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Major Exhibitions & Conferences in Hong Kong

Basic Law of Hong Kong SAR Guaranteed One Country Two System for 50 Years

HK Leaders & Basic Law Top China's Students Attend HK Universities  HK School of Creative Media, Entertainment & Tech Industries

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
The U.S. Commercial Service in China offers valuable assistance to U.S. businesses exporting goods and services to China. Our trade specialists can help you identify trade opportunities and local trading partners from our Embassy in Beijing, our four consulates1 in Shanghai, Guangzhou, Chengdu and Shenyang and 14 newly emerging markets2. From these locations we can access all of China!
 Hong Kong Trade Development Council (HKTDC) Market Intelligence > China
 United States Chamber of Commerce > China
 The AmCham-China White Paper: American Business in China

http://www.directory.gov.hk/

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 Share 2009 - 2010

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) http://www.tid.gov.hk/english/cepa/index.html

AmCham Shanghai launches latest Viewpoint - U.S. Export Competitiveness in China - on the 2010 Washington, D.C. Doorknock - Please download report in PDF format: http://www.hkchcc.org/viewpointusexport.pdf 

Hong Kong - China's Global Financial Center

Sundeep Bhandari, Managing Director, Regional Head, Global Markets North East Asia and Co-Head Wholesale Banking, Standard Chartered Bank.

Simon Galpin, Director-General, InvestHK

Victor L.L. Chu, Chairman, First Eastern Investment Group Mr. Chu is Chairman of First Eastern Investment Group, a leading Hong Kong-based direct investment firm and a pioneer of private equity investments in China. He is also Chairman of First Eastern Investment Bank Limited in Dubai and Evolution Securities China Limited in London. Mr. Chu is a main board member of Zurich Insurance. Mr. Chu has served as Director and Council Member of the Hong Kong Stock Exchange, Member of the Hong Kong Takeovers and Mergers Panel, Advisory Committee Member of the Securities and Futures Commission, and part-time member of Hong Kong Government's Central Policy Unit. He is currently a Foundation Board Member of the World Economic Forum and co-chairs the Forum's International Business Council. He is also Chairman of the Paris-based ICC Commission on Financial Services and Insurance.

Professor K C Chan, Secretary for Financial Services and the Treasury Government of the Hong Kong SAR (HKSARG) Professor K C Chan is the Secretary for Financial Services and the Treasury, the Government of the Hong Kong Special Administrative Region. Before assuming the post, he was Dean of Business and Management of the Hong Kong University of Science and Technology (HKUST). Prior to joining the HKUST Business School in 1993, he spent nine years teaching at Ohio State University. He received his bachelor's degree in economics from Wesleyan University and both his M.B.A. and Ph.D. in finance from the University of Chicago. He specializes in assets pricing, evaluation of trading strategies and market efficiency and has published numerous articles on these topics.

Hong Kong Budget 2011 Hong Kong Financial Secretary John Tsang will dish out nearly HK$44 billion (US$5.6 billion) to taxpayers from Surplus

HK$6,000 will be given to each holder of a valid Hong Kong Permanent Identity Card 

Hong Kong Business Name Search 香港政府公司註冊處綜合資訊系統 (ICRIS) 的網上查冊中心可以英文或中文進行聯線查冊,客戶可查閱由公司註冊處處長登記和備存的公司現況資料,以及文件的影像紀錄。 The Hong Kong Government Cyber Search Centre of the Integrated Companies Registry Information System (ICRIS) enables you to conduct searches online in either English or Chinese on the current data of registered companies and the image records of documents registered and kept by the Registrar of Companies.  Hong Kong Company Registery - HKSAR Government HK Trademark Registration HK Trademark Online Search

Hong Kong http://en.wikipedia.org/wiki/Hong_Kong

December 26 2010

HK to become world genomics research hub - Mainland gives huge talent advantage
By Fiona Tam 

Hong Kong is poised to become an international gene sequencing and genomics research hub, thanks to Beijing's drive to turn the country into an international science powerhouse by 2020. Already it is housing some of the world's most powerful supercomputers and gene sequencers, the result of the mainland's dominant genomic company, BGI, using the city to host its key laboratory.

Working at the blinding speed of supercomputers, BGI Hong Kong will theoretically be able to sequence 1,300 human genomes every day. By comparison, the Human Genome Project took more than 10 years to unravel the human genome.

"To put that in perspective, [BGI] has about the same capacity as the three largest genome centres in the United States, including the Broad Institute, Washington University and Baylor College of Medicine combined," said Kevin Davies, editor-in-chief of the American magazine Bio-IT World. BGI was also much larger than Asia's other DNA sequencing centres, Davies said, referring to Macrogen in South Korea and NIG and Kazusa in Japan.

Gene sequencing is a research tool and the basis of biotechnology. For example, in medicine, it helps to identify genetic abnormalities and hereditary diseases, and to produce new drugs. In agriculture, the genes of crops are modified to enhance desirable features and eliminate undesirable ones. In biology, researchers study the evolution of organisms by pinpointing their genetic mutations, or changes in the genetic sequences that were passed on to the next generation by natural selection.

An old printing factory on Tai Po Industrial Estate now houses BGI Hong Kong's four-storey laboratory, which is engaged in an unparalleled DNA sequencing project that may grab global attention; earlier discoveries from its parent institute, BGI, have already been published in some of the world's leading scientific journals, such as Nature and Science.

Inside, Alex Wong Lap-chi, executive director of BGI Hong Kong, presides over the laboratory's 58 Illumina next-generation sequencers. Each costs about 3.4 million yuan (HK$4 million). Another 57 HiSeq 2000 advanced gene sequencers would be shipped from the US by the end of January, he said.

When all those genome analysers are running around the clock, electricity for the computer and cooling systems alone will cost 9 million yuan a year. The analysers will be supported by another 22 on the mainland, backed by 1,500 bioinformatics specialists working mainly in Shenzhen.

The world has already seen some of BGI's capabilities. In March, the cover pages of Nature reported on its sequencing of an ancient human genome, 4,000-year-old extinct Palaeo-Eskimo remains from Greenland. Last year, Nature featured BGI's draft sequencing of the genome of three-year-old female panda Jing Jing, one of the Beijing Olympics mascots.

At present, BGI is aiming to sequence the genomes of 1,000 plants and animals and 10,000 microbes to expand its own database of genomic information. It has launched an ambitious but controversial project to hunt for the genes responsible for human intelligence.

It is also undertaking sequencing projects for profit to pay back a 10 billion yuan bank loan. The institute has already scored one important client - the pharmaceutical company Merck, which announced a five-year deal with BGI two months ago. Other drug firms such as GlaxoSmithKline, Pfizer, Lilly and Novartis have also shown interest in the Hong Kong facility.

Genomics is among the physical sciences that Beijing wants to champion as an industrial policy goal, and BGI is at the forefront of genomic science on the mainland.

BGI started life as the Beijing Genomics Institute. The central government set it up in Beijing in 1999 when it decided to join the international Human Genome Project and sequenced 1 per cent of the total human genome. BGI relocated its headquarters to Shenzhen in 2007.

In April this year, the institute set up its Hong Kong sequencing centre, financed with part of a 10 billion yuan low-interest loan from the state-run China Development Bank. The Hong Kong centre is to handle most of the institute's international genomics business, taking advantage of the city's scientific research capability and easier customs facilities for importing biological specimens such as blood, tissue and urine.

BGI now has a staff of 3,000 at six research centres across the mainland, Hong Kong and centres in Boston and Copenhagen. About 100 bioinformatics specialists work at the Hong Kong facility and about 1,500 at BGI's Shenzhen headquarters to analyse and interpret the reams of DNA data churned out by the sequencers.

Those 1,600 specialists are a huge asset, says Sumio Sugano, bioscience professor at the University of Tokyo. "They are all under 30 and these young brains with world-top capability of sequencing and computing power could make BGI the future Apple, Microsoft or Google in the genomics field," Sugano said, and the influence could reach beyond medicine to agriculture and green energy.

No single institute in the US or Europe can afford 1,600 bioinformatics specialists, but the mainland's cheaper labour market makes it possible. Labour is usually about one-third of the cost of sequencing (reagents, computing and capital expenditure make up the rest).

BGI is hiring Chinese specialists in computer science, biology, mathematics, statistics and genetics at about one-fifth the price its US and European counterparts must pay.

BGI technology director Li Jingxiang said it was difficult to recruit bioinformatics specialists in Hong Kong because many fresh graduates with related backgrounds joined the financial sector. And because technicians in Hong Kong cost more than BGI is used to paying, the number of such specialists will be kept to a minimum in Tai Po, with most IT work done in Shenzhen.

Not everyone is impressed with BGI. Pseudo-science debunker Dr Fang Shimin , better known as Fang Zhouzi , said large-scale sequencing resembled a labour-intensive Henry Ford assembly line. While acknowledging that information generated from DNA sequencing is very useful for geneticists and biologists, he said sequencing simply was not an innovative activity.

"Basically, genome analysers will sequence automatically as long as you can afford these expensive machines," the Beijing-based biological chemist said. "BGI's work is more like a transcriber that simply copies down crude DNA data from organisms, but that doesn't mean BGI understands what it is writing about."

But biology professor Samuel Sun Sai-ming from the Chinese University of Hong Kong said he was confident BGI could make major contributions. It would not mean much to genomic science if BGI simply sequenced DNA alone, Sun said. "But BGI has thousands of bioinformatics specialists to manage, analyse and interpret the huge amount of DNA sequence data, making biological sense of the DNA sequences. It can mine the data and make discoveries in biological and medical sciences and for further applications."

Kelvin Lee, a professor of chemical engineering at the University of Delaware, said that because life-sciences research relied heavily on access to large amounts of high-quality sequencing data, BGI was capable of providing the foundation of knowledge needed for the study of genomics to move forward this century.

Last year, BGI launched a 400,000 hectare project with the government of Laos, exploring the possibility of turning genetically modified plants such as cassava, sugar cane, oil palm and castor oil into food, biological alcohol or diesel oil within five years.

Yin Ye , a BGI vice-president, said the institute's ambitions included cutting the cost of sequencing a human genome from less than US$10,000 this year to US$2,000 - and eventually to an affordable level for everyone. The Human Genome Project, which published its first rough sequence of mankind's genetic code in 2001, cost an estimated US$3 billion.

Jay Flatley, chief executive of the world's leading genome sequencing company, Illumina, based in California, predicts DNA sequencing will become so cheap that babies born from 2019 onwards will have their genetic code routinely mapped at birth.

Dennis Lo Yuk-ming, a professor of medicine at Chinese University, hopes the presence of such a large facility will raise Hong Kong's profile in the global genomics community.

"BGI's achievements show that with timely funding, Asian scientists can compete at the highest level on the world stage," he said.

December 22 2010

Multicolor Marketing 

Viveca Chan founded the WE Marketing Group in 2005. Ranked among the top 10 international agencies on the Chinese mainland, with more than US$80 billion in annual billing, WE has over 200 employees in offices in Beijing, Shanghai, Nanjing and its headquarters in Hong Kong. As Chairman and CEO, Ms Chan says she’s on a mission to help build the Chinese mainland build global brands. In Six Questions, Ms Chan explains how she has done just that for Hong Kong’s Yip’s Chemical Holdings and its signature brand, Bauhinia Paints. 

How did you start working with Yip’s Chemical and its Bauhinia Paint brand?
We’re called “WE” because our position is to combine East-meets-West. We all come from an international advertising agency background, and we work a lot with international brands, so we wish to bring that experience to help local brands globalize and global brands to localize. 

We see an opportunity in China, where there are a lot of ad agencies, but no China-based and owned firms that are also global. Our mission is to help these local brands globalize, using our experience. This project came about at roughly the same time as we started four years ago. I was a speaker at an HKTDC branding conference, where I met the CEO of Yip’s Chemical. I ended up meeting later with the company’s Deputy General Manager Francis Ip, and I thought, “Wow, this is my dream client, because this is what we want to do; we want to help local brands globalize.” 

http://www.youtube.com/watch?v=or1f-4h1ExM

How do you approach a project like Bauhinia Paint?
The first thing is you’ve got to know your market and respect your competitors. So we spend time understanding the market. We study what all the competitors are doing, what they’re saying in the marketplace to find out where our opportunities and challenges are. Then we also have to understand a lot about Bauhinia – where they are now, where they were and where they want to be to map out what our communication objectives are. 

We then define a three-point task: one is brand identity, another is brand awareness and the third, which I think is very important, is brand integrity. This is where Bauhinia’s core value and strength lie, and that is being from Hong Kong. Hong Kong is very international. At the same time, there is a lot of local and cultural understanding. Combining the two is very much a Hong Kong strength. The other thing Hong Kong is well-known for is its style and design. I think, in a business where it’s not just really about paint – it is about designing your home, about living, about upgrading your living style – Hong Kong style and that kind of a design image really enhances the brand. 

What are some of the issues to consider as you develop a brand on the mainland?
I think that there are two big challenges. The first one is differentiation, because there is never a lack of brands and products. How do you differentiate yourself in this vast market? The second is sustainability. We see many brands that are an overnight success, but to be able to sustain beyond five years is very difficult. So very few have the sustaining power. What we’re trying to do is create the difference. I think what Bauhinia has is the brand basics of being very competitive in terms of quality pricing. And I mentioned the brand integrity being very important because we really need to provide the quality at the price. But secondly, it’s the sustainability, because it’s not just about doing a lot of advertising and creating awareness, if you cannot sustain it. So it has to come from very sound business models.

What should companies know about modern mainland consumers?
First, they are trading up, but at the same time they are also trading off, because money is not limitless. So we want to make sure we are the ones they are trading up to. 

Second, Chinese consumers really believe in big brands, so bigger is better and more expensive to them means better quality. China’s consumers believe in big brands because it gives them more trust. They place a lot of importance on product safety, on health – much more so because of the prevalence of negative publicity on some of the not-so-good products. The other thing is that it is not easy to capture their loyalty. For example, their purchasing decisions will always take into account not just “me” but the whole family, and shopping is a family affair. 

How is your approach reflected in Bauhinia’s “Paint Your Spring” advertising campaign?
If you look at the way that we’ve done the positioning, we summarized it into something the consumer can easily capture in their minds and hearts. We talked about trading up, about optimism and about health. How do we summarize that in one line? So our communication theme is “Paint Your Spring,” and that means life to them is like spring. Spring is optimism; it’s very colourful – just like our paint. And if you think of spring, it’s fresh and healthy. So it is the implication of hope. What you see in the commercial is the whole family working on this new home together. It is like they are creating their new life, so it is a visual identity that we want to create and also a theme that we think is quite sustainable. It captures the hearts and minds of the consumers. 

What edge does Hong Kong offer to mainland companies that choose to base here? 
The advantages we capture are what we talked about, with brand trust, and I think Hong Kong companies have that advantage. We’re seen as very trustworthy because we deliver what is promised. And I think what we are doing now goes beyond that – the brand integrity is there as well. I think we’re building on the future as Hong Kong goes beyond just a manufacturing society. We’ve become a services society, now we’re becoming a value-driven society. So what we see is that we have good products that meet the needs and desires of the consumers.

December 22 2010

Hong Kong to host Asian TV, pop music awards - Two new events, the biggest of their type in region, to be held during Entertainment Expo

Hong Kong will have two new awards for television and pop music next year, both sponsored by the government and set to be the largest of their kind in Asia. The Asia Rainbow TV awards and the Hong Kong Asian Pop Music Festival will be the first big Asian showbiz events staged by Hong Kong.

The former, organised by the Hong Kong Television Association and China Radio and TV Academy, will cost more than HK$10 million and receive HK$5.3 million from CreateHK, a Commerce and Economic Development Bureau agency.

Awards will go to playwrights, producers, actors and actresses, as well as the best television drama, entertainment show, documentary and animation. "Rainbow is like a bridge, linking friendship between Asian nations. And it is like an expanded version of the three basic colours on TV, too," association president Tsui Siu-ming said.

The music festival, organised by the International Federation of the Phonographic Industry (Hong Kong Group), will receive HK$5.5 million of its HK$8.5 million cost from the agency. It will invite top-ranked pop stars from the mainland, Hong Kong, Taiwan, Malaysia, Singapore, Japan and South Korea.

An award will be presented to a rising star, who has only issued records in the previous three years. Others will go to the best vocal performance and the best stage performance. Two pop singers, one top-ranked and one new, from each place will perform at the event.

CreateHK head Jerry Liu Wing-leung said he hoped the awards would promote commercial exchanges between the nations.

He could not estimate the economic benefit Hong Kong would receive from the awards. "It's the first time we have held these kinds of events, so we don't have any reference for estimation," he said. "But it's like spreading seeds. We won't see the result immediately."

The events will be non-profit. If the organisers spend more than proposed, the government will not give more cash. But if they spend less, the money will return to the public purse.

The music event will be made into a television programme to be broadcast in Hong Kong and elsewhere in Asia. Liu estimated 10 million people would watch the programme.

But federation chairman Ng Yu said technical problems, such as contracts of some stars that forbade them from appearing on certain television channels, had yet to be worked out.

The events will be held on March 22 and 23 at the Convention and Exhibition Centre in Wan Chai during the Entertainment Expo. Liu said he hoped the expo would draw producers, buyers and sellers to the new awards.

The television awards will have capacity for an audience of 2,000, with priority for organisers, guests, stars and their assistants, and any surplus distributed to the public.

Ng said that for the music festival, "at least a few thousand free tickets" would be distributed to the public on a first-come-first-serve basis.

He said information on how to get tickets would be released later.

December 15 2010

Cross-Strait Trade: the Hong Kong Factor 

Taiwan’s corporate investments have shifted from traditional - labor-intensive manufacturing to technology-intensive industries 

The month of June 2010, highly significant for trade relations between the Chinese mainland and Taiwan, looks promising for Hong Kong’s role in cross-strait ties as well, particularly where it comes to technology-driven industries, systems integration and enhanced logistics. 

Taiwan and mainland authorities in June signed the Economic Co-operation Framework Agreement (ECFA) and an agreement on intellectual property rights protection, pacts that are expected to help boost economic activity, trade and investment. 

The new arrangements are complementary. As the mainland’s technology industries grow rapidly, there’s constant demand for new materials, key parts and components, as well as related technology and production know-how. In short, the mainland is a destination for Taiwan investment, but also a huge market for Taiwan industries. 

Taiwan investment flows to the mainland have surged. In the eight years to 2009, companies on the island invested a cumulative approved sum of US$82.7 billion on the mainland, accounting for 58.1 per cent of Taiwan’s total outward investment over the period. 

Taiwan’s corporate investments have gradually shifted from traditional labour-intensive manufacturing to technology-intensive industries, particularly for manufacturing electronics parts and components, as well as computers, electronic and optical products. 

Last year, Taiwan company investments in those two categories made up 30.6 per cent and 17.3 per cent respectively of the island’s total investment in mainland manufacturing, a marked increase from the early 1990s. 

In the printed circuit board (PCB) industry, for example, the mainland is the world’s largest production base, but 40 per cent of the output value of the mainland’s PCB is generated by Taiwan companies. 

