hong Kong-based units such as Centro.

To achieve "Hollywood success", regional film makers are increasingly expecting to draw on the expertise of companies that can deliver the latest and best, or suffer at the box office.

Aug 9 2007

HK contributes to the country's modernization By Lau Nai-keung

In measuring Hong Kong's contribution to the mainland's modernization program, many people have focused on its economic contribution. In the past 60 years, Hong Kong's contribution has been huge, and there is no dispute about that.

For a long time, Hong Kong was practically the country's only outlet to the outside world, monopolizing trade and inward investment. Even today, 30 years after the launch of reform and the opening up policy, about half of the country's trade and investment is still related to the territory. Everywhere you go, even in the most remote inland provinces, Hong Kong joint venture projects are thriving.

Let us take a closer look at why China welcomes overseas direct investment. It is a package consisting of capital, technology and modern management. Money does not do all the talking, and when it comes to management, it obviously falls outside the traditional concept of economic matters. Management is a complex system more on the culture side. In the past, though not so conspicuously, Hong Kong contributed tremendously to the cultural area, and it will continue to do so in the years to come.

I can still remember back in the 1980s when Hong Kong reporters covering the Sino-British negotiation on the future of the territory after 1997 were frustrated because press conferences were unheard of in the mainland. Taking the advice of Hong Kong journalists, the country began its system of press conferences and official spokespersons. In the same vein, early joint ventures, which were all from Hong Kong, led to feasibility studies, which are now a pre-requisite for any joint venture agreement.

Many terms that are in daily use on the mainland - off-hand, "taxi" and "bus" pop into mind - originated in Hong Kong. More recent examples are "anti-corruption storm" and "accountability". Along with these new terms, the country has imported many new concepts and new practices that are part and partial of modernity and modernization.

To give a more concrete example, when you walk along the pavements in Shanghai, you will find many are covered with different patterns of colored bricks, a practice borrowed from Hong Kong in the last decade. This is more beautiful, and is more convenient for regular repair and maintenance of underground ducting and cables. It is very practical indeed, especially in the rainy seasons when water has to be quickly absorbed and drained.

When you walk down the subway stations in Shenzhen, Guangzhou, Shanghai and Beijing, you will find many features there quite similar to those of Hong Kong. This is of no surprise, since the Hong Kong Mass Transit Railway Corporation (HKMTRC) consulted on these subway projects. At the moment, HKMTRC is building subway extensions in Shenzhen and Beijing. You will see more of Hong Kong in these operations.

Another spectacular success is the Octopus Card. This started off as a prepaid card for Hong Kong's subway and busses. Now it is the electronic payment medium accepted everywhere for small payments, say below HK$500, except taxis. You buy a newspaper from the convenient store together with your breakfast, beep, Octopus Card. You check out from the supermarket, beep. You buy a coffee from Starbucks, or a hamburger from Macdonald's, beep. Now you go back to your apartment, beep, the door opens for you because it recognizes your card number. Even the kids, they beep the card at the school gate, and the roll call is automatically taken, together with the exact time of entry. Needless to say, there will be no more time punching in the office.

The Octopus Card is a relatively low-tech device, and the hardware, the IT infrastructure, the manufacturing capability, and the software codes are all there. Everybody is talking about electronic money, but no other city in the world is as successful in its application as Hong Kong. The secret to its success lies in marketing and management. Learning from the Hong Kong experience, similar IC cards are beginning to proliferate in major cities in the mainland. Soon you will be able to buy this newspaper with an IC card and then start your car with it in the mainland.

Along with Closer Economic Partnership Arrangement, there are more and more mainland visitors coming to Hong Kong. Almost to a voice, they are all amazed at the efficient traffic management in Hong Kong. Public transportation is so convenient and there are practically no traffic jams. Not only do cars stop in front of red light, incredibly most of the pedestrians do too, even when there are no cars and no policemen in sight.

People automatically line up for everything, and the streets are clean. When they have more interactions with the local people, they will experience first hand what efficiency, professionalism and a service attitude mean. With more exchange and interaction at all levels, I am sure in the not too distant future, all major Chinese cities will be like this. After all, Hong Kong is also a Chinese city run by Chinese people, and there is no reason why other cities are unable to do so.

Tales like this can go on and on. In a nutshell, other than money, Hong Kong still has a lot to offer to the country's quest for modernization, especially in the areas of modern city management. A few decades from now, the Guangzhou-Shenzhen-Zhuhai Highway, which was China's first super-speed highway, and a joint venture with a Hong Kong company, will be lost in the maze of highways crisscrossing the Pearl River Delta, but more people will ride on buses, pay with an IC card, and talk about accountability.

Looking from this angle, we can all appreciate why our leaders pay so much attention to Hong Kong. After all, it is "the Pearl of the Orient".

The author, from Hong Kong, is a member of the National Committee of the Chinese People's Political Consultative Conference

July 25 2007

Hong Kong Enterprises Must Register Before 23 October to Safeguard Processing Trade Business

On 23 July, the Ministry of Commerce (MOFCOM) and General Administration of Customs promulgated Announcement No.44 on the issuance of the Catalogue of Products under the Restricted Category in Processing Trade. Under Article 5 of the Announcement, for enterprises in the eastern region which have not been granted foreign trade rights before 23 July, their application for engagement in the processing trade of products under the restricted category will not be entertained. However, for enterprises in the eastern region which have undertaken processing activities before without foreign trade rights, if they register with the local commerce department before 23 July 2007 and convert into enterprises with foreign trade rights within the specified time frame, they will not be subject to Article 5. Also, enterprises which have changed their names due to corporate restructuring but whose equity and legal representatives have not changed will not be subject to the article. Hong Kong companies engaging in processing with supplied materials and intending to convert into foreign-invested enterprises and continue to engage in the export of products under the restricted category in processing trade should register with the local commerce department before 23 October to declare their status as old enterprises in order to retain their qualification for engaging in the processing trade of products under the restricted category.

According to MOFCOM, in the calculation of the payable customs duty deposit for products under the restricted category, the so called ¡§integrated tax rate¡¨ is calculated on the basis of combining the import tariff and import-related value-added tax rates. The current rate is 22%, and Customs can adjust the rate in the future in accordance with the actual situation.

For interpretation of the catalogue by MOFCOM in Chinese, please visit: http://www.mofcom.gov.cn/aarticle/ae/ai/200707/20070704919873.html

For details of the above catalogue and its implementation in Chinese, please visit: http://www.mofcom.gov.cn/aarticle/b/c/200707/20070704918873.html

July 17,  2007

Luxury brands choose Asia showcase wisely - David and Linda Ting, founders of Globalluxe, with designer Diane von Furstenberg

American husband and wife team David and Linda Ting were both working for Gucci in New York when they first had the idea to bring high-end global brands to Asia, via Hong Kong. Their company, Globalluxe Limited, was formed in 2001, with US designer label Kate Spade as its first customer. As exclusive distributors for the brand in Asia, Globalluxe has now opened 11 Kate Spade boutiques in eight countries, and added US fashion brand Diane von Furstenberg (DVF) and Italy's prestigious golf wear label Chervo to its stable.

Mr Ting explained that it was Hong Kong's entrepreneurial spirit that first attracted the couple.

"I was the Managing Director, Asia Pacific at Gucci Timepieces before moving to New York to manage their worldwide business. As Gucci's business grew and the job became more corporate, I wanted to do something more entrepreneurial. At the same time, other brands had approached me to launch their business to Asia, and Linda and I decided, why not bring the brands there ourselves?"

Perfect choice - "Hong Kong seemed the best starting point because of its entrepreneurial spirit, and because it's so easy to set up a business here. There is a strong support network and great infrastructure, and as Hong Kong has such a good service industry one is able to hire top quality accountants, and lawyers easily. Plus, Hong Kong's central location makes it easy to go north to China, and south to all other markets in Southeast Asia. Our airport is the best, and it has convenient flights to all parts of the world – that makes a major difference in being able to cover those markets."

International brands are keen to gain exposure in Hong Kong, which is "a shopper's paradise", Mr Ting continued.

"Hong Kong has a lot of brands that offer the most number of styles," he said. "Most brands have a presence elsewhere in the region, but those stores rarely have the whole collection. Shopping in Hong Kong is very convenient, and my business partners when they come here are always amazed to see the size and range of the huge mega-flagship stores all within walking distance of Central. As there are no duties, shoppers know they can come to Hong Kong and get the best selection, and probably the best prices in Asia." In addition to having a fashion-conscious domestic market in its own right, Hong Kong is also the place to launch brands for the Chinese mainland market. It's the right strategy, Mr Ting says. "Brands set up here not only to do business in Hong Kong, but to educate the mainland people about international brands. So many brands have tried going into China first, or even Macau, but they have a much better success rate if they've established themselves in Hong Kong first. This city is the fashion capital of Asia, and Chinese consumers look to Hong Kong as a kind of validation for international brands."

Best of both - The Tings also love the lifestyle in Hong Kong. Having worked in New York for many years, Mr Ting says Hong Kong has the same type of vibe – it is fast paced, and a place where things get done. "Hong Kong people work hard, but they also have the chance to enjoy themselves with world-class restaurants and lots of entertainment. We now have three children, and one of the nicest things about Hong Kong is that it is a big international city, yet only 30 minutes or less away from nature, beaches and mountains. That's all part of the lifestyle." So far, Globalluxe has taken Kate Spade to Hong Kong, China, Singapore, Macau, Taiwan, Thailand, Indonesia and Malaysia. Since opening the first DVF store in the Landmark, Central, in October 2005 it has launched the brand in Singapore, Indonesia and Shanghai, with more stores to open later this year (including two more in Hong Kong). It's opened Chervo at Open Terminal, Harbour City, and more are planned.

Other brands continue to approach the company, but Mr Ting says Globalluxe is "very selective". "We are very bullish about Hong Kong and the region – in fact, we feel the future looks quite positive," he said.

July 12,  2007

Macau poses conventions challenge - Hong Kong needs new facilities as Venetian Macao is set to open a venue for meetings by Yvonne Liu

Hong Kong is in urgent need of new exhibition and convention facilities to fend off growing competition from Macau and nearby cities. Its higher value-added convention and exhibition business will face a head-on challenge when more than one million square feet of convention and exhibition area is completed at the Venetian Macao on the Cotai Strip in Macau in the fourth quarter, according to industry participants.

Although a big hit from Macau was unlikely in short term, they said the government should consider improving the industry's facilities in preparation for the long-term threat. Michael Li, executive director of the Federation of Hong Kong Hotel Owners, said his group planned to form a strategic alliance with other concerned parties to call for the development of phase three of Hong Kong Convention and Exhibition Centre. In the long term, according to Mr Li, Hong Kong needs new facilities for meetings, incentives, conventions and exhibitions (MICE) as the sector faces intensifying competition from nearby cities.

Macau, following the development path of Las Vegas, will make plenty of rooms for exhibitions and conventions. It now has only four convention and exhibition centres with a total gross area of 218,000 square feet, which does not qualify for the hosting of an international trade fair. However, the outlook for the MICE sector in Macau would change after the opening of the exhibition and convention facilities at Venetian Macao. The centre will provide an area of 163,900 sq ft for conventions, 803,900 sq ft for exhibitions plus an arena with 15,000 seats.

The exhibition area at Venetian Macao will be larger than the Hong Kong Convention and Exhibition Centre or AsiaWorld-Expo. According to a Jones Lang LaSalle report, at least 44 events have been confirmed to be held at the Venetian Macao in first two years of its operations. The venue will receive an estimated attendance of 327,000 for exhibitions or trade shows in the fourth quarter of the year and 1.3 million for a year.

Marcos Chan, associate director of research department at Jones Lang LaSalle, said Macau's new convention and exhibition facilities would bring in overseas business travelers who generally spend more on accommodation and food and beverages than regular tourists. He believes demand and supply for hotel rooms in Macau will rise alongside the influx of business travellers.

Stanley Chu, the chairman of Hong Kong Exhibition Organizers Association, also called for more exhibition and convention facilities in Hong Kong, even though he believes the threat from Macau is not imminent.

Mr Chu said Las Vegas took more than 20 years to develop into a convention and exhibition destination, and Macau would likewise need time to develop a successful convention and exhibition industry. "But Macau has an advantage in hosting conventions because it is full of entertainment facilities," he said.

Mr Chu said the Hong Kong government should partner with mainland government bodies and associations to corner international exhibitions in the city. A new exhibition centre in the urban area could also help the development of Hong Kong's exhibition industry.

"The parking area of Hong Kong Convention and Exhibition Centre has to be converted into exhibition area during peak seasons," said Mr Chu. "This shows that the supply for exhibition space is tight."

William Cheng Kai-man, chairman of Magnificent Estates, which own hotels in Macau and Hong Kong, believes the outlook for Hong Kong's hotel and exhibition industries remains positive despite the opening of a convention and exhibition centre in Macau.

"Macau does not have an international airport and international flights, which is a problem for the development of its exhibition and convention industry. This definitely gives Hong Kong an advantage in hosting exhibitions," Mr Cheng said. Last year the Hong Kong Trade Development Council studied the development of the convention and exhibition industry in nearby cities. Its report shows that Macau has strengthened its position in hosting conventions while Guangzhou has increased its capacity for hosting exhibitions with an international convention and exhibition centre in Bazhou.

The size of the Guangzhou International Convention and Exhibition Centre will be doubled to more than 3.22 million sq ft by the end of next year.

Lawrence Yau, spokesman for Hong Kong Trade Development Council, said: "Hong Kong does not have enough venues for holding exhibitions. The exhibition area is fully booked in peak seasons." Under its expansion plans, which started last year, the Hong Kong Convention and Exhibition Centre will have added an exhibition area of 208,821 sq ft by 2009. The Trade Development Council will submit a proposal for the development of phase three of the centre by the end of the year.

July 4,  2007

'At times, we were in the depths of despair' Chief Executive Donald Tsang Yam-kuen looks back on an often tough decade, and pledges to follow his personal mantra of excellence in the years ahead by Donald Tsang

This year, we celebrate the 10th anniversary of Hong Kong's reunification with the motherland. Ten years is a significant period of time. Looking back over the past decade, Hong Kong people will have different thoughts and recount different experiences. My feelings are a mix of joy and grief. The past decade has been full of challenges. As Premier Wen Jiabao puts it, since our return to the motherland 10 years ago, Hong Kong has taken a truly extraordinary path. We have encountered unprecedented difficulties: the Asian financial turmoil, avian influenza and Sars, to name a few. None of these were resolved by referring to previous experience or by following quick-fix solutions. The journey has been long and tough, but ultimately we weathered all these crises.

I remember the stress, the sadness and, at times, the total exhaustion brought about by these challenges. But, I also remember our society overcoming these difficulties, and the maturity of Hong Kong people in dealing with them. At times we were in the depths of despair but as our sorrow subsided we came to know ourselves better and to cherish our traditional values more - to care more about our friends, our family and our community.

I remember even more deeply the heroes of SARS. Few people in Hong Kong really set out to become heroes - we are wary of those who glorify human virtue or sing their own praises. Rather, Hong Kong people tend to keep a low profile and just get on with doing their jobs. But in times of crisis, many in society naturally come forward to help. They do not make a fuss of it. But their actions in the face of adversity are truly heroic.

We will never forget Doctor Tse Yuen-man. She volunteered to work in the Sars wards to save the lives of her patients but, unfortunately, she lost her own life after contracting this deadly disease. Dr Tse and all the medical staff who fought bravely against Sars are true heroes of Hong Kong. I hope we can remember the lessons learnt from all the challenges of these past 10 years. But we must never forget the sacrifices of those who lost their lives because of their selflessness and dedication. Their actions revealed the brightest side of humanity. We should all strive to sustain and uphold the ideals they pursued.

Our "unusual path", of course, has included the successful implementation of "one country, two systems". Two systems, two ways of life, two currencies, two sets of laws, and even two sets of values within one country. At first, many people were rather sceptical about this concept. But today, let's ask a few questions: Does Hong Kong enjoy a closer relationship with the mainland? Do we have a stronger sense of national identity? Do we still embrace our unique systems, way of life and core values? I believe our answers to all of these questions would be a resounding "yes".

We communicate and co-operate with the mainland every day for business, travel and cultural exchanges. Surveys have shown our sense of national identity is the strongest it has been. At the same time, we are strongly committed to protecting our core values and way of life. We firmly believe we must maintain all our unique characteristics if we are to sustain economic success, give our people better lives and contribute more to the nation's development. And, because this is the case, we can truly say that the implementation of "one country, two systems" has been a success. We can certainly strive to do even better; but we can also say that our achievements in implementing this unprecedented undertaking have been truly remarkable.

Reflecting on the past also prompts us to think about our future. The path we have taken over the past 10 years has been about exploration: an exploration of systems, attitudes, values and visions.

Children born in 1997 have grown up amidst our joys and sorrows. These children and I both have a part to play in shaping our next 10 years. I hope we do not simply see a repeat of the past decade. "Never settle for mediocrity, strive for excellence" is a mantra I hold for myself and my administration. I believe it is a philosophy that also strikes a chord with many Hong Kong people.

In my new term I will continue to work with everyone to build a more open government; to develop a constitutional system that is more democratic; to lift the economy to new heights; to improve our quality of life; and, to promote a caring and supportive culture in society. It is my wish for children born in 1997 to be even prouder of their city and home when they reach 20.

As small and inconspicuous as it is on a world map, Hong Kong is a city with a big heart. Our people are our lifeblood and our most valuable asset. Countless individuals have given their best to make Hong Kong the prosperous, vibrant, inclusive, open and highly civilized city it is today.

I am sure Hong Kong will become even more successful in the next 10 years, just because you - the people of Hong Kong - are here.

What's in a decade? Many foretold doom after the handover. Ten years on, the city looks back on a kaleidoscope of events no one could have predicted. by Chris Yeung

What a decade! Half a million people took to the streets on July 1, 2003. Sars turned Hong Kong into a city of masks, taking 299 lives. Over a million chickens were slaughtered in the government's desperate war against bird flu. The property market slumped. By mid-August 1998, the Hang Seng Index had plunged to 6,660; in the past week it has been nudging 22,000. Tung Chee-hwa stood down as chief executive. Enter his successor, Donald Tsang Yam-kuen, who was re-elected in March this year. Mickey and Minnie touched down at the Disneyland theme park on Lantau, the first on Chinese soil.

At Ocean Park in Aberdeen, two giant panda cubs, Le Le and Ying Ying, greeted Hong Kong citizens on the 10th anniversary of the city's return to Chinese rule. The People's Liberation Army, a symbol of sovereignty, was conspicuous by its absence from public view.

The past decade has provided a wealth of vivid images for the media to roll out in the lead-up to the 10th anniversary of the handover. To borrow a trendy phrase, Hong Kong society is immersed in a sea of collective memories, be they good or bad. Now we say goodbye to the first decade of post-colonial Hong Kong, peppered with dramatic events and loaded with mixed feelings. And we welcome the beginning of a new phase for the special administrative region, which is poised to be no less exciting and lively than the past 10 years.

Many Hongkongers bade farewell to British rule 10 years ago with doubts and apprehensions about the new order with its catchy name, "one country, two systems". Their feelings about what the next decade may bring could be just as profoundly mixed and complex.

Ask any ordinary citizen in the street a simple question: do you feel better or worse off, 10 years on? Chances are their replies will be anything but clear. Certainly, opinion polls show a consistent strengthening in people's feel-good sentiments towards Beijing and the nation's progress in areas including human rights and the rule of law.

On the face of it, the implementation of "one country, two systems" has been largely hailed as a success. After years of woes, Hong Kong's economy is back in the growth lane. The gross domestic product leapt by 6.8 per cent last year, and it should continue at a brisk 6 per cent annually from next year to 2011, forecasters say. Hong Kong remains a free, affluent and open society with the rule of law, as it was under British rule.

The reality, however, is far more complex. The warm breeze blowing across the mainland-Hong Kong landscape was ruffled by a cold draught last month - a reminder by state leader Wu Bangguo of the limits to the city's autonomy. "However much power the central government decides to assign to the SAR, this is what the SAR gets," he told a Basic Law symposium on June 6.

That stirred up some concerns. Did Mr Wu's not-so-gentle reminder mean Beijing would further tighten its grip over the city's affairs? Don't forget, after the mass protest rally of July 1, 2003, Beijing set aside the hands-off approach it adopted after the handover.

Mr Wu's comments came on the eve of a public consultation on universal suffrage this summer. They laid bare the underlying tensions, both within society and between Hong Kong and Beijing, over the development of democracy under "one country, two systems".

Ordinary people face bread-and-butter issues that they feel just as keenly, if not more so, than the right to elect their political leader and all lawmakers. These include economic and livelihood issues like unemployment and air pollution.

Recent years have brought a jarring succession of amber-light warnings about the city's long-term viability, from people who know what they're talking about. Time magazine says its sister publication Fortune got it wrong in 1995 when it predicted the city's demise after 1997. But recently Time referred to Hong Kong as "sunshine with clouds".