Of the top exporting enterprises, most are in the electronics industry, among which Taiwan companies have been in leading positions for some time, with names like Quanta, Hon Hai, Compal, Inventec, Asus and Acer testimony to increasingly intertwined cross-strait ties. 

Last February, Taiwan announced a further relaxation of restrictions on technology investment on the mainland, reclassifying the manufacturing of “polycrystalline silicon,” “other monolithic digital integrated circuits,” “other monolithic integrated circuits” and “other hybrid digital integrated circuits” and the integrated circuit design industry, from the prohibited to the general category. 

At the same time, the scope of prohibition on the mainland has been reduced for investment in wafers and TFT-LCD panels. Following the signing of the ECFA, trade across the Taiwan Strait, as well as investment and industrial cooperation, is expected to move forward in tandem. 

Cross-Strait Technology 

Taiwan companies can look to Hong Kong for various support services in their Chinese mainland business expansion 

Despite closer cross-strait relations, supply chains and division of labor for technology products are becoming increasingly complicated. Taiwan players need different services to support business expansion. Hong Kong has an edge in specialized services, including technology marketing and applications. Hong Kong services providers can also offer highly efficient logistics and a range of financial services to accommodate technology companies. 

In a sense, Hong Kong is set to continue – but even more effectively – as a bridge for Taiwan and mainland firms linked by technology. 

Perfect Partner 

Taiwan companies are particularly able in front-end R&D and component manufacturing, especially industrial products. Hong Kong, with its competitive advantages in back-end applications and commercialisation, can be a perfect partner for Taiwanese firms. 

In fact, numerous Taiwan companies have set up offices in Hong Kong to support their sales activities for industrial products in Hong Kong and on the mainland. 

For example, Taiwan’s Macronix International Co Ltd, one of the world’s largest manufacturers of ROM products, has an office at the Hong Kong Science & Technology Parks, engaging in R&D work of non-volatile memory and related products to support the company’s regional technology business. 

Other Taiwan technology companies, including Winbond, Elan Microelectronics Corp, Sunplus and Silicon Integrated Systems Corp, have set up Hong Kong offices to offer sales services to Hong Kong and mainland customers. 

Many Taiwan companies work with Hong Kong companies through agent or distributor arrangements to market and send their products to the city and the mainland, providing solutions for product design and applications as well as engineering consultancies and after-sales technical services. 

Logistics Demand 

Hong Kong Financial Secretary John Tsang (center) pays a landmark visit to Taiwan in August 

Taiwan’s corporate investment on the mainland is largely related to the production of high-tech products, so it has an especially strong demand for efficient logistics services. 

Some Taiwan logistics companies, such as Dimerco, have set up branches in Hong Kong to cater to their mainland-Hong Kong-Taiwan businesses. 

At the same time, some Hong Kong services suppliers, including Kerry Logistics and IDS Logistics International, have set up offices in Taiwan in addition to establishing networks on the mainland. Given the technology industry’s demand for logistics services, there are plenty of opportunities for even closer ties between Taiwan and Hong Kong logistics players. 

Venturing Capital 

Hong Kong’s financial services play a crucial role in technological cooperation between the mainland and Taiwan. For instance, some Taiwan-funded banks have set up branches or offices in Hong Kong to provide services to Taiwan customers. 

At the end of May 2010, there were 17 licensed banks in Hong Kong with Taiwan origins and two Taiwan-incorporated banks with representative offices in Hong Kong. 

Listing on the Hong Kong stock exchange is another means for Taiwanese technology companies to obtain financing for their mainland businesses. At the end of April 2010, some 46 Taiwan-funded companies were listed, with an estimated total market capitalization of HK$412 billion. A number of these listed companies are technology-related, such as Foxconn International Holdings (FIH), TPV Technology Ltd and Proview International Holdings Ltd. 

Hong Kong is Asia’s largest management centre for venture capital and can readily offer the necessary funds required by Taiwanese technology companies for their mainland projects and investments. 

Some venture capital funds have already set up offices or Asia-Pacific regional headquarters in Hong Kong, targeting Taiwan as a significant market. Among them are the Carlyle Group, Warburg Pincus Asia and AsiaTech. 

Hong Kong’s position as an overseas renminbi center is growing, with authorised banks able to offer renminbi trade-settlement services to Hong Kong enterprises since July 2009. 

The problem of managing and lowering trade risks brought about by exchange-rate movements has become an issue for Taiwan companies trading with the mainland, due to fluctuations in the foreign exchange market and such issues as the revaluation of the renminbi. These firms can consider pricing in renminbi and carry out trade settlements in the currency as a means of hedging against exchange-rate risks. 

Technology Marketplace 

Taiwan-based technology firms are in the process of transferring more and higher technology to the mainland while increasing their investments there. 

Conversely, mainland enterprises have increased their demand for Taiwan technology, especially related to the production and design of electronics products and the parts and components sectors in which Taiwan excels. 

Technology transactions across the strait are becoming more frequent. Nevertheless, infringement of intellectual property rights (IPR) is the biggest headache for Taiwan technology companies. Hong Kong’s transparent, precedent-based legal system provides the necessary IPR protection to reassure Taiwan investors. 

A number of Hong Kong IPR agencies and law firms can handle property rights registration, transfer or licensing transactions with the appropriate intellectual property offices in the Greater China region, and other markets, on behalf of technology companies and other customers. Their extensive experience allows them to offer a complete range of IPR management services to Taiwan companies for technology transactions, particularly those spanning different jurisdictions. 

Many Taiwan companies have set up Hong Kong subsidiaries to hold specific IPR assets and handle related business. When a mainland company is licensed through a Hong Kong subsidiary, the withholding tax levied on the royalty payment made by a mainland vehicle to a Hong Kong company is reduced from the usual 10 per cent to seven per cent. This falls under the Arrangement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income signed between Hong Kong and the mainland. 

New Opportunities 

Hong Kong’s reputation as a highly efficient services center and regional technology marketplace is a major draw for future business. Taiwan companies can leverage Hong Kong for expansion. 

With increased trade and economic relations across the strait, Taiwan companies are set to increase their trade and investment activities on the mainland and step up their presence in that market. Hong Kong’s role as a services platform for cross-strait technology cooperation can only become more significant and provide a competitive edge for them. 

December 8 2010

Luxury Unlimited - Hong Kong’s high-end retail areas continued to attract new brands.

Throughout 2010, as retailers worldwide were still struggling to recover, Hong Kong’s high-end retail areas continued to attract new brands. In June, American luxury men’s retailer Tom Ford opened a flagship store at Central’s ifc, one of the city’s most prestigious malls. The store occupies 1,700 square feet of space and offers a comprehensive range of products, including the brand’s made-to-measure service. Tom Ford is just the latest high-end brand to tap the lucrative Hong Kong market. A newly released survey by market research firm Synovate has found that Hong Kong leads in the region in luxury spending even during the economic downturn. "It's going to take more than an economic dip for Hong Kong's luxury lovers to stop spending on their objects of desire," noted Steve Garton, Executive Director of Media at Synovate.

As the region's most comprehensive study of elite adults, Synovate PAX tracks media and digital consumption, prosperity and influence across 11 markets: Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand. Now in its 14th year, the survey is conducted year-round, with 1,674 affluent Hong Kong residents polled in the 2010 study. 

Steve Garton, Executive Director of Media, Synovate

Among its findings, the survey revealed that Hong Kong’s high earners were the most likely to own jewellery items worth more than US$1,000 (32.5 per cent) and a luxury watch of the same value (28.8 per cent). They are also most likely to spend on designer clothes and leather goods worth US$1,000 or more (16.1 per cent) and to buy luxury accessories and footwear.
Buying More

If anything, said Mr Garton, the downturn was a time for buying more. “For people with money, Hong Kong was actually a shopping paradise during the downturn. Prices were discounted and incentives offered, so shoppers with cash were able to make it go further. It was confirmation that affluent people want to enjoy the benefits of a high discretionary income.”

They shop here, Mr Garton said, because with so many brands on offer, Hong Kong “has the world on its doorstep” in terms of international choice. He described Hong Kong residents as “dedicated followers of fashion,” for whom keeping up with the latest trends is entrenched behaviour. “Hong Kong people love shopping – why would they ever stop?”

Hong Kong’s ability to attract high-end brands, in turn, draws luxury shoppers from the Chinese mainland. Since visa restrictions were eased in 2004, the flow of wealthy mainland tourists coming to Hong Kong to shop for luxury goods has increased year after year. They come for the wide range of international brands, the duty-free prices and the knowledge that brands sold in Hong Kong are genuine. In the year to date (January to September), Hong Kong welcomed nearly 16.5 million visitors from the mainland, up 23.7 per cent over 2009.

On Top of the World

Joe Lin, Senior Director of Retail Services, CB Richard Ellis

When it comes to luxury fashion, watches and jewellery, no city in the world offers more choice than Hong Kong. Research collated this year by global real estate firm CB Richard Ellis (CBRE) found that 91 per cent of luxury brands surveyed had a retail presence in Hong Kong. London, in second place, attracted 87 per cent of the luxury retailers, while Dubai came in third, with 85 per cent of luxury retailers present. According to the CBRE report, Hong Kong “benefits from being regarded as a premier retail destination from both Western and Eastern perspectives, attracting luxury retailers from across the world.” But as Joe Lin, Senior Director of Retail Services at CBRE Hong Kong explained, it is Hong Kong’s edge as a catchment for wealthy mainland visitors that has the most pull for international brands. “They like to set up a shop window in Hong Kong as a stepping stone to the long-term Chinese market.”

This explains why so many brands set up early in Hong Kong in the key market sectors of watches, cosmetics and high-end audio-visual products. In recent years, top fashion brands have begun establishing flagship stores, keen to stake their claim in a market where others have been successful.

Christoph Wellendorff (centre) at the launch of his brand’s new boutique in ifc

Prime retail space in Hong Kong’s most exclusive high-street areas – Canton Road in Tsim Sha Tsui and Queen’s Road in Central – is among the most expensive in the world, not far behind the equivalent in New York or Tokyo. But Mr Lin said many brands believe the investment in Hong Kong is worth it. “Many of the top names are taking up big space in Hong Kong. They will have one flagship store in a prime area rather than seven stores in cheaper locations, because they can benefit from the exposure.”

Still They Come

Nicholas Paspaley, Paspaley's Executive Chairman, opens his pearl emporium on Canton Road

In November, renowned German jeweller Wellendorff also chose ifc mall to open its first stand-alone boutique in Asia. Explaining the location, Christoph Wellendorff, the fourth generation of the Wellendorff family to manage the company, said: “Being one of the most modern and luxurious cities in Asia, Hong Kong is at the same time respectful and true to its traditions and heritage. This represents the core values that are exactly what Wellendorff strives for.” Burberry this year opened its 15th store in Hong Kong, a 450-square-metre, multi-level site for women’s and men’s ready-to-wear. The shop is located in Kowloon, at Elements, one of Hong Kong’s biggest shopping malls.

On Canton Road in Tsim Sha Tsui, Marc Jacobs launched a new flagship store – the brand’s third retail venture in the city – while Australian luxury pearl brand Paspaley opened its new Asian “pearl emporium,” joining brands such as Cartier, Tiffany, Van Cleef & Arpels, Rolex and Piaget to create Hong Kong’s newest luxury precinct. 

Jerome Lambert, CEO of Jaeger-LeCoultre, at Harbor City

Luxury Swiss watchmaker Jaeger-LeCoultre opened its second Hong Kong boutique in Tsim Sha Tsui’s Harbour City shopping mall, buoyed by the brand’s initial success at Pacific Place, the upscale mall in Admiralty.

Ho, Ho, Ho

To date, it has been a busy year for Hong Kong retailers, with sales seeing double-digit growth each month of 2010 so far. Going into the Christmas sales period – traditionally the highest yield-time of the year – they have every reason to smile.

December 1 2010

Better Living Expo to be Launched in July 2011 - New Fair to Showcase Lifestyle Products and Services

HKTDC Deputy Executive Director Benjamin Chau (left) and PCES Managing Director Eddie Leung (right) today signed a memorandum of agreement to jointly launch a new trade fair, “Better Living Expo,” in July 2011

HKTDC Deputy Executive Director Benjamin Chau told a press conference today that the new fair would target lifestyle products and services

PCES Managing Director Eddie Leung expects that the trade fair partnership could help the development of Hong Kong’s exhibition industry

A new trade show, “Better Living Expo,” will debut next July at AsiaWorld-Expo. Organized by the Hong Kong Trade Development Council (HKTDC) and private fair developer Paper Communication Exhibition Services (PCES), the 22-24 July show will feature lifestyle products and services in such areas as beauty and well-being, hobbies and learning, back-to-school products and value shopping.

The two organizations signed a memorandum of agreement today. “The new lifestyle-focused event is our next marketing-style fair. It follows the launching of the HKTDC Hong Kong International Wine & Spirits Fair in 2008 and the Hong Kong International Tea Fair in 2009,” said HKTDC Deputy Executive Director Benjamin Chau.

“Hong Kong is a regional trendsetter, with a cosmopolitan lifestyle that has an extraordinary influence on the Chinese mainland and other parts of Asia,” said Mr Chau. With such advantages, the new show could be an ideal platform for exhibitors to promote their lifestyle products and services, according to Mr Chau.

“Most local SMEs are doing business related to our daily life. For these companies, especially those newly established, the Better Living Expo can help them launch new products and build their brand image,” he said.

Mainland China Target

“The new fair will target both local and mainland markets, and can help exhibitors keen on expanding their business into the mainland,” Mr Chau added. “We also expect local and mainland traders to look for well-received products and services at the new expo, creating opportunities for future partnerships.”

Although essentially a trade fair, Better Living Expo will also open to the public. Mr Chau said visitor reactions could provide a boost for the products featured at the show, enhancing the overall promotional impact of the expo.

“Based on the principles of shared investment, shared operation and shared responsibilities, we expect our cooperation with the HKTDC can help the development of Hong Kong’s exhibition industry,” PCES Managing Director Eddie Leung said. “In addition, we believe the new show can benefit exhibitors as well as buyers and visitors.”

The HKTDC and the PCES will consider arranging transportation for buyers and visitors in order to help them visit the show. Details will be available in due course.

Enhancing Hub Role

The HKTDC organises seven fairs with other organizers. They include the Hong Kong International Stationery Fair, the Hong Kong International Printing and Packaging Fair, the Hong Kong International Tea Fair and Eco Expo Asia.

“In addition to Better Living Expo, the HKTDC will continue to explore new exhibition opportunities with other fair organisers to help maximize the use of the AsiaWorld-Expo,” said Mr Chau. “We believe that such cooperation will strengthen the city’s exhibition industry, enhancing Hong Kong’s role as a regional exhibition hub.”

About the HKTDC

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

Additional information, please contact: Johnson Choi at (415) 963-1541 or 691-6138 (San Francisco USA); (808) 524-5738 (Hawaii USA), (852) 8171-3118 (Hong Kong SAR); Fax (808) 524-8063 or by email to johnsonchoi@johnsonchoi.com  or jwkc8168@yahoo.com

November 23 2010

Hong Kong $10billion (US$1.29billion) university hub planned for border loop - 24,000 students will study at up to four tertiary institutions

An uninhabited pocket of land polluted by toxic mud will be turned into a hub for higher learning, according to the Planning Department.

Up to four new tertiary institutions may be built on the Lok Ma Chau Loop, a swathe of land that will also feature research and development facilities and a nature conservation area, it said. Officials yesterday disclosed details of the plan for the 870,000-square-metre area, which belongs to Shenzhen but is managed by the Hong Kong government. At least five local universities have expressed interest in opening new campuses there.

"The site is ideal for training talent for the Pearl River Delta so that it can compete with the Yangtze River Delta, which has a lot more tertiary institutions," said deputy director of planning Ling Kar-kan.

The loop was carved from Shenzhen's territory during the straightening of the Shenzhen River in the 1990s. Controversy has dogged the site. Developers wanted full-scale building while environmentalists fought for its conservation after cleaning up the toxic mud from industrial waste discharged into the river. The new plan will disappoint both groups. The result of a joint study by the Hong Kong and Shenzhen governments, it will be open for public consultation until January.

Ling said the loop could produce a floor area of 1.2 million square metres for the new education hub. More than half the space, or 720,000 square meters, will be reserved for educational facilities. That space should be enough for one to four institutions to set up a new campus or faculty, or even a new university, Ling said.

The facilities, to open no sooner than 2020, will accommodate 24,000 students, half of whom will live in dormitories on the site. Building the infrastructure is expected to cost about HK$10 billion. It will include new roads, sewage treatment plants and possibly a light-rail system. Hong Kong will pay for most of that but is in negotiation with Shenzhen over possibly sharing the cost.

A University of Hong Kong spokeswoman said it had already handed in a development proposal for the site. "We are interested in setting up a school zone in Lok Ma Chau," she said.

"We are waiting for the results of government research. [The proposal] could help HKU further its development in teaching and research."

Chinese University said the site's geographical proximity to Shenzhen made it ideal for its expansion plan. "We have always hoped to make use of this edge to help cope with the demand for talents from Hong Kong, Shenzhen and the Pearl River Delta," a university spokesman said.

The University of Science and Technology, Baptist University and the Polytechnic University, along with several educational institutions based in Shenzhen, have expressed interest. Ling hopes to attract interest from overseas universities, as well.

The rest of the loop will go to hi-tech research and development, and creative industries. Buildings on the loop will be restricted to 15 storeys or less. To be a low-carbon area, only electric cars and bicycles will be allowed in. The loop will be linked to the Lok Ma Chau boundary control point with a road or light rail system, which will make it a 10-minute journey for commuters to travel to the hub from the control point.

An ecological zone, intended to be a no-go area, will be created along the edge of the loop to preserve the flight paths of migratory birds.

Areas adjoining the loop - covering 182 hectares of land that contain villagers, hills and fish ponds - will see small-scale, commercial developments such as restaurants, shops and guest houses. Across the border, a similar-sized site in Shenzhen, including the Huangguang and Futian ports, will have offices, hotels, exhibition venues and research facilities to support the education hub.

Public forums will be held in Hong Kong and Shenzhen to collect public views.

Hong Kong SAR November 17 2010

Signing of US trade agreement with the United States Commercial Service - Bridge to New Opportunities for American Companies

http://www.youtube.com/watch?v=LC5MZGNUiVQ

http://www.facebook.com/video/video.php?v=456331861983&comments

HKTDC Executive Director Fred Lam (left) and Assistant Secretary for Trade Promotion and Director General of the USFCS Suresh Kumar seal the deal with a handshake, following the signing of the statement of intent to cooperate on trade promotion

American companies looking to expand beyond their home market can turn to Hong Kong for opportunities in booming Asia, thanks to the Pacific Bridge Initiative (PBI), introduced by the Hong Kong Trade Development Council (HKTDC) and the United States Foreign Commercial Service (USFCS) of the US Department of Commerce.
The PBI responds to US President Barack Obama’s National Export Initiative (NEI), which sets out to double American exports over the next five years, while supporting employment in the US.

A statement of intent to cooperate on trade promotion was signed, 15 November, by Suresh Kumar, Assistant Secretary for Trade Promotion and Director General of the USFCS, and HKTDC Executive Director Fred Lam at a business luncheon hosted by the American Chamber of Commerce in Hong Kong.

“Hong Kong is well-positioned to help US companies looking to increase exports to this region,” Mr. Lam said. “Hong Kong companies can also benefit by using US companies’ competitive advantages in various fields to explore more opportunities in this vast regional market.”

Trade Partners

This year’s Eco Expo Asia, featuring the US as partner country, was the first HKTDC event to capitalize on the PBI. It featured the US as partner country

According to the USFCS, less than one per cent of America’s 30 million companies currently export. Of those companies that do, 58 per cent sell only to one country.

“To continue to move the US economy forward, US small businesses must innovate, create jobs and expand their global reach to new markets,” Mr Kumar said. “Hong Kong can be the gateway to some of these markets with its efficient networks, comprehensive and well-endowed service sector, and superior IP protections,” he said.

The US is already one of Hong Kong’s most important trading partners – second-largest in total trade and the city’s fifth-largest source of imports. “Our history of collaborating with each other, our track record of export success and our shared values make Hong Kong a key trading partner and a major partner of our NEI strategy,” Mr Kumar said.

Eco Expo Asia, held earlier this month, was the first HKTDC event to capitalise on the PBI. The region’s only major environmental fair featured the US as partner country. Nearly 30 American companies exhibited at the US pavilion, reaching key regional contacts, including representatives from mainland city governments such as Foshan, Guangdong, Jiangmen, Kunming and Shenzhen. According to Mr Kumar, the fair produced initial orders of more than US$700,000 for US companies.

The HKTDC also arranged a trip to Shenzhen for US and Hong Kong companies to study the city’s environmental markets and meet industry and government officials.

In March, the Independent Film & Television Alliance will organize an American pavilion at the Hong Kong International Film & TV Market (FILMART). The PBI will subsidize the US pavilion – the first at FILMART.

HKTDC Deputy Executive Director Margaret Fong says the PBI has targeted nine priority industries for cooperation, including the renewable energy sector

Other business exchanges are in the pipeline to promote to American businesses the benefits of working with Hong Kong to reach markets on the mainland and across Asia. The agreement is expected to generate new business for both US and Hong Kong companies. “Working with the USFCS, we will expand business missions to help Hong Kong and US companies explore opportunities,” said HKTDC Deputy Executive Director Margaret Fong, speaking at the American Chamber luncheon. “Missions bringing US companies to the mainland through Hong Kong will also be organized.”

A dedicated website has also been launched to provide details on PBI activities. It will also feature research and market information for US and Hong Kong companies looking for partnership and business opportunities.

Model Pact

While all industries are covered by the agreement, the agreement targets key industries, including: renewable energy, environmental, water resources; healthcare, medical and biotechnology; value-added food products, including wine and spirits; information and communication technology, and the creative and entertainment industries.

(file photo - front row far right) According to Richard Vuylsteke, President of the American Chamber of Commerce in Hong Kong, green technology represents “significant opportunities” with the ongoing construction boom and demand for clean energy in Asia, particularly on the mainland. “There are huge opportunities for advanced technology, for conservation of energy, for materials that are longer lasting, more eco-friendly,” Mr. Vuylsteke said. “For both the US and China, which have serious energy and pollution problems, this is a great area for specific cooperation.”

Mr. Kumar noted that Hong Kong is the first economy to help the US jump-start its export sector. “It is the first formal signing of an understanding between two institutions representing two different economies with one common goal. There’s much learning in this,” he said. The Assistant Commerce Secretary said that both sides will strive to go beyond the terms of the initiative, using it as a showcase for future potential partners. “We’ll take this to other countries as a model of engagement,” he said.

Hong Kong SAR November 16 2010

Signing of US trade agreement with the United States Commercial Service 'may quadruple exports to Hong Kong'

HKTDC executive director Fred Lam (left) and US Assistant Secretary for Trade Promotion Suresh Kumar sign the agreement yesterday.

Hong Kong held out a fig leaf to the United States yesterday as it became the first and so far the only signatory to an agreement to co-operate on trade promotion with the US Commercial Service since the launch of President Obama's National Export Initiative in January.

The development does not hint at any change of attitude towards the initiative in Beijing.

Suresh Kumar, assistant secretary for trade promotion, said Hong Kong had reached the understanding and it would be "a completely different issue" for the mainland.

"I would hope this is not a lip service agreement," Kumar said, adding that even though US exports remained low, President Obama's plan was to double the country's exports by 2015.

Independent economist Andy Xie said the deal bears more symbolic meaning than practical benefits.

But Kumar had high expectations of the agreement and forecast that exports to Hong Kong could triple or even quadruple in the next five years.

Hong Kong is the largest export surplus market for the US, at about US$18 billion last year.

Exports to Hong Kong rose 29 per cent to US$19.4 billion for the first eight months this year, according to the Hong Kong Trade Development Council (HKTDC).

The agreement signed yesterday, known as the Pacific Bridge Initiative, might have its eye on the mainland's market, as most of the favoured industries are prioritized in Beijing's 12th five-year plan, such as green energy, health care and financial services.

"Hong Kong is just as much an `export-to' city as an `export-through' city," Kumar said.

The agreement comes at a time when President Obama faces increasing political pressure due to a slowdown in the US domestic economic recovery.

With individual consumers and companies not spending, America has only two options, said Zhang Yansheng, an international trade researcher at the National Development and Reform Commission. It can continue to carry out more quantitative easing or it can boost exports, he said.

"The world's export amount is shrinking, but America, Japan and Europe all want a larger share of the shrinking pie. This will inevitably lead to trade and currency wars," he said.

China's trade surplus with the US rose about 21.3 per cent in the first nine months of this year to US$201.23 billion compared to same period last year, according to the CEIC database.

Rhetoric against China's trade surplus has grown hostile, but Xie said the fundamental reason for the trade imbalance is that the United States does not have a strong manufacturing industry.

November 15 2010

Asia now competes with America for top business students

Asian MBA programs have emerged as challengers to their more established United States peers in global academic rankings, but their pulling power may still be limited to students willing to put down roots in this region. Top students have traditionally completed their Master of Business Administration degrees in the US or Europe, where opportunities for high-level jobs are most abundant.

But global growth has since shifted to Asia and business schools in the region have capitalized on the trend, drawing candidates from both home and abroad. The rising profile of Asian MBA programs is expected to come at the expense of overseas universities by taking a bite out of their application intakes. But so far the face-off between East and West has been kept in check by a lack of overlap between the two markets, said Richard Lyons, dean of the Haas School of Business at the University of California, Berkeley.

"There is still such a strong segmentation that we don't see ourselves going head-to-head against those schools very often," Lyons said. "People either decide they want to do [the MBA] here or they want to do it over there."

He said only a "tiny" number of Haas's roughly 240 full-time MBA students in last year's class had also been admitted to the Hong Kong University of Science and Technology (HKUST) Business School. The head-to-head numbers between Haas and Hong Kong-based business schools have generally been five or less, Lyons added.

That comes as no surprise to Hong Kong's leading business schools, which have positioned themselves as distinct alternatives to the traditional western MBA programs.

"There is no single school that we are battling it out with because we are unique," said Steven DeKrey, a senior associate dean at HKUST.

"If people want a top school and want Asia, is there a better choice?"

The Chinese University of Hong Kong (CUHK) has also made efforts to differentiate its MBA program from other overseas ones. The curriculum covers themes unique to this region, including family business ownership, supply chain management in the Pearl River Delta and corporate governance in the mainland.

"Asian business schools should start to have confidence in ourselves and not copy from the US," said T.J. Wong, dean at the faculty of business administration of CUHK.

Attending an Asian business school has become a more viable option in the past few years after several MBA programs around the region have charted a rise up global academic rankings.

HKUST was ranked ninth in the Financial Times Global MBA Rankings 2010, tied with University of Chicago Booth School of Business. And CUHK was tied with Haas at 28th overall.

In total, six schools from the region cracked the top 30, including France's Insead, which has a full-time campus in Singapore. That is up from just two in the 2007 rankings.

Academic rankings are usually taken with a grain of salt because of all the variables involved in calculating them.

But they can still serve as a useful starting point for prospective students when they are deciding where to apply, DeKrey said.

"[And then] the more sophisticated reader will analyse the criteria and match it against what they care about," he said.

Many students seem to be zeroing in on the better job placement data from Asian business schools.

The FT survey showed that nine out of 10 students from both HKUST and CUHK had secured work within three months after graduation, for example, compared with just three in four students from University of Pennsylvania's Wharton School of Business.

Data from the Graduate Management Admission Council, which offers the GMAT exam required by most MBA programs, reflected this trend, reporting the percentage of test scores sent to US-based business schools decreased from 83.9 per cent of the world total to 78.4 per cent between 2005 and 2009.

The combined percentage of scores sent to India, Singapore, and Hong Kong more than doubled to 5.3 per cent in that time.

That signals competition for students could increase over time between East and West, even though top-tier US business schools have been relatively insulated so far.

"There will be some shake-up among US business schools," Lyons said.

"[In] that middle-tier of US business schools there is going to be a lot of competition and increasingly the top 10 schools are [even] feeling it."

October 20 2010

Hong Kong Designs on Shanghai

The busiest shopping street in China this past week was ablaze with billboards, banners and other bright signs spotlighting the Style Hong Kong Show in Shanghai, which ended 19 October. The five-day show, on Nanjing Road East, a pedestrian street streaming with shoppers, was the latest in a continuing series of Hong Kong brand events organized by the Hong Kong Trade Development Council (HKTDC).

The Shanghai show, however, was a distinct departure from earlier Chinese mainland product fairs, according to HKTDC Regional Director, East and Central China, Jacky Chung.

“This was the first time we’ve located the show in an outdoor public area for business,” said Mr Chung. “We also wanted to position this at the higher brand end, which is why we limited the show to about 40 premium companies, excluded food exhibitors and held a VIP gala dinner prior to the opening.” Any Hong Kong-registered company, of course, can take advantage of our Style Hong Kong shows on the mainland.”

A Hong Kong fashion show highlighted the gala dinner, which took place at The Peninsula Shanghai and was attended by senior Shanghai government officials, major buyers, the media and exhibitors. HKTDC Chairman Jack So was guest of honour. HKTDC Executive Director Fred Lam also attended, along with event ambassador and Hong Kong entertainer Leo Ku and celebrity model Kathy Chow.

Urban Oasis in Shanghai

www.Fashion.com.hk, a fashion accessories company, was among the 40 lifestyle exhibitors at Style Hong Kong Show in Shanghai

More than 120,000 people took in the show. Products on offer ranged from fashion and fashion accessories to houseware, beauty products and other lifestyle offerings.

The show’s appealing, open-air setting alongside the busy pedestrian walkway helped drive traffic. So, too, did the live entertainment, the massive screens that flanked the show stage at the front of the venue and the airy design, with its smart white-and-green color scheme and flowing use of space. “An urban oasis,” was how Mr Chung described the setting.

Exhibitors responded enthusiastically to the concept. “I think the image and the design are the best yet. I know the HKTDC has invested a lot in this show,” said Michael Li, Deputy Director of Hong Kong jewellery company La Milky Way.

“It’s a very public venue, a bold move to hold the fair outdoors. So many people, so much brand exposure for us,” said Blanc de Chine Chief Operating Officer Davie Mok, who was dressed in his company’s signature zhong shan suit and white shirt with mandarin collar.

Mr Mok said Blanc de Chine was at the show “because of the HKTDC network. They have been promoting Hong Kong brands aggressively in China, and we want to leverage on their network and their connections.”

Shanghai Expo 2010 Boost

Blanc de Chine Chief Operating Officer Davie Mok says his company hopes to open a shop in Shanghai within the year

Mr Mok said it was the right time to turn to the mainland. “After the success of the Beijing Olympics, Chinese pride in its culture is growing. Chinese people are turning to their cultural roots, and our brand translates those roots into a modern sensibility.”

He is also counting on a boost from Expo 2010 Shanghai, “taking advantage of all the tourists here and the mainlanders from other Chinese provinces.”

Mr Mok said the company hopes to have a shop in Shanghai in the coming year. “We feel that eventually, inevitably, China will be our biggest market, so we are here looking for business partners.”

During the show, the HKTDC arranged more than 100 business-matching meetings between exhibitors and Shanghai distributors and department stores. “If I’m a department store, I’m looking for more good tenants. And if I’m a Hong Kong brand hoping to do business here, I need a base in Shanghai. We are working to put the two together,” said Mr Chung.

China’s Top Tourist Street

"I’ve been to every Style Hong Kong fair in China,” says CPJ Ltd Managing Director Matthew Chow, a producer and retailer of leather handbags. “China is the future,” he says

CPJ Ltd Managing Director Matthew Chow said he had met with department stores already, “exchanging ideas,” and that the show’s central location, “on the best tourist street in China in terms of traffic and shop rentals,” was giving him plenty of feedback. “We are getting to know what people here want, and at what price points.”

Mr Chow, whose second-generation leather business features five brands of leather bags, was at the show promoting his Charming Pop label, one of the company’s high-end brands.

“China is the future,” said Mr Chow, when asked why he had joined the Shanghai show. “I’ve been to every Style Hong Kong fair in China, and I’ll be going to Jinan next week,” he said. (Style Hong Kong Show in Jinan takes place, 22-26 October, at the Jinan Shungeng International Convention and Exhibition Center.) “I’m following the HKTDC, and I’m learning a lot from these fairs,” added Mr Chow.

Other exhibitors voiced similar sentiments, with Silver Trading Company Marketing Director Victor Chang saying he was learning about the Shanghai market. “It’s very close to Hong Kong in that the Shanghai consumer prefers global brands, but here they also look to Hong Kong brands like mine. Mr Chang designs and manufactures watches in Hong Kong under the MA˚AM brand. “This exhibition,” he said, “shows Shanghai people that our products are really about design and high style.”

It also underlines the opportunities available for Hong Kong companies, according to La Milky Way’s Mr Li. “The Shanghai department stores and retailers are coming to the show to look for good brands. It’s the best way to test the market and develop the brand in China.”

Hong Kong Community in Shanghai

Alongside the Style Hong Kong Show, the HKTDC and the Hong Kong Government put together the first Hong Kong Community in Shanghai Joint Promotion Scheme. The program is part of Hong Kong Week, an event showcasing Hong Kong creative talent, 18-22 October. More than 100 Hong Kong companies representing over 600 shops and outlets in Shanghai are taking part, supporting the Style Hong Kong show through a variety of in-shop promotions.

“You can see the promotions everywhere in Shanghai,” said the HKTDC’s Mr Chung. The idea, he added, is to feature Hong Kong’s role in Shanghai life. “There are many such elements in Shanghai. It’s all part of our efforts to help Hong Kong companies brand-build their products and enhance their image – in Shanghai and throughout China.”

Sept 1 2010

Surveyed 450 Hong Kong Business Executives 65% plan to increase hiring in the third quarter of 2010

A poll of nearly 450 executives across key business sectors in Hong Kong found 65 per cent plan to increase hiring in the third quarter of 2010, compared with 59 per cent in the second quarter, according to global recruitment and talent management firm Hudson. It is the strongest burst of confidence ever recorded in one survey period since 1998, when the firm began collecting such data, published in The Hudson Report.
The latest survey, conducted in May, revealed expectations almost three times higher than a year ago, with most businesses planning to increase headcount, and many finding they must offer substantial salary increases to dissuade top talent from resigning.

The study also found the city is attracting the region’s best talent. Employers in Hong Kong were less likely to receive refusals when making job offers than in the other markets surveyed in Asia.

James Carss, Executive General Manager, Hong Kong, Hudson, said the upward trend was steady. “Even after several quarters of rapid growth, expectations continue to rise and are now at the highest level ever recorded by The Hudson Report. However, in a buoyant job market, employers must offer competitive salaries to retain key talent.”

He said confidence had returned among blue chip companies and SMEs alike. “Hong Kong has proven once again its resilience to tough times and ability to bounce back after recession. Hong Kong is an excellent place to grow and develop organisations, [as] the infrastructure and environment are extremely conducive to this.”

Hong Kong's Business Confidence Across the Board

HSBC’s latest Small-Business Confidence Survey shows that confidence among SMEs across Asia, including Hong Kong, has reached pre-financial crisis levels since the rebound began in the fourth quarter of 2009. It showed the majority (64 per cent) of Hong Kong SMEs hold a stable, positive outlook on the local economy.

The bank’s survey noted that 44 per cent of SMEs in Hong Kong are international – a figure expected to rise to 48 per cent in the next two years. Almost one-third (29 per cent) of Hong Kong SMEs have a renminbi trade account to prepare for more transactions in the Chinese mainland currency, reflecting the mainland’s growing influence on global trade. HSBC said this number will rise to nearly half (48 per cent) in the next 12 months. It also found one in 10 SMEs are recruiting, and almost one-third are planning to raise their capital expenditure spending.

“Hong Kong’s GDP growth forecast for 2010 is 5.4 per cent,” said Lena Chan, HSBC Managing Director and Head of Business Banking for Hong Kong. “We expect Hong Kong’s economy to stay resilient for the rest of this year, mainly driven by domestic demand, although exports of goods will also pick up.” She added that Hong Kong’s exports maintained strong growth, rising more than 24 per cent on the year in May, thanks to growing intra-Asia trade.

Hong Kong a ‘Significant Advantage’

Another survey, the UPS Asia Business Monitor 2010, noted that Hong Kong’s convenient location for the mainland and the region, places Hong Kong SMEs at a significant advantage. This year, 66 per cent of Hong Kong SMEs’ business is conducted within the Asia Pacific region, as opposed to Europe at 19 per cent, North America at 11 per cent and Latin America at two per cent. Among Hong Kong SMEs polled by UPS, 41 per cent plan to expand further into Asia over the next three years.

Derek Woodward, UPS Asia Pacific President, said SMEs were on the “brink of new opportunities” in Asia and keen to expand their businesses in the region. He added UPS itself was strengthening its position in Hong Kong following an increase in cargo volumes. Starting this month, the company would add a larger capacity freighter aircraft to its Hong Kong-United States route.

Among Hong Kong SMEs in the UPS survey, most said their financial concerns have eased.

“Concerns related to financing are yesterday's problem,” said KK Leung, Managing Director of UPS Hong Kong and Macau. “The cash situation has improved vastly in 2010, with the number of SMEs seeing no financial issues, nearly doubling. More than 60 per cent of Hong Kong SMEs reported that they have no difficulties in financing their business, which is a significant improvement from the mere 33 per cent who shared the same view last year.”

As financial fears subside, SMEs are refocusing on growing their headcount. The number of respondents who plan to increase their workforce has more than tripled, from six percent in 2009 to 20 percent this year, according to the UPS research.

Collectively, these survey results are good news for business. Shaun Wallis, Global Head of Business Management, Commercial Banking, HSBC, said SME confidence is a good market barometer.