Some even see clouds hanging over the core issue of the city's long-term development. Lu Ping is a retired mainland official formerly in charge of Hong Kong affairs as director of the Hong Kong and Macau Affairs Office. Pointing at rapid economic development in the surrounding region, he recently said Hongkongers must be vigilant to avoid being marginalized.

"The problem of Hong Kong's economic transformation is structural," he said. "It won't be solved solely by Cepa [the Closer Economic Partnership Arrangement, a free-trade deal with Beijing] and the individual visitor scheme for mainland visitors."

Those measures were among Beijing's prescription to reinvigorate an ailing city economy, infected by the 1997 Asian financial meltdown and worsened in 2003 by the severe acute respiratory syndrome outbreak. The first Cepa, signed in June 2003, and subsequent agreements gave Hong Kong businesses and professionals easier access to the mainland market.

The tonics worked wonders. The individual travel scheme eased restrictions for mainlanders, bringing legions of visitors to a city where tourism had been devastated by Sars. It went further, transforming the tourism industry and even raising profound questions about the city's development. In 1997, 13 million people visited Hong Kong, 3 million of them from the mainland. By last year, the visitor count had doubled to 26 million, with half of those from the mainland.

Another reality was at play in this marked shift in tourism - the emergence of a well-off middle class on the mainland, spawned by its growing economy. Hongkongers grew increasingly receptive to the mainland influx as they saw the number of jobs it helped create, especially in low-skilled work.

If the regional financial shock left people uncertain about the economy's future direction, the qualms did not last too long. Government and society grew to accept that the economy would stand on the four pillars of financial services, logistics, tourism and trade.

Observers noted that the words "industry" and "technology" were dropped from the names of government bureaus in a major restructuring completed last month. That was yet another sign of a government self-correction, a shift in strategy towards a service-oriented economy with financial services as its core. Mr Tsang made it clear during his election campaign this year: the economy, he said, could create enough jobs and wealth to feed all 7 million residents if Hong Kong became Asia's key financial hub. But others, including former secretary for security Regina Ip Lau Suk-yee, are sceptical. Mrs Ip has become a strong advocate for innovation and technology to help diversify the city's economic structure. Among others, she has suggested greater collaboration with Shenzhen in promoting innovation and technology.

Shenzhen's rapid growth and its economic relationship with Hong Kong speak volumes about the seismic changes in the mainland economy, especially in the past 10 years, and their impact on Hong Kong. This city had been the major driving force of the Guangdong economy since the open-and-reform policy of the early 1980s, but the cross-border economic relationship has become increasingly complex. Co-operation and competition co-exist in an increasingly integrated economy in the nation. There are growing fears that Hong Kong's container ports might lose out in competition with Shenzhen's ports.

Mr Lu says the early completion of the Hong Kong-Zhuhai-Macau bridge project and greater co-operation with the western part of Guangdong will be crucial to Hong Kong's future development. The multibillion-dollar plan to build the bridge across the Pearl River Delta remains up in the air, with governments still locked in dispute over financing and other matters. Their differences, however, have not slowed the momentum of integration between the Delta cities.

The past two years have seen a marked change of strategy towards regional co-operation. The co-operation framework of the pan-Pearl River Delta has increased government-led business activities across the region. The renaming of the Constitutional Affairs Bureau to the Constitutional and Mainland Affairs Bureau, in the latest restructuring exercise, reflects this wind of change.

So closer economic integration is undeniably important: that view is shared by the government and some quarters in the community. But with awareness comes unease - what will Hong Kong's role be in the rapidly growing mainland economy? Former financial secretary Antony Leung Kam-chung is adamant that the city's future success lies in its ability to pool together capital and talented people.

If you look at the surveys and studies by prestigious institutions and think-tanks, Hong Kong is still well ahead in the economic race - notably, ahead of Shanghai. That city's development of futuristic skyscrapers, roads and other infrastructure has been breathtaking. Yet it still lags far behind Hong Kong in terms of "software infrastructure" - clean government, the rule of law, an independent judiciary, freedom of the press and flow of information.

But Hong Kong's competitive edge in such software is fraught with concerns. Its living environment is deteriorating; the standard of its education and quality of its manpower are in decline. That "must-see" attraction in every tourist guide, the view of Victoria Harbour from the Peak, is tarnished by haze mixed with air pollutants on most days of the year.

Mr Tsang might genuinely believe the problem of air pollution is more a question of perception than reality. He has tried to deny the problem by citing statistics showing Hongkongers live longer than the average citizen elsewhere. Not surprisingly, he has been roundly criticised for this. Government statistics speak louder than words: the number of hazy days with high pollution is growing steadily.

Hong Kong's chief weatherman, Observatory director Lam Chiu-ying, has warned that our winter might become a thing of the past within a century if nothing is done. "When I was young, there were 20 to 30 cold days," he said. "Now there are roughly half that; but by the end of the century there will be zero." While Hong Kong is not immune to global warming, half of its air-quality problems can be attributed to urbanisation, such as the proliferation of skyscrapers.

In the face of growing concerns locally and internationally, Mr Tsang has put better air quality high on the agenda for his second term. The government will seek a helping hand from Guangdong authorities in relocating polluting industries further away from Hong Kong. And it is contemplating radical measures such as electronic road pricing and cutting emissions from electricity utilities, to improve air quality before it is too late.

Hong Kong can claim to be one of the world's safest cities, with a low crime rate and highly efficient law enforcement agencies. The bird flu crisis and the Sars onslaught emerged to some extent as blessings in disguise: they awakened a belated sense of the importance of public and personal hygiene.

Arguably, Hong Kong has become a cleaner city. The loss of 299 lives during the months-long Sars epidemic changed attitudes towards life for a people known as money-minded and materialistic. People's appreciation grew for what they already had, for the beauty of sharing and caring, and the meaning of community spirit.

This changed mindset explains in part the surge in civic awareness and the sense of a Hong Kong identity, as manifested in opposition to harbour reclamation and the embrace of heritage conservation. Terms such as "sustainability", "green lifestyle" and "open space" became woven into the fabric of society's values. As mindsets continue to change, the government faces fresh challenges against its policies and practices on a wide range of issues, including harbour reclamation, height limits of buildings, heritage conservation, city planning and caring for the poor.

When it came to the vital sector of education, however, the Tung and Tsang administrations showed no lack of direction or commitment. It was one of the three livelihood issues - along with housing and elderly welfare - that Mr Tung identified as priority tasks even before he was sworn in.

But a series of big-bang education reforms unveiled since the handover have proven overly ambitious, ill-timed and poorly delivered. They created more foes than allies in the education sector and society at large; more problems than solutions for the embattled Tung administration. At one point tens of thousands took to the streets, prompting a belated government review of teachers' workloads and what went wrong when reforms were launched in classrooms.

The difficulties that befell Mr Tung's signature education reform highlighted the government's dilemma in trying to introduce much-needed changes in important areas. It faces a fragmented legislature, with no direct administration control over any lawmakers' votes. Ranked against it is an assertive and at times unpredictable media, and increasingly volatile public opinion. The result: major setbacks for the government over a proposed goods and services tax, national security legislation and the West Kowloon cultural hub project.

The old formula of effective government used by the colonial administration no longer works, observed former chief secretary Anson Chan Fang On-sang, who retired in 2001. "You cannot go back to the old system. You have to move with the times and change the system so that it can deliver strong, effective governance, transparent and accountable governance ... Until we have [universal suffrage] we are not going to have good, accountable governance."

Set aside for a moment the practical importance of good governance. The civic row over democracy has hampered the city's full-hearted return to the motherland, says an eminent pro-Beijing figure in Hong Kong politics, Tsang Yok-sing. The former chairman of a party that merged into the Democratic Alliance for the Betterment and Progress of Hong Kong, he wrote in Sing Tao Daily: "Up to now, what is the most important factor that hinders the return of the hearts of people towards the nation? The answer is: there's no universal suffrage. Some people will say it is politically incorrect for [this comment to] come from the 'pro-China camp'. But it is true and obvious."

To break the deadlock, he said, the confrontation between the pro-Beijing and pro-democratic camps must change. For that to occur, influential figures in Beijing would have to take the initiative.

Constitutionally and politically, there is no doubt that Mr Tsang plays a vital role in bridging the gulf between Beijing and Hong Kong over the democracy issue. He has pledged to come up with a "complete solution" to the decades-old question during his tenure. Signs abound, however, that the upcoming public debate on universal suffrage will cause more divisiveness and controversy, both in the city and between Hong Kong and the mainland. Its timing, too, could hinder consensus, coinciding with district and Legislative Council elections and the fractiousness of the campaign trail.

If people are doubtful or cynical about Mr Tsang's game plan, it is not so much that they doubt his resolve or political skills in brokering a deal. There are good reasons for him to do his utmost. If he succeeds, he would certainly go down in history as the man who accomplished an impossible mission.

The question mark, rather, is over Beijing's view of the city's political future: that's the decisive factor. Beijing is caught in a dilemma. It feels obliged to progress towards the final destination under the Basic Law - universal suffrage. At the same time, it is still paranoid about the political uncertainties and implications that might arise when Hongkongers are allowed to elect their own leader.

The dilemma boils down to this simple question: what if Beijing does not want to appoint the candidate elected by the majority of people through universal suffrage? If that happens, what political price would be paid by both Beijing and Hong Kong? Does the possibility of a political crisis exist only in theory, or in the real world?

Beijing's lack of trust in Hongkongers is compounded by the complex issue of identity. Most Hongkongers have identified themselves as Hong Kong Chinese first, instead of simply Chinese. That may not seem like a problem to most city residents, but in Beijing's view, this "identity issue" reflects their immaturity. Beijing cites this weak sense of national identity in the "minus" column when it rates Hongkongers' trustworthiness in electing their chief executive.

In an interview with Time magazine, Yan Xuetong of Tsinghua University lamented that Hong Kong's return to China "is just half achieved". He said: "Hong Kong is still regarded as a foreign part of China, still regarded as a foreign country. Hong Kong has returned in name, but not in substance."

Central Policy Unit head Lau Siu-kai said that while Hong Kong had physically returned to the motherland 10 years ago, "the hearts of Hong Kong people haven't. We have just begun to redress the balance between 'one country' and 'two systems',".

That view is not shared by John Chan Koon-chung, a writer and cultural critic who has lived in Beijing in recent years. He told a conference on the handover anniversary: "Why do we have to choose between being Hongkongers and Chinese? I don't see a conflict." Judging from opinion polls, his view is shared by the majority of the community.

Ordinary people can be pardoned for feeling perplexed by the identity debate. They feel Hong Kong has become more Chinese and less international since the handover. More people speak Putonghua in classrooms, shopping malls and workplaces. National anthems are broadcast regularly on local TV stations as part of a government-led campaign to promote national identity. The standard of English is on the decline. Hong Kong has largely vanished from the international radar screen.

But the government has launched a global campaign to promote the notion of Hong Kong as "Asia's World City". Central and Hong Kong government leaders are at pains to highlight the importance of the city's uniqueness and its role as an international financial hub for the nation.

A mainland expert on Hong Kong issues, who did not want to be named, said: "To be fair, just so many things happened in the first 10 years of the SAR. There were economic ups and downs, epidemics and the September 11 terrorist attacks. Politically you had the Basic Law interpretations, the resignations of Mr Tung and some ministers, Article 23 ... you name it.

"[The fact that] there are problems of this or that kind is the best illustration that 'one country, two systems' is a living policy ... the big test has just begun."

There has been one constant in the history of Hong Kong since the start of colonial rule in the 1840s - the tie between its fate and that of the mainland. That link strengthened with the handover. And so did the delicate task of striking a balance between "two systems" and "one country", made harder by the dramatic changes in the mainland's economy and society.

The issue of universal suffrage in Hong Kong is a case in point. Former Basic Law drafter and kung fu novelist Louis Cha Leung-yung put it plainly when he said: "It is not possible to have universal suffrage in Hong Kong when [mainland] China doesn't have it."
Universal suffrage aside, an air of unease and uncertainty over what the next 10 years may bring lingers in the back of Hongkongers' minds. There it rests against the tangled backdrop of celebrations and protests marking the 10th anniversary. In an interview with the Chinese-language Hong Kong Economic Times, Mr Tung said: "Today, 10 years later, Hong Kong is more important to China ... if we can continue to lead, to help China's development by making use of our advantages, that will be very good."

'Hong Kong now rises and falls with the mainland' Executive Councillor Anthony Cheung Bing-leung charts the evolution of 'one country', as the 'two systems' learn to abandon their mistrust by Anthony Cheung Bing-leung

When the concept of "one country, two systems" was first mooted in the early 1980s as the solution to Hong Kong's future, it was largely construed as a defensive framework, enabling Beijing to resume sovereignty over upsetting Hong Kong's status quo. The separation between the two systems - socialism and capitalism - was to be a real one, almost to the point of mutual exclusion. Back then, the mainland was viewed by most Hongkongers as a backwater in every sense of the word. Many had come here to find refuge from political and economic turmoil in the mainland. Ironically, the city managed to prosper precisely because the mainland had done poorly, being embroiled in incessant political campaigns and class struggles that drained it of its much-needed energy and harmony. The mainland, too, was wary that its socialism should not get eroded by fully absorbing an enclave that economist Milton Friedman once described as the last bastion of classical capitalism.

Separation seemed to serve the purposes of both sides. Hence the historical compromise: Beijing retained ultimate sovereign authority over the city but otherwise left its political, administrative, legal, judicial and economic systems untouched. That was on condition, of course, that Hong Kong should not pose a threat to the mainland. The underlying tone was: "You go your way and we'll go ours".

After the Tiananmen crackdown on democracy in 1989, mainland authorities suspected Hong Kong to be a base of subversion. They warned "the well water should not interfere with the river water". Tiananmen also reinforced some Hongkongers' resentment towards Beijing. So there seemed all the more need to play up Hong Kong as a self-sufficient economy and polity. Ten years after the handover, while mutual political suspicions remain high, the larger picture is a long way from that of the 1980s. Hong Kong's basic freedoms are as vibrant as before, at least according to public opinion polls. Public confidence in the central government and the PLA garrison has moved up steadily. However, people could easily be swayed towards pessimism by issues like the imprisonment of journalist Ching Cheong and national security legislation.

The past decade also saw the "rise of China". Now there is wide recognition of the mainland's economic strength and global influence. Business and professional sectors now wonder if Hong Kong has been left behind in this mainland boom, and become marginalised. The sense of boundary between the special administrative region and the mainland is being transformed, with the two sides more and more intermingled economically, socially and even culturally.

Increasing droves of students, professionals, businesspeople and visitors move across the boundary in both directions. Intermarriage is becoming common. The interflow of people, goods and information will only escalate. The pre-1997 sense of mutual defence no longer fits the reality, which calls for co-prosperity. Hong Kong now rises and falls with the mainland.

Despite economic integration and social interaction, however, political suspicion and scepticism remains on both sides. It is frequently unleashed in debates on constitutional reform and national identity. Until the larger question of political democratisation is settled, many Hongkongers will be inclined to see the SAR government as more an agent of Beijing. This is conducive neither to strengthening the political mandate nor forging a strong consensus to take Hong Kong to new heights.

Since the handover, Hong Kong Chinese have been torn too much by the question of patriotism. Some pro-mainland patriots see Hong Kong as void of national identity because of its 150 years of British colonial rule, and think it needs national re-education. They urge that Hong Kong learn to become patriotic first, before full democracy is introduced. The pro-democrats, on grounds of human and civil rights, wonder why patriotism should be a condition at all, and how it can be defined.

But things need not be split in this way. Many Hong Kong Chinese take pride in the mainland's achievements - its economic development, sports, the arts and cinema and so on - although some remain critical about its slow progress in political reform and freedom of speech. Loving one's country and being concerned and critical about its shortcomings are two sides of the same patriotic coin.

On the other hand, there is no reason why singing the national anthem, displaying the national flag or learning more about the mainland should be made a subject of political sensitivity or even ridicule.

Patriotic feelings are always complex. National identity would not be a problem if Hong Kong and the mainland engaged each other with an open and trusting mind, aware of their differences but seeking to strengthen affinities. We should search for a proactive interpretation of "one country, two systems" that sees Hong Kong's prospects not only in terms of respecting its past but also charting its course into a more challenging world.

Some key questions have to be addressed: What are Hong Kong's strengths in terms of core values and institutional competencies that make it work? For what purpose within the rising China do we keep our "Hongkongness"? How can Hong Kong, now as a constituent and supposedly also a dynamic part of China, contribute towards a growingly diverse national face?

"One country, two systems" should represent a framework of mutual support, opportunities and possibilities rather than constraints and stagnation. Both Hong Kong and the mainland should look beyond the narrow and defensive mentality that originally underpinned the two-system concept a quarter of a century ago. Hong Kong should not be content with being cast to the periphery of China, but should strive to be at the centre of things and a pioneer of the nation in her journey towards modernity.

As the mainland moves rapidly into the world, so is the world moving towards it. Between mainland China and the world stands Hong Kong, whose role lies in its connectedness with both. When becoming immersed in China does not amount to "mainlandisation", and maintaining strong links with the western world does not mean a deficit in national identity, then Hong Kong will have found its confidence.

I have a dream. One day outsiders will see China's face through Hong Kong just as much as through other mainland cities like Beijing, Shanghai, Guangzhou and Tianjin. "One country, two systems" will be turned around so that the two organic parts together make one nation.

Anthony Cheung Bing-leung is an executive councillor and founder of SynergyNet, a policy think-tank

July 2,  2007

Great concept, successful practice

People Daily Overseas Edition issues an editorial on Monday, or July 2, to greet the tenth anniversary of Hong Kong's return to China, entitled "Great Concept, Successful Practice", and its detailed extracts are as follows:

On July 1 a full decade ago, China resumed its exercise of sovereignty over Hong Kong, which had returned to the motherland after undergoing a century of vicissitudes, and the Hong Kong Special Administrative Region (HKSAR) of the People's Republic of China was formerly established. This represented a great victory in the annals of the Chinese nation.

In the early 1980s, late senior leader Deng Xiaoping, with the wisdom and boldness of a great statesman, set forth the great concept of "One Country, Two Systems" and opened up a feasible path for resolving the Hong Kong issue left over by history by means of peaceful negotiations. The third-generation collective leadership with Jiang Zemin at the core appropriately handled various challenges and complicated problems it had encountered around Hong Kong's return to the motherland, ensuring the smooth transition of Hong Kong and effecting its smooth transfer, and contributed historically in implementing the great concept. And the Party Central Committee with Hu Jintao as the general secretary, is pragmatic and takes up specific matters, goes on innovation and pioneering, and further enriches both the theory and practice of the "One Country, Two Systems" concept.

In the past 10 years, the central government has unswervingly carried out the "One country, Two Systems" concept, "Hong Kong people administering Hong Kong"and "having a high degree of autonomy", done things in strict compliance with the Basic Law of the SAR., and given an all-out support to the HKAR chief executive and government in their governance according to law. Meanwhile, the HKSAR government has led people from all walks of life in working hard and constantly strove even in adversity, tiding over difficulties and challenged wrought by the Asian Financial Crisis of 1997, unfavorable changes inflicted from the outer economic environment and the outbreak of severe acute respiratory syndrome (SARS) occurred in Spring 2003, and maintained prosperity and stability. In Hong Kong today, its economy grows, people's life continues to improve, and society, full of vigor and vitality, has shown a sound momentum for active development.

Practice has eloquently proven that the "One Country, Two Systems" concept is workable. After its return to Chinese sovereignty, Hong Kong is under China's unified sovereignty, and its people administer Hong Kong with a "higher degree of autonomy" in line with the Basic Law of the HKSAR. Hong Kong's socio-economic system has not changed and laws remain basically the same. Hong Kong has continued to be a free port and its status as an international center of banking, trade and shipping has remained unchanged and the city has been cited as one of the most open economic entities and most viable regions globally.

In a short span of a decade, numerous global conferences have been convened in Hong Kong, including a World Bank annual conference; the Fortune Global Forum 2001 held in Hong Kong which not only put it in spotlight but also put in a huge fortune in ticket revenue; the Six Ministerial Meeting of the World Trade Organization (WTO) held in 2005; ITU (the International Telecommunication Union) Telecom World 2006, the unofficial Olympics of the telecommunications industry, officially opened in Hong Kong Asia world Expo, etc. The series of these major international activities have fully indicated the recognition and confidence of the global community in the development and progress Hong Kong had scored after its return.

In the wake of its return, Hong Kong has increasingly kept in close touch with the interior area. On the one hand, it serves as a bridge between the interior and the global market and a window for import of capital, technology and managerial experience. On the other hand, it has attained still more opportunities for development and an untiring motive force drawn from the fast development of the interior area. Since it inception a decade ago, HKSAR has forged cooperative mechanism with neighboring Guangdong province, Shanghai and Beijing and Pan-Pearl River Delta Region, and its exchanges and cooperation with China's interior area have kept deepening and strengthening.