“SMEs are close to the heartbeat of the local economy and thus it is good to see that Hong Kong businesses are showing steady signs of recovery,” he said. “SMEs are, by nature, always running at essential staff levels. Unlike larger organisations, they are unlikely to make big changes to staff numbers in good times or bad. The fact that there are more SMEs that are planning to keep or increase staff rather than decrease staff is a positive sign for this sector.”

June 11 2010

Hong Kong SAR Passport holders have granted visa-free access or visa-on-arrival by 140 Countries

 Hong Kong SAR Passport holders have granted visa-free access or visa-on-arrival by 140 Countries - The Government of the Hong Kong Special Administrative Region (HKSAR) said Friday, with immediate effect, HKSAR passport holders visiting Myanmar would be issued a tourist visa for a stay of up to 28 days on arrival at the international airports in Yangon and Mandalay.

The announcement came after the government received formal notification from the Consulate General of the Union of Myanmar in Hong Kong. "We welcome this notification by the local Consulate General of the Union of Myanmar," a government spokesman said. At present, 140 countries/territories have granted visa-free access or visa-on-arrival to HKSAR passport holders.

 http://www.gov.hk/en/residents/immigration/traveldoc/hksarpassport/visafreeaccess.htm

May 27 2010

Hong Kong signs latest CEPA deals with China - CEPA boosts six pillar industries - Doctors and architects among professionals to benefit in latest agreement Share

Financial Secretary John Tsang Chun-wah (left) and the Vice-Minister of Commerce Jiang Zengwei (right), exchange documents after signing the seventh supplement to the Closer Economic Partnership Arrangement (CEPA) on Thursday.

The seventh supplement to the Closer Economic Partnership Arrangement (Cepa) between Hong Kong and the mainland, was signed at the Central Government Offices in Hong Kong on Thursday.

The supplement was signed by Financial Secretary John Tsang Chun-wah and China's Vice-Minister of Commerce Jiang Zengwei, with Chief Executive Donald Tsang Yam-kuen and other guests as witnesses.

Thirty five measures will come into effect next year to improve cross-border trade. The new supplement also relaxes market access conditions in 14 service sectors, such as medical services, tourism, banking and air transportation.

The supplement will enable Hong Kong service industries to develop in the mainland market and allow professional exchanges between the two sides.

Financial Secretary John Tsang, Chief Executive Donald Tsang Yam-kuen, Vice-Minister of Commerce Jiang Zengwei and the deputy director of the Hong Kong and Macau Affairs Office, Zhou Bo, at the signing ceremony.

Government efforts to foster six new pillar industries will receive a major boost when an enhanced free-trade pact between Hong Kong and the mainland kicks in next year.

A diverse range of professionals, including architects, doctors and book sellers, will have easier access to the market across the border.

Highlighted in the seventh edition of the Closer Economic Partnership Arrangement, or Cepa, are concessions allowing Hong Kong businesses and professionals to establish wholly-owned hospitals in Shanghai, Chongqing, Guangdong, Fujian and Hainan, as well as related facilities.

Registered health care professionals such as doctors, nurses and midwives, currently numbering more than 76,000, will also be able to practise on the mainland for up to three years at a time.

The new arrangement allows accredited companies in Hong Kong to test products according to the China Compulsory Certification System. There are about 300 companies that can do product testing in Hong Kong and about half of them are accredited by the government.

Medical services and product testing are two of the new economic pillars the government hopes will help diversify the city's economy. The other sectors are education, environmental industries, innovation and technology, cultural and creative industries, and food safety.

The new arrangement was signed in Hong Kong yesterday by Financial Secretary John Tsang Chun-wah and Vice-Minister of Commerce Jiang Zengwei. It will take effect on January 1. It includes 35 measures aimed at fostering trade and investment in 19 sectors. Of the measures, 27 focus on liberalising the mainland market in 14 service sectors.

Permanent residents of Hong Kong will be able to set up shop on the mainland offering wedding services and veterinary help. Other possibilities include renting out comic books and video games.

And Hong Kong companies can sell locally published books that are cleared for sale on the mainland.

Banks in Hong Kong that already have a profitable mainland presence can apply to do yuan business and small-company financing while plans are under way to launch open-end, index-tracking, exchange-traded funds based on Hong Kong-listed stocks on the mainland.

It will also be easier for Hong Kong architects and structural engineers qualified on the mainland to work and set up shop across the border.

Tourism benefits from the arrangement with a pilot scheme allowing Hong Kong travel agents in Beijing and Shanghai to sell residents of the two mainland cities group tours to Hong Kong and Macau.

Seven years ago, Hong Kong secured exclusive and early access to the mainland market via Cepa. The free-trade pact came into effect on January 1, 2004, and paved the way for zero import tariffs for Hong Kong products and preferential treatment for many service sectors.

While many in the business community welcomed the latest measures, some want more to be done to improve the implementation of Cepa to help reduce red tape and other market restrictions. Some insiders in the Hong Kong General Chamber of Commerce believe the free-trade pact may have run its course after seven years as implementation remains a major challenge.

Private orthopaedic specialist Dr Ko Wing-man welcomed the measures but said many in the hospital management business were now focused on local opportunities.

"I am sure there will be investors interested in running hospitals on the mainland but they may not hire Hong Kong doctors," Ko said.

Some of the new provisions

* Hong Kong architects and structural engineers registered on the mainland can be partners in setting up construction and engineering offices
* Companies can set up wholly-owned hospitals in Shanghai, Chongqing, Guangdong, Fujian and Hainan
* Product testing labs can offer services under the China Compulsory Certification System
* Companies can set up wholly-owned specialty design as well as audio and video businesses
* Hong Kong companies can distribute authorized books published in Hong Kong
* Relaxed operation and profitability requirements for Hong Kong banks setting up wholly-owned mainland branches
* Launch of exchange-traded funds based on Hong Kong-listed stocks
* Companies can operate wholly-owned welfare agencies for the elderly and disabled
* Pilot scheme allowing Hong Kong travel agents in Beijing and Shanghai to offer group tours to Hong Kong and Macau

More information on Cepa is available on the Trade and Industry Department’s CEPA website http://www.tid.gov.hk/english/cepa/index.html

May 21 2010

Hong Kong overtakes United States as top business-friendly economy

Hong Kong and Singapore are the world’s most competitive economies, an annual survey said on Friday, demoting the United States from the top spot for the first time since 1993.

The study lists 58 economies according to 328 criteria that measure how the nations create and maintain conditions favorable to businesses – a formula that had favored the US for 16 years.

“They are so close in the rankings, that it would be probably better to define them as a leading trio,” said Stephane Garelli, professor at the Lausanne, Switzerland-based IMD business school, publisher of the World Competitiveness Yearbook.

Despite high unemployment and debt, and continued market instability, the United States was better placed than European nations and others to attract new investments and help companies grow.

“The US has weathered the risk of the financial and economic crises thanks to the sheer size of its economy, a stronger leadership in business and an unmatched supremacy in technology,” Garelli said.

Switzerland and Australia rounded out the top five. Then came Sweden, Canada, Taiwan, Norway and Malaysia.

Mainland continued its rise in the survey, reaching 18th and highlighting that it is no longer dependent on foreign markets buying up its cheap exports. It led fellow emerging economies India, 31; Brazil, 38; and Russia, 51.

Debt-laden Greece actually improved in the ranking this year, rising six places to 46th.

Venezuela ranked last for the fifth year in a row, preceded by Ukraine, Romania, Argentina and Croatia.

May 19 2010

Clean-Energy Challenge

US Secretary of Commerce Gary Locke speaks at a business luncheon co-organized by the Hong Kong Trade Development Council

http://www.youtube.com/watch?v=i8o6YA31Nn0

Green-energy solutions, according to US Secretary of Commerce Gary Locke, are the “defining challenge of our time.” Mr Locke kicked off the start of his clean-energy trade mission in Hong Kong last week addressing a group of 500 business leaders at a luncheon organised by the Hong Kong Trade Development Council and the American Chamber of Commerce in Hong Kong.

“I want to talk about how the development of the clean energy and energy-efficiency technology that we need to curb greenhouse-gas emissions could spur one of the greatest economic opportunities of the 21st century,” he said.

The decision to make Hong Kong the mission’s first stop highlights Hong Kong’s role as a key partner for American companies looking to introduce their technology to the Chinese mainland.

“There is no question that Hong Kong has worked hard to become a welcoming place for investment and innovation,” Mr Locke said. “It has an efficient, transparent legal system that offers rigorous intellectual property-rights protection and an open government procurement process.

“When an American clean-energy company finds success here in Hong Kong and on the mainland, it creates economic value throughout the supply chain here in Hong Kong, on the mainland and in manufacturing towns across the US,” he said.

Cutting-edge Solutions

Mr Locke’s clean-energy mission to China is the first cabinet-level trade mission of the Obama administration. From Hong Kong, the 10-day mission moves on to Shanghai, Beijing and Jakarta, Indonesia. Twenty-four leading US firms with “cutting-edge solutions,” including the Boeing Company, DuPont and General Electric, are seeking export opportunities for their technology in clean energy, energy efficiency, and electric energy storage, transmission and distribution.

Lam talks trade with the US Commerce Secretary at a luncheon organised by the HKTDC and the American Chamber of Commerce in Hong Kong

US Secretary of Commerce Gary Locke checks out a MyCar during his Hong Kong visit

DuPont has already made inroads in the region by partnering with Hong Kong and the mainland, basing its thin-film photovoltaic research centre at the Hong Kong Science and Technology Park and a manufacturing centre in neighbouring Shenzhen.

“Many US companies look to take advantage of the strengths Hong Kong has to offer as well as Hong Kong companies’ expertise and experience on the mainland, to enter that dynamic market,” Mr Locke noted.

The Asian trade mission builds on US President Barack Obama’s economic initiative to double American exports by 2015, and takes advantage of opportunities in the Central Government’s policy of promoting clean energy in industries. The Pearl River Delta region is a key market for clean-energy technology, thanks to the Hong Kong and Guangdong Cleaner Production Partnership Programme, which offers subsidies to upgrade industrial plants in the region. Mr Locke said mission delegates have scheduled 75 one-on-one business meetings in Hong Kong.

“You have come to the right place,” Hong Kong Secretary for the Environment Edward Yau told the US delegation at a Clean Energy Forum held prior to the luncheon. “Hong Kong has positioned herself as a green city that strives to work with our neighbouring province, Guangdong, to build a Green Pearl River Delta that will become the greenest part of our nation.”

Electric Car Deal

EuAuto Technology seals a deal with US automaker GreenTech Automotive to take Hong Kong’s home-grown electric vehicle mycar to the US market

Hong Kong’s first home-grown electric vehicle, mycar, meanwhile, is poised to hit the US market after a deal was signed between Hong Kong company EuAuto Technology Ltd and US automaker GreenTech Automotive during Mr Locke’s Hong Kong visit. EuAuto Technology and Hong Kong Polytechnic University jointly developed mycar, which launched in Hong Kong and in Europe last year. At last week’s event, EuAuto also signed a deal with Denmark to supply rental electric cars for tourists visiting the country’s Bornholm Island.

May 12 2010

CAFTA and Hong Kong

CAFTA has led to better economy of scale between the Chinese mainland and ASEAN

Although Hong Kong’s trade with members of the Association of Southeast Asian Nations (ASEAN) shrank last year, traders can count on good news in the developing relationship between the trade bloc and the Chinese mainland under the fully formed China-ASEAN Free Trade Area (CAFTA).

Hong Kong manufacturers on the mainland can benefit from CAFTA’s zero-tariff treatment, and their costs of importing ASEAN products such as rubber and plastics will also be lower.

The 2010 CAFTA deal is also expected to further promote China-ASEAN and intra-Asia trade. Asia’s position as a more integrated production base for the global supply chain will help attract foreign investment. Hong Kong could benefit, as a popular choice for regional headquarters and as a service platform.

Trade in Transition

Under CAFTA’s origin rules, consigned products transhipped through a non-CAFTA territory such as Hong Kong, are entitled to preferential tariff agreement

The more debatable aspect of CAFTA stems from the fact that Hong Kong is not a member, and so could see a gradual shrinking of trade links as a third party. But the fact is that over the past 20 years, China-ASEAN trade has changed dramatically, with Chinese exports to ASEAN now including value items such as electrical machinery and machinery, ships and boats, as well as minerals and fuels, optical and medical instruments, iron and steel, textiles and footwear. Those trade categories continue to grow wider and deeper.

By comparison, China’s imports from ASEAN are less diversified, mainly consisting of electrical and other machinery, minerals and fuels, plastics, fats and oils, rubber and organic chemicals. More than 60 per cent of China’s imports in 2008 were electrical and other machinery, compared to a 26 per cent share in 1997.

To date, Hong Kong has generally benefited from the flourishing trade between China and ASEAN, thanks to its strategic location, excellent transportation network and business infrastructure. Although Hong Kong’s trade with ASEAN shrank by 12 per cent year-on-year in 2009 – with exports and imports declining by 17 per cent and 10 per cent, respectively, over the same period – there was double-digit export growth over preceding years.

CAFTA’s Impact

Although Hong Kong’s trade with ASEAN shrank by 12 per cent year-on-year in 2009, there was double-digit growth over preceding years

While CAFTA has led to better economies of scale between China and ASEAN – with lower production costs, higher efficiency and economic growth – there are concerns that Hong Kong could suffer from trade diversion. Though CAFTA members are expected to benefit, logic dictates that trade with non-members could decline due to CAFTA’s tendency toward member preference.

The mainland and ASEAN are Hong Kong’s largest and third-largest trading partners respectively. About half of Hong Kong’s exports go to the mainland and Hong Kong remains the mainland’s largest source of inward foreign direct investment.

Since the bulk of Hong Kong manufacturing takes place on the mainland, CAFTA’s import tariff cuts will be extended to Hong Kong manufacturers so long as they comply with the required country-of-origin rules. The big question is the extent to which trade diversion will take place where it comes to Hong Kong’s major exports to CAFTA.

Given the CAFTA tariff cuts, most of the trade volume growth can be expected in direct trade between China and ASEAN. That could well mean a shrinking share of re-export trades via Hong Kong.

But the picture is not entirely cut-and-dried. If one compares the compound annual growth rate (CAGR) differential between 2002 and 2005 and between 2006 and 2008 (when CAFTA tariff cuts were implemented), a different picture emerges.

The average annual growth of total China-ASEAN trade was 23 per cent from 2002 to 2005, and dropped to a CAGR of 20 per cent during the period 2006 to 2008. This highlights the fact that China-ASEAN trade didn’t pick up significantly in the first three years after CAFTA tariff cuts were implemented.

Nonetheless, Chinese exports to ASEAN rose between 2006 and 2008, with CAGR surging from 20 per cent in the four years to 2005 to 27 per cent in the three years to 2008.

Meanwhile, Hong Kong posted double-digit growth in both its trade with ASEAN or re-exports of China-origin to ASEAN in the period 2002 through 2008. Broadly stated, CAFTA tariff cuts introduced from July 2005 did not lead to any substantial, adverse trade diversion during that period. (This analysis purposely excludes 2009, because international trade was severely disrupted by the global economic downturn.)

CAFTA Impact Minimal

Looking at electrical machinery, the CAGR differentials between 2002 and 2005 and between 2006 and 2008 were marginal. Hong Kong’s re-exports of electrical machinery originating from the mainland grew from a CAGR of less than eight per cent during the 1997-2005 years to 13 per cent during the three years to 2008.

Meanwhile, the CAGR for Hong Kong’s electrical machinery exports (of all origins) to ASEAN stood at 11 per cent and 15 per cent, respectively, for the periods 2002 to 2005 and 2006 to 2008, contrasting with CAGRs of 13 per cent for the corresponding re-exports of China-originated items to ASEAN.

Using this yardstick, it appears that Hong Kong’s exports to ASEAN countries registered double-digit growth, irrespective of the country-of-origin. The strong performance of Hong Kong’s electrical machinery exports to ASEAN through 2002-2008, including mainland-originated items, was tied to the upswing in the global semiconductor and electronics cycle since 2002.

The surge in sales of electronics, semiconductors and IT products owes much to the World Trade Organization’s Information Technology Agreement (ITA), which took effect in 1997. The ITA includes such items as telecom equipment, computer software and electrical components.

Sea-Cargo Transhipments

Next comes the important question of the mode of transhipment and whether Hong Kong can benefit. Under CAFTA’s origin rules, consigned products transhipped rather than re-exported through a non-CAFTA territory like Hong Kong are entitled to preferential tariff treatment.

Since airfreight covers relatively time-sensitive items, many of which are electronics and telecom products and related parts that are subject to zero import-tariffs, there is no need to convert re-exports of these products to transhipments.

Predictably, airborne cargo, which features prominently in intra-Asia and Hong Kong-ASEAN trade, should largely follow the trend of re-exports through the period 2002 to 2008.

Sea cargo transhipment has been a key driver of Hong Kong’s recent sea-cargo growth, accounting for roughly two-thirds of the sea cargo processed in Hong Kong. It is worth noting that the CAGR for sea-cargo transhipment of China-origin increased between the two periods, meaning that Hong Kong has not lost out to mainland imports following the CAFTA cuts.

In fact, as CAFTA further strengthens Asia’s role as a production base for the global supply chain, Hong Kong manufacturers should stand to be net beneficiaries.

Tariff Cuts on Track

Under CAFTA’s Trade in Goods Agreement, both the Chinese mainland and ASEAN started to reduce import tariffs from July 2005. As of January 2010, the five-year tariff reduction schedule was entirely phased in, signifying the completion of CAFTA, while creating the world’s largest free trade area by population (1.9 billion), covering 11 Asian countries.

With a combined GDP of about US$6 trillion, CAFTA trails only the European Union and the North American Free Trade Agreement in terms of GDP. The International Monetary Fund estimates that more than half of the trade conducted by Asian economies is intra-regional, with an even higher ratio for trade in components and parts, and CAFTA is seen as an important step to expanding pluralistic trade in the region.

With CAFTA, import tariffs on traded items on a “normal track” have been reduced in four phases (2005, 2007, 2009 and 2010) for the six original members of ASEAN. Known as the ASEAN-6, those nations are Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.

Tariff reductions on selected “sensitive track” items are to be eliminated by 2018. In 2010, the average tariff on ASEAN-origin exports to China has been lowered to 0.1 per cent, while the average tariff on China-origin exports to the ASEAN-6 has been slashed to 0.6 per cent.

While about 7,000 items traded between China and ASEAN are currently zero-rated, by 2015 the zero-tariff rate for 90 per cent of traded goods is expected to apply between China and the four new ASEAN members – Cambodia, Laos, Myanmar and Vietnam.

China-ASEAN trade shrank by eight per cent year-on-year to hit US$212 billion in 2009 owing to the global financial downturn, but trade with ASEAN represented close to one-tenth of China’s total trade for the same period. ASEAN is China’s fourth-largest trade partner, while China is ASEAN’s third-largest trade partner.

Prior to 2009, China-ASEAN trade rose quickly, with bilateral trade growing by about 24 per cent annually from 2003-2008, to a total of US$231 billion in 2008, nearly triple the 2003 level of US$78 billion.

April 27 2010

Flying High

David Fraser, FCm Travel Solutions’ Executive General Manager, Greater China

Australian-listed travel company Flight Centre Ltd (FCL) has taken off in Asia since setting up a Hong Kong regional base in 2002. Best known for its distinctive Flight Centre retail brand, FCL is one of the world’s fastest growing groups servicing business and leisure travellers. It has a network of more than 2,000 stores and 13,000 staff worldwide, operating through 15 retail, corporate and wholesale brands.

David Fraser was at the helm when FCL entered the market by acquiring a leading Hong Kong travel management company with more than 40 years’ experience. FCL rebranded the new business as FCm Travel Solutions Hong Kong.

The new company offered local businesses access to a broader range of travel-management solutions in addition to worldwide reach, negotiating strength and 24/7 emergency support. The business was now poised to take off on the Chinese mainland.

Mr Fraser, who is Executive General Manager, Greater China, says expansion into Hong Kong had always been part of the company’s strategy to develop its corporate travel business globally. “Hong Kong has long been recognised as a growing market for our customers and their corporate travel needs,” he says.

Trade Fairs Mean Business

FCL’s Hong Kong base has played an integral role in developing the company’s Greater China business

The business was set up to serve the corporate-travel segment, and Mr Fraser says Hong Kong’s expertise at staging trade fairs was a major draw card.

“Hong Kong is a fantastic destination for trade fairs and exhibitions, and also has great facilities and services for these events. This is something that many sectors in the travel industry and the broader economy definitely benefit from.”

 FCm Hong Kong has since played an integral role in developing the brand’s Greater China business, which includes operations in Beijing, Shanghai and Guangzhou. “Through this network we can service local companies with travel needs throughout Greater China and the world,” he says.

In April 2009, FCm bolstered its position on the mainland by becoming one of the first wholly owned foreign travel companies to establish an international ticketing agency in Beijing.

Late in 2009, parent company FCL expanded its signature Flight Centre retail brand to Greater China, targeting expatriate and returned overseas-Chinese leisure travellers. “This gave our clients the added benefit of a specialist leisure provider with an extensive breadth and depth of travel product at globally competitive rates,” says Mr Fraser.

Early this year, FCm Hong Kong launched a specialist conference and incentive brand, CiEvents, to offer local clients event-management services.

Platform to China

The distinctive Flight Centre

“We have recognized Hong Kong as a strategic market for long-term expansion due to the strong growth of the local corporate-travel market and the fact that it is becoming more educated in strategic travel management. We see the growth of our network and services as essential to meeting the needs of local businesses.”

Hong Kong, he adds, provides a good legal and regulatory framework for entry into the mainland market and ownership there, while Hong Kong’s Closer Economic Partnership Arrangement (CEPA) with the mainland enables Hong Kong travel agents to own and operate agencies on the mainland. “We have found it easier to create a Greater China regional office in Hong Kong for these reasons. Importantly, it is also easier to recruit quality and experienced staff in Hong Kong, which is essential to our service capabilities and standards.”

With record numbers of mainland Chinese travelling for business and leisure, Mr Fraser sees sunny skies ahead for his company. He says Hong Kong “will continue to be a key base for FCm’s long-term investment in mainland China.”

April 10 2010

Key role for Tung Chee Hwa as the go-between - Ex-chief executive's 'quiet diplomacy' valued in Washington and Beijing Share

Tung Chee-hwa, the former shipping tycoon who became Hong Kong's first chief executive, is back.

Five years after he resigned, citing poor health but following a turbulent reign which culminated in a 500,000-strong mass protest, he has managed to forge an intriguing role as an elder statesman involved in Sino-US and cross-strait relationships.

Tung last week hosted US Treasury Secretary Timothy Geithner and then former US President George W. Bush during their flying visits to Hong Kong. Next month he is almost certain to catch up with another American, Commerce Secretary Gary Locke, who will pass through Hong Kong heading a trade delegation en route to Beijing.

Tung was also visible during US President Barack Obama's first state visit to Beijing last November.

The Beijing loyalist met Locke, the first Chinese-American state governor and just the second appointed to a presidential cabinet, last year during one of his regular forays to Washington and New York.

As well as chairing the Hong Kong-based China-United States Exchange Foundation he created two years ago, he maintains links with Harvard University's Asia Centre and close ties to the New York-based Committee of 100, an influential grouping of Chinese Americans prominent in business, politics and the arts.

Closer to home, Tung became the chief director of the newly founded Hong Kong Association for the Promotion of Peaceful Reunification of China, along with other Beijing loyalists, which seeks to promote reconcilliation between Taiwan and the mainland.

Chan Wing-kee, a Hong Kong delegate to the Chinese People's Political Consultative Conference, said Tung's long-time personal connections allowed him to be an unofficial bridge between China and the US.

"He is neither an official representative nor an ordinary person," Chan said. "His special roles as a former chief executive of Hong Kong and a CPPCC vice-chairman give him flexibility to build ties with political and business sectors in the US. There are many channels for US-China communications. He is certainly one of the channels."

Just like his father, Tung Hao-yung, founder of the Orient Overseas Container Line, who forged ties with US presidents Gerald Ford, Jimmy Carter and George H. W. Bush, Tung maintains both Republican and Democrat connections as well expansive business relationships. Elaine Chao, labour secretary in George W. Bush's cabinet, is considered a close family friend.

"As a networker, he is the consummate operator and still moves in the upper stratosphere of both cities (Washington and Beijing)," said one person long familiar with Tung's connections. "I'm not sure Hong Kong people really appreciate it but he was at it long before he got the chief executive job and he continued it after he left office ... he doesn't just rely on old connections, but he keeps himself very current.

"He has consciously positioned himself as a go-between between Beijing and Washington ... he is close to Beijing but he cares deeply about the relationship and believes he can play a role, straddling both cultures."

A diplomat familiar with Tung's efforts described his "old school, backroom skills". "He is very courtly and quietly offers a useful perspective ... he is clearly loyal to Beijing but he still speaks as an outsider and the Americans and others still find that useful. He is also ultra discreet, too, and that is always appreciated."

However, his discretion when dealing with the US is in marked contrast to his recent visit to Taiwan, which drew wide media coverage. Despite positioning the trip as a private one, he allowed cameras to film him sightseeing and speaking at a luncheon hosted by the Straits Exchange Foundation chairman Chiang Pin-kung - the island's top negotiator with the mainland.

Unlike other mainland officials whose trips see the outbreak of pro-independence group protests, a relaxed Tung fronted Taiwan's press, talking about his favorite steamed dumpling (xiaolongbao) restaurant in Taipei and his appreciation of the island's high-speed railway. These scenes would seem unimaginable for those in Hong Kong who remember Tung as the chief executive who either remained silent or spoke sternly on thorny public issues.

During his one-week visit, Tung also met Lien Chan, Kuomintang honorary chairman and former vice-president of Taiwan, whom he described as "an old friend".

"Mr Tung's family has extremely close ties with Taiwan. Just look at the plum blossom flower in the logo of Orient Overseas Container Line - it is the national flower of the Republic of China. You can tell how profound the relationship is," Chan said.

Tung's go-between role has increased because, while US administrations have dramatically expanded direct connections with various arms of the Communist Party, government and military in recent years, there is still the need for other perspectives, particularly during times of tension.

It is often forgotten in the wake of his troubled tenure that his range of international connections was a key factor that put Tung in the running to become Hong Kong's first post-handover chief executive.

Discontent with Tung's stewardship began growing almost from the day he took over on July 1, 1997. First came the Asian financial crisis and controversial approvals for developments such as Disneyland.

And despite his appointment for a second term in 2002, the criticism continued with the administration's controversial decision to push for introduction of the Article 23 legislation - laws relating to national security that critics said would cripple free speech in Hong Kong.

Disapproval of Tung's leadership intensified with the government's response to the Sars epidemic in early 2003.

All this culminated with one of the biggest demonstrations in the city's history, when at least 500,000 people took to the streets.

Tung outlined his vision of the Sino-US relationship - "the most important international relationship today" - in a speech in Hawaii at the 50th anniversary of the East-West Centre think tank in February.

He also outlined his cultural perspectives, speaking of his pride in being a Shanghai-born Chinese but also his "great admiration" for the American people.

"In 1960, I arrived in the United States and for the next nine years, I made this country my home," he said. "I was married in the United States, I worked in the United States, and began building a family in the United States."

While attempting to explain and justify China's military build-up and Beijing's policies on Taiwan and Tibet, he repeatedly stressed the importance of an enduring strategic trust between Beijing and Washington.

"This may be the hardest nut to crack in the history of mankind," he said. "But it is worth our while to try every means to crack it ... we cannot afford to bear the consequences of China and the United States becoming enemies.

"For the sake of our next generation and the interests of the whole world, we must try our best. This requires vision, wisdom and courage." Reviewing current strains including US arms sales to Taiwan, Sino-US tensions over Google, Tibet and the value of the yuan, he said: First, "steady hands and cool heads" must be allowed to manage the issues. Second, decisions on such issues must not be based on "political expediency". Instead, a long-term view must dominate if strategic trust were to be forged.

Jackie Hung Ling-yu, a former convenor of the Civil Human Rights Front who led at least 500,000 protesters against the Tung administration in 2003, said Tung would always be remembered for his controversial leadership in Hong Kong.

"I have no expectations of him," Hung said. "He didn't even defend 'one country, two systems' during his office. What can we expect from him after he stepped down?

"I am most furious about him seeking to have the National People's Congress Standing Committee interpret the Basic Law in 1999. He also pushed forward the legislation on Article 23 against the public's will. These are all bad precedents for the SAR government.

"His vice-chairmanship of the CPPCC is just a reward for his selling out Hongkongers' interests."

March 17 2010

The Show Must Go On

Held last week at the HKCEC, the HKTDC Hong Kong International Jewellery Show is Asia’s largest spring trade fair

Hong Kong’s exhibition industry appears to have escaped the worst of the global economic downturn, according to an economic impact study commissioned by the Hong Kong Exhibition and Convention Industry Association (HKECIA).

The industry contributed some HK$30 billion to the local economy in 2008 and created the equivalent of 61,000 full-time jobs, the biennial study shows. It also generated close to HK$1 billion in taxes.

“This report is a valuable reminder that Hong Kong’s exhibition industry has an important role to play in Hong Kong’s prosperity,” observes HKECIA Chairman Stanley Chu. The industry's contribution to the economy in 2008 was 14 per cent higher than in 2006. Mr Chu describes this as “a remarkable accomplishment” in such a challenging economic climate.

“The report’s findings are also a powerful reminder that we must keep formulating new growth strategies for the long-term success of both the industry and Hong Kong,” he says.

Sourcing Still Strong

The study, conducted by KPMG Transaction Advisory Services Ltd, indicates that strong sourcing activities and consumer demand on the Chinese mainland and in other Asian markets continue to fuel the growth of Hong Kong's exhibition industry. As such, Hong Kong is expected to remain the region’s pre-eminent exhibition hub.

There has been no noticeable impact of competition from the Chinese mainland or other countries in the region, largely due to the different positions and strategies used by those markets.

In addition to its role as a base for mainland exports, the report says, Hong Kong should also develop as an import platform for the mainland market by holding more exhibitions targeted at mainland buyers.

The study projects that business-to-consumer (B2C) shows targeting mainland visitors will play an increasingly important role in future. In recent years, B2C shows have attracted growing numbers of visitors from the mainland. These numbers are expected to rise sharply when the Hong Kong-Zhuhai-Macau Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link are completed.

It adds that sourcing activities on the mainland remain strong, particularly in southern China, while the number of international companies seeking to introduce their products to the mainland and Asia via Hong Kong continues to grow.

The report is good news for the city’s primary exhibition venues, the Hong Kong Convention and Exhibition Centre (HKCEC) and AsiaWorld-Expo. Both posted strong results and continued to grow through the downturn.

Venues a Draw Card

Sandy Angus, Chairman, Montgomery Worldwide

The excellence of these two venues is a factor in London’s Montgomery Worldwide, one of the world’s most respected organisers of trade exhibitions and specialist business events, ramping up its work in Hong Kong. Montgomery Worldwide Chairman Sandy Angus says the company had been involved in Asia before and felt “the timing was right to return to this very exciting market.”

“Hong Kong is a major Asian hub with huge amounts of opportunity as a city in its own right, as well as being the gateway to investment into China and East Asia,” he says. “This, combined with high growth rates, state-of-the-art venues, access to a very international audience and general ease of doing business, makes this a very favourable city to run events in.”

Montgomery is a joint-venture partner in Asian Art Fairs, which runs ART HK – the Hong Kong International Art Fair. The fledgling event has quickly demonstrated the huge potential that Hong Kong offers in both a local and international context, Mr Angus says.

“The fair has grown exponentially since its inception in 2008, and this May, it will be over 7,000 square metres in size. In addition to the fair, we are also consulting on the West Kowloon project, and we hope that both will help Hong Kong further establish itself as the arts and cultural capital of Asia.”

He adds that Montgomery Worldwide will continue to expand in Hong Kong, leveraging the city as a springboard to develop its mainland business.

HKCEC Expansion

HKCEC Managing Director Cliff Wallace says the exhibition industry in Hong Kong suffered no major decline as a result of the economic downturn.

“A clear indication of this is the business experienced by the HKCEC during the last half of 2009, compared with the same period in 2008,” he says. “There was an increase of 26.9 per cent in space rented in the HKCEC and an increase of 27.3 per cent in venue revenues attributable to exhibitions.”

Space for this additional business demand was provided, in part, by the HKCEC’s second expansion, which opened in April 2009, bringing the centre’s total rentable exhibition and meeting space to 91,500 square metres.

Mr Wallace says organisers were cautious, noting “some slight decreases in attendance for some fairs during the period.” But the quality of exhibitions in Hong Kong continued to draw the most active buyers and exhibitors, so that many shows actually grew during the downturn, albeit at a slower rate.

“The fact that Hong Kong exhibitions continued to grow even during the recession is a solid stamp of approval for the high quality of these events, as well as the friendly business environment and reasonable cost of accommodation in the city,” Mr Wallace says.

“The past six months of experience and the return to major growth rates of many of the exhibitions in Hong Kong suggest that buying is increasing, and an increase in manufacturing will follow. As GDP climbs, so will the industry. We are projecting that the fiscal year ending 30 June and calendar year 2010 will be record periods for the exhibition industry in Hong Kong as well as for the HKCEC’s overall business.”

Meeting Today’s Needs

The biggest-ever China Sourcing Fair, Electronics & Components, at AsiaWorld-Expo

In 2008, international trade fairs at AsiaWorld-Expo accounted for close to 30 per cent of Hong Kong’s trade exhibition market. In economic terms, it contributed an estimated HK$9 billion to the local economy in 2008, an annual increase of more than 10 per cent.

Allen Ha, CEO of AsiaWorld-Expo Management Ltd, says this confirms the valuable role the venue plays in the success of Hong Kong’s exhibition industry. “By creating a world-class venue that meets the needs of today’s most discerning exhibitions and events, AsiaWorld-Expo is not only an international icon of excellence, but also a dynamic engine for employment and economic growth.”

In the four years since it opened, AsiaWorld-Expo has hosted a wide variety of new global MICE events and high-profile conventions. These include the popular China Sourcing Fairs, which feature more than 14,000 exhibitors and 144,000 trade visitors each year, and the internationally acclaimed Conference on Information and Knowledge Management 2009.

Mr Ha says Hong Kong is uniquely positioned to capitalise on the rapid economic growth of the Pearl River Delta region.

“In fact, as regional and global economies continue to accelerate, this prime region will emerge as a focal point for the world’s business and trading communities.”

March 10 2010

Fast-tracked Wine - Hong Kong

Portugal’s Sogrape Vinhos set up its Asian base in Hong Kong about two years ago to distribute the company’s brands in the region, including the fast-growing Chinese mainland market.

“We have no doubts that the potential [of the mainland market] is enormous,” said Filipe Carvalho, Managing Director of Sogrape Group (IW Hong Kong Ltd). “China is definitely a growth market for us, although there is a long way to go in terms of distribution, consumption habits and wine education.”

Mr Carvalho said exporting wines to the mainland “has been quite demanding and complex because, many times, customs requirements are not consistent and change frequently.”

That will soon change under an agreement between Hong Kong and the mainland that will make it easier for Hong Kong-based traders to export wine into the mainland.

Filipe Carvalho, Managing Director, Sogrape Vinhos (IW Hong Kong Ltd)

More wines from Portugal’s Sogrape’s vineyards in Quinta do Seixo in Douro Valley are likely bound for the Chinese mainland, thanks to the new customs facilitation scheme for Hong Kong-based exporters

Traders to Benefit

“The measures to be put in place will help enhance transparency and certainty in doing business, thus facilitating Hong Kong’s wine traders who wish to expand their operations on the mainland,’” said Rita Lau, Hong Kong Secretary for Commerce and Economic Development. The moves, she said, are part of efforts to strengthen Hong Kong’s position as the regions’ wine trading and distribution hub.

Hong Kong Commissioner of Customs and Excise Richard Yuen (front row, left) and Vice Minister of the General Administration of Customs Sun Yibiao sign a cooperation agreement on customs facilitation measures, witnessed by Hong Kong and Chinese mainland officials, including Hong Kong Financial Secretary John Tsang (centre) and Hong Kong Secretary for Commerce and Economic Development Rita Lau (third from left)

The new measures, to be introduced in the second quarter of the year, are open to registered traders. Companies that have been set up in Hong Kong for at least six months and are engaged in wine-related businesses, including trading, storage and logistics, are eligible to register.

Currently, it could take several weeks for wine shipments to clear mainland customs and quarantine procedures. Under the plan, registered traders can ask mainland customs to conduct a duty valuation 10 working days before the shipment leaves Hong Kong. Mainland customs authorities would normally complete the procedures within one working day of the shipment arriving at a mainland boundary point.

For registered traders who choose not to use the pre-valuation service, mainland customs, under the agreement, would strive to shorten the clearance time at the boundary point. Wines that have been imported into the mainland before will normally take no more than three working days to clear, with submission of the necessary documents. Wines new to the mainland, meanwhile, would be processed within seven working days. And if customs clearance is not completed within the timeframe, the goods may still be released with a deposit, to allow the wines to go on the market as soon as possible.

“This measure will definitely make the export process from Hong Kong to the mainland more transparent,” said Mr Carvalho. “It will give more confidence to our partners when importing from Hong Kong.”

Another Step in the Ladder

Canadian wine distributor Portfolio Wine and Spirits Inc, which is eyeing the mainland market, also welcomed the move. Leo Baduria, who manages the company’s Hong Kong-based retail shop Wines to Go, said the measures will help the company’s expansion plans into the mainland.

“The government has provided another step in the ladder for the local wine industry to develop,” said Gregory De’eb, Managing Director of Crown Wine Cellars, Hong Kong’s first fine-wine storage facility. “It provides clarity of the mainland system that’s desperately needed for small exporters unable to establish a strong line.”