The Chinese mainland and Hong Kong Close Economic Partnership Arrangement (commonly known as CEPA) whick was reached on June 30, 2003, signified a brand new era for economic and trade cooperation between the interior area and Hong Kong, whose trade had grown from 1.1 trillion HK dollars in 1997 to 2.3 trillion HK dollars last year. Hong Kong compatriots and people in the interior areas have become more and more aware that Hong Kong and the interior can mutually complementary, take on each other's advantages and make common development under the "One Country, Two Systems" concept.

Setting itself against a backdrop of the great motherland and facing up the outside world, Hong Kong should seize opportunities, surge outwardly and charge valiantly ahead as it has unique regional advantages with special endowments from the nature and available rare opportunities for still greater successes. At present, seeking development, stability and harmony has become the common aspiration of the central government and the entire Chinese people as well as the common interests of the masses of Hong Kongers. People from all walks of life in Hong Kong society should get united around the banner of loving the motherland and loving Hong Kong, seek the common ground while reserving differences, and make concerted efforts to overcome difficulties. So Hong Kong is sure to have a splendid tomorrow by tapping the wisdom of all social strata and gathering the strength of the whole society.

July 1,  2007

(File Photo) Hu hails Hong Kong as 'window and bridge'

Editor's note: President Hu Jintao made a speech yesterday at the meeting marking the 10th anniversary of Hong Kong's return to the motherland and the inaugural ceremony of the third government of the Hong Kong Special Administrative Region. The following is the full text:

Fellow Compatriots,

Dear Friends,

Ten years ago today, at the handover ceremony of Hong Kong held by the Chinese and British governments, the Chinese government solemnly announced its resumption of the exercise of sovereignty over Hong Kong and the establishment of the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong SAR). Hong Kong's return to the motherland fulfilled the century-old wish of the Chinese people of all ethnic groups, including the people in Hong Kong. It will go down as a great event in the annals of Chinese history.

Today, after 10 years, we are meeting here to warmly celebrate the 10th anniversary of Hong Kong's return to the motherland. First of all, I would like to extend, on behalf of the central government and people of all ethnic groups across the country, cordial greetings to all the people in Hong Kong. I also would like to offer our warm congratulations to Mr Donald Tsang, the third Chief Executive of the Hong Kong SAR, his team and members of the Executive Council who have just been sworn in. I am confident that the Hong Kong SAR government will draw upon the experience of the previous governments, build on their success and lead the Hong Kong people in a concerted effort to turn Hong Kong into an even more prosperous city.

As I speak to you, I cannot but recall the historical process of Hong Kong's return to the motherland. Mr Deng Xiaoping creatively put forward the scientific concept of "one country, two systems" and personally oversaw China's negotiation with Britain on Hong Kong and the drafting of the Basic Law of the Hong Kong SAR, thus breaking a new ground in striving for China's peaceful reunification. Our thoughts are with him today. Let us also express our great admiration to Mr Jiang Zemin who made historical contribution to the smooth handover and transition of Hong Kong and the successful implementation of the "one country, two systems" concept.

I also want to take this opportunity to sincerely thank all the fellow Chinese, both at home and abroad, and foreign friends who care about Hong Kong and have contributed to its return and its continued prosperity and stability.

The past 10 years since Hong Kong's return have been a decade of both challenges and remarkable progress.

During this decade, the central government has earnestly followed the principles of "one country, two systems," "Hong Kong people administering Hong Kong" and a high degree of autonomy. It has, acting in full compliance with the Basic Law of the Hong Kong SAR, endeavored to ensure prosperity and stability of Hong Kong. Hong Kong has maintained its capitalist system and way of life and fully exercised executive, legislative and independent judicial power, including the power of final adjudication as mandated by the Basic Law. The people of Hong Kong have enjoyed extensive democratic rights and freedoms. The principles of "Hong Kong people administering Hong Kong" and a high degree of autonomy have been turned into a living reality.

During the past decade, the two chief executives, Mr Tung Chee-hwa and Mr Donald Tsang, with the full support of the central government and the mainland, led the Hong Kong SAR government and people in meeting such grave challenges as the Asian financial crisis and SARS. They upheld the overall stability of Hong Kong, revitalized Hong Kong's economy, and Hong Kong has made great progress in all fields of endeavors.

During the past decade, Hong Kong's exchanges and cooperation and particularly its business ties with the mainland have grown increasingly closer. With stronger support from the mainland, Hong Kong serves as an important window and bridge for China's economic, scientific, technological and cultural exchanges with the rest of the world. Through their dedicated efforts, the people in Hong Kong have both promoted the development of Hong Kong and contributed their share to China's modernization drive.

During the past decade, Hong Kong has steadily expanded its relations with other parts of the world. It has maintained and developed economic and cultural ties with countries and regions as well as some international organizations. It has remained a free port and an international financial, trade and shipping center. It has been consistently rated as the most open and free economy and one of the most dynamic regions with the best business environment in the world. Hong Kong, an international metropolis, is thriving as never before.

Today's Hong Kong enjoys stability and has a dynamic economy, and its democracy is growing in an orderly way. The Hong Kong people enjoy their lives and everywhere in the city one sees a scene of prosperity. Hong Kong's success has indisputably demonstrated that "one country, two systems" is the right policy for Hong Kong. It shows that the Hong Kong people are fully capable of managing Hong Kong well and sustaining its growth. It shows that Hong Kong can always count on the great motherland to ensure its prosperity and stability.

Fellow Compatriots,

Dear Friends,

Ten years is just a very brief moment in the long course of human history. But for the cause of "one country, two systems" we are advancing, the past decade has been ground-breaking in significance. Over the 10 years, we have obtained much valuable experience in this great endeavor, which may be summarized into the following four major points:

First, it is important to fully and faithfully appreciate and implement the policy of "one country, two systems". Basically, the policy of "one country, two systems" means that in the People's Republic of China, the State practices the socialist system. A special administrative region directly under the entral government is set up in Hong Kong upon its return. Hong Kong maintains its capitalist system and exercises a high degree of autonomy pursuant to the Basic Law. We should fully and faithfully implement this policy under all circumstances. "One country, two systems" is an integral concept. "One country" is the prerequisite of "two systems". Without "one country", there will be no "two systems". "One country" and "two systems" cannot be separated from each other. Still less should they be set against each other. "One country" means that we must uphold the power vested with the central government and China's sovereignty, unity and security. "Two systems" means that we should ensure the high degree of autonomy of the Hong Kong SAR and support the chief executive and the SAR government in exercising government power as mandated by law. Only when these two points are fully observed, can the strength of the "one country, two systems" policy be brought into play to the real benefit of the Hong Kong people.

Second, it is important to strictly comply with the Basic Law. The Basic Law of the Hong Kong SAR is the legal guarantee of Hong Kong's long-term prosperity and stability and the legal basis for administering Hong Kong pursuant to law. The supreme status of the Basic Law in Hong Kong's legal system must be upheld and the Basic Law must be strictly abided by. The executive, legislative and judicial branches and social organizations in the Hong Kong SAR, the central government, the government departments and organizations at all levels and in all areas on the mainland, and the Hong Kong residents and people on the mainland must all observe the Basic Law. The provisions of the Basic Law on Hong Kong's political system are in keeping with the particular conditions in Hong Kong and consistent with the legal status of the Hong Kong SAR. By observing the relevant provisions of the Basic Law, we can surely promote the gradual and orderly development of Hong Kong's political system.

Third, it is important to give high priority to promoting economic development and improving people's well-being. To grow economy and improve people's life is the most important task for Hong Kong and the common desire of the Hong Kong people. Only with continued economic development can Hong Kong improve the life for its people, maintain stability and develop a democratic system that suits its actual conditions. With the backing of the mainland which is experiencing fast growth, Hong Kong enjoys unique opportunities and favorable conditions. As long as the SAR government and the Hong Kong people work in partnership, give full play their strengths, enhance economic cooperation with the mainland, and adapt to accelerated economic globalization and the global industrial relocation, they can certainly ensure Hong Kong's sustained and steady economic growth and improve their well-being. The central government will earnestly implement policies and adopt new ones that facilitate Hong Kong's economic development. We will endeavor to expand areas and improve mechanisms of our cooperation with Hong Kong, upgrade it and make it more effective.

Fourth, it is important to uphold social harmony and stability. Social harmony and stability are essential for maintaining a sound business environment, growing economy and improving people's life in Hong Kong. They serve the interests of the Hong Kong people. People from different social groups and sectors in Hong Kong have different interests and priorities. But the vast majority of the Hong Kong people love the motherland and Hong Kong. They share the same fundamental interests on this critical issue. The Hong Kong people from all walks of life should close ranks and make every effort to advance their well-being and China's interests, and they should resolutely oppose any attempt to undermine these interests. It is important that the Hong Kong people adhere to the social consensus of upholding public interests, unity and inclusiveness, put the overall and long-term interests of Hong Kong and China's national interest above everything else, and expand common ground while shelving differences through cool-headed dialogue. As you do this, there will be no problem or differences that cannot be settled, and you can promote economic and social development in Hong Kong and share its benefits.

Fellow Compatriots,

Dear Friends,

The concept of "one country, two systems" is a unique contribution made by the Chinese nation to mankind's political development. It is an endeavor to promote common prosperity of both the mainland and Hong Kong and an important part of the great cause to rejuvenate the Chinese nation. To advance this great cause requires the joint efforts of the central government, the Hong Kong SAR government and all the Hong Kong people. Here, I wish to reiterate that the central government will remain committed to the principles of "one country, two systems", "Hong Kong people administering Hong Kong" and a high degree of autonomy and act in strict accordance with the Basic Law. It will firmly support the chief executive and the Hong Kong SAR government in exercising government power as mandated by law. It will fully support Hong Kong in promoting economic development, improving well-being of the people and developing democracy. It will vigorously promote exchanges and cooperation between the mainland and Hong Kong in economic, education, science and technology, cultural, public health, sports and other fields, and actively support Hong Kong SAR in conducting external exchanges.

In short, all the central government policies concerning Hong Kong are designed to promote the interests of Hong Kong and its people and create a better future for Hong Kong and its people.

Fellow Compatriots,

Dear Friends,

The people of all ethnic groups across China care deeply about Hong Kong, and the Hong Kong people also care deeply about the motherland. Under the guidance of Deng Xiaoping Theory and the important thought of Three Represents, people of all ethnic groups on the mainland are putting into practice the scientific thinking on development and vigorously promoting economic, political, cultural and social development. They are working in unison to build a moderately prosperous society in all aspects and accelerate the drive of socialist modernization. Thanks to years of efforts, we have made remarkable achievements in China's development. The Chinese people have never enjoyed better life as they do today, and they have never been in such high spirit as they are today. China's international standing has been significantly raised. The fast development of our great motherland is made possible by the hard work of people of all ethnic groups in China including the Hong Kong people. It is a source of pride for all the Chinese people.

Both the mainland and Hong Kong are now at a new historical starting line in their development endeavor. We face both rare opportunities of development and grave challenges. Let's jointly seize opportunities and meet challenges and strive to make new progress in common development. We are fully convinced that working closely with the people of the motherland, the Hong Kong people can surely create another success story in Hong Kong's development and make new contribution to the rejuvenation of the great Chinese nation!

Thank you!

June 30,  2007

New China and Hong Kong economic agreement signed

The Chinese central government and the government of the Hong Kong Special Administrative Region (HKSAR) signed in Hong Kong Friday Supplement IV to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), aiming to further open the mainland market to Hong Kong.

The agreement was signed by Henry Tang, secretary of Finance of HKSAR government, and Vice Minister of Commerce Liao Xiaoqi, witnessed by HKSAR Chief Executive Donald Tsang and Minister of Commerce Bo Xilai.

Welcoming the agreement, Tang said that it will provide further and broader opportunities for Hong Kong business and reinforce Hong Kong's comparative advantages in better tapping the potential of the mainland market.

Under Supplement IV to the CEPA, the mainland will open 11 new service areas to Hong Kong, including sports, environment and public utilities. The mainland has already opened 27 areas to Hong Kong, and the agreement promised further access to these areas such as banking, securities, tourism and insurance.

In banking, the minimum total asset requirement for a Hong Kong bank acquiring a shareholding in a mainland bank will be lowered from 10 billion U.S. dollars to 6 billion U.S. dollars.

Both sides will enhance cooperation in establishing green lanes for Hong Kong banks to set up branches in mainland, and encouraging mainland banks to set up subsidiary operations in Hong Kong.

In tourism, the minimum annual business turnover required of a Hong Kong travel enterprise setting up joint venture and wholly owned enterprises on the mainland will be reduced to 8 million U.S. dollars and 15 million U.S. dollars, respectively.

Hong Kong travel agencies in Hunan, Hainan, Fujian, Jiangxi, Yunnan, Guizhou and Sichuan provinces and Guangxi Zhuang Autonomous Region will be allowed to apply for the operation of group tours to Hong Kong and Macao for the permanent residents in these provinces and autonomous region, an extension of similar arrangement already in place in Guangdong on a pilot basis.

In relation to conventions and exhibitions, Hong Kong services suppliers will be allowed to organize exhibitions in Guangdong and Shanghai through cross-border supply on a pilot basis.

In addition, Hong Kong enterprises established in Guangdong and Shanghai will be allowed to organize overseas exhibitions for mainland enterprises in these areas. The mainland will also support Hong Kong in attracting and organizing large scale international conventions and exhibitions.

The required capital investment required of Hong Kong services suppliers for setting up equity or contractual joint-venture medical institutions on the mainland will be lowered from 20 million yuan (about 2.6 million U.S. dollars) to 10 million yuan ( 1.3 million dollars).

All the service liberalization measures will come into force on Jan. 1, 2008. The mainland will work out and promulgate the necessary implementation rules and regulations as appropriate.

CEPA was signed in 2003. Under CEPA, the mainland has agreed to give all products of Hong Kong origin tariff free treatment if they meet the CEPA rules of origin. On trade in services, the mainland has already allowed preferential treatment to Hong Kong services suppliers in 27 services.

Latest figures from the HKSAR government indicated that between 2004 and 2006, CEPA generated 36,000 new jobs for Hong Kong residents and induced 5.1 billion HK dollars additional capital investment in Hong Kong.

CEPA also created 16,000 new jobs for mainlanders and attracted 9.2 billion HK dollars additional capital investment by Hong Kong companies on the mainland.

"The implementation outcomes indicate that CEPA is a mutually beneficial arrangement, allowing Hong Kong to explore the vast mainland market while assisting the mainland in integrating with the world economy," said Henry Tang, the secretary of Finance.

June 27,  2007

Horse still to race on and even more joyously!

What has been the genuine effect in a decade after Hong Kong's return to Chinese sovereignty? This question has arrested not only the attention of people across China, but given rise to a flurry of discussion around the world.

Hong Kong will soon mark the tenth anniversary of its return to China. The Times magazine of the United States has carried a cover story on Hong Kong to the denial of a pessimistic and incorrect prediction of sister publication Forbes a decade ago that Hong Kong would gradually die after its return. The Times story cites Hong Kong as more vigorous today than anytime in history. Meanwhile, the New York Time noted in an article that the vestiges of British rule in Hong Kong will vanish and yet no one feels it sorrowful. Even the last Hong Kong Governor Chris Patten, who also served as Chancellor of Oxford University and the former EU Commissioner for foreign affairs, said recently: "Overall, Hong Kong remains a very special place 10 years after its proper and inevitable return to Chinese sovereignty."

Such optimistic, affirmative appraisals have strong evidences to back up. The "fine and sturdy steed" of Hong Kong still races on and even more joyously. To date, it has acceded to the 190-plus international organizations in the name of "Hong Kong, China" and 134 countries and regions have granted it an entry visa exemption treatment. The number of aliens having immigrated to Hong Kong rose by a 60-fold in the past decade. Hong Kong's economy has revived with its best performance recorded over the past two decades, and its potential competitive edge ranks the first among the top 50 global economic entities, acknowledged a report from Japan.

"Chinese sovereignty" and "Hong Kong way of life" best epitomizes what it looks like after a decade following it return to China most succinctly. Louis Cha, a Chinese scholar and an ace roving knight tales writer, depicts the present situation with a popular simile that Hong Kongers today are still under the thumbs of their wives instead of their regional government. A couple of media moguls, who are known for their free speech on their own, note they now enjoy much more rights to the job of editing over the past 20 years. Hong Kongers' demand for a unique social system, the way of life and core values has been retained and carried on without any "alterations".

Many local residents were not sure whether or not to immigrate elsewhere overseas as they had felt that they dwelled on a tract of "borrowed"or leased land prior to Hong Kong's return to the motherland and, after the return, they have turned more and more resolved to take root in the city.

The outcome of varied polls or social surveys conducted recently show that Hong Kong people have greatly increasing the recognition of their homeland and a growing number of locals turn to the interior region as their reliable rear area.

With regard of a few crises in Hong Kong over recent years, the central government has exerted its utmost to help tide over their and resolve the related thorny problems there in cases of the Asian financial storms of 1997-98, the fight against SARS of 2003, forging CEPA and opening the "free accesses to travel' in early and mid of the first decade at the turn of the new century. Mr. Li Ka Shing, a wise Hong Kong businessman, was fair and square when he said Hong Kong did not need to cover any national revenue. On the contrary, central authorities has always taken to heart the interest of Hong Kong, so local people should valuate the priceless support of the motherland.

Hong Kong's road ahead, nevertheless, is full of both opportunities and challenges. How to shape and enhance its competition edge, how to resolve the widening income gap, how to dissolve social bias and discrimination, and how to spur and carry forward democracy orderly and steadily? ¨C All these questions call for great wisdom and talents for the solution. Fortunately, People in Hong Kong know clearly what they need most and their society is more mature. Hong Kong has the type of people with the best intelligence and a most ideal pioneering spirit. Chief Executive Donald Tsang Yam-kuen has spurred himself on not to be reconciled to mediocre but to pursue things preeminent. In the incoming decade, Hong Kongers, with an utter devotion coupled with an all-out effort, will not have to simply repeat what they had accomplished over the past 10 years, and so the "superb Hong Kong spirit" is sure to re-emerge and demonstrate to the entire world vividly and distinctly.

June 26,  2007

Hong Kong the best business partner for Vietnam enterprises

Hong Kong is Vietnam's best partner for capturing business opportunities arising from the country's recent accession to the World Trade Organization, Mr Peter Woo, chairman of the Hong Kong Trade Development Council, told more than 200 business executives in Ho Chi Minh City today.

Mr. Woo, who is leading a 17-member Hong Kong business delegation to Vietnam, said that Hong Kong is an ideal conduit for Vietnamese businesses. Through Hong Kong, they can get all the services support and contacts they need to connect with world markets.

The TDC delegation visited Hanoi, the Vietnamese capital, on Monday and Tuesday before going on to Ho Chi Minh City. In Hanoi, the delegation met with the Vietnamese Prime Minister, Mr. Nguyen Tan Dung, who welcomed Hong Kong businesses to invest in Vietnam. Mr. Nguyen said that overseas investment was an integral component of Vietnam's economic development. He added that his government would provide favorable conditions to help Hong Kong investors do more business in the country, particularly in the financial, banking, insurance, securities, shipping and manufacturing sectors.

The Prime Minister also agreed that Hong Kong has the infrastructure, as well as the international experience and contacts, to serve as a useful platform for Vietnamese companies looking to connect with world markets.

Earlier, the delegation was briefed by Minister of Trade Mr Truong Dinh Tuyen and Vice-minister of Planning and Investment Mr Nguyen Bich Dat on the latest developments in Vietnam, including laws recently introduced to create a more effective business environment in the country.

June 25,  2007

Stars celebrate Hong Kong 10th Anniversary

Kelly Chan (L) and Leon Lai (R) pose on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

Chinese superstar Zhang Ziyi poses on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

Chinese superstar Gigi Leung poses on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

Actress Fanny Shu poses on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

Actress Zhou Xun poses on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

Actress Dong Jie poses on the red carpet at a film industry gala event that was celebrating the 10th anniversary of Hong Kong's return to the Chinese mainland in Beijing, on Monday, June 25, 2007.

June 24,  2007

(Front row L-R) Secretary for Security Ambrose Lee, Secretary for Commerce and Economic Development Frederick Ma, Secretary for Justice Wong Yan Lung, Chief Secretary for Administration Henry Tang, Hong Kong Chief Executive Donald Tsang, Financial Secretary John Tsang, Secretary for Education Michael Suen, Secretary for Constitutional and Mainland Affairs Stephen Lam and Secretary for Food and Health York Chow, (back row L-R) Director of the Chief Executive's Office Norman Chan, Secretary for the Environment Edward Yau, Secretary for Financial Services and the Treasury K C Chan, Secretary for Labour and Welfare Matthew Cheung, Secretary for the Civil Service Denise Yue, Secretary for Home Affairs Tsang Tak-sing, Secretary for Development Carrie Lam, Secretary for Transport and Housing Eva Cheng and Head of the Central Policy Unit Lau Siu-kai attend a news conference to announce the new team of principal officials appointed in Hong Kong June 23, 2007.