Hong Kong Business Leaders: Wine Specialist Gregory de'Eb

http://www.youtube.com/watch?v=VWE8j46j0MU

Mr De’eb believes that the move will mainly benefit rare and fine-wine exporters. “It locks down the time lines and input process for fine wines to go into China,” he noted.

A clear and transparent system, he said, would avoid delays that could put shipments at risk. “If it’s sitting in improper conditions, you stand to lose the whole shipment.

“It’s great not only for fine-wine exporters but for mainland consumers, because it will raise the quality of wine available on the mainland market. And that, for someone who’s as passionate about wine as me, is good news.”

Asia’s Wine Hub

The agreement, signed last month, is the latest effort to develop Hong Kong as a regional wine hub following the abolition of wine duties in 2008. The value of wine imports soared 80 per cent that year from 2007, and increased another 41 per cent year-on-year in 2009. The mainland’s wine imports are projected to grow to as much as US$870 million by 2017, representing 58 per cent of the Asian market, excluding Japan.

The government said it would continue exploring new measures to help the trade make further inroads into the mainland market.

“We will also continue to discuss with the relevant mainland authorities in mapping out possible facilitation measures on the quarantine side,” said Assistant Secretary for Commerce and Economic Development Aubrey Fung.

Shenzhen will be the testing ground for the new customs facilitation scheme. After a review of the measures six to nine months after its introduction, the scheme may be extended in phases to other major mainland cities, including Shanghai, Guangzhou and Beijing.

"Not only has Hong Kong consolidated its position as the regional hub for fine and rare wines, it is continuing to claim its rightful place on the world wine stage." - John Kapon, President, Acker Merrall & Condit

Fine Wine Centre

Hong Kong’s fine wine market continues to sizzle, based on results of several key wine auctions held earlier this year. Sotheby’s first Hong Kong wine auction of the year, in January, realised a total of US$6.7 million. Among the highlights was a six-litre bottle of Chateau Lafite 1982, which fetched US$46,700. The 10-hour sale of more than 800 lots saw strong bidding from buyers throughout Greater China, Sotheby’s said.

Acker Merrall & Condit’s first auction of the year, held last month, achieved even higher results, raking in US$7.6 million. Two cases of Chateau Petrus 1982 sold for US$88,041 each.

“The excellent result sends a very clear message,” said John Kapon, Acker Merrall & Condit’s President and Auction Director. “The wine market in Hong Kong is extremely robust. Not only has Hong Kong consolidated its position as the regional hub for fine and rare wines, it is continuing to claim its rightful place on the world wine stage.”

Last year, Hong Kong overtook London as the world’s second largest wine-auction centre, after New York. But Mr Kapon believes the city will go on to take the top spot. “We predict that in 2010, Hong Kong will go further and become the world’s leading wine auction centre.”

Wine on the Run

It’s the start of the afternoon rush hour at the Mong Kok East Rail station in Kowloon, where commuters catch the cross-border train to the Chinese mainland. An eye-catching shop offering an array of wine prompts some to drop in and have a look. Others take time to sample the wines on offer.

“Wines to Go was set up in a user-friendly fashion, to bring a fresh and exciting selection of fine wines from around the world to Hong Kong,” says Leo Baduria, the Canadian entrepreneur behind the concept.

Launched last December, Wines to Go is the first licensed shop to open at Hong Kong’s Mass Transit Railway (MTR). According to Mr Baduria, the store’s open layout is designed to be inviting, to encourage people to browse.

Leo Baduria, President of Wines to Go (left) and Pok Man Wong toast the recent opening of their new retail wine shop

No Château Lafite Here

Wine is featured in a user-friendly fashion, based on style and taste profiles

“Our goal is to open up the market to wines other than Bordeaux, and to let consumers discover other quality wines at competitive prices,” he says. Bordeaux wines are on offer, but you won’t find one well-regarded brand in China on the shelves.

“We get a lot of traffic from Chinese mainland travellers, who often ask if the shop carries Château Lafite,” Mr Baduria said. The shop gets the question so frequently that a sign now hangs in the shop telling customers: “We don’t carry Château Lafite, but we have fine-quality Bordeaux.” Mr Baduria says he hopes the retail concept will help change the Chinese mindset of wine as a luxury product, that they will instead buy wine for the pure pleasure of it.

Wines to Go is designed to resemble a mini-showroom, with wine featured based on their style and taste profiles. Prices range from HK$100 to HK$950.

There is a chilled-wine section for customers on their way to a party, or for those who just want to pick up a bottle for dinner. A gift section, featuring products to enhance wine appreciation, including wine cellars, is also on offer.

Wines to Go is the first licensed shop to open at Hong Kong’s mass transit rail system

An MTR commuter stops for a taste test at Wines to Go

Mr Baduria, a veteran wine importer and distributor in Toronto, likens the Hong Kong market to Toronto’s 20 years ago. “It was young people who started setting the standards by frequenting or setting up wine bars and restaurants,” he recalls. “That’s the approach we want to take here. We want the young people to be more adventurous.”

The Canadian entrepreneur says he had been looking into the Asian market for seven years before deciding on Hong Kong. In 2006, Mr Baduria started to actively explore opening the first Wines to Go for its parent company, Toronto-based Portfolio Wine & Spirits, Inc, in Hong Kong. He came up with the retail concept as “the best way to make wine more accessible.”

Mr Baduria says he would have loved to introduce his retail concept in his hometown, but was put off by Canada’s restrictive laws to regulate the wine business. Hong Kong, on the other hand, he says, offered the perfect setup: “It’s a virgin market with a huge growth potential.”

Market to Explode

An MTR commuter stops for a taste test at Wines to Go

Wines to Go is the first licensed shop to open at Hong Kong’s mass transit rail system

Mr Baduria says he has high hopes for the region overall. “The Asian market is going to explode in 10 to 15 years’ time; there’s nowhere else where it’s growing like it is here – certainly not North America, which is a mature market.”

The company plans to open stores on Hong Kong Island later this year, and has its sights on the mainland market. It has recruited Pok Man Wong, a long-time wine professional, to introduce the retail concept there. Mr Wong, who has worked at wineries in the United States, Australia and New Zealand, says he has been in discussion with possible partners to open the first shop, possibly in Guangzhou, in the next few months. “Our shop in Hong Kong can serve as a window for the rest of China,” he says.

As the company continues to map out its expansion plans, Mr Baduria says Hong Kong will remain its base.

“Hong Kong remains the best hub in Asia for the wine market because of its highly efficient systems and zero wine duty. We will keep Hong Kong as our regional headquarters as we grow, enabling us to manage our business operations in other cities in Asia from our hub in Hong Kong.”

Vine and Wine China

The Organization Internationale de la Vigne et du Vin International, or Organization of Vine and Wine (OIV), is an intergovernmental association of 43 member states with an interest in all aspects of wine production. Vine-growing, grapes and any wine and spirits of viticultural origin are of interest to what is often referred to as the “United Nations of Wine.”

Yves Bénard was elected as OIV President last July, the first French national in the post since Baron Le Roy in 1962. A qualified agricultural engineer and oenologist, Mr Bénard is a graduate of the SupAgro International Centre for Advanced Studies in Agricultural Science and an eminent personality of the wine and spirits sector.

Attending the HKTDC Hong Kong International Wine and Spirits Fair last November, Mr Bénard talked about his impressions of the region’s rapidly growing wine culture and his aspirations for the mainland to become a full-fledged member of the organization.

Competition and Education Key for Hong Kong Wine Hub http://www.youtube.com/watch?v=MZJdhCEz-hk

What was your connection with Hong Kong and the Chinese mainland before your election to the OIV?
I am also General Manager of the Champagne and Wine Division at LVMH Moët Hennessy Louis Vuitton. Our regional office for Asia is here in Hong Kong, where we cover markets across the region and as far away as Australia. So we anticipate Hong Kong will be the key place to be.

Tell us more about the role of the OIV.
OIV is an official international organisation in terms of scientific and technical issues, gathering 43 countries from around the world. It is a governmental organization that meets three times a year. Experts from different countries work together on issues concerning viniculture, and also on topics about wine consumption and education.

The mainland has been involved only as an “observer” through Yantai, in Shandong Province, for the past 20 years. Why are you now interested in the mainland becoming a full-fledged member?
China, of course, for us is a very important country as a producer of wine and low-cost grapes – the OIV is also in charge of work regarding cheaper grapes. So it is important not just as a wine-consuming country, but also as a grape-growing country. So [that’s why] I think China must be part of the OIV in the future. I also know that the Chinese government is interested in hosting in maybe in two or three years’ time the Annual Congress of the OIV. I have already made some contact with the Chinese government about this [late last year] in Beijing.”

What promise does the wine industry on the mainland, and throughout Asia, hold for France and other wine producers around the world?
I’m French, but I’m here as the president of all the countries belonging to the OIV. And I consider that China will become a major wine market, again, not only for imported wines from around the world, but also for producing wine – and, I would say, quality wine. The key question today in China is [how] to help the Chinese people interested in the wine industry produce quality wine. So China is definitely the key market for the future.

In terms of developing the China market and its industry, how important is education and such events as the Hong Kong International Wine and Spirits Fair.
I think education is an absolutely fundamental issue, and I think that an exhibition like this, with all the wine tasting organized, is very important. First of all, educate the people who are working in the wine industry – I mean the distributors, wholesalers, sommeliers. All these people will then be able to educate the consumers. So it’s a long process, but it is a key process in order to avoid situations where you see very good wine mixed with soft drinks or something like that. I also think it’s very important that the region learns how best to match Chinese food very well with wine.

How can Hong Kong realize its plan to become Asia’s wine hub?
First of all, Hong Kong has taken the key decision to abolish wine tax, which means that in the coming year, I’m sure Hong Kong will become the key place to import wine from all over the world. It will then be the window, the place to resell in Asia. And I also know that in Hong Kong, you have the right people to import, to manage the storage of wine in good conditions, and to have these wine education programs. All of that means that Hong Kong definitely is key for the future of wine in Asia.

March 6, 2010

Council (HKTDC) plans to spend big money to lure major buyers to trade fairs in Hong Kong

Exhibit at the 2010 International Jewellery Show

The Trade Development Council will continue to help boost attendance at its fairs this year by sponsoring the air tickets and hotel accommodation of some new overseas buyers - a sign many companies are still struggling in the nascent economic recovery.

The council sponsored about 22,000 buyers last year, when HK$80 (US$10.38) million was allocated to help attract more people to its trade fairs amid the global crisis. This was more than twice the 10,000 buyers the council had originally targeted under the programme, and was due to cheaper air fares and hotel room rates last year.

At the Chuk Kam Jewellery Design Competition Award Presentation held yesterday, the fascinating creations of winning designers were paraded by models at Hall 3C Oasis. These wonderful designs are on display at the Hall 1C Concourse Display Area for all to see and enjoy.

Hall of Fame and Hall of Jade Jewellery Parade

Hall of Fame and Hall of Watch Jewellery Parade

Hall of Fame and Hall of Italian Jewellery Parade

Hall of Fame and Hall of Stylist Jewellery Parade

Hall of Fame and Hall of Elegant Jewellery Parade

About 2,100 buyers were sponsored to attend this week's Hong Kong International Jewellery Show March 5 - 9 2010.

Guest of honour, Bi Lijun, Vice-Director of National Gems & Jewelry Technology Administrative Center, the Hon. Starry Lee Wai-king, member of the Legislative Council Panel on Commerce and Industry, Gaetano Cavalieri, President of World Jewellery Confederation (CIBJO), Fred Lam, Executive Director of HKTDC, Lawrence Ma, Chairman of Jewellery Advisory Committee and Fair Organising Committee, along with VIP guests and industry officials celebrate the opening of the HKTDC Hong Kong International Jewellery Show.

The sponsorship is targeted at new buyers or major buyers who have not been to the council's fairs for a while, mainly from emerging markets such as the Middle East, Russia, Eastern Europe and North Africa, in a bid to drum up more business for exhibitors.

The sponsorship helped to boost the total number of buyers at the council's fairs last year by 1 per cent from a year ago despite the tough economic times. The number of exhibitors rose 2 per cent, Benjamin Chau, the council's deputy executive director, said. Chau said that more money will be allocated to enable the sponsorship to continue this year, but declined to reveal how much more money will be needed until the council's governing body decides whether or not to approve the funding on March 18.

Jewellery sales, especially in the US and EU, were hit hard by the global downturn. The financial meltdown forced many consumers to cut back their non-essential spending on items such as luxury goods and jewellery. With a cautiously optimistic outlook on business this year, exhibitors are looking for signs from buyers that consumers are again willing to spend their extra cash on luxury goods.

At this year's five-day jewellery show, the number of exhibitors rose to more than 2,640, up 12 per cent from last year, while the size of the fair grew one-fifth to more than 87,600 square metres.

The number of buyers at last year's show fell to 29,326, down 6.4 per cent from 31,333 buyers in 2008, as demand for jewels and precious stones dwindled. Many exhibitors believe a clearer picture about the health of the jewellery industry will emerge when the show ends on Tuesday at the Hong Kong Convention and Exhibition Centre. A relatively poor showing could signal a long road to recovery.

March 3 2010

The Recovery Budget - Hong Kong

Hong Kong's economy is expected to grow between four per cent and five per cent this year

In his 2010-2011 budget last week, Hong Kong Financial Secretary John Tsang outlined the government’s priorities for the upcoming fiscal year. “I will continue to invest in infrastructure, promote the development of our industries and adopt various measures to achieve the objectives of consolidating the recovery, developing our economy and building a caring society.”

Mr Tsang said Hong Kong's economy expanded 2.6 per cent in the final quarter of last year, rebounding from four consecutive quarterly contractions. Mr Tsang said economic growth is expected to accelerate to between four per cent and five per cent this year.

He stressed, however, that Hong Kong is still in its early stages of economic recovery. “I am cautiously optimistic about Hong Kong’s economic prospects,” Mr Tsang said. “The global economy has not yet regained its vigour. There remain a number of uncertainties and potential pitfalls in the external environment,” he said, noting that the European and United States economies may have undergone fundamental changes in their economic structures that will affect Hong Kong’s future export performance.

The China Factor

The government will earmark HK$20 million in the next two years to develop Hong Kong’s testing and certification industry

But with the Chinese mainland currently leading the global recovery, Hong Kong, said the Financial Secretary, will continue to capitalise on its close links with the mainland. Hong Kong will remain a partner to mainland enterprises expanding overseas, providing expertise to bring mainland management and technological standards closer to the international level. “With our rich experience in international exchanges, we can assist the mainland in building brand names and improving product image.”

Mr Tsang also pointed to the city’s close cooperation with neighbouring Guangdong to develop the Pearl River Delta (PRD) region, including the latest initiative to promote the development of services industries in Qianhai. “This will allow us to tap the Greater PRD market, which has a population of 50 million, and in turn the Pan-PRD market, which has a population of more than 400 million.”

Hong Kong will also broaden cooperation with Taiwan, by setting up the Hong Kong-Taiwan Economic and Cultural Cooperation and Promotion Council.

Big Market, Small Government

Hong Kong Financial Secretary John Tsang says Hong Kong is still in an early stage of economic recovery

On the domestic front, Mr Tsang said the government will continue to support market development under the principles of “Market Leads, Government Facilitates” and “Big Market, Small Government.” This means maintaining the rule of law and a simple and low tax regime, nurturing talent, investing in infrastructure and helping enterprises tap markets outside Hong Kong.

One of the government’s key priorities is to foster the growth of six economic areas identified last year: testing and certification, education, medical services, environmental industries, innovation and technology, and the cultural and creative industries. Mr Tsang pointed out that the private enterprises of these six industries directly contributed eight per cent to Hong Kong’s GDP in 2008 and employed about 380,000 people, representing about 11 per cent of the total workforce.

The government will earmark HK$20 million in the next two years to support the work of the Hong Kong Council for Testing and Certification, set up last September, to enhance the professional standards of the local testing and certification services, as well as boost international recognition. Another HK$21 million will be allocated in the next two years to the Hong Kong Accreditation Service to strengthen services to the industry.

Hong Kong Science Park

About 4,000 new R&D-related jobs are expected to be created as a result of the expansion of the Hong Kong Science and Technology Parks

Mr Tsang also announced that the HK$200 million "R&D Cash Rebate Scheme,” to promote research and development (R&D) in Hong Kong, will launch in April. The government will also proceed with the development of Phase three of the Hong Kong Science and Technology Parks, to promote the development of innovation and technology, boost the growth of green technology and attract more high-tech companies to Hong Kong.

Hong Kong’s scientific research hub is home to more than 300 science and technology companies from Hong Kong, the mainland and around the world. Construction work is expected to start next year, with completion in phases between 2013 and 2016. An additional 4,000 R&D-related jobs is expected to be created as a result of the expansion.

Mr Tsang also unveiled plans to strengthen the competitiveness of Hong Kong’s financial services. One measure is to extend the stamp duty concession for the trading of exchange traded funds (ETFs), which have no more than 40 per cent of their assets composed of Hong Kong stocks. The concessionary profits tax rate will also be extended to cover qualifying debt instruments.

“Equipped with world-class hardware and software, including a strong asset management foundation, and benefiting from a huge demand for wealth and asset management services on the mainland, Hong Kong is well placed to become Asia's premier asset management centre,” Mr Tsang said.

Welcoming the latest economic initiatives, the Hong Kong Trade Development Council (HKTDC) said it has already devised a set of initiatives to promote the six new pillar industries. “A number of economic development strategies made in the budget are very targeted,” said HKTDC Executive Director Fred Lam. “I believe that these will effectively facilitate Hong Kong towards steady recovery. The HKTDC will continuously align its strategies with the government's in the relevant areas."

The Financial Secretary said he will closely monitor the pace of Hong Kong’s recovery before deciding when to begin pulling back on special measures initiated during the global crisis. “While we have come through the most difficult period of the financial tsunami, the external environment is still fraught with uncertainties and the foundations of the recovery are not yet firm,” Mr Tsang said. He noted that growing protectionism by some countries could pose new challenges for the early stages of Hong Kong’s recovery.

March 2 2010

Educating Hong Kong

The Chinese University of Hong Kong plans to build a campus in neighboring Shenzhen

Looking to diversify the Hong Kong economy, the government has targeted education services, together with five other economic sectors, for promotion. With education, however, the main objective is not to create business opportunities and jobs. Rather, as Chief Executive Donald Tsang explained in his October Policy Address, it is “to enhance Hong Kong’s status as a regional education hub, boosting Hong Kong’s competitiveness and complementing the future development of the mainland.”

The government’s policy is two pronged: internationalise Hong Kong’s student population and diversify into more self-financing tertiary institutions.

Attracting Asia’s Brightest

On the internationalization front, says Amy Wong, Principal Assistant Secretary for Education, the government’s focus is “to attract more quality non-local students to come to Hong Kong to study, mainly in the higher education sector.”

In the past two years, the government has increased the non-local student quota from 10 per cent to 20 per cent (the current figure is about 12 per cent); set up a HK$1 billion scholarship fund for both local and non-local students; and relaxed employment and immigration restrictions for non-local students.