Hong Kong's largest painting was unveiled yesterday to mark the 10th anniversary of the handover. Measuring 7.1 metres by 2.8 metres, Halcyon Days Pearl is seen as a sister work to Festive Day, another epic oil painting that fetched HK$23 million in 1997 - then a record for contemporary Chinese art. The painting features state leaders and Hong Kong's movers and shakers. It was painted by renowned artist Liu Yuyi and his daughter, Liu Haomei. At the heart of the painting is President Hu Jintao , who is handing a huge pearl to Chief Executive Donald Tsang Yam-kuen as other state leaders and top Hong Kong officials look on. "Festive Day was more solemnly themed when people still held doubts about Hong Kong's future," said Liu. "Now Pearl has harmony and happiness in the air." He said he included people of different political views. Near the edge of the painting stand such figures as Cardinal Joseph Zen Ze-kiun, former chief secretary Anson Chan Fang On-sang and Civic Party legislator Alan Leong Kah-kit. Tycoons Li Ka-shing and Stanley Ho Hung-sun were among the closest to the state leaders in the canvas. Some key members of the Democratic Alliance for the Betterment and Progress of Hong Kong and the Liberal Party were also close to the action. Liu, who has lived in Hong Kong since 1991, said he had not yet decided whether to auction the painting, although some interested buyers had contacted him in recent days. "I may just give it to the state," he said. "And I don't rule out the possibility of giving it to the Hong Kong government." In the background of the painting are Hong Kong's landmark skyscrapers and tourist attractions. Mount Everest sits in the deeper background to symbolise the support of the mainland.

June 21,  2007

Hong Kong - 10 Year Anniversary of the Handover, Klaus Koehler, Managing Director, Klako Group

One of the biggest events for 2007 is Hong Kong's 10 year anniversary of the handover from British governance to Chinese rule and reviews published over the last decade show us that Hong Kong's position not only in China but in Asia as a whole, is still very strong, particularly in its role as an international financial hub. In the early years of the handover, many people, more so the foreigners not living in Hong Kong than the locals, predicted that Hong Kong would loose its position and importance on the global market.

Indeed Hong Kong, as well as the rest of Asia, did not have a smooth ride during this period, with SARS, the Asian financial crisis and the growth of the economy, but Hong Kong's status in Asia and internationally has proven itself to still be very high, if not even stronger than before the handover.

It has taken the ten years, for Hong Kong to find itself and its role in the "one country, two system" principle, particularly in the international business world with the opening of China's market. Its strong economic cooperation with China is developing Hong Kong's position as "the most open, free and international" city in China.

Hong Kong's position now

Hong Kong is one of the most important key locations for trade, finance and regional headquarters in Asia - and yet again was named as the world's freest economy by the US based 'Heritage Foundation'. The economy is built on free enterprises, free trade and a free market which is open to all. There are no trade barriers, quotas and no foreign exchange controls. Hong Kong has a low tax environment; it is politically stable and provides security, as well as a free flow of information and communications.

The Global Financial Centers Index (GFCI) the world's first index of financial centre competitiveness published that Hong Kong is the third financial hub in the world, after London and New York. The report ranked the cities according to human resources, business environment, market access, infrastructure and competitiveness.

Hong Kong's taxes are among the lowest in the world. A simple tax system with a corporate profit tax of 17.5% and a personal income tax attracts many foreign investors. There is no value added or sales tax, withholding tax on interest or dividends and no capital gains tax. In March 2007, 1.35 Million citizens even received a reduction of up to 50% of their income tax.

Hong Kong has a very service oriented economy. Nearly 90% of the GDP is derived from services, and 80% of jobs are in the service sector. This is why many foreign investors choose Hong Kong as their regional centre, with approximately 3800 regional headquarters and regional offices. Hong Kong is the second largest recipient of Foreign Direct Investment (FDI) after China in Asia.

Hong Kong versus Shanghai

The comparison between Hong Kong and Shanghai as financial centers has been going on since the plans for the handover started. In contrast to 10 years ago, many Chinese government officials now pledge the support for Hong Kong as an international financing hub, whereas Shanghai is "being seen as the centre for the Mainland".

This has not always been the case, but it currently seems that it has been recognized by the Mainland officials that it is not easy for any mainland city to compete with Hong Kong as an international centre. As per InvestHK, 68 of the world's top 100 banks operate in Hong Kong, as well as 310 banking institutions, over 180 insurers, around 700 security dealers and about 1900 unit trusts and mutual funds. From these statistics one can gather, therefore that Hong Kong's position seems to be protected.

It also appears that the comments from officials now emphasize that the main purpose of Hong Kong's stock market is to attract international finances in order for Chinese companies to receive funds from global investors. The purpose of Shanghai's market is to assist companies from the mainland to raise money from local Chinese investors. This contradicts that Shanghai is a competition to Hong Kong.

Last year more than 40 companies listed in both Hong Kong and in either Shanghai or Shenzhen stock exchanges. It has been also recognized, that Hong Kong as a mature financial market is much more attractive to the global investors. This is one reason why in public statements, Hong Kong is now seen as an international financial centre, and Shanghai and Shenzhen as domestic financial centers. In general, the cooperation between Hong Kong and Shanghai is considered from the Chinese government as successful.

Financial Platform

With the widening of the investment scope for the mainland's qualified domestic institutional investors (QDIIs), it is widely expected to boost Hong Kong's equity market as long as the mainland regulator continues to widen the quota of investment. It is forecasted that half the amount of the granted quotas will be used by the end of the year.

On May 11th 2007, the China Banking Regulatory Commission (CBRC) announced that it is extending the spectrum of QDII products to overseas stocks. This will allow Chinese Banks to invest up to 50 percent of its overseas investment into stocks. However, banks can neither put more than 5 percent of a wealth management product into a single stock, nor use their own money in such investments. The news sparked Hong Kong's Hang Seng Index to soar initially 511 points to 20,979, while the daily turnover hit an all-time high of HK$95 billion. But the rally ran out of steam and the index fell 111 points the next day.

Many investors believe that China stocks listed in both A share and H share markets will be favoured by mainland investors. A shares are shares issued by China registered companies listed either in Shanghai or Shenzhen, and are denominated in RMB and only allowed to be traded by Chinese Citizens or foreign investors with the applicable QFII status. H shares are shares of mainland companies listed on the Hong Kong stock exchange, in HK Dollar and freely traded.

Logistic

Even though sea routes and airports in China are expanding, as well as the improvement of the necessary road and rail infrastructure, a large number of the Import and Export of goods bought in or sold to China, are transported and distributed through Hong Kong.

Hong Kong is remaining one of the most important entrepots and trading partners for China.

Customer demand is also driving two of the largest logistic companies DHL and FedEx to further multi million dollar investments for expansion. As per Mr Price, the Chief Executive Officer of DHL Express, a further USD $35 Million will be invested in a new facility in South Kowloon, increasing their handling capacity by 20%.  Furthermore 2006 was the fifth consecutive year of a double digit growth for DHL Express Hong Kong. The expansion raises DHL's total investment in Hong Kong to USD $645 million, which includes the USD $210 million for the Central Asia SuperHub and the USD $400 Million investment into the joint venture with Cathay Pacific Air Hong Kong. FedEx will add thirty percent more capacity by relocating the Express Distribution Centre to the container port in Kwai Chung. This will also give them the opportunity to expand in the future. FedEx's largest station is at Yuen Long, near the Chinese Mainland border.

Surveys indicate that standards and the delivery of service are still more efficient in Hong Kong, even though China is catching up.

Retail and Tourism in Hong Kong

The numbers of visitors to Hong Kong continues to positively affect not only the hotel and tourism sectors but also the retail industry in Hong Kong. In 2006, the number of visitors reached 25 million, up from 23.4 million in 2005. All major luxury brands are present in Hong Kong and due to the import duties and VAT, luxury goods are usually 20-30% more expensive in China than in Hong Kong, where VAT is not added. Therefore shopping trips to Hong Kong are very popular, not only amongst foreigners, but also mainland Chinese. The booming tourism industry benefits from the shopping trips and the flagship stores of international luxury brands, as well as large lower cost retailers, who continue to get bigger and even more extravagant in Hong Kong. Latest examples are the H&M flagship store, the new shopping centre SkyPlaza, near the Hong Kong International Airport and the upcoming opening of a mega store of DIY retailer B&Q.

Hong Kong Property Market

Due to one of the major property slumps ever to occur in Hong Kong in the 1990s, Hong Kong's craze for property investment has slowed over the past decade, leaving a 1990s-style speculative boom unlikely despite efforts by powerful developers to start one. However since the handover the city has emerged as the main driving force for investment into mainland China's thriving property industry, with funds, developers and individuals investing cash northwards.

China attracted HKD $9 billion in cross-border investment in 2006, up 69 percent from a year earlier, while Hong Kong drew HKD $6.9 billion, down 33 percent, according to Jones Lang LaSalle Property Consultants.

Due to the major downward events occurring in the last decade, property prices slumped 70 percent in the six years from the handover to mid-2003. Hong Kong's commercial property market has thrived thanks to an economic rebound based on its role as a financial services hub for China, and an influx of mainland Chinese tourists. Also partly thanks to a shortfall in supply, rents at top grade offices have doubled and capital values have tripled since 2003, while retail rents have jumped by half. But in contrast to Singapore and Japan, Hong Kong's real estate investment trust (REIT) market has slowed, with investors believing landlords were tricking them into paying too high a price for second-grade buildings. But the Hong Kong people have learnt their lesson in the last 10 years and are paying more attention to these details.

One Country - Two Systems

The two Panda cubs that have been given to Hong Kong by the Chinese government might not be the only gift from the Mainland. The twenty month old cubs will be unveiled once they have settled in on 01st July 2007 in Ocean Park as part of the handover celebrations, and some other gestures that will place Hong Kong companies or investors in a more advantageous position towards global investors are expected. Similar to the CEPA Agreements, different areas may continue to strengthen the synergy between Hong Kong and the Mainland. This will support a continued growth in Hong Kong.

Without a doubt, Hong Kong's continuous growth is closely linked with the immensely booming export orientated manufacturing base in China, first by moving production sites from Hong Kong into China and now by continuing to use Hong Kong as a financial centre.

Of course one of the concerning issues for Hong Kong's 6.9 million citizens- next to the pollution in Hong Kong - is the topic of democracy. The original joint declaration that came in effect when Hong Kong was handed over in 1997, and the Special Administrative Region was to maintain its capitalist system and autonomy. The Basic Law, as it is called, ensures that the current political situation in Hong Kong will be based on the impartial rule of law and an independent judiciary. However, the implementation of the Joint Declaration has been an international concern. The systems in Hong Kong, which are supposed to protect basic freedoms and rights, are often fragile, because they are not built on a system of democratic government.

During the last election of the Chief Executive, where the candidate was challenged by a pro-democracy legislator, Mr. Alan Leong, it became apparent that for Beijing, the prospect of any moves towards universal suffrage might have been postponed from 2012 to 2017. Even though Mr. Leong had no prospect of winning the election over Beijing's favoured candidate, Donald Tsang, especially as the votes were cast by an 800 member, largely pro Beijing election committee, it seems that the election process itself has raised concerns in Beijing.

Outlook

Generally, the Hong Kong economy shows a broad-based expansion in the first quarter of 2007. The GDP was growing solidly by 5.6 percent in real terms over a year earlier. Since mid-2003, the economy has been growing at above-trend pace for 14 quarters in a row. The economic upturn continued to result in a stronger demand for labor, pushing the seasonally adjusted unemployment rate lower to 4.3% in the first quarter, which is the lowest in more than 8 1/2 years. It seems Hong Kong has found its place in the one country two systems principle, and even with unresolved issues such as the democracy of the country, and has used the advantages of a free economy to establish its position within China. The Chinese Government seems to have accepted the position and now one can foresee measures of strengthening it further.

Hong Kong's service orientated industry, stable and low tax investment environment will continue to attract foreign investment, as well as being a centre for investments into China for many foreign companies.

June 20,  2007

Hong Kong still one of freest cities in Asia

Safeguarded by the Basic Law, residents in Hong Kong enjoyed more freedom and rights after it returned to the motherland, said Elsie Leung Oi-Sie, vice chairwoman of the Commission for the Basic Law of the Hong Kong Special Administrative Region (HKSAR) of the Standing Committee of the National People's Congress of China.

Leung, former secretary for justice of the HKSAR, said during an interview with Xinhua recently that the principle of "one country, two systems" has been successfully implemented in Hong Kong during the past 10 years.

She said when China resumed the exercising of sovereignty over Hong Kong 10 years ago, many people understood little about the principle of "one country, two systems" and many predicted that Hong Kong residents would lose their freedom.

But the facts of the past 10 years have proved that these predictions are wrong, said Leung, noting that Hong Kong is still one of the freest city in Asia.

"In 1997, Hong Kong had a population of 6 million. At that time, many people emigrated out of Hong Kong owing to they fear and doubt of Hong Kong's future. But currently, Hong Kong has a population of 7 million, which is a proof of the residents' confidence in Hong Kong," said Leung.

Leung admitted that more than 150 years' of colonial rule had caused some blur of identity on some people and that some of them had not a clear sense of identity. It takes time to change, Leung added.

She noted that the rapid economic growth, technological advancement, improvement of China's international status, and increasing linkage and exchange between Hong Kong and the Chinese mainland have helped Hong Kong residents improve their sense of identity with the motherland.

June 14,  2007

We got it wrong on HK, Time admits

Ten years ago, Time's sister magazine, Fortune, predicted that the return of Hong Kong to the motherland would sound the death knell for the Pearl of the East. But in a cover story on its latest issue entitled "Hong Kong's future: Sunshine, with clouds", Time admits it made a mistake. The following are excerpts of the article.

These days, 10 is practically the new teen - as knowing, and as confused, an age. You think you understand who you are, but you don't, not really. You want to be independent, but you still need adult supervision. You are developing a sense of righteousness, but find it runs up against a pragmatic world where compromise is a necessity. Ten is a neat number, but a messy stage in life.

So it is with Hong Kong. At just past midnight on July 1, 1997, in a glittering and poignant ceremony, Hong Kong passed from being the last jewel of an old empire to a component of a new global power

Hong Kong matters not only because it is a vital driveshaft of the global economy, transmitting the raw power of China's (the mainland) manufacturing capability into a worldwide system for distributing consumer goods. The city matters because it is a unique experiment that will probably succeed but could possibly fail: the creation of a free, international city within China. In the short period since a collection of fishing villages were turned into a modern metropolis, Hong Kong has survived war, waves of refugees, pestilence, drought and economic near-implosions, consistently defying the doomsayers, repeatedly rebounding.

In the past 10 years alone, Hong Kong has lived through a crippling regional financial crisis, bird flu, SARS... The city's run of luck has often seemed near the end; Time's sister magazine Fortune once infamously, and incorrectly, predicted that its return to China would bring about its death.

Yet Hong Kong is more alive than ever. On the eve of the handover, the stock market index, a key barometer of Hong Kong's health, stood at the then record of 15,200; today it hovers near the 21,000 mark.

Property prices - in many ways the best measure of the territory's success because they are followed so closely by the man (and woman) on the Kowloon minibus - dipped after the handover and again after SARS, but are now once again rising to stratospheric levels.

"Things did not come to a grinding halt in 1997," says Sir David Akers-Jones, 80, a former acting governor who stayed on in Hong Kong after retiring. "Things continued Life went on."

But not, of course, in the way it had. Neither China (the mainland) nor its SAR has stood still in the past 10 years. Once, Hong Kong's preeminent preoccupation was the pursuit of wealth, and the place remains obsessed with money. (Only in Hong Kong would the website for an investment seminar be www.icanrich.hk.)

As it becomes ever richer, however, Hong Kong has realized that there's more to life than making a fortune. A civil-society movement has come into being, agitating about everything from the filthy air (though it is probably the cleanest of all China's cities) to preserving old buildings to helping the poor...

Hong Kong is a pulsating organism made up of the most enterprising conglomeration of humanity the world has ever known. That will never change. Identity crisis or no, Hong Kong understands that it's damned lucky to have become a part of China at so fortuitous a time, when the mainland is becoming ever freer and more open and in a position to give its hybrid, somewhat alien, child more opportunity than it could possibly have dreamed of.

"I can't see what reason people in Hong Kong have to be pessimistic," says economist David O'Rear.

June 13,  2007

Hong Kong on track to host world-class events

Hong Kong Jockey Club CEO Winfried Engelbrecht-Bresges is proud of Hong Kong's leading role in international racing

Winfried Engelbrecht-Bresges (known as E.B), the new CEO of the Hong Kong Jockey Club (HKJC), one of the world's largest racing organizations, arrived in Hong Kong in 1998 as HKJC's Director of Racing. The former footballer said it was the highlight of his career to head a Hong Kong icon, which is also the city's biggest single taxpayer, charity donor and one of the largest employers. The Club's presentation to the International Federation of Equestrian Sports in London in April 2005 was instrumental in winning support for Hong Kong to host the Equestrian events for the Beijing 2008 Olympics.

"Hong Kong is the mecca of horse racing. It is a fascinating, dynamite city, full of pressure but there are some people who thrive on challenges and responsibilities. I am one of them.

When the late Alan Li, former HKJC Chairman approached me to take up the post of Director of Racing, he had a vision – to bring horse racing in Hong Kong to a world class level. I felt honoured to share in this vision and started work on 3 April 1998.

Fast forward nearly 10 years later and now I am the CEO. Tremendous improvements have been made with Hong Kong's can-do spirit. People in the industry see us as a world leader. The Hong Kong Jockey Club is a world operational model. We are proud of our not-for-profit business model governance framework and the fact that it has the world's highest betting turnover per race. We have 78 race meetings in Hong Kong and we have turned out world class champions such as Fairy King Prawn, Silent Witness and Vengeance of Rain.

World's best - We started an upgrading programme three years ago to increase the number of horse owners and the quality of race horses. I am proud to say that the owners' facilities have become by far the best in the world and a benchmark for elsewhere. Ownership has jumped an impressive 40 per cent and there are now over 1,000 owners owning 1,200 horses in Hong Kong.

Two of the lowest points in my 10 years here were undoubtedly Sars where there was hysteria and people were afraid to come to Hong Kong, then the deaths of two apprentice jockeys, Willy Kan and Philip Cheng - it was tragic and emotional.

Financially, the Jockey Club is in record surplus and we are doing well. Although we have significant financial reserves, there are underlying threats and competition especially from Macau which is competing with us on customers, products and services.

I think Macau with its limited number of casinos is an even bigger threat than Las Vegas. Hong Kong people spend time and money in Macau and the paradigm shift is to world class casinos. Yes, we should be aware of the social costs of gaming but we will lose out if we stick with a restricted framework and if we do not adjust to a changing environment. We have to look at these changes within the context of our charity and tax revenues and how this would put stress on our employment.

Ambitious masterplan - We have been working on a Racecourse Masterplan with a huge focus on the community. If we want to keep our customers, we need major investments. We used to have a captive audience but things have changed. There is alternative entertainment now with varied gaming opportunities and soccer betting. The latter is now legalised under us and we have developed the biggest soccer betting operation in the world, practically from zero to number one.

In the light of competition, we must rethink how we can make use of our race courses 360 days a year. The Jockey Club is not just a Hong Kong institution, we are mindful that we are a good citizen and the Club is not just for betting. We must rethink how we can get closer to the hearts of the community.

After the 2008 Olympics have come and gone, what is our legacy? We want to turn the Penfold area where much of the Equestrian events are taking place into a park with equestrian elements where people can point and say, 'this is where the Olympics took place'. There could be the Olympics stables, a museum with past Olympic winners and some retired world class horses, and pony rides for children and the disabled. I see this as a place for adding value to the community, where Hong Kong people would like to spend their time here.

And talking of the Olympics, never in its history had anyone needed to do a bid. One of the reasons why Hong Kong got the Olympics was because of the Jockey Club. We have a worldwide reputation that we can do things.

Can-do spirit - How do I feel about getting the Olympics bid? There was great excitement as it would put Hong Kong on the world map as a world class city with a can-do attitude. Yet, we were also a bit scared at that time. There was a normal placement cycle of five years to get everything ready but we had only two and a half years so it was a real challenge. There have been lots of hurdles but over the last six months, people have seen what we can do and they have 100 per cent confidence. Princess Haya, the President of the FEI was extremely complimentary and very impressed with our facilities in Hong Kong.

I feel strongly about the Handover*. Being German, I would rather think of it as a reunification. I would be right here in Hong Kong on 2 July at the HKSAR 10th Anniversary Cup in Shatin. I hope to be still here celebrating HKSAR's 20th anniversary!'

Entrepreneur designs his success

Interior designer Clifton Leung says Hong Kong's international image is a role model for the Chinese mainland

For entrepreneurial interior designer Clifton Leung, "the time was right" to set up his own design firm in 1997.  Unfazed by a mood of uncertainty that pervaded some business sectors in the lead-up to the Handover*, Mr Leung started Clifton Leung Design Workshop full of optimisim.

His confidence paid off, and just one decade on, his Hong Kong business has an international following with prestigious brands such as D&G, Just Cavalli, Calvin Klein, Converse and Siemens among his growing retail design clientele.

With its Parisienne feel and outdoor seating, French restaurant Lot 10 survived when others failed

The business has also diversified, with Mr Leung indulging his love of fine food by starting a food and beverage division. His first restaurant, Lot 10, opened in Central in 2003, followed a year later by NoHo Cafe (which means, north of Hollywood Road). He then began a product division, distributing imported designer homewares to retail outlets in Hong Kong and Shanghai.

Vibrant pace - Born in Hong Kong, Mr Leung was raised in Toronto, Canada, where he completed an interior design degree. When he'd decided he had enough work experience to start his own design firm, Mr Leung headed back to Hong Kong.

"In Toronto the pace is a lot slower, and you don't get much done in a day," he explained. "Hong Kong is much more vibrant, (and) has more energy. It's much less complicated to set up a company here, and the business environment is favorable."

Coffee and dessert shop NoHo Cafe is Clifton Leung’s second F&B venture

Starting from home with himself as sole employee, Mr Leung focused his minimialist, user-friendly style on mainly residential interiors. He found it slow going at first. The Asian financial crisis hit soon after he began, and while this didn't reduce inquiry as investors were buying property to take advantage of lower prices, it was harder to secure a contract. "People thought everything should be cheap. It was tough to seal a deal when they didn't know who you are, and they were hard bargainers," he said.

But after two or three years, it started to pick up fast and Mr Leung "couldn't believe the figures" when he found business had doubled. It continued to double for the next three years, before settling into a steady growth pattern that persists today. The firm now has an office in Central, a staff of 15 and a growing portfolio of projects both in Hong Kong and the Chinese mainland cities of Beijing, Guangzhou and Shanghai.

Restaurant launch - With things going well, he took the plunge and launched Lot 10, a cosy, 30-seat French restaurant with a Parisienne feel, complete with tree-fringed al fresco dining. The doors opened in February 2003, and six weeks later Hong Kong was hit by Sars. Mr Leung remembers this time as "a nightmare", but while the outbreak forced many restaurants to close down, Lot 10 survived – saved by the fact that it could offer patrons outside seating.

That success led to the set up of NoHo Caf?a coffee and dessert shop, and then the designer product arm The Workshop Company Limited (or simply The Workshop).

While his restaurant business continues to do well and the product line business is developing, Mr Leung says it is the interior design element that promises the biggest growth, driven by demand from the Chinese mainland retail sector.

"The Chinese want to upgrade their image, even within their own domestic market," Mr Leung said. "(Shops) refresh their design every two years because for every business, there are at least 100 similar brands doing the same thing. China wants to be more international, and it's using Hong Kong as a marketing tool. They all want the Hong Kong image."

Boom times - Ten years after the Handover, Mr Leung says it's a very exciting time to be in Hong Kong where the economy is booming, and a feeling of prosperity fills the air. "There is a lot of money being made. People are confident, working hard, having fun and enjoying their lives. They're also buying great properties, which is good for my business."

While not planning any major expansion, Mr Leung says Hong Kong's word of mouth network will enable Clifton Leung Design Workshop and his flagship restaurant Lot 10 to continue building steadily, and expand the brands' presence in Greater China.

* "The Handover" refers to Hong Kong's return from British to Chinese rule on July 1, 1997.

June 9,  2007

Cut and run - Budding fashion designers are looking overseas for their big break - Joyce Siu

The usual path for young fashion designers keen to advance their own labels is to start off in hip shopping malls in Tsim Sha Tsui or Causeway Bay before looking further afield. But a few are eyeing major cities abroad as their launch pads instead. Will one of them turn out to be the next Vivienne Tam? Wong Kay and her brother Jing are among the bold few. Both are trained in London - 27-year-old Kay at the Royal College of Art, and Jing, who's two years younger, at Central Saint Martins. The pair set up their Daydream Nation label last year, buoyed by the response to Kay's first clothing line, The Hug Project. A quirky collection inspired by vintage styles, it was quickly picked up by a buyer for the Tokishirazu fashion store in Tokyo.

And following in Tam's footsteps, the siblings are directing their Daydream Nation label at overseas markets, presenting their clothing to buyers at trade fairs in Europe and Japan. Featuring ready-to-wear collections with a playful twist - turning a pair of pants into a shirt, for example - the clothes are aimed at men and women aged 20 to 35. "A number of fairs have sprouted in the past few years. Sometimes, we don't even know which to attend," says Jing. They narrowed their list to a handful of shows in Paris, London and Berlin that target young, independent designers. Part of the reason for first looking overseas is that they can't get a fair chance at home, the siblings say. "Local buyers won't even look a t our work because we're from Hong Kong. They prefer to stock European or Japanese designs," says Kay.

Another hurdle they face is that local buyers often dismiss homegrown designers as cheap. Overseas buyers show more respect for original designs, she says. Back Down the Rabbit Hole and Just Spill, two fairy tale-inspired collections from Daydream, were recently picked by stores in London, Paris and Madrid. Andrew Choi Chun-wing of T-book reports a similar response, after attending several trade fairs overseas. "International buyers don't care where we're from; only [about the quality of] our designs. They like designs with a message," says Choi, whose T-shirts are sold in boutiques in London, Las Vegas and Sydney. Hong Kong people are very label-conscious, says Choi. "They prefer to buy an expensive brand name such as A Bathing Ape rather than a hand-painted T-shirt from an unknown Hong Kong designer."

Local designers, however, have an edge abroad because they can offer affordability as well as originality. "As designers from Hong Kong, we're in a favourable situation. It's more convenient for us to source fabrics and link up with factories on the mainland," says Kay. "A lot of London-based designers face production problems. If they make their clothes in London, it'll probably cost three times more than what we'd pay to produce them on the mainland. That's why buyers prefer ordering from us - our prices are very competitive." For Kay, selling overseas also helps circumvent the problem of widespread copying in Hong Kong. "The high-street fashion scene here is about copying at a high speed," she says.

Thanks to the internet, clothes are copied and sold in Mong Kok boutiques within weeks of the designs appearing on international catwalks. There's no such thing as copyright in the fashion world unless you're talking about the work of major names, such as the signature pleating by Issey Miyake," Kay says. "If we had a shop in Hong Kong, we'd probably be operating alongside shops that sell Marc Jacobs knock-offs for under HK$500," she says.
Exorbitant rent is also spurring emerging designers to try their luck abroad. In late 1990s young fashion graduates from the Polytechnic University opened outlets in shopping arcades such as the Rise Commercial Building in Tsim Sha Tsui. But with rents rising to between HK$20,000 and HK$30,000 per month for a 100 sq ft space - almost 10 times 1997 levels - even a small shop is out of the question.

Lo Sing-chin, one of 15 finalists in a contest for Asian designers at InFashion Berlin in September, hopes to secure international contacts from his exposure at the German fair. "Opening a boutique in Hong Kong is a risky business. I'd rather invest my hard-earned money on the overseas market than rent a shop here," says the 25-year-old PolyU graduate. Lo, who's worked as an assistant designer for local chain Moiselle and Sin Sin Atelier, will have a booth in Berlin to showcase women's wear featuring his unorthodox drapery and cutting. "As a new designer, I need to establish my name on the international scene in order to gain recognition in Hong Kong," he says, citing designer Joanna Ho as an example.

However, designers such as Lo may have an overly rosy view of the overseas route. "There are difficulties chasing payment from overseas and more paperwork when exporting goods," says Henry Lau Chi-wah, who has an enviable niche at home with his label SPY. Overseas buyers can set tough terms, for example, issuing payment three months after receiving a consignment of clothes, Lau says. Even then, some never settle what they owe.

It took Lau several years to build an overseas clientele. "[Buyers] spend a long time observing your label, and only confirm orders after they see that you can survive," he says. "Dealing with foreign buyers is tough. You need to show that you have everything under control - from the design concept and fabric sourcing to production at mainland factories. Many local designers lack such skills."

Chen Dao, who was listed among the world's 250 top young talents of 2005 by international design magazine i-D, found breaking into foreign markets harder than he imagined. He held a show in Singapore in January, hoping to find a foothold abroad, in addition to his boutique in Causeway Bay, but struck stony ground. "Many people came to my show, but none made an order," says Chen.

"I thought Singaporeans would be more open about fashion compared to Hong Kong people, but they wanted something more mainstream. It's hard to adjust to overseas markets."

The 29-year-old remains undaunted. Chen, whose designs combines Chinese elements such as embroidery and floral prints with modern styling, eventually hopes to find a following in New York.

"I believe there's a market there for Hong Kong designers. The east-meets-west trend will still prevail," he says. "We can't be put off by failure."

June 6,  2007

Hong Kong film blitz at Europe's premier showcase - report from the Cannes Film Festival and Market, 2007

Despite a two-decades-old decline in its film production, Hong Kong had an impressive presence at the 60th Cannes Film Festival (16th to 27th May), with glamorous stars and high-profile directors. The HKTDC threw one of the festival's trademark spectacular parties and held a series of high-profile press conferences at its seaside pavilion at the International Village, while Hong Kong star Maggie Cheung was on the prestigious international competition jury. The territory's celebrated director Wong Kar Wai's first English-language film, My Blueberry Nights, opened the festival. The movie, starring American singer Norah Jones and British actor Jude Law, competed against the world's top productions. Triangle, a late out-of-competition addition, jointly directed by Johnnie To, Ringo Lam and Tsui Hark, was shown at the festival. In an unusual collaboration, the three film veterans each directed a 30-minute segment of the police story, starring Hong Kong actors Louis Koo, Simon Yam and Sun Hong Lei. Hong Kong companies were also well represented at the Film Market 2007, held concurrently with the Festival, with most companies reporting lively sales. Some 14 Hong Kong film companies participated in the festival this year, with 10 films for sale and a number of market screenings to promote them. One trend emerged. While Wong Kar Wai made a cultural breakthrough with his first English-language film (shot in the US), most Hong Kong filmmakers are looking to the Chinese mainland to boost the flagging local industry.

At a press conference in the HKTDC pavilion, Wong told the press that he always wanted to make a film in a different language. "It is not a start or an end," he said. "I wanted to try something new." However, the director has not decided if he will shoot another English film. As it turned out, Palm D'Or prize judges preferred Korean and Japanese entries. "It is not necessary for all Hong Kong directors to shoot Hollywood movies, for them to make big scale movies," Wong added, pointing out that the Chinese mainland film market was healthy and prosperous.

Hong Kong film makers looking north - Siuming Tsui, president of Sundream Motion Pictures Ltd and executive director of i-Cable Entertainment Ltd, also stressed the importance of the Chinese mainland market. Chinese movies on the way. "Ten years ago, there were not enough screens in China but the Chinese mainland market is becoming more important, with a very strong box office," he said. The number of screens has gone up from 2,013 in 2003 to 3,360 in 2006. "The trend is getting bigger and bigger, so there will be a big increase in Chinese-speaking movies, and the box office," Tsui predicts. Sundream was launched in 2005 as a movie division of Hong Kong's i-Cable's paybox Cable TV. Its products include Johnnie To's romantic drama Linger, a China co-production with Sil-Metropole. It also released four films last year: A Battle of Wits, Nothing Is Impossible, 49 Days and Twins Mission. Joseph Lai, chief executive officer, IFD Films and Arts Limited, pointed out that Hong Kong survives because of the Chinese mainland market. "We recoup 50% to 75% of our investment from [the Chinese mainland]," he said. Even so, the company shoots all of its small budget animation and action or martial arts pictures in English. "Then we dub in English, because the level of the actors' English is not so good," said Lai. However, IFD shoots co-productions with China in Putonghua. "An international picture has to be in English," Lai explained. "But there are not enough actors [in Hong Kong] who speak fluent English. That is always a problem with Asian actors." Among the top actors, he cites Jackie Chan as having perhaps the best command of English. "Everyone hopes that that will improve, but we have a long way to go." While the future may be on the Chinese mainland, there are still pitfalls. "There are always problems with censorship [on the Chinese mainland], but we know their culture and mentality, so we know how to deal with them," said Lai. Christy Choi, senior distribution executive, Hong Kong-based Mandarin Entertainment (Holdings) Ltd, said: "if you have a good film, there is a big market [on the Chinese mainland]. If you have a good director, title and action, it will succeed." However, to make it in the foreign market, a picture must have a higher production budget. "For the international market, the budget must range from US$8 million to US$30 million," Choi added. Her company shoots in Cantonese and dubs into English. "Last year, we had great success with Dragon Tiger Gate," explained Choi. This year, the company is selling Flash Point from the same production team.

Mandarin Entertainment announced in the early days of the festival that Distant Horizon acquired North American rights to its Donnie Yen martial arts action picture. The company co-produced the film with Chinese mainland companies Polybona Film Distribution and Enlight Pictures. "For the past two or three years we have done action films," Choi said. "But we are trying to bring a new genre, such as suspense thrillers, to the market." Some producers bring the company English-language projects, but it is much more expensive to shoot in English. "You have to hire an English crew, and there are not enough in Hong Kong," she insisted. Still, she believes the standards are better than it was 10 years ago. An upside to Hong Kong's lower production - "Ten years ago, more than 200 movies were made each year in Hong Kong, but many were 'crap'," Choi remembers. "Producers were after fast returns. Now, because production has dropped, with only 40 to 50 movies last year, the quality is getting better and better."

In April 2007, the Hong Kong Government established the high-level Film Development Council to advise on policies and strategies for the promotion and development of the film industry. Hong Kong Financial Secretary Henry Tang provides support at Cannes. It also injected HK$300 (US$39) million into its Film Development Fund to help finance the production of small-to-medium budget films. The Government has made it easier for Hong Kong movies to enter the coveted Chinese market. Under the Closer Economic Partnership Agreement (CEPA), Hong Kong films can be shown in Guangdong Province in Cantonese, the dialect of both areas, with effect from 2006. This adds a potential market of 70 million to Hong Kong's seven million base. A free trade agreement also allows unlimited access of Hong Kong films to the Mainland market. "There are still some constraints with distribution, but it is now phase three," said Sundream's Siuming Tsui. There is a big difference in "A" class movies in China to Hollywood, he added. The gap is huge in terms of investment, but it is closing. Some 10 years ago, an "A" class movie in China represented a US$3 million to US$4 million investment. Now it is US$50 million to US$60 million, Tsui explained. "We have plans for shooting in English, productions saleable for both Chinese and English-speaking markets," said Tsui. Sundream has some specific projects, but they are very preliminary. Western producers know it is good at action movies, so they are looking for co-productions. Sundream is discussing projects with producers in Thailand, France, Japan and South Korea. Tsui pointed out that while movies especially designed for Western markets bring in higher revenues, some Chinese movies such as Eye in the Sky are very popular overseas.

"Relationship" films beginning to gain credence as finance grows - Golden Network Asia, promoted its film Wushu at the Hong Kong pavilion, at a combination photo-opportunity and lunch. "Wushu is a 'coming-of-age' story, a youth film, about a father-and-son relationship," explained Colette Koo, producer. Getting financing was good in Hong Kong, and the Hong Kong Government was trying hard to help the film industry, she said. The Hong Kong company recently concluded a financing deal with Standard Chartered Bank, to help arrange gap finance for Wushu. "There should be more films in English, but it takes some time. I hope our next film will be in English," said Koo. "There needs to be a wider range of subject matter, better scripts. We should grow from genre films." Alvin Lam, chief operation officer, Universe International Holdings Ltd, said his company is not planning to make English-language movies. "Maybe in a few years, but we are still making Hong Kong movies," explained Lam, speaking at his booth in the film market. In the first two days of the event, the company signed two distribution deals, with Turkey and Brazil, for Invisible Target, and anticipates bigger sales after the screenings. "It's an action movie. These have come back in the past two or three years," explained Lam. "Comedy was big for us from 2000 to 2005." Comedy, aimed at the domestic market, is low budget and easy to produce, said Lam. However, with their cultural differences, Mainland audiences often do not appreciate Hong Kong comedies. Horror films also have difficult access to China because of censorship, so they usually go to the international market. Both action and horror pictures sell in the Western market, Lam explained. The Thai-Chinese Pang brothers Oxide and Danny are the most popular directors of horror movies. "We co-produced Re-Cycle, a popular horror film which closed the Un Certain Regard competition at the Cannes Film Festival in May last year and was later very successful with major sales," said Lam. For the future, the company is planning co-productions with China's Polybona. Oxide Pang will also direct The Photo, a crime suspense movie that is one of the company's big current projects. It wasn't all business at the Festival, as more than 1,000 filmmakers, distributors and media from around the world attended the inauguration ceremony for the 60th Festival de Cannes Anniversary Exhibition, STARWAY, Allee de Stars. The HKTDC organized the ceremony and the cocktail reception, which was held at Carlton Beach, in front of the opulent Carlton Hotel.

400+ Japanese business leaders turn out in Tokyo to hear Hong Kong business advantages - New book launched in Japan details Hong Kong's value as the trading hub for the Pearl River Delta

Mr Kunio Suzuki, Chairman of Japan-Hong Kong Business Cooperation Committee and Representative Director and Chairman of the board, Mitsui O.S.K. Lines, Ltd (left) and Dr Victor Fung, Chairman of the Hong Kong-Japan Business Cooperation Committee (right) presented a new publication, Evolving Hong Kong - Newly Revealed Secrets of its Competitveness. The newly launched book, written by leading Japanese economists, extols the virtues of Hong Kong's trading platform for Japanese companies.

(From left to right) Mr Kunio Suzuki, Mr Fujio Mitarai, Chairman of Japan Business Federation and Chairman and CEO of Canon Inc and Dr Victor Fung attend a toasting ceremony following a Hong Kong-Japan business symposium. Earlier, Dr Fung spoke about new opportunities for trade-related cooperation between Hong Kong and Japan now that Hong Kong has been included in mainland China's 11th Five-Year Program.

More than 400 of Japan's business elite gained new insights into China's current five-year economic programme and related promising new prospects for Japanese-Hong Kong cooperation, during a one-day bilateral business meeting Thursday in Tokyo.

The meeting was co-chaired jointly by Dr Victor Fung, Chairman of the Hong Kong-Japan Business Cooperation Committee, and Mr Kunio Suzuki, Chairman of Japan-Hong Kong Business Cooperation Committee and Representative Director and Chairman of the board, Mitsui O.S.K. Lines, Ltd. The closed plenary session was followed by an open business symposium.

At the plenary, members heard how Hong Kong's trade, logistics, financial-services and technology hub advantages can help Japanese companies benefit from Hong Kong's inclusion in the mainland's 11th Five Year Program.

During the symposium, Japanese business leaders were particularly focused on Hong Kong as a financial services market. Now the world's second-largest market for initial public offerings, Hong Kong raised close to US$43 billion in 2006 alone. Hong Kong is also Asia's venture capital centre, featuring some 180 funds with approximately US$40 billion under management. Japan's environmental technology industry strengths were also highlighted, with the focus on partnering with Hong Kong companies to capture a mainland market now looking toward energy efficient sustainable development.

New book on Hong Kong business advantages creates buzz - Mr Fujio Mitarai, Chairman of Japan Business Federation and the Chairman and CEO of Canon Inc, hosted a post-symposium reception. The high-level gathering commemorated the 10th anniversary of the Hong Kong Special Administrative Region, and was the occasion for the launch of a new book on Hong Kong's edge in delivering value as a trading platform.

Evolving Hong Kong - Newly Revealed Secrets of its Competitiveness was published by the Hong Kong-Japan Business Cooperation Committee and supported by the Japan-Hong Kong Business Cooperation Committee. The new book features sector-specific essays and studies on Hong Kong's trading platform from some of Japan's leading economists and business minds.

The Hong Kong Trade Development Council (TDC) serves as the secretariat for the Hong Kong-Japan Business Cooperation Committee, while the Nippon Keidanren (Japan Business Federation) is the secretariat for the Japan-Hong Kong Business Cooperation Committee.

The meeting consisted of the Japan-Hong Kong and Hong Kong-Japan Business Cooperation Committees 29th Plenary Session in the morning, as well as the Business Symposium Commemorating the 10th Anniversary of the Hong Kong Special Administrative Region. The two committees will hold their 30th Plenary Session next year in Hong Kong.

May 31,  2007

Run Run decides to retire in his 100th year

Television Broadcasts (0511) executive chairman Run Run Shaw is planning to retire and is looking for a replacement, the company's deputy chairman said Wednesday. Mona Fong Yat-wah, however, declined to comment on whether Shaw will sell his stake in the company.

Fong did not elaborate further on Shaw's retirement plans.