Ms Wong says the increased non-local student quota doesn’t affect the number of places for local students. She adds that having more non-local students on Hong Kong campuses “will do our local students some good by exposing them to different cultures and a different calibre of people, and just expand their horizons.”

Grace Chow, Director of Admissions and Financial Aid, Chinese University of Hong Kong, says training future leaders requires international exposure

Grace Chow, Director of Admissions and Financial Aid at the Chinese University of Hong Kong (CUHK), agrees. “We should be training leaders,” she says. “For anybody who will eventually be in a responsible leadership position, this exposure to international culture and ambience is indispensable.”

There are currently about 3,800 full-time, non-local students enrolled at CUHK, including exchange students. “A lot of our graduate students are from outside Hong Kong, and we have exchange programmes with over 200 universities in 28 countries and region. The university takes in about 1,000 non-local students for one academic year or shorter exchange each year,” she says.

“If you look at it from a broader perspective, some 90 per cent of our teaching staff have a degree from outside of Hong Kong, and we have a lot of research cooperation with prestigious universities outside of Hong Kong. So when we are talking about internationalisation, we are really talking about a lot of things other than just admissions.”

Ms Chow, who has served as Deputy Commissioner of the Office of Administrative Complaints (now Office of the Ombudsman), points to the many advantages Hong Kong has in striving to become a regional education hub: “We are a metropolis with a strong international flavour, and a very successful business and financial centre. We enjoy political stability. We also have a safe – you’d be surprised how important that is to a lot of parents – and relatively clean living environment. We enjoy freedom of speech, we are genuinely a place where east meets west, and we are right on the doorstep of China.”

The Education Bureau’s Ms Wong also notes that Hong Kong institutions enjoy high positions in prestigious international university rankings.

The Cream

Hong Kong is a natural destination for many Chinese mainland students, given that the city is trilingual, biliterate and part of China. Hong Kong’s universities can now directly recruit students from 25 cities and provinces around the country, and the Education Bureau and mainland officials are discussing the possibility of mainland senior secondary students studying in Hong Kong. “We believe that if we can attract them earlier on, our universities will be in a better position to attract them,” says Ms Wong.

This push has prompted some people to complain about “mainlandisation.” But Ms Chow says CUHK attracts top-notch mainland students – “the cream of the cream.” It accepts only 250 to 260 mainland students from some 10 million potential candidates each year. “And I think that, as a part of China, it is not inappropriate for us to help provide quality tertiary education to aspiring mainland students.”

Hong Kong university moves into the Pearl River Delta are already in the works. For example, the University of Hong Kong plans to build an extension in Shenzhen, and last month CUHK signed a memorandum of understanding with the Shenzhen Municipal Government to establish a campus there.

India Calling

Roderick Wong, Vice-President (Development and External Relations), City University, says Hong Kong boasts first-class scholars and research

Roderick Wong, Chair Professor of Mathematics and Vice-President (Development and External Relations) at City University of Hong Kong, has long been a proponent of internationalization and supports the initiative to develop Hong Kong as an education hub.

“Hong Kong is really an international city, a world city, and we ought to keep it that way.” He notes that Hong Kong boasts first-class scholars and research, and says most of the Nobel laureates in the United States were not born there. “The government has to help to make this a genuine education hub, and I think we can do it.”

Professor Wong, who taught mathematics at the University of Manitoba for many years, has been recruiting leading mainland students for some time. But, he says, “I find, for example, we don’t have enough Indian students. My experience in North America, at every campus I visit, I see lots of Indians.”

Indeed, India is one of several countries in the region being targeted by the government for educational promotion.

Pet U

There is no shortage of ideas on how to bolster Hong Kong’s reputation as a regional education hub and world-class centre for university teaching and research.

One of the more intriguing proposals is City University of Hong Kong’s application last year to the University Grants Council to establish a school of veterinary medicine.

CityU’s ambitious goal is to create the first veterinary school in Asia with the coveted American Veterinary Medical Association accreditation. And CityU has enlisted a heavyweight Ivy League school to help guide it through the process: Cornell University, which operates the top-ranked school of veterinary medicine in the US.

“It’s not simply for looking after pets, although that’s important,” says Roderick Wong, CityU’s Vice-President for Development and External Relations. “But we also want to look after food safety and disease control.”

He says the school would have diagnostic labs and could potentially use Guangdong’s dairy, pig and poultry farms for studies.

“Seventy-five per cent of infectious diseases now come from animals,” says Professor Wong, citing World Health Organization statistics. “If you do not stop this at the roots, you cannot prevent widespread disease.

“I think to showcase our achievements in reaching to make Hong Kong an educational hub, this would be a showcase.”


One of the big constraints on internationalization is lack of space for student housing. CityU takes in about 700 exchange students a year. “We could have more, but we don’t have places for them to stay,” says Professor Wong. “That puts a very strong restriction on our enrolment.

“If government wants to push this, my strong recommendation is they must provide us with enough accommodation for students, simply because Hong Kong is not like North America,” he says. “We don’t have cheap housing around campuses, especially in Kowloon Tong. If you find cheap housing places, they’re in a very poor condition.”

Money for Schools

In terms of diversification, the government sees self-financing institutions as future big players in Hong Kong.

“Up until now, our higher education sector has had a quite publicly funded focus,” notes Ms Wong. “We realise that we can’t continue on this route because education takes up over 23 per cent of the government budget and, out of that, a quarter is on higher education. Publicly funded higher education is expensive. So in order to get more places, we would like to encourage the development of the self-financing sector.”

The government has launched two initiatives since 2000 to further this goal: the Land Grant Scheme, which provides land at a nominal premium for new campuses; and the Start-up Loan Scheme, which provides loans for campus construction or renovation, interest-free for the first 10 years. The government recently committed an additional HK$2 billion to the loan scheme.

And, in his 2010-11 budget speech last week, Financial Secretary John Tsang announced the allocation of HK$1 billion for a fifth round of the Matching Grant Scheme to help tertiary institutions tap more funding sources.

“For the first time, this will cover all 12 degree-awarding institutions so as to support the diversified development of higher education,” he said.

Feb 24, 2010

Back to Business

Banking giant HSBC has found that Hong Kong SMEs are the most optimistic in Asia

Hong Kong’s small and medium-sized enterprises (SMEs) are leading a rebound in business optimism in Asia, according to the latest HSBC Small Business Confidence Monitor.

The survey – the largest to date – shows confidence among Hong Kong SMEs climbed 25 points in the fourth quarter last year, the strongest increase in Asia, as the region bounces back from the financial crisis of late 2008.

Around the world, a growing number of small businesses are bullish about the first half of this year. Many are signaling increasing capital investment and recruitment for the first time since the financial crisis.

The sentiment expressed in the latest HSBC Small Business Confidence Monitor, which captures the views of more than 6,000 SMEs across 20 markets in Asia, the Middle East, Europe, North America and Latin America, is also confirmed in a new report by the Economist Intelligence Unit. That report found Asia’s SMEs are well placed for regional recovery. Times are tough, but Asian SMEs are even tougher, said David Line, editor of the report. “SMEs are the entrepreneurial lifeblood of the Asian economies, and those that have shown the toughness and flexibility to survive the financial crisis may well be tomorrow’s corporate stars.”

The HSBC Small Business Confidence Monitor, conducted in October and November 2009 by research agency TNS for HSBC Commercial Banking, gauges the six-month outlook of SMEs on local economic growth, capital investment plans and recruitment.

On a High

Sandy Flockhart, HSBC Chairman Personal and Commercial Banking, said the results show small business confidence is back to pre-financial crisis levels. “Not only are SMEs confident that their local economies will strengthen, they are ready to invest again in their own operations and people.”

The Asia index rose from 107 in the second quarter of 2009 to 122 in the fourth quarter. Hong Kong’s business confidence climbed 25 points from 83 to 108, the biggest index rise among the Asia economies in the survey, placing it back in positive territory. Vietnam remained at the top, with an index of 160, followed by India (132), the Chinese mainland (124) and Singapore (117).

The SME indices tracked by HSBC globally show a positive outlook, with the Middle East at 125, Latin America at 118, the United States and Canada at 107 and the United Kingdom at 101. France is just below neutral, at 94. But emerging markets in Asia, the Middle East, Latin America and Eastern Europe are significantly more optimistic than the developed markets of the US, Canada, the UK and France, with an index of 121 versus 106.

In Hong Kong, 84 per cent of SMEs say their business prospects look stable or better for the first half of 2010, with 73 per cent expecting local GDP to remain stable in the next six months. Fifteen per cent expect GDP to increase, and only 12 per cent expect growth to slow, a 33 per cent improvement over the SME economic outlook in the second quarter of 2009.

Nearly one in three Hong Kong SMEs are preparing to invest in their own businesses this year. Apart from increased capital expenditure, many are starting to hire again.

Characteristic Resilience

Christopher Hammerbeck, Executive Director, British Chamber of Commerce in Hong Kong

Mr Flockhart said this sentiment underscores the remarkable resilience of Hong Kong SMEs. “The sector has been through the Asian crisis, SARS and the recent global financial crisis, proving its adaptability to challenging market conditions. As a whole, he says, Asia weathered the financial crisis relatively well. “Led by the Chinese mainland, Asia's economies have entered a sustained growth cycle, and Hong Kong's business climate is positive as a result.”

The British Chamber of Commerce in Hong Kong has also seen a significant improvement in business confidence. The results of its latest survey, carried out by TNS, show member optimism for the coming year increasing from 40 per cent at the end of 2008 to 78 per cent at the end of 2009.

The survey reflected a dramatic increase in the mid-term outlook, with 92 per cent expressing confidence in the coming two years, 94 per cent optimistic about the coming three years and 87 per cent showing confidence over five years.

 Similarly, 95 per cent of respondents continue to be very satisfied or satisfied with the Hong Kong business environment, according to Christopher Hammerbeck, Executive Director of the British Chamber of Commerce.

“It seems to be the general ease of doing business in Hong Kong that continues to make it such a dynamic centre for business activities with geographical location, taxation, communications network, free port status, infrastructure and public safety and security rating top of the list of areas that create highest satisfaction.

“There is also a perception that Hong Kong’s competitiveness in terms of the costs of doing business has seen some improvement, with issues such as inflation, executive and staff remuneration, availability of low cost labour, commercial rents and residential rents seeing significant increases in satisfaction.”

He described the emerging optimism as very encouraging after “an extraordinarily difficult year for business.”

“Of course, there are still areas to be addressed, particularly in terms of providing the right support to SMEs in today’s market, but overall, Hong Kong continues to be seen as a unique business environment with much to recommend it.”

Investing in Hong Kong

Simon Galpin, Director-General of Investment Promotion at Invest HK, charts the growth of inward investors choosing Hong Kong for business expansion

Despite recent economic challenges, 265 overseas, mainland and Taiwanese companies set up or expanded their businesses in Hong Kong in 2009, with the assistance of InvestHK. A record for the government’s investment promotion arm, it signified investors’ strong vote of confidence in Hong Kong, despite the global economic environment.

The Asia-Pacific, Europe and North America accounted for 43 per cent, 35 per cent and 18 per cent, respectively, of those investing in Hong Kong, with the mainland the single largest market. The top three performing sectors were business and professional services, including education services and design; technology, including renewable energy; and special projects, which includes environmental technology and the wine sector.

Simon Galpin, Director-General of Investment Promotion at InvestHK, conceded that it was a challenging year, but the positive results demonstrated that Hong Kong remains a preferred base in Asia for business expansion.

“In these times of economic uncertainty, the enduring advantages of Hong Kong, such as its rule of law, low and simple taxes, level playing field, free economy, world-class communications and transportation infrastructure, and available talent pool, have become increasingly important,” Mr Galpin said.

“They continue to enable the city to act as a stable and secure platform for companies looking to do business in the region and beyond.”

He added that more would be done in 2010 to attract companies from such emerging markets as India, Latin America, the Middle East and Russia. In addition, InvestHK will strengthen its marketing promotion efforts on the mainland to assist corporations looking to expand internationally by using Hong Kong as their hub. It will also continue to organise joint promotion seminars with mainland partners in key overseas cities to promote the combined advantages of Hong Kong and the mainland, in particular the Pearl River Delta region.

Feb 14, 2010

Asia’s Green Capital - Hong Kong and the Chinese mainland are making concerted efforts to clean up their environment

The winds of change have been building in recent years, but the green movement gained momentum last year when the Hong Kong Government identified environmental industries as one of the six new pillars of economic growth. Chief Executive Donald Tsang pledged to make Hong Kong a green city, calling on innovative environmental companies to bring their solutions to Hong Kong.

Overseas businesses have been quick to respond. Phil Ingram, Senior Trade Commissioner, Austrade, and Deputy Consul-General (Commercial) at the Australian Consulate-General in Hong Kong, said the market is particularly ripe for companies involved in water treatment and environmental remediation, both areas of need on the Chinese mainland.

“Hong Kong is located at the mouth of the Pearl River Delta, the richest area in China, accounting for one-third of its exports and 70 million people. They have the money to spend on environmental technology, and they have the need, especially for the supply of enough clean water.”

Corporate Sustainability

Martha Grossman, General Manager Asia, RepuTex

One Australian company to take advantage of the opportunity in Hong Kong is RepuTex, an Asian market-leader in corporate sustainability and carbon-risk research. Martha Grossman, General Manager Asia at RepuTex (HK) Ltd, said that the company first set foot on the mainland via a sustainability showcase it organised in Shanghai in 2005 at the invitation of Fudan University. But it was its appointment in 2009 to assess the environment, social and governance (ESG) performance of more than 500 companies in Hong Kong and the mainland that moved RepuTex to set up its new regional hub in Hong Kong.

“The Hang Seng project provides a wonderful opportunity for RepuTex, as it gives us a stronger presence in Hong Kong, a dynamic market in its own right and a solid platform to the region,” Ms Grossman said. With its status as an international financial centre, Hong Kong “is important to the whole sustainability agenda.”

In the long term, companies that neglect to disclose their ESG performance will find it more difficult to obtain funds from institutional investors, according to Ms Grossman. Several pension funds, for example, consider climate change a key criterion and will exclude companies that cannot substantiate their environmental commitments.

“Financial markets are the real force driving companies to behave in a more sustainable manner. A performance listing on Hang Seng Index Company’s soon-to-be-launched Sustainability Index Series will demonstrate to investors the depth of their commitment to these issues.”

Secure Laboratory

New Zealand’s Environmental Decontamination Ltd (EDL) has been conducting trials in Hong Kong to further its soil clean-up work for clients in the region.

Marcus Glucina, North Asia Regional Director, EDL Asia, said its Kowloon laboratory has become a showcase, providing a practical and convenient operating environment.

EDL’s Hong Kong laboratory tests soil samples from around the region - The company, which also does business in Vietnam, Japan and the mainland, set up its Hong Kong office three years ago.

Having the facility in Hong Kong, he said, “ensures protection of our intellectual property. Operating in this manner enables EDL to bring soil to the plant for trials and to demonstrate the technology without traveling all around the region.

“To date, the laboratory has been used to treat contaminated samples from Hong Kong, mainland [cities] and Manila, in front of local regulators and consultants, and with full security.”

Merv Stark, Director, Environmental Decontamination Ltd

EDL’s exploratory work on the mainland has been assisted by implementation of the New Zealand-China Environment Cooperation Agreement, which came into effect with their Free Trade Agreement, signed in September 2008.

Merv Stark, former Regional Director for the New Zealand Government’s Trade & Enterprise agency for North Asia, and an EDL director, strongly supported the location of Hong Kong as the Asian base for EDL. Mr Stark describes Hong Kong as “a wonderful place to do business. The ease of travel to other countries in Asia is a major advantage. Hong Kong people are very motivated, and will quickly do whatever is needed. Being in the same time zone also helps.”

Canadian firms are answering the call, too, after Hong Kong Secretary for the Environment Edward Yau visited Toronto last year to outline the government’s “green game plan” for Hong Kong. “We are going to be greener, and the goal for our region is to be the greenest,” Mr Yau told a gathering of 150 business leaders, encouraging environmental protection companies in Canada to partner with their counterparts in Hong Kong to enter the mainland market.

Carbon Footprint Audits

Bruce Hicks, Managing Director, TPIZ Resources - Canadian Bruce Hicks, a self-styled “eco-preuneur,” who founded TPIZ Resources in 2006, saw the commercial potential in providing green solutions for businesses, perceiving that “sustainability is logical.”

Operating through two joint ventures – Green Building Services Ltd and Asia Clean Capital Ltd – TPIZ Resources uses Hong Kong to develop, manage and finance environmental and energy-efficiency projects and businesses in Hong Kong and the mainland.

Green Building Services is an advisory services company helping clients develop and implement sustainability strategies, with a particular focus on green buildings, indoor environmental quality, energy management, stakeholder engagement and sustainability reporting. “We also do carbon footprint audits as well as employee-training and organisational-change management around sustainability,” said Mr Hicks.

Asia Clean Capital is an investment company using ground-source heat pump technology to provide heating, cooling and hot water as an outsourced utility to large buildings and developments on the mainland. Using natural energy from the ground, Asia Clean Capital designs, invests in and operates energy-efficient systems. The company says these can result in energy-cost savings of up to 50 per cent.

“China is doing a huge amount of work to improve its environment, and Hong Kong more recently has put a lot of focus on green activities. There is definitely a lot happening in both markets,” Mr Hicks said.

“I believe I am in the right place, at the right time. Servicing these markets out of Hong Kong is the best strategy for me.”

Jan 19, 2010

Follow your nose - Asian buyers' competitive spirit has turned Hong Kong into a major wine hub much faster than traders expected By Ben Sin

A former amateur racing driver, Carson Chan Kai-shun enjoys cars. So when an opening came up at Bonhams' local subsidiary 10 years ago, he seized the chance - the auction house was then better known for its sales of vintage cars. But now, as managing director of Bonhams in Hong Kong, Chan finds himself at the forefront of a regional wine boom that has made Barolos and Chateau Rothschilds the focus of his attention rather than Aston Martins and Rolls-Royces.

Traders expected a boost from the government's scrapping of wine tax in 2008, and their hopes have since been fulfilled in impressive style with Hong Kong quickly challenging London's place as the world's second biggest auction market for fine wines after New York.

"I knew the auction scene was going to be big in Hong Kong as soon as the tax was dropped," says Chan.

Still, it took nifty footwork to catch the wave. "We had a hunch months in advance that the government was going to lower the wine tax because officials had been talking to people in the wine industry," Chan says.

Once the tax abolition was announced, he and his team got together and made swift plans. Within two months Bonhams held a wine auction - its first in Hong Kong for over a decade - recording sales of more than HK$11 million.

Other auction houses soon followed, with Sotheby's announcing that Hong Kong has become its most important centre for fine wines after notching up more than HK$111 million from its three sales last year. Its auctions in New York took in US$12.7 million while London booked £9.2 million (HK$116 million) from 10 auctions.

"Last year will be remembered as the year Asian collectors overtook the US in the purchase of fine wine at auctions," says Serena Sutcliffe, head of Sotheby's international wine department. Local and mainland buyers accounted for 40 per cent of Sotheby's total wine sales.