Shaw, affectionately known as Luk Suk (Uncle Six), controls a 32.49 percent stake in TVB, Hong Kong's dominant free-to-air television broadcaster, partly through his 74.6 percent stake in film studio Shaw Brothers (0080). Shaw Brothers had said earlier that several parties had shown interest in acquiring stakes in the studio but the company reiterated that Shaw, who will turn 100 in October, has no plans to sell his share. Meanwhile, TVB said it aims to turn around its 49 percent owned pay TV business Pay Vision in three years. "Three years are possible [to turnaround], it's a reasonable projection as a stake owner," Mark Li Po-on, TVB's general manager, finance and administration, told reporters after the company's annual general meeting Wednesday.

Pay Vision, one of the four pay-TV operators in Hong Kong, brought a loss of HK$163 million to TVB last year, compared to a loss of HK$187 million shouldered by TVB in 2005. "The loss we shared has been shrinking and I believe the result will continue to improve in 2007 and 2008," Li said.

TVB reported a net profit of HK$1.1 billion last year with turnover amounting to HK$4.1 billion.

Both net profit and turnover edged up 1 percent compared to a year ago. TVB also plans to splash out HK$700 million on digital broadcast services in Hong Kong, of which HK$400 million to HK$500 million will be booked in 2007, Li said.

The SAR government requires the city's two TV stations to offer the services by the end of this year. "I think the government will announce further details on the digital standard in the coming two weeks," said assistant managing director George Chan Ching-cheong. Chan said the company will complete the construction of a transmitter at Tsz Wan Shan by year end, with coverage of more than 50 percent of Hong Kong. Digital broadcasting would involve high costs but the company could withstand these.

TVB will launch a new channel for "high definition programs" while its smaller rival Asia Television will open four new channels by year-end, covering commercial news, cultural lifestyle, TV shopping and English-language entertainment and education. TVB shares closed Wednesday up 0.56 percent at HK$53.80.

May 1,  2007

Hong Kong Companies Brace for Corporate Income Tax Law Reform

On 16 March this year, the Fifth Session of the Tenth National People's Congress officially passed the Corporate Income Tax Law which will become effective on 1 January 2008. What is the background that necessitated the introduction of this new tax law? What are the main points of the new law? What should taxpayers be aware of? What should be done to capitalise on the golden opportunity before the new tax law is officially implemented? In order to answer these questions, the Hong Kong Trade Development Council held a seminar on the latest reforms of the Corporate Income Tax Law in Guangzhou, inviting Mr Charles Leung and Mrs Petrina Tam, partners of Price Waterhouse Coopers China Tax and Business Advisory, to provide an analysis.

1. Why is it necessary for China to unify its income tax for domestically and foreign-funded enterprises?

For more than ten years, China has been using a dual-track system for assessing income tax and two sets of legislation are in force. One is the Corporate Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises promulgated in 1991 which is applicable to foreign-invested enterprises (FIEs). The other is the Provisional Regulations on Corporate Income Tax promulgated in 1993 which is applicable to domestic enterprises.

China has been using two taxation systems because in the past it needed investment from foreign enterprises to stimulate economic growth. Thus, it has been implementing a special preferential policy to encourage foreign investment in the mainland. But today, as China has joined the WTO, its economy is growing rapidly and its trade surplus continues to expand, the Chinese government reckons that now is the best time to unify the two tax systems.

2. Key points of the new tax law

The new tax law clearly defines "Chinese resident enterprises" and "Non-Chinese resident enterprises"

Chinese resident enterprises refer to enterprises established within China or foreign enterprises established outside China but with their "substantive management operation" in China. Enterprises deemed Chinese resident enterprises must pay taxes on incomes derived from both within and outside China. Non-Chinese resident enterprises refer to enterprises established outside China and their substantive management operation is also outside China. Such enterprises only need to pay taxes on incomes derived from within China, and on incomes derived from outside China but are substantively related to operations or venues set up in China.

At present, since concrete details have yet to be announced, the definition of "substantive management operation" awaits further clarification. Also, the definition of the "China regional headquarters" of foreign enterprises with part or all of their management functions undertaken by companies in the mainland cannot be clarified until the details are announced.

Charles Leung reminded participants in the seminar that for the many Hong Kong companies which are engaged in outward processing activities in the PRD and have shifted their whole management, production and sale operations to the mainland, they may be considered as having their "substantive management operation" in China and are therefore deemed as Chinese resident enterprises. As such, these enterprises must pay tax on incomes derived from within and outside China. Therefore, these Hong Kong companies must modify their management structure as soon as possible, and seriously consider whether they should transfer some operations back to Hong Kong.

New tax law sets two separate corporate income tax rates

The new tax law prescribes a 25% standard tax rate applicable to all Chinese resident enterprises, except for small-scale enterprises with meager profits, which are subject to a 20% tax rate. According to Charles Leung, small-scale enterprises with meagre profits may be defined based on their annual total income.

Corporate withholding tax levied at 20%

Withholding tax applies to non-resident enterprises which have not set up any operations or venues in China but are generating income in the Chinese territory. On the issue of whether China will continue its current policy of allowing foreign investors exemption of withholding tax on dividend income, and whether China will continue its reduced withholding tax rate of 10% on foreign investors' income from non-active operations including interest and royalties derived in China, Charles Leung said it is not sure until the actual details are announced.

However, Article 27 of the new tax law provides for the possibility of tax exemption and reduction.

Major adjustments to original tax concession policy

First, the current tax concession policy of tax exemption and reduction for foreign-invested production and export enterprises will be abolished. However, enterprises granted approval for establishment before the promulgation of the new tax law can enjoy a five year transition period.

To help old enterprises adapt to the new tax environment, it is stipulated in the law that enterprises granted approval for establishment before the promulgation of the Corporate Income Tax Law and have been enjoying the reduced tax rate according to the old tax laws and administrative regulations can progressively transition to the new tax rate within five years after its implementation, in accordance with State Council regulations.

As for the definition of enterprises granted approval for establishment before the promulgation of the new tax law, Charles Leung predicts that China may use the approval document issued to the enterprise by the Ministry of Commerce before 16 March 2007, i.e. the date the new tax law was promulgated, as the basis for definition instead of the approval document issued by the State Administration for Industry and Commerce before the same date.

Second, economic and technological development zones, industrial parks and old urban districts will gradually lose the benefit of tax concessions.

Third, the Corporate Income Tax Law will grant tax concessions to high-tech enterprises, farming, forestry, animal husbandry and fishery projects, and environmental protection enterprises which are supported and encouraged by the state. Under the Law, corporate income tax on eligible small-scale enterprises with meager profits will be levied at a reduced rate of 20%, while that on key high-tech enterprises supported by the government will be levied at a reduced rate of 15%.

However, what is the tax rate applicable to industries encouraged by the state in specific areas, such as newly established high-tech enterprises in special economic zones and the Pudong New Area? Are there any new tax concession policies? What is the applicable tax rate for industries under the encouraged category in the western region? All these issues await the announcement of concrete details.

3. Points to note for Hong Kong companies

Under the new tax law, enterprises are not allowed to file consolidated taxes return, unless with the approval of the State Council

Mrs Petrina Tam remarked that under the new tax law, Hong Kong companies investing in the mainland should carefully consider whether to set up an independent accounting system when setting up branch companies. The reason is that, after the new law is in force, branch companies under the same group but with independent accounting systems may not be able to offset their profits and losses internally. Therefore, Mrs Tam reminds Hong Kong companies to make use of the few remaining months (the new law will be implemented on 1 January 2008) to adjust their internal structure to prepare for the new law.

New tax law to incorporate more provisions on preventing tax avoidance

The tax authority reserves the right to adjust taxation on enterprises without a valid business goal. Profits generated by related enterprises in countries/regions with a low tax rate may be deemed as paid dividend and are thus taxable in China. To avoid capitalization loss, the concept of capital and liabilities ratio may be introduced, and entries of excessive interest charges are not allowed.

Under the new tax law, Hong Kong companies may face the risk of tripling their tax responsibility if they continue to transfer their profits out of the mainland

According to Mrs Tam, under the new tax law, Hong Kong companies found to have transferred their profits to Hong Kong or other countries/regions must pay retroactively the taxes due (with interest) in the mainland. Moreover, taxes paid to other countries/regions may not be deducted.

In terms of actual operation, the implementation of the new tax law remains complicated; Hong Kong companies should watch out for the latest policies

Mrs Tam predicts that the implementation details and other documents may be promulgated in the next few months. Many of the existing regulations and notices will cease to apply, or will need to be incorporated into the new tax law. A very important and practical issue is how to integrate the different taxation methods for certain businesses. For example, how should income tax be managed in enterprise merger and acquisition or restructuring? Moreover, there may be geographic variations in the execution and interpretation of the new tax law.

4. How to capitalise on the golden opportunity before the new tax law kicks in

Mrs Tam suggests Hong Kong companies to take action before 1 January 2008 so as to enjoy the new tax concession policy. Actions taken can include:

1) Review the company operation structure as soon as possible; check whether the substantive management function takes place in China; avoid being identified as a Chinese resident enterprise which has to pay taxes in the mainland.

2) Devise a taxation scheme for the future

Cash back scheme
Enjoy tax concessions through the use of technology R&D expenses to offset the taxable income
Attain the recognition of "new- and high-tech enterprise"
On whether China will continue its tax exemption and reduction policy on withholding tax for various non-active operations income, Mrs Tam suggests that Hong Kong companies should grasp the opportunity presented in avoiding double taxation in the mainland and the Hong Kong SAR.

The Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was officially signed in Hong Kong on 21 August 2006. The tax authorities in both places exchanged letters on 10 November and 8 December respectively to confirm the completion of necessary legal procedures. According to Article 26 of the Arrangement, the Arrangement came into effect on 8 December 2006. It is applicable to incomes derived on or after 1 January 2007 (beginning of the fiscal year) in the mainland, and applicable to incomes derived on or after 1 April 2007 (beginning of fiscal year) in Hong Kong.

April 22, 2007

Hong Kong 10 Years Later - Which way now? Chris Yeung

After more than a decade of "gau-tsat" ('97) jitters, there was a sense of "so far, so good" in the days immediately following the handover. "All of a sudden, the inception of the SAR coincided with the eclipse of politics in Hong Kong," Professor Lau Siu-kai wrote in the book The First Tung Chee-hwa Administration. Hindsight shows that it was the calm before a long spell of stormy political weather.

Triggered by the Asian financial turmoil, Hong Kong's economic miracle was shattered. Stock and property markets slumped. Unemployment shot up. The popularity of Mr Tung and the government nosedived in the wake of a host of policy blunders and the mishandling of crises. Chief among these, official arrogance in handling the legislative process of the Article 23 national security law in 2003 unleashed pent-up frustration and sparked a protest march by 500,000 people.

Citing sore legs, Mr Tung stood down two years later, launching the reign of Donald Tsang Yam-kuen, who last Monday received a letter of appointment from Premier Wen Jiabao for his second term. Groomed in the colonial administration, Mr Tsang - who became chief secretary in 2001 when Anson Chan Fang On-sang took early retirement - underscored the importance of a change of style and mind-set in governance.

"We can no longer just follow the rules. We must embrace change and embrace the future ... The government decision-making process inherited from the colonial era must change," he said. Regina Ip Lau Suk-yee, who was secretary for security before her 2003 resignation in the wake of the furore over the Article 23 bill, said the senior echelon of the civil service was caught unprepared for the new ball game after the handover. Localisation of the bureaucracy came too late.

"I don't think when [last governor] Chris Patten pushed constitutional reform [in 1993/95] he was worried about the readiness of senior officials. He had a very high opinion of Anson Chan. Maybe he thought everybody would be able to function like Mrs Chan. By leaving Mrs Chan to take up the reins, everything would be alright. Actually, the entire civil service team was politically under-trained," said Mrs Ip.

"[Late financial secretary] Sir Philip Haddon-Cave used to say `let the best argument win'. Nowadays, you can't just do that. Just look at the Star Ferry pier demolition. Going through the normal consultation procedures is not good enough. You need to be more open, to devise a system that takes account of public opinion. "It's much harder for bureaucrats, for government officials. It's a totally different ball game."


The four governing tools of the British Hong Kong government no longer work, she said. First, the authority and credibility of the civil service face increasing challenges as demand for democracy and accountability surges. Secondly, the government encounters difficulty in pushing policies and bills through the Legislative Council as it holds no votes in the legislature. Thirdly, the role of the long-standing advisory committee system in policy formulation is being undermined in the face of the growth of populist politics. And finally, more people take the government to court over the legality of policies.

Chan Kin-man, of Hong Kong's Chinese University, attributed the governance malaise to the outdated political system, the deficiencies of which have been aggravated by fast-paced social developments. "Our political system has failed to cope with the growth of party politics and the aspirations of civil society ... After the handover, our long-standing rules and practices in policy formulation were also thrown into disarray. The role of the Executive Council as gatekeeper has been weakened. The political order has not yet been restored." As a case in point, the sociology academic cites the chaos over Mr Tung's housing policy, which began when an annual supply of 85,000 flats was promised, a target that was later quietly abandoned. "We have lost direction in policy formulation. We don't know whether or not we should go back to the old system based on the civil service or move towards a new mode based on political parties," Professor Chan said.

Veteran politician Allen Lee Peng-fei said Mr Patten single-handedly changed Hong Kong politics before the handover when he unilaterally introduced changes to the Legco election in 1995. Relations between Beijing and the democrats were badly damaged in the ensuing political row. "By supporting Patten's reform, the democrats were labelled as a force that confronts Beijing," he said, adding that democrat legislators' vetoing of the government's proposed 2007-08 electoral arrangements in 2005 deepened the mistrust. "Hong Kong people do not want to confront Beijing on the issue of universal suffrage. They just want to cast a vote for their own leader ... The whole political scene is still volatile and chaotic."

A wave of universal suffrage pressure was unleashed after the July 1, 2003, rally. The government's U-turn over the national security bill and the resignations of three Tung team members - Mrs Ip, financial secretary Antony Leung Kam-chung and health minister Yeoh Eng-kiong - were hailed as a victory for people power. July 1 has become the red-letter date for democracy. Tsang Yok-sing, former chairman of the Democratic Alliance for the Betterment of Hong Kong, believes Beijing has become increasingly aware that a solution on the issue of universal suffrage cannot be delayed further. "I think Beijing is giving some serious thought to the issue," the veteran Beijing ally and executive councillor said. "It faces a dilemma over the final blueprint: they know people won't accept it if it's too conservative, but they will feel uneasy if it goes too fast."


Mr Tsang said an intrinsic defect in the political system, which he called "asymmetry", had made strong governance impossible. Even so-called "pro-establishment" political parties dared not support unpopular government policies at the expense of election votes, he said. "The government has to introduce unpopular policies at times. Anyone can run a government if what he or she needs to do is just follow opinion polls. How can that be called strong governance?"

Mr Tsang is adamant that party politics is the way forward, but says Beijing remains sceptical. "Based on its own history, the Chinese Communist Party does not buy the western concept of a rotational change of power among political parties," he said.

Although the future of party politics is still fraught with uncertainty, Professor Chan has observed that the demand for democracy has found more solid ground since the handover, and Beijing has recognized its importance in securing good governance.

"At long last there is a common language for dialogue between society and Beijing on the issue of universal suffrage," he said. Professor Lau, who has headed the Central Policy Unit since taking a sabbatical from Chinese University in 2002, argues that the community's view of democracy is highly complex and, at times, contradictory. While seeing it as an instrument to secure their well-being, most are not keen to see opposition forces coming to power.

"The end result is that there are a lot of constraints over the aspirations for democracy. People take more factors into account when they think about the issue." The top government adviser said the lack of a mandate from a general election had made the government more cautious and aware of the importance of public support when making policies.

"It's not as if the government can dictate its decisions at will as the democrats have claimed," Professor Lau said. "Some people feel Hong Kong at present is worse than in the past. But imagine if we were still under colonial rule. I could anticipate enormous difficulties for the government when dealing with issues like economic development."

Professor Lau said the government had become more transparent and responsive, but Hong Kong was still a partial democracy at best and no one had come up with a criteria to evaluate the government's performance.

April 17, 2007

Make The Most Of The Mainland

Buyers, traders and manufacturers seeking new and lucrative markets should take a close look at the growing economic power of the new generation of consumers on the Chinese mainland. The new generation that grew up and started careers during the era of economic reforms in China is characterised by self-confidence, high incomes and high spending power. However, successfully capturing this market requires an intimate understanding of their mentality and needs in order to offer the right products and services, together with innovative sales promotion campaigns addressing their personal concerns and preferences.

The New Generation of Mainland Consumers report by the Hong Kong Trade Development Council says the new generation of mainland consumers typically leads a stressful life and craves a leisurely, carefree lifestyle - thus weekend or holiday getaways to unwind, relax and keep fit have become popular pastimes. Indeed, regardless of age and income the new generation of mainland consumers is extremely health-conscious and is willing to buy products and services that can help relieve stress and relax, as well as health food and products. Hence, beauty treatments, fitness exercise, yoga, travel and "green" or environmentally-friendly food have become increasingly popular on the Chinese mainland in recent years. Yet, despite the aspirations of the new generation to a leisurely and carefree lifestyle, few of them are ready to accept a lower income in return for a less stressful life.

On the contrary, most are highly career-minded, with 75% of the respondents to a recent survey believing work can confer social status and is a means of self-actualisation. Work is thus one of the key aspirations of the younger generation, with the majority of them willing to sacrifice family and social life for greater career success.

They pursue continuing education as a means to achieve success at work, with 48% of respondents having enrolled in training courses in the year prior to the survey, 34% having taken foreign language courses and 28% having attended academic seminars. The ideal self-image of the new generation encompasses inner virtues and outer appearance, with more than 70% of respondents resorting to improving and equipping themselves by developing new interests to nurture inner virtues and pursuing further studies to acquire new knowledge.

Approximately 80% also agree that appearance and attire can enhance self-image; hence they dress smartly and go to gyms and beauty parlours in order to boost their image. It is therefore not surprising that the new generation regards upmarket brands as status symbols associated with a certain class of consumers. In general, the need for a sense of achievement or recognition is rather strong among the new generation, and they are willing to spend money on acquiring symbols of success to prove they have made it in life.

At the consumption level, the new generation goes after enjoyment and experience, buying luxury items, frequenting high-class venues, drinking red wine, playing golf, buying collectibles and travelling overseas to reward themselves for working hard and to reaffirm their self-worth. They are generally receptive to new things and find excitement in discovering new products and new services in life, with 75% of respondents saying they are willing to try new products and 57% eager to use the latest technological gadgets.

The new generation appreciates that the consumption process itself is an enjoyment and is willing to pay a premium for special "experiences" such as attentive service, pleasant environment, classy ambience and advanced technology. Interestingly, 72% of them say price is not a consideration when it comes to things they like or enjoy, but the new generation does not spend indiscriminately.

Although they have the money and are willing to spend, they are still sensitive towards price, with 76% of respondents saying they would carefully weigh different factors including quality-to-price ratio before making purchase decisions. Similarly, while they are well aware of the latest trends, styles and technology, they do not follow the crowd blindly, with 73% maintaining they readily accept fashionable items but wouldn't follow trends blindly.

Moreover, 77% say they are more interested in keeping their personal style and taste, and insist that while value-for-money items must offer excellent quality, service, brand value, design and image, they must also be something they like and find suitable. That said, the new generation believes that a brand can reveal the status of a person and tends to pursue brands that best match their own status.

Hence, brands targeting the new generation should not be positioned at the very top-end of the market or the mass market but should have their own characteristics and styles. The new generation is well-informed on brands and has its own preferences, generally believing that international brands are better managed and offer better quality than local labels, but that does not necessarily mean that foreign products and cultures are superior. They are proud of the Chinese culture, don't consider it inferior in any way and don't follow Westernised products blindly, with 67% of them supporting national brands.

The new generation still embraces traditional Confucian values, which are very much family-centric, and see the family as a source of joy rather than a burden. Eighty-seven per cent of them consider that "having a perfect family is a prerequisite for a happy life" and are ready to share the fruits of their success with family members through travelling and enjoying life together.

The vast majority - 89% -- indicate they are willing to provide their family with the best material comforts - for example, they are very generous in buying health food for their parents, travelling with their children and nurturing their talents. Not surprisingly, given the close geographical proximity, the new generation of mainland consumers has a particularly good impression of the "Hong Kong brand"; the core advantages of which include style, innovation, quality assurance and cultural affinity.

These advantages are fully demonstrated in various kinds of Hong Kong products and services:

-garments, footwear, jewellery and accessories are stylish
-home decoration items and household products are known for their innovative designs
-processed food products, health supplements and medicines are tailored for the Chinese culinary culture and are of premium quality
-services such as financial and wealth management, retail, catering and beauty are highly professional
-Armed with this market knowledge and these core advantages, products and services that are well-suited to the needs of the mainland market have excellent prospects, both now and in future.

TOP TIPS - There are several key points that any buyer, trader or manufacturer must bear in mind to effectively win the hearts of the new generation and break into the mainland market.

They include:

-offering niche products and services that take into consideration the importance the new generation attaches to relaxation, physical and spiritual health, personal development, life experiences, boosting personal image and cherishing the family
-building a distinct brand image by providing products that have both character and substance and reflect the -consumer's confident, independent self-image
-monitoring the changing preferences of the new generation, which is highly receptive to new things and eager to try new products and thus reacts positively to innovative elements in products and services
-The new generation of mainland consumers also considers the environment and the experience of their consumption as a kind of personal satisfaction. Therefore, companies are advised to pay attention to the interior decoration of their business venue and the quality of service offered in addition to the product or service itself.

April 3, 2007

Hong Kong Enterprises Move into Guangdong Industry Relocation Parks

The mountainous regions and the eastern and western wings of Guangdong have attracted the relocation of many Hong Kong companies from the Pearl River Delta (PRD), thanks to their advantages such as lower investment costs and abundant energy supply. At present, over 80% of the 18 approved industry relocation parks in Guangdong are occupied by Hong Kong companies, with the majority in Zhongshan and Dongguan. This trend is set to grow continuously.

Industry relocation is a major strategic move of Guangdong in coordinating the development of the province. In recent years, the PRD has been presented with unprecedented opportunities created by a new round of industrial relocation on an international scale. At the same time, the region has also come under serious challenges posed by resources and environmental constraints, and the need to upgrade its industrial structure. As a result, the demand by labour-intensive industries to relocate to low-cost regions has been getting more and more intense.

The mountainous regions and the eastern and western wings are the hinterland of Guangdong's economic development. Natural resources are relatively bountiful and production costs are lower there. In a bid to offer better facilities and management services to enterprises and to lower their costs, industry relocation parks are set up in these regions with the government providing support and guidance. Management measures and financial support polices have been formulated to regulate the management of these parks and to provide financial aid to enterprises operating in the parks.

Compared with the PRD, the mountainous regions and eastern and western wings are more attractive to Hong Kong enterprises, particularly those involved in labour-intensive operations. Some industries in Zhongshan have already relocated to Yangxi in western Guangdong. At the Zhongshan Torch Programme (Yangxi) industry relocation park, Hong Kong enterprises account for five projects with a total investment of Rmb800 million. In terms of construction costs, the Yangxi park is Rmb250 cheaper per sqm than the PRD. For instance, in the case of a 25,000 sqm industrial plot, an enterprise can enjoy a 40% saving amounting to Rmb12 million in construction cost. In terms of operating costs, for a factory operating within the Yangxi park with 1,000 staff and consuming 3 million kwh of electricity and 200,000 tonnes of water annually, a 25% savings amounting to around Rmb3.5 million can be achieved as compared to operating in the PRD.

At present, among the 14 prefectural-level cities in the mountainous regions and the eastern and western wings, nine have already set up industry relocation parks. Five PRD cities, namely Guangzhou, Shenzhen, Zhongshan, Dongguan and Foshan, have committed to setting up relocation parks, with Zhongshan and Dongguan being the most active. Of the 18 industry relocation parks approved by the provincial government, 11 are found in Zhongshan and Dongguan, among which five are Hong Kong-invested involving 15 projects at a total investment of Rmb1.84 billion. These include the Zhongshan Shiqi (Yangjiang) industry relocation park, which accommodates three Hong Kong projects with an investment of Rmb740 million; and the Dongguan Qiaotou (Longmen Jinshan) industry relocation park housing four Hong Kong projects with an investment of Rmb130 million.

March 13, 2007

Hong Kong Arbitration status gains global trust

Christopher To, HKIAC Secretary-General, outlines Hong Kong's strengths in international dispute resolution

New figures show Hong Kong is well on track to achieve the prestigious status of an international dispute resolution centre. In 2006, the number of arbitration cases handled by Hong Kong climbed to a record high of 394. In terms of caseload, this cements the city as the fourth busiest arbitration centre in the world, after the Chinese mainland, US and Europe.

The amounts in dispute ranged from HK$370,500 (US$47,600) to HK$369 million (US$47.5 million) and the parties involved came from a wide range of countries, including the US, Australia, UK, Hong Kong, the Chinese mainland, France, Germany, Holland, India, Japan, Singapore, Switzerland and Vietnam.

Last year's figures are significant, says Christopher To, Secretary-General of the Hong Kong International Arbitration Centre (HKIAC), because they represent strong growth (up from 281 cases in 2005, and 280 cases in 2004). Even more significant is the quality of the caseload, which is becoming more sophisticated as overseas parties increasingly trust the Hong Kong system.

Local talent - "An emerging trend is that parties in a dispute are increasingly using local lawyers and other professionals, instead of bringing in their own teams," Mr To said. "They know Hong Kong has a deep pool of talent, and that our judiciary is independent. Recently, an Australian was appointed as a High Court judge here, which further boosts confidence in Hong Kong as an international city."

Mr To said Hong Kong offers a number of advantages for parties seeking a secure, independent and cost-effective arbitration platform.

"Firstly, there is a choice of system. One way is that HKIAC facilitates the arbitration, but is not involved in it, as this is done in private between the parties in dispute. We do not charge for this service, although there is a fee if the parties are renting our premises. If we do administer the dispute, our charges are still the lowest in Asia. Unlike most jurisdictions which require a substantial fee up front, in Hong Kong you pay as you go. This is our competitive edge.

"Also, Hong Kong has a variety of experts - including the largest branch of the Chartered Institute of Arbitrators outside the UK. We have a lot of people studying here, with four universities offering arbitration courses at post-graduate level, and sufficient back-up support through our engineers, accountants and other professionals.

Even chance - "The level playing field is very strong in Hong Kong, so as long as you have sufficient evidence and back-up, the small players have as much chance of winning as the big guys."

Tellingly, Mr To cited a growing number of cases where both parties in a dispute are from the Chinese mainland, but have specified Hong Kong as the place for arbitration. He said that in order to compete in a global setting, Chinese companies need to win the confidence of investors. "They know that Hong Kong is seen as transparent, and trusted by Westerners for resolving disputes," Mr To said.

Opportunities for cross-border co-operation are also emerging as HKIAC works closely with its Chinese mainland counterpart, The China International Trade Arbitration Commission, to build relationships.

Such is the demand for its services that HKIAC has already outgrown its capacity and needs bigger premises in order to develop further. Even now, Mr To says he has sometimes had to turn away clients when the centre's 10 hearing rooms were fully booked. Increasing capacity without increasing fees is vital to the future development of Hong Kong's arbitration industry, Mr To said.

On the spot - He added that the growth of the industry would ultimately benefit the economy as a whole.

"I know of at least one major European company which has relocated its entire legal and executive team to Hong Kong, to benefit from being ‘on the spot' for settling disputes. It's a common story, and especially so for people involved in IP (intellectual property) disputes, where they need a speedy resolution so they can take their product to market. Hong Kong is the hub of Asia, and people trust our system - so it makes an obvious choice."

Mr To was recently named one of 250 Young Global Leaders by the Geneva-based World Economic Forum, the group that organises the high-powered annual Davos summit of world leaders and business tycoons. Winners need to have five to 15 years of proven outstanding contributions in their professional fields.

Hong Kong Trade Promotion Breakthrough - Hong Kong Brands to Exhibit at the Canton Fair

Hong Kong companies will be exhibiting at next month's China Import and Export Fair (Canton Fair) for the first time in the fair's 50-year history, as part of a Hong Kong Trade Development Council (TDC) initiative.

"Hong Kong's participation is a breakthrough in our efforts to promote Hong Kong brands in the mainland," said the TDC's Director of Product Promotion Ralph Chow.

In all, 41 Hong Kong companies will exhibit at the fair's new international pavilion. The TDC has arranged for an exhibition area of about 1,000 square meters, the largest single space among all non-mainland participants.

Inaugurated in 1957, the fair features annual spring and autumn shows, making the April 15-20 and April 25-30 spring fair the 101st edition.

Last October, Chinese Premier Wen Jiabao announced that the Canton Fair would be renamed the China Import and Export Fair, beginning with the spring 2007 show. A new international pavilion of 5,661 square metres was established.

The Hong Kong contingent will be made up of 41 local brands in consumer electronics, electrical appliances, household products, toys and watches. Because of the fair's limited exhibition space, the TDC selected companies on the basis of their brands and their commitment to promoting them.

"Mainland consumers are willing to pay a premium to purchase Hong Kong branded products," said Mr Chow. "They are regarded as superbly designed, high in quality and affordable. Hong Kong branded watches, for example, enjoy a 20 per cent premium over mainland products."

Hong Kong's brands are targeted at the mainland's 200 million new middle-class consumers. They live in the major cities and earn an income of more than RMB 60,000 a year.

In its 100th session last autumn, the Canton Fair included about 14,000 mainland exhibitors. These were chosen from about 600,000 mainland export companies. The event attracted nearly 200,000 buyers from more than 200 countries and regions.

The fair has evolved into a brand promotion event for mainland enterprises. In 2006, more than 800 mainland brands participated in the fair's brand pavilion. They occupied 4,175 exhibition booths, or 13 per cent of the event's booths.

About TDC - Established in 1966, the Hong Kong Trade Development Council (TDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the TDC promotes Hong Kong as a platform for doing business with China and Asia. The TDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, visit www.tdctrade.com

March 12, 2007

Market Access Eased Further for HK and Macau Residents under CEPA

Starting 1 January 2007 the business scope of individually-owned businesses established by Hong Kong and Macau residents in Guangdong has been further expanded to include agriculture, husbandry, fishery, computer repair service, and technology exchange and promotion.

Agriculture covers the growing of grains and other crops; vegetables and horticultural crops; fruits, nuts, and crops for making beverage and fragrance; and Chinese herb. Husbandry covers the rearing of livestock such as pig and poultry. Fishery covers marine and inland aquaculture. Computer repair service includes other related services as well, while technology exchange and promotion also include related intermediary services. Furthermore, individually-owned businesses established by Hong Kong and Macau residents which engage in agriculture, husbandry or fishery are not subject to a minimum business area of 300 sqm.

Hong Kong and Macau residents wishing to engage in production and business operation involving seeds, genetically modified plants and organisms, or production and business operation in the agriculture, husbandry and fishery sectors, should apply to the industry and commerce administration department for advance approval of the name of the individually-owned business to be used according to the relevant rules and regulations. The applicant should then proceed to the administrative department at the place where the business is to be located to apply for an advance permit for establishment by presenting the original and photocopies of his identity card, identity authentication document and prior approval notice on the name of the individually-owned business concerned. Upon issuance of the approval permit, the applicant can proceed to the industry and commerce administration department to complete the registration of the individually-owned business.

Prior to this latest change, the business scope of individually-owned businesses established by Hong Kong and Macau residents covered retailing (except tobacco), catering, as well as services such as hairdressing, beauty and fitness, bath, repair of home electrical appliances and other daily goods, import and export of goods and technologies, photography and photographic processing services, washing and dyeing services, and repair and maintenance of motor vehicles and motorcycles.

March 7, 2007

Hong Kong Businessmen Eye Jilin's Corn Market

The number of Hong Kong companies investing in deep processing of corn products in Jilin surged drastically in 2006, with their investment amount registering a year-on-year increase of 90%, or close to US$100 million. Deep processing of corn products has become a new investment hot spot in Jilin attracting Hong Kong companies.

A working staff at the Changchun Corn Industrial Park revealed that many Hong Kong investors expressed strong interest in the sector when representatives from the park went to Hong Kong early last year to promote corn deep processing projects. In the following few months, some Hong Kong investors visited the park on a study mission.

Chengchanglong Ltd, a Hong Kong enterprise investing in the production of corn starch sugar in Changchun, signed a land assignment fee agreement with the Changchun Corn Industrial Park on 31 December 2006, and construction work on its production plant will start in April this year. Taking up a 300,000-sqm land plot, the plant is expected to produce one million tonnes of starch sugar each year.

According to the working staff of the park, with the same piece of corn, if it is processed into lysine, it can sell for Rmb10, but if it is made into a primary corn product, it can only fetch 50 cents. Compared to primary products, deep-processed corn products with a high technology content carry higher value-added and reap higher profits. Hence, it has successfully lured investment from Hong Kong companies.

To corn farmers, while 1 kg of corn can sell for only Rmb1, when this 1 kg of corn is turned into starch, amino acid and biochemical animal feed, its value may increase several times. Hence, the industry chain for corn in Jilin has been extending longer and longer in recent years.

According to an official of the Jilin commerce department, there are now more than 10 large corn deep-processing enterprises in the province. Over 10 others are under construction and are expected to commence operation in the next one to two years.

March 5, 2007

SCMP (South China Morning Post) Article - Count your health care (Hong Kong) blessings - Bernard Chan (Member of Hong Kong Legislative Council / Alumni - Rosaryhill Hong Kong)

Last Christmas I was in San Francisco with my family and, on December 25 exactly, my little son got sick. We wanted a doctor to have a look, just in case it was serious.

I called a dentist friend in the city and asked if he knew of a hospital with an emergency room. His response was that most private hospitals' emergency rooms had closed. Not for Christmas, but shut down permanently in recent years. There might be one somewhere, but it would take a while to find and we could be waiting for many hours.

A better bet would be San Francisco General, a public hospital, but we could expect to wait five or six hours there. Eventually I found an urgent care service that was open, and fortunately my son was fine.

Something has clearly gone wrong with the medical system in that city. Emergency rooms have closed because the overwhelming demand from uninsured patients essentially bankrupted them: a large proportion of uninsured patients don't pay their hospital bills. One in five people in California is uninsured, including many illegal immigrants.

As a result, hospitals often divert ambulances away because they can't handle the workload. If you're in a critical condition you will get priority, but that's at the expense of other people who are waiting, maybe in pain. In many parts of the US, there is a similar problem.

In Hong Kong, it would have been simple to get my son seen in a hospital on Christmas Day. For a fairly reasonable charge, most private hospitals would have seen him in minutes. For a nominal fee, a public hospital would have made us wait, but certainly not for the sort of times we were looking at in San Francisco.

We often forget how well run Hong Kong is in many ways. Often, if our hospitals are in the news, it is because people are complaining about something. There is no way the Hong Kong public would tolerate a situation here like that in California. We simply take high standards for granted.

But there is a danger: we cannot guarantee that our current high standards will last forever. California's system has crumbled. In a referendum, voters rejected a plan to shift more of the cost onto employers. Now Governor Arnold Schwarzenegger is trying to introduce universal health care, but it will probably take years.

Perhaps we are ahead of California. We have universal coverage, so we don't have to worry about the uninsured forcing costs up for hospitals and the insured. (It also means that people who cannot be insured because of pre-existing conditions - like me - will always be covered.)

Also, we don't have huge overheads from the threat of malpractice suits. But our health care system, like those of nearly all communities, does face long-term funding pressure because of advances in medical science and the ageing of the population.

We clearly do not want to repeat others' mistakes. Although I work in insurance, I wouldn't want to see Hong Kong introduce the sort of health maintenance organizations found in the US. They deprive people of choice and put strict limits on the care patients receive.

But, at the same time, we do have to accept a simple trade-off: put more funds into the system or see more rationing. Rationing here would mean longer waiting times for treatment and the slower introduction of new techniques.

The way forward probably involves extra government spending paid for out of taxes, plus maybe an individual savings plan or some form of top-up coverage for those who can afford it.

The bottom line is that, as a community, we need to spend a bit more. Arguments about who exactly pays are inevitable, but probably misleading. Essentially, if you pay tax you will probably have to put a bit more into the system, either through the Inland Revenue Department or some other route.

The good news is that, unlike California, we are not facing a short-term crisis. Provided we start to increase spending moderately in the next few years, we should be able to maintain the standards we take for granted.

February 16, 2007

Invest Hong Kong's strong performance bodes well for 2007

Providing tailored market research, advising on opportunities and office space and even finding school places for executives' children is all in a days work for the team at Invest Hong Kong, who this year assisted a record-246 companies to set up or expand in Hong Kong.

Investment promotion in Hong Kong produced impressive results in 2006. The award-winning inward investment agency, Invest Hong Kong, assisted 246 companies to invest or expand in Hong Kong during the year.

Demonstrating Hong Kong's diverse economic appeal, the companies covered a wide range of sectors – catering, consumer products, financial services, information technology, manufacturing, multimedia, professional services, retail, sourcing, telecommunications and transportation. A common factor, however, was the desire to use Hong Kong's unique position as a low risk gateway to the Mainland of China.

Companies ranged in size from entrepreneurial start-ups to major multinationals. High-profile investments came from the Chicago Mercantile Exchange and Bayer Material Science, both of which opened their Asia Pacific headquarters; Methanex, the world’s largest producer of methanol, which relocated its Asia Pacific marketing and logistics operations to Hong Kong; and Eu Yan Sang opened a large traditional Chinese medicine R&D, quality assurance and logistics centre.

HK$10.24 billion invested, up 15% on 2005; 7,835 jobs expected over two years; Over 25% cite the CEPA free trade pact in their investment decision

"These results show that Hong Kong remains a highly attractive location for business in the region," said Mike Rowse, Director General of Investment Promotion at Invest Hong Kong. However, he warned against complacency. "We work in a highly competitive region and it's essential that we continue to improve our attractiveness to Mainland, Taiwanese and overseas investors," he said.

"The companies helped by Invest Hong Kong in 2006 have already invested HK$10.2 billion and are expected to create some 7,800 jobs over the next two years."

But attracting companies is only one part of the department's role. Retaining companies and helping them to expand via a range of personalised after-care services is a key aspect of Invest Hong Kong’s mandate.

Mr Rowse is optimistic about investment promotion outlook for Hong Kong in the coming year: "It is important that we retain and attract even more companies of strategic importance to Hong Kong. These companies create new jobs and bring new opportunities, skills and technologies – all crucial to the long-term growth of our economy," said Mr Rowse.

Planet Payment expands payment processing services throughout Hong Kong

Innovative US company, Planet Payment, has been active in Asia for some time. However, it was not until 2005 that the UK AIM-listed company actually set up in Hong Kong. Starting with 'half a person,' the company today has a headcount of some 15 people. And they are looking to move to bigger offices to accommodate their forecast growth. Planet Payment provides a number of payment processing tools that apply when consumers use credit cards. Their flagship product in this market is called Dynamic Currency Conversion (DCC). Enjoyed by international consumers who use credit cards issued in one currency to settle transactions in another currency, DCC enables consumers the choice to pay for their purchase in either the currency of their home or the currency of purchase. Consumers benefit by knowing exactly how much things cost at the time of sale; and there is no surprise or time-lag by having to wait until credit card bills are received. With three of Hong Kong's top banks contracted to outsource their credit card payment services this way, Planet Payment’s priority now is to improve the market penetration of their point of sale terminals. Already, many leading hotels, restaurants and premium brand shops have adopted the process.

InvestHK met Thomas DeLuca, Senior Vice President, Corporate Development, to find out more about this new technology that both empowers consumers and assists
banks.

Why Hong Kong? "The Hong Kong market was ripe for our market offering. Everything just clicked in terms of markets, banks (our customers) and technology. Furthermore, Hong Kong serves the company well in terms of being conveniently located to look after the Mainland, and other business in the region. The city is financially sophisticated and, being so international, the banks are very at ease with cross currency concepts. This, plus the fact Hong Kong is visited by many international people who have heavy global spending patterns, made the city a good fit. The openness and receptiveness of Hong Kong people to adopt new technologies gave us the lever to capitalise on this market. And the merchants' ongoing desire to improve customer service helped the uptake. Many Hong Kong banks have been looking to improve their credit card payment processing, so our solution simplified their build or buy decision."

Priorities and challenges - "Our immediate priorities lie in Hong Kong, to help more merchants to use the system. Despite our short life in Hong Kong, we already have a good foothold in the market with several hundred merchants using the system. On the bank side of things, we already service three of the major high street's bank credit card payment processing business. So, we will work closely with them to serve their needs, in Hong Kong, the Mainland, Macao and beyond. The credit card market in the Mainland is relatively modest today; however, the potential is huge once consumers adjust to this means of payment. As this technology evolves, many more opportunities are arising through mobile phones, near frequency, e-commerce and more. Our challenge is to stick to our core competency and prioritise. Another challenge has been adjusting to the practices of the labour market in Hong Kong. We have been fortunate to recruit a number of excellent candidates among the Hong Kong work force, and we want to ensure that we provide a work environment to promote employee satisfaction and retention. We realize there are differences in employee expectations in this market. For example, stock options, although common in the US, are less popular over here. So, we are feeling our way in developing our HR policies."

Meeting expectations? "Hong Kong has exceeded our expectations! There are huge business opportunities both to win new customers, and to sell new features and services to existing customers. Hong Kong banks and their merchant clients have been quick to understand the benefits in changing and seem keen to adopt our services. Because of the quality of the staff we have hired here, we are even serving other markets out of our Hong Kong office."

How did InvestHK help? "We were in our early stages in the city, when we were introduced to InvestHK. Their Financial Services sector team helped across many aspects of the business. They provided guidance on Hong Kong employment visas, assistance with securing school places, help in identifying suitable office premises, as well as introductions to key business."

Top tips - "Be focused! Make your business objectives razor sharp. Because there are so many opportunities in Hong Kong, it is easy to lose sight of your focus and priorities. If you have a consumer business which needs to accept credit cards as a means of payment, contact Planet Payment!"

UK sandwich chain continues to delight hungry Hong Kongers

UK-based sandwich chain, Pret A Manger is going from strength to strength. It opened its first shop in Hong Kong in 2002, the company's first move outside Europe and America. Now with nine stores around the city's business districts, Pret directly employs some 150 people. Selling around 8,000 sandwiches alone per day, it is not at all surprising that the company's mantra is 'passion for food'.

Pret plans to extend its network of shop fronts locally in more remote corners of the city, so that more people have ready access to their freshly made, all natural and preservative-free food and drinks. About 30% of products are tailored to the local market taste; the rest comprise familiar favourites. In November, Pret expanded its international presence by opening its first store in Singapore, a development that was co-ordinated from its regional office in Hong Kong. InvestHK enjoyed a latte in one of Pret's stores with Winne Lau, Managing Director in Hong Kong, and found out more about the company's experiences in Hong Kong so far.

Why Hong Kong? "Pret chose Hong Kong for its first store in this part of the world for several reasons, including the number of office workers with good disposable income. We selected Hong Kong not only because it is Asia's leading city and financial centre, but because it embodies what Pret is all about. Hong Kong is a city that innovates, demands excellent standards and has an unstoppable energy and passion for life.

Our products are freshly made with good, preservative free, top quality ingredients and offer lively combinations. We demand very exacting standards from our suppliers. Since we source virtually all our products locally in the market, we have to be confident we can find suppliers who can consistently deliver what we need. Hong Kong suppliers were very helpful and adaptable from the outset, and have worked with us to fulfill our needs. Quality is paramount to us - if we can’t achieve the quality we require, we will not consider opening in a market."

Priorities and challenges - "In 2007, we celebrate our fifth anniversary of operating in Hong Kong and enter our third decade in business. In Hong Kong, our immediate goal is to continually upgrade our products, develop our people and to open more branches as the right sites become available. We will also manage our network development in Singapore from Hong Kong. We will keep a keen eye on other markets in Asia. However, we will need to review them critically, given the premium quality and specific standards of raw ingredients we require. Pret prides itself on having staff who have a cheerful personality and a bit of charisma. We want to employ people who are passionate about the job, and not just do the work. After candidates pass a first interview, we put them ‘on the job’ for a day, and then get their colleagues to vote on their suitability. It is not easy, but this process helps us identify the right people. Even though landlords are now approaching us directly with requests to open up shops in their premises, finding good locations at the right price is an ongoing challenge. We are making a healthy profit in Hong Kong; however, we need to make wise choices to control overheads while achieving the network coverage we want. Since Pret adopts such high standards, there was no problem in meeting the local industry requirements for F&B establishments. The challenges lay in understanding the sometimes complicated licensing requirements and then allowing time for the processing of applications."

Meeting expectations? "Our Hong Kong operations are exceeding our expectations in many ways. For example, our financial targets have been exceeded. Plus, we have been very fortunate to source and work with suppliers who can deliver the superior raw materials we need, to the extent that only a handful of ingredients are now imported. The Hong Kong stores have been revolutionary and have influenced Pret market offerings worldwide. For example, because Hong Kong people like hot food and eating many different things at the one meal, we launched wraps and 'Pret Petites'. These are now very successful product lines locally, and have been rolled out elsewhere. Looking to the greater community, Pret also likes to give back. Even this side of the business has worked out well. For example, at the end of each day, we give away the remaining sandwiches to charities; at Christmas time, we make a donation for every Christmas sandwich sold to a local charity. Also, we are looking to use even more environmentally friendly packaging in the future."

How did InvestHK help? "InvestHK approached the company and its specialist Tourism and Entertainment sector team helped in many ways. They assisted with visas for our staff at the very beginning, helped us receive approval from government departments for our 'hot holding' presentation racks, promoted our arrival to the city and invited us to various networking events. They have provided proactive help, as well as ongoing support to advise when issues arise."

Top tips - "Invest time and resources up front to undertake an in-depth feasibility study. Just because your business model has worked elsewhere does not mean it will work in Hong Kong. Check out the local market and its specific demands. Hire local people. Not only do they know the language, but they also fully understand and relate to the culture of customers."

May 3, 2006

Branding brings HK and Guangdong closer - Innovate to grow.

Not many need reminding that Chinese mainland enterprises face "growing" problems - of declining profits, homogenous products and vicious price wars - as market competition intensifies. How to innovate, compete through product differentiation, build brands and add value to products have indeed all become vital tasks for growing enterprises, with home and international markets firmly in mind. Based on the findings of a research study of industry clusters in Guangdong, HKTDC and the Economic and Trade Commission of Guangdong Province invited Hong Kong experts and leaders of mainland enterprises to share experiences. The idea was to see where views coincided on a key area: adding value to brands through communication and design.

The district of Xinhui in Jiangmen City and Xiaolan district in Zhongshan City, two adjacent locations with similar pillar industries, were chosen as pilots. Xinhui district, as an integral part of Jiangmen City, has its roots in primary industries: stainless steel, chemical fibres and textiles, papermaking, food processing, power generation, electric appliances and motorcycles. As for Xiaolan, its pillar industries include metal works, electronics, hi-fi systems, chemicals, garments and printing and packaging. Enterprises in Xiaolan are already quite aware of the importance of brand building and 31 local enterprises and 73 brands have won the "Guangdong Brand Name Product" title, about a quarter of the total number of recipients in Zhongshan.

Cost effectiveness in mind - Price competition concerns mainland companies. Most mainland enterprises say they stress product quality in their market promotion and brand building strategies and do not spend too much money on media publicity. Given the sensitivity of price in competition and given that publicity expenses will inevitably be transferred to the cost of the product, affecting the price competitiveness of the product. Most enterprises would rather cut down on brand building and promotion expenses in order to reduce price, or give distributors a greater profit margin.

Since many enterprises are mainly engaged in OEM, the demand for branding is not great. Compared to "product branding", it is more important for OEM manufacturers to build their "enterprise brand", mainland firms believe. OEM manufacturers are more concerned about how they excel among competitors, create international recognition and maintain good customer relations. To them, this is branding of greater immediate significance. Many mainland enterprises are engaged in the production of raw materials or have industrial end-users as customers. They don't have a systematic understanding of how to build their brands among specific customer groups or how to maintain customer relations, they confide. Their existing strategy is rudimentary and not implemented in a target-specific manner within the enterprise framework.

Some domestic enterprises often find that after putting their brand strategy into practice that it often falls short of the mark. Domestic enterprises do not pay as much attention to detail and consistency in their implementation of brand strategy as their foreign counterparts do. The dislocation between formulation and implementation may lead to disappointment and dampen their confidence in brand building, they believe. Some enterprises producing chemical items plan to adopt a multi-brand strategy to expand the scope of their products. However, they have no experience in this area and do not know how to work out their brand strategy on the basis of their development plan or apply it within a scientific framework and system.

Hong Kong brand building approach - Hong Kong experts came up with the hallowed message familiar to international branding: while products can be imitated and substituted, brands are unique and cannot be replaced. Hence, efforts should be made to turn product competition into brand competition, said a number of experts. They distinguished the fact that brand building should be seen as investment in intangible assets rather than unrecoverable expenses. As brand building takes time, an early start will enable brand producers to reach targets ahead of their competitors.

Furthermore, brand building does not necessarily have to rely on expensive mass media, said the Hong Kong experts. There are many ways of reaching out to clients, depending on specific circumstances. Direct brand marketing can target specific customer groups. Brand strategy should also be mapped out on the basis of long-term development targets, with objective assessments and planning, while a scientific and feasible brand accountability management system should be established.

Businesses should also seize opportunities as they occur. For instance, an OEM manufacturer of stainless steel products in Nanhai took advantage of the opening of Hong Kong Disneyland to obtain a licence for the production of private label kitchenware with Disney character designs. The products are now on sale in overseas markets and have done well as a brand promotion

Global investors vie for HK's prime property - Overseas investors are snapping up property in Hong Kong's financial centre, pushing up sale and rental prices

Real estate investors around the world are snapping up commercial buildings and office blocks in Hong Kong, lured by rising prices and rental yields and the city’s transparent property market. In the latest in a string of such deals, Morgan Stanley Real Estate Fund paid HK$1 billion (US$128.5 million) for a majority stake in Shama, a Hong Kong serviced apartment and property company. The Schroder Asian Properties Fund was the vendor of Shama which operates five properties in Hong Kong, including 233 apartments and six restaurants.

Such deals are riding on the back of strong demand for commercial property in Hong Kong as a wide variety of foreign companies seek a foothold in the financial centre or look to expand their presence. “Basically it is a demand-driven scenario,” says Tony Chan, Executive Director at Vigers Appraisal and Consulting. “Also, there is little new supply in the prime central locations. The outcome of that is reflected in these deals.”

Worldwide demand - The demand for office space and service apartments is coming from financial institutions, law firms, accountants and ancillary services. “They are coming from all over the world,” said Mr Chan. “Hong Kong is a spring board into China. Hong Kong is equipped with the best legal and banking system. It’s good to set up a regional headquarters in Hong Kong before you jump into China.”

The influx amid tight supply is pushing up rents. Hong Kong’s most prestigious office tower, the 88-storey IFC2, recently struck a tenancy deal at HK$105 (US$13.5) per square foot per month, setting a new benchmark high for the city. The AIG Tower nearby in the city’s Central district has achieved HK$85 (US$11) per square foot per month.

Grade A office rents rose 55 per cent last year and are tipped by analysts to rise by up to 25 per cent this year. For top 10 buildings in prime locations, vacancy rates are the lowest in 12 years, according to CB Richard Ellis research.

Buildings which are now being rented out at HK$20 to HK$22 (around $US2.6) per square foot are yielding a 4 per cent annual return on purchases prices. But if rents rise to HK$30 to HK$35 (around US$4.3) in the next year or so, annual yields are tipped to be an even more attractive 7 per cent.

Mainland investors surge - Besides demand from overseas, a growing number of mainland companies are taking up space in Hong Kong - some after listing on the city’s stock market, others tourism-related new arrivals since the introduction of the individual travel scheme in 2003, says Buggle Lau, chief analyst of Midland Realty. Morgan Stanley started the trend for foreign investors to buy whole buildings in Hong Kong when it paid HK$843 million (US$108 million) n 2003 for Vicwood Plaza, a 38-storey office and shops complex in Sheung Wan, next to Central. It later sold the building to Macquarie Global Property Advisors for HK$2.6 billion (US$333million), reaping a tidy profit.

More in the pipeline - “I do see more deals coming,” said Vigers’ Mr Chan. “Big firms such as Carlyle Group and Macquarie are coming with billions of dollars. It’s phenomenal,” he marvels. Pricing for Hong Kong commercial property is likely to stay firm because of the limited number of buildings which come on to the market, said Midland’s Mr Lau. “The majority of the stock is being held by major listed property companies like Hongkong Land or Hysan Development,” he said.

Part of the attraction of Hong Kong goes beyond the fact that the property cycle is in a sweet spot. Hong Kong’s regulatory and property services backdrop also provides a lot of comfort for potential bidders in regard to due diligence checking, and the costs are reasonable. In contrast, acquiring commercial buildings in the mainland is not so straight forward and can be more expensive – often because of the need to fly in a team of lawyers from Hong Kong to do an independent due diligence check.

Overseas visitors rush to Asia’s sourcing hub - Visitors flock to the opening day of Hong Kong Gifts & Premium Fair

This year’s Hong Kong Gifts & Premium Fair (28 April - 1 May) opens to a double digit surge in exhibitor numbers. With a record breaking attendance of 3,879 local and overseas exhibitors and a 10 per cent increase over last year, Asia’s largest fair of its kind and the world’s number two in terms of exhibitor numbers, promises to be an exciting sourcing event. This fair follows hot on the heels of several recent successful fairs organised by the Trade Development Council (TDC). The Hong Kong Electronics Fair (Spring Edition) recorded a 20 per cent jump in overseas visitors and a total of 2,800 exhibitors from 24 countries, 15 per cent more than the previous year’s show.

Over 550 exhibitors from 18 countries and regions took part in the twin new fairs – International Auto Parts Fair and the International Printing and Packaging Fair – held in the new AsiaWorld-Expo near Hong Kong International Airport. In view of the overwhelming response from exhibitors and buyers, TDC plans to expand its shows in 2007.

International interest - The success of these recent fairs bodes well for the forthcoming summer shows. Already the strong market demand for gifts and premiums has attracted 83 buying missions from some of the largest retail stores and sourcing groups around the world, including Germany’s Karstadt Quelle, US-based National Wholesale Buying Inc, Australia’s Gift and Homeware Association, and the Canadian Association of Importers and Exporters.

Hong Kong's international reputation as a sourcing hub is further reinforced in July when thousands of visitors will come for the Summer Sourcing Show for Gifts (4-7 July), the Hong Kong Licensing Show (4-6 July) and Fashion Week Spring/Summer (11-14 July).

DATE EVENT EVENT FORMAT ORGANISER
28 Apr, 06 Vietnam - Latest Development and Business Opportunities for Hong Kong (Putonghua)
The latest economic development, investment incentives, as well as Hong Kong-Vietnam economic relations and its future development.
Conference,
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29 Apr, 06 [How to Get Positive Coverage, for Free] Workshop
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3 May, 06 ISO 14001 -- Understanding & Application
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The Asia-Pacific Economic Co-operation (APEC) Business Advisory Council (ABAC) and Hong Kong Trade Development Council are co-organising a conference ......
Conference Hong Kong Trade Development Council; The Asia-Pacific Economic Co-operation (APEC) Business Advisory Council (ABAC)
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Course Contents ~ An review on the requirements of ISO 9001:2000 ~ The direction of ISO 9004:2000...
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4 May, 06 Practical HR Workshop Series: Module III - ''Employee Motivation''
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6 - 13 May, 06 Study Mission on "Developing Human Resources for Future Success" to USA Conference,
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8 May, 06 OHSAS 18001 -- Understanding & Application(Occupational Health & Safety Management System)
Course Contents ~ Occupational Health & Safety Management -- System approach ~ Hong Kong OHS legislation and F&IU safety...
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11 - 12 May, 06 OHSAS 18001 -- Internal Safety Auditor Training(Occupational Health & Safety Management System)
Course Contents ~ Requirements of Safety Auditing, types of safety audit and audit objectives, audit planning and preparation...
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11 May, 06 Luncheon: ''The Increasing Global Influence on Hong Kong'' Conference,
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The British Chamber of Commerce in Hong Kong

 
11 May, 06 Meeting with European Trade Commissioners Featuring Belgium, Czech Republic, Denmark, Finland, France, Greece, Poland, Russia, Sweden and Turkey Conference,
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12 May, 06 Environmental Protection in The Construction Supply Chain: Workshop 2 Conference,
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Business Environment Council

 
12 May, 06 Jones Lang Lasalle 5-A-Side Corporate Football Tournament Conference,
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13 - 18 May, 06 Mobile and Wireless Technology to UK
This will be a golden opportunity to keep abreast of UK's mobile & wireless market trend and technology development and to identify suitable business ......
Conference,
Seminar & Workshop
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Hong Kong Wireless Development Centre

Hong Kong Wireless Technology Industry Association

 
22 May, 06 Introduction of ISO 22000 Food Safety Management Systems Conference,
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State Administration for Industry and Commerce, PRC

 
22 May, 06 ISO 9001:2000 -- Introduction
Course Contents ~ ISO9000 management principle ~ ISO9000 certification in the world...
Conference,
Seminar & Workshop
Hong Kong Quality Assurance Agency

 
22 May, 06 Workshop on 'MS Office' (2nd Class) Conference,
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23 May, 06 Creating Valuable Cities Conference
It will focus on a holistic approach to planning, emphasising the need for integration, planning and sustainability ...
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24 - 25 May, 06 ISO 14001:2004 - Internal EMS Auditor Training
Course Contents ~ The Core Elements of an Environmental Management System (EMS) ~ Appreciation of EMS standards and ISO 14001...
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24 - 27 May, 06 Study Mission on ''China Compulsory Certification'' (CCC) to Beijing Conference,
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24 & 26 May 2006 (Wednesday & Friday) International Selling Skills Workshop
This workshop is designed to bring you in touch with the latest in International Selling Skills. By the end of this workshop you will have an ......
Workshop Hong Kong Trade Development Council
24 & 26 May 2006 (Wed & Fri) Workshop : Distribution Strategy Towards Successful Brand Building in China
The workshop is designed for companies with a commitment to own and increase the value of their brand. Participants will be exposed to the process ......
Workshop Hong Kong Trade Development Council
25 - 26 May, 06 Workshop on 'MS Office' (2nd Class) Conference,
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The Chinese Manufacturers' Association of Hong Kong

 
30 May, 06 Introduction of Six-Sigma Conference,
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Hong Kong Quality Assurance Agency

 
1 Jun, 06 Introduction to ISO 10002 for Customer Complaints Handling Conference,
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Hong Kong Quality Assurance Agency

 
2 Jun, 06 ISO 14001 -- Understanding & Application
Course Contents ~ Environmental issues ?V how they affect you and your company ~ Introduction to the ISO 14001 series of...
Conference,
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5 Jun, 06 ISO 9001:2000 -- Understanding & Application
Course Contents ~ An review on the requirements of ISO 9001:2000 ~ The direction of ISO 9004:2000...
Conference,
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8 Jun, 06 Environmental Protection in The Construction Supply Chain: Workshop 3 Conference,
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9 Jun, 06 World Cup Germany Opening CocktailReception
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12 - 13 Jun, 06 ISO 9001:2000 -- Internal QMS Auditor Training
Course Contents ~ The Year 2000 ISO 9000 family ~ Documentation structure, ISO 9000 certification infrastructure, internal audit...
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15 - 16 Jun, 06 ISO 14001 -- Internal EMS Auditor Training
Course Contents ~ The Core Elements of an Environmental Management System (EMS) ~ Appreciation of EMS standards and ISO 14001 ~ EMS auditing ......
Conference,
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19 Jun, 06 How to Create 5S Culture and Conduct Internal Assessment Conference,
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21 & 23 June 2006 (Wednesday & Friday) Brands and Branding Workshop
This program offers both a broad view of the necessary marketing structure to support brands and more importantly a comprehensive and practical ......
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22 - 23 Jun, 06 Integrated Management System Set Up and Audit Approach
Course Contents ~ IMS concept, definition and documentation ~ Pros and Cons of IMS ~ How to integrate system documentation?...
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22 Jun, 06 The 31st Annual General Meeting of the HKIE Conference,
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27 - 29 Jun, 06 The 7th International Congress on Work Injuries Prevention, Rehabilitation and Compensation
The WorkCongress is a bi-annual international prestigious event on multidisciplinary approaches to the issues on safety & health at work, work ......
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27 - 28 Jun, 06 ISO 9001: 2000 Advanced Internal Auditing Techniques
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12 Jul, 06 ASHK Luncheon Meeting Conference,
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17 - 21 Aug, 06 International Conference & Exhibition of the Modernization of Chinese Medicine & Health Products 2006 Conference,
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Hong Kong Trade Development Council

Modernized Chinese Medicine International Association Ltd.

 
25 - 28 Aug, 06 Hong Kong Computer & Communications Festival 2006 Exhibition The Chamber of Hong Kong Computer Industry Co., Ltd.
 
DATE EVENT EVENT FORMAT ORGANISER
14 Oct, 06 Dinner: The Henley Group 'Boxing Smoker' Conference,
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16 - 19 Oct, 06 2006 AIA Northwest & Pacific Region Conference Conference,
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1 Nov, 06 2006 HKMA Annual Conference Conference,
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22 - 23 Nov, 06 26th HKIHRM Annual Conference Conference,
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29 November - 1 December 2006 World SME Expo
Come to the world's largest Expo dedicated to the business needs of the small and medium-sized enterprises (SMEs). The World SME Expo is a one-stop ......
Business Advisory Service Hong Kong Trade Development Council
7 - 10 Dec, 06 The 14th Hong Kong International Jewelry Manufacturers Exhibition 2006 Exhibition Hong Kong Jewelry Manufacturers' Association

HKJE

 
9 Dec, 06 - 1 Jan, 07 41st Hong Kong Brands and Products Expo Exhibition The Chinese Manufacturers' Association of Hong Kong

 
12 Dec, 06 2006 ASHK Annual General Meeting Conference,
Seminar & Workshop
The Actuarial Society of Hong Kong
 

 

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