John Kapon, president of international wine merchants Acker Merrall & Condit, reinforces the view. "Asian buyers in general have been what's driving the sales," he says. "Not just in Hong Kong [but also in New York]."

Still, Chan was surprised by how swiftly Hong Kong's auction market had grown following the end of wine tax, attributing it partly to last year's financial meltdown hitting the US harder than Asia as well as a growing thirst among mainland buyers.

The surge was also in reaction to a lack of auctions earlier, says Jamie Ritchie, senior vice president of Sotheby's wine department, who expects the market to stabilize after the initial fervor.

Kapon, however, sees the recent boom as a natural phase in Asia's growing interest in wine.

Bidding in Hong Kong tends to be more lively than in New York or London, Kapon says, and there's a "friendly, competitive nature here that can't be found elsewhere".

Recalling an Acker Merrall & Condit auction where he wielded the gavel last year, he says the event at a local hotel had to be moved from one hall to another because bidding went on far longer than expected.

As in many businesses, much of the impetus for growth is coming from the mainland, particularly from wealthy Chinese for whom premium wines have become a status symbol as well as pleasurable pursuit.

Chan attributes the strong Chinese interest in wine auctions partly to cultural mores. "Chinese people in general really care about face," he says. "If I invite a friend to dinner and I open up an expensive bottle of wine, he'll feel the need to top it by opening up a more expensive bottle of wine the next time he invites me to dinner."

Jack Hui Wai-po, who founded the Hong Kong Fine Wine Auction website with a few friends in November as a way for enthusiasts to make small trades, echoes the view.

"Chinese people, if they can afford it, really like to indulge and spend on the biggest brand names and expensive items, and wine is no exception," says Hui, who estimates up to 60 per cent of wine traded on his website ends up on the mainland.

The end of wine tax acted like rocket fuel.

"Many mainlanders buy and store their wine in Hong Kong until they need it due to the high tax in China," says Kapon. "Hong Kong has become a portal for mainland buyers who want to avoid duties."

Purchases by mainland wine buffs have opened new opportunities for wine traders to provide storage services.

"We offer storage here at a small percentage fee," says Hui. "They place bids online and, after the purchase, they have an option to store the winse with us and pick them up in small batches each time they come to Hong Kong."

But to keep the wine scene growing, traders and enthusiasts agree novice buyers have to be better educated. "You can't keep buying something you don't understand," says wine lover Danny Wong King-wang.

A frequent participant at wine sales, Wong views the auction fever as a fad but he hopes to turn it into sustained interest by helping novices learn more about wines and collecting.

Which is why he opened Vintelligence, a club that provides a venue for members to share experiences and knowledge about wine, as well as to trade.

"Some people look at wine as an investment and I hate that," Wong says. "It should be something to be enjoyed."

Chan also reckons more knowledge is needed to keep up interest among the swelling band of local wine buffs.

"The growth rates in Hong Kong don't just indicate rich buyers willing to spend, but wine drinkers becoming more sophisticated. To sustain this, we've started wine education courses to help spread the culture," he says.

To attract mainland buyers unable to attend its Hong Kong auction, Sotheby's last year introduced live online bidding, where participants make offers via the internet with video and audio feeds.

"Live bidding was most popular at the Hong Kong auctions, with most of the bidding coming from mainland buyers," says Ritchie, who plans to further develop online business.

With Asia becoming the prime hub of his international business, New York-based Kapon also expects to spend more time in Hong Kong this year.

Acker Merrall & Condit sold more than HK$165 million worth of wine here last year - the most among the auction houses - and Kapon expects an 80 per cent increase in business this year.

Five auctions are being held, including a major sale next week that will feature a "super-lot" group of premium Bordeaux valued at about HK$680,000.

"In all my years in the business, the value of wine has only gone up," Kapon says. "So it's here to stay regardless of how the economy is."

December 23 2009

Toy Story

Raymond Choy founded Hong Kong company Toy2R, which has been instrumental in popularising the designer/art toy movement through its key-chain collectible figure Qee.

Mr Choy is also a pioneer in the huge Chinese mainland market, successfully developing major sales channels, including the opening of exclusive shops, along with franchising, and crossovers with department stores and international brands.

The designer’s efforts have earned him two awards this year alone. He won “Most Promising Entrepreneur” in the Asia Pacific Entrepreneurship Awards and was named one of the Ten Outstanding Designers by the Hong Kong Communication Art Centre. In Six Questions, Mr Choy maps out his strategy for success on the mainland.

How does the mainland market see Hong Kong brands?
Hong Kong brands have an advantage and enjoy a privileged status on the Chinese mainland. Mainland companies think that Hong Kong brands have a unique philosophy and are more similar to the local culture than international brands. Therefore, they are willing to invite industry insiders from Hong Kong to the mainland to share their experience, which is a valuable opportunity for Hong Kong companies.

What is the best way to promote Hong Kong products on the mainland?
Collaborating with mainland magazines is very important. I recommend that enterprises allocate resources for this, because it’s a kind of soft-promotion strategy, which greatly helps brand development and marketing. Television advertising on the mainland, on the other hand, is not a must because of the high cost and broadcasting geographical constraints. But print advertising is a better way to penetrate the market. Apart from conducting interviews with magazines, you can also work with them to launch promotions, such as organising activities or competitions, to achieve a win-win situation. The cost of magazine publicity is also less expensive.

What is your marketing strategy?
No matter what kind of publicity, the key to success is focusing on merging products with life. For example, I designed a product in 2001 – a keychain figurine series called Qee. It’s a patented key chain and necklace collection that has caught on with art toy collectors.

We realized that we cannot rely on a single product. Instead, we need to take a concept and spin it off into other series. This creates a fresh and evergreen image to users.

How do you create a connection with users to your product?
For designer toys like ours, the buyers’ sense of involvement is crucial. In 2003, I introduced the concept of DIY (do it yourself), teaching users via the Internet how to draw their own Qee key ring designs. In some shops, there’s a design corner, with art instructors on hand to help our customers create their own personal characters. This "everyone can design" concept not only encourages creativity and brings satisfaction, it also enhances their sense of belonging to the brand.

Apart from magazines, you have been successful in collaborating with shopping malls and department stores.
This channel is more extensive and allows direct interaction with consumers. We once held a redemption program at department stores over the Christmas period, which resulted in a great response. In addition, we have cooperated with middle-end fashion brands on the mainland to create special commemorative-edition clothing.

During the launch of The Simpsons Movie in the United States in 2007, we also worked with a partner in the US to organize a world-tour exhibition of Bart Simpson Qee DIY. The tour’s last stop was the mainland.

You have since collaborated with several international brands through cross-licensing agreements. How has that helped in licensing your brand and property?
We have been actively cooperating with well-known international brands, including adidas, LeSportsac, SanDisk and FX Creations. But I don’t see this as my ultimate goal. Every brand creator wants to develop his own licensing products, so I also use my brand to design a variety of hats, bags, shirts, mugs, phone lanyards and other products.

Qee and Toy2R’s other creations will be featured at the HKTDC Hong Kong Licensing Show, 11-13 January 2010.

December 17 2009

BVI Companies Allowed to List in Hong Kong Stock Exchange

Companies incorporated in the British Virgin Islands (BVI) are now allowed to list in the Hong Kong Stock Exchange.

The HKSE has agreed to accept applications from companies incorporated in the British Virgin Islands.

Barry Mitchell, a partner at international law firm Maples and Calder heading the firm’s Hong Kong-based BVI team was quoted by Hong Kong Legal News as saying: “Private equity firms have incorporated companies in the BVI for the purpose of investing into China and many of them are now looking for an exit.”

He added: “Foreign private equity investment is reaching a certain level of maturity in China and with exits sometimes difficult to achieve, the ability to list in a well regulated and cost effective jurisdiction such as Hong Kong should provide BVI companies with an exit strategy which has not been hitherto available without first undertaking a significant restructuring.”

“Given that a listing on other exchanges can be less attractive in terms of costs and regulation,” Mitchell went on to say, “this is a welcome development and an option that will be very attractive.”

The British Virgin Islands is known for tourism and financial services. The territory is considered a tax haven with majority of government income coming from license fees for offshore companies.

December 15 2009

The folly of promoting 'private' universities - REGINA IP

Former senior civil servant Regina Ip discusses the latest in-depth government issues and policy.

Can education services be "commercialized" and turned into a self-sustaining money-spinner? Our chief executive and some of our city's top educators apparently think so, or they would not have pushed education as one of the six new "industries" slated to function as a new locomotive of growth.

The level of education attainment and skills is no doubt a decisive factor determining a territory's economic future. That is why governments worldwide feel duty-bound to provide education services, to various extents, at public expense. But examples of really successful education services as unabashed, unsubsidized commercial enterprises are few and far between. In Hong Kong, the only such examples are the tutorial schools, which package their tutors like rock stars and pin their business appeal wholly on exam scores.

In comparison, none of our universities qualify, as they are dependent on the government for land and annual financial grants. As for their professional and continuing-education arms, the extent of any hidden subsidies is not clear. Even if they are entirely separate profit-and-cost centres, their business appeal derives to a large extent from their being part of prestigious public universities. Much of that will wear off if their parents are seen to be spreading their brands too thin and striking too many deals. In the commercial world, a brand risks degrading itself if it is seen by its supporters to be overextending itself and letting standards slip. Such reckless, rent-seeking expansion would be even more fatal in the world of higher education, where standards are supposed to come first.

If the promoters of "private" universities as a viable commercial enterprise persist in indulging in such fancy by pointing to prestigious private universities overseas, they need to look at the figures in a much more cool-headed manner. In the US, private universities receive massive federal funding in support of their research. Stanford, for example, which stands on more than 3,200 hectares of its own land, in 2009-10 derives only 17 per cent of its revenue from tuition and fees, but 70 per cent from government, foundation and corporate support for sponsored research. And that's a university which charges a whopping US$50,000 annually for tuition and fees. Can our "private" universities aspire to be a true commercial success if, shorn of recurrent government subsidies, they charge market-level fees?

The US does offer a good example of a successful and truly "private" university in the form of the San Francisco-based Academy of Art University, which owns its own premises. It specializes in art and design, and has grown over 80 years. Hong Kong could take a leaf from its book and establish private colleges specializing in business, finance and related skills, but not kid itself by claiming to be building world-class research universities. That would be much more honest. But there remains a catch: if land and interest-free loans are to be provided, as the Education Bureau is proposing, any such universities would not be "private" in the true sense of the word. On the basis of the information available, the government will be providing land worth potentially HK$3 billion, and interest-free loans amounting to another HK$2 billion.

The immediate beneficiaries will probably be the faculty and new staff, whose salaries would rise with the increase in demand. Certainly, it wouldn't be the 6,000-odd high-school students who qualify for university admission but are denied places because of shortfalls in the public sector, if the fees are to be set at commercial rates. Nor would it even be the mainland undergraduates who our planners hope to target.

Tang Jie, a vice-mayor of Shenzhen, said recently that mainland students would come if tuition fees were set at HK$100,000 per annum. Welcome to fools' paradise if you believe that Hong Kong will strike gold by tapping into the mainland's market.

Regina Ip Lau Suk-yee is a legislator and chairwoman of the Savantas Policy Institute

December 9 2009

The World’s Consumer Market

The Chinese mainland will drive global retail sales in the next three years, according to a PricewaterhouseCoopers study

More than 380 business leaders from 23 countries took part in the 10th Hong Kong Forum, 1-2 December, to gain insights into the fast-growing Asian market, dominated primarily by the Chinese mainland. “As the top global consumer market, definitely, it is China,” said Anthony Keung, CEO of Hong Kong’s Fenix Group Holdings. “In fact, it has only just started.”

Among the speakers at this year’s event were such pioneering Hong Kong companies as Hong Kong Beijing Air Catering, which signed the first Sino-foreign joint venture in 1979.

“In China, you have to take a lot of risks, whether it’s financial or political,” said Dr Annie Wu, the company’s Managing Director. Thirty years later the gamble for the airline-food catering business has paid off for the firm: “We trusted the Open Door policy and never looked back.” Dr Wu’s company currently runs 12 joint venture businesses on the mainland.

Build and They Will Come

Another Hong Kong entrepreneur who saw huge opportunities early on was Sir Gordon Wu. In the 1980s, the Chairman of Hopewell Holdings identified a future demand for highways on the mainland at a time when, Sir Gordon said, “no one could even afford bicycles.” His company went on to build, among other infrastructure projects, the first highway from Shenzhen to Guangzhou in the Pearl River Delta region.

Shui On Group Chairman Vincent Lo said that Hong Kong has a unique role in continuing to open new business opportunities for mainland companies and foreign businesses that want to break into the mainland market.

Mr Lo’s first major project came during the mainland economic downturn in 1996, when he was approached by Shanghai authorities to redevelop a dilapidated housing area.

“Even though the market was bad at the time, I was certain Shanghai would become an international business centre in the 21st century.” Mr Lo was personally involved in drafting the master plan for what is now Xintiandi, one of Shanghai’s main tourist attractions. (See "Remaking Heaven and Earth" in Six Questions.)

Mr Lo said the Shanghai project illustrates how Hong Kong can integrate the best the world has to offer, and make it work on the mainland. “Hong Kong’s ability to constantly transform itself, from a manufacturing to a services industry – it’s what we do best,” Mr Lo said.

Sir Gordon said another of Hong Kong’s strength that should serve as a model for other emerging markets. “Hong Kong has thrived because of the rule of law,” he said, adding that no economy can prosper even with vast amounts of technology and know-how, without “everyone knowing the ground rules.”

Mainland Branding

Hopewell Holdings Chairman Gordon Wu says building a good brand is important to making it on the mainland - “The brand market on the mainland is now a free-for-all,” Sir Gordon noted, which makes it important to establish yourself as a good brand.

Hong Kong brands are helping expand the mainland middle-range consumer market. Opportunities to cater to this growing segment are expected to grow as domestic spending continues its upward trend.

Mr Keung of the Fenix Group has seen success on the mainland for his fashion brand Anteprima. “There used to be only the very top-end brand and low end-markets. The middle-range market was not there. But, in the last three years, the middle market has been growing 30 to 40 per cent.”

According to a study carried out by PricewaterhouseCoopers (PWC) and the Economic Intelligence Unit, Asia – with the Chinese mainland leading the way – will drive retail sales in the next three years. Promising sectors in the mainland consumer market, include food and beverage, apparel and private labels. “Opportunities are plenty; there’s no question about that, said Carrie Yu, a Partner at PWC. “But competition is intense, especially in the first-tier markets. Third- and fourth- tier cities, though, are far from saturated.”

“Branding is very important,” said Shui On’s Mr Lo. “But it’s not easy building a brand. You’re looking not at just one market, but hundreds of different markets [on the mainland].

Business veterans of the mainland market say patience is key to making it. “It won’t happen overnight,” Dr Wu said. “Relationships in China are built on long-term trust.

The Shui On Chairman, who’s been dubbed the “king of guanxi” [connections] for being among the first successful foreign investors on the mainland, maintains that “delivering on your promise is the best way to maintain good business relationships.”

Remaking Heaven and Earth

Vincent Lo

Hong Kong property developer Vincent Lo is best known for transforming a crumbling housing development in Shanghai more than 10 years ago into a prime tourist attraction. Xintiandi, which means “new heaven and earth,” has earned praise for preserving the traditional shikumen, the stone-gate style of housing unique to Shanghai, and turning it into a vibrant entertainment district.

Mr Lo’s building-materials and construction company is now involved in other mainland redevelopment projects in Hangzhou, Wuhan, Foshan, Dalian and Chongqing, where his company is redeveloping the municipality’s central business district.

Mr Lo is seen as one of the most consistently successful foreign investors on the mainland. In Six Questions, he explains why the mainland market was always going to be a good bet.

What was the Chinese mainland like when you first entered more than 20 years ago?
The difference is like night and day. Twenty-five years ago, in Shanghai for example, there was only one hotel – the Jin Jiang Hotel – that catered to foreign visitors. But the Jin Jiang could not even guarantee your reservation. So you used to arrive in Shanghai with a bit of trepidation, not knowing for certain whether you would sleep on the streets that night.

Today, all the top hotels are in Shanghai. The streets are busy late into the night, whereas in the past it would be empty by 8pm.

Why did you choose to focus your business on the mainland, and why Shanghai?
In the early 1980s, I decided that I wanted to stay in Hong Kong after 1997. Since we were going back to the mainland, I believed then that, as a business, I needed to invest in China to get first-hand knowledge of what was happening, because the economic reforms were just starting then. Most Hong Kong people were not confident, but I felt there was a good chance because the market is huge. And with the opening up of the economy, I felt there were plenty of opportunities.

We visited three cities: Shanghai, Beijing and Guangzhou. On my Shanghai visit, I was introduced to the city’s Communist Party Youth League, which wanted to build a three-star hotel. I was impressed by them, and although we did not do much market research, I decided to invest there first.

Your projects have been very successful at integrating the old with the new. What is your overriding philosophy when redeveloping these places?
I believe that for a country like China, with its 5,000-year history, every city has its own culture, history and customs. Old buildings are the best reflection of the culture and history. I believe it’s not right to tear down all old buildings and build everything brand new. If you go to a city where you see high-rise buildings, they all look the same. There’s no character. Preserving the old is important. For myself, when I go to any city, I always want to see the old part of town because that tells me most about that place.

Xintiandi was successful because we combined preservation with modern living. We transformed these traditional houses, which are unique to Shanghai, and made them fit for the 21st century lifestyle.

Much has been made about the rivalry between Shanghai and Hong Kong. As a resident with business stakes in both places, do you believe that Shanghai could overtake Hong Kong as an international financial centre?
Shanghai is moving forward very rapidly, especially now that the Central Government has designated it to become the country’s international business and financial centre by 2020. Right now, Hong Kong still has several very strong advantages, but these will gradually diminish unless we make sure it continues to stay ahead of the game. There is room for both to thrive. But Hong Kong will have to compete in the future with Shanghai.

As one of the early investors on the mainland, what is your advice for companies interested in breaking into that market?
You must take a long-term view. It takes a lot of commitment and a lot of conviction on what you plan to do. You must not just say, ‘This is how we’re going to do it,’ from afar in your home base. You need to be there on the ground and have your fingers on the pulse to know what is happening, what is changing, and plan accordingly.

What role does Hong Kong play for businesses that want to break into the mainland market?
The Xintiandi project is a perfect illustration of Hong Kong’s strength as an integrator and packager. We brought the world’s best to put together that project. There are similar opportunities on the mainland that Hong Kong and overseas businesses can take advantage of using Hong Kong as the platform.

Hong Kong has all the human capital, the experience and knowledge of what is required on the mainland. We have been the mainland’s biggest partner since the opening up, and we must continue capitalizing on that.

December 3 2009

Hong Kong's tertiary institutions are winning worldwide kudos, reinforcing Hong Kong's goal to develop education as one of its new growth engines

Kellogg-HKUST representatives celebrate the number-one ranking of their EMBA program

The annual ratings period can be a testing time for universities, but Hong Kong has excelled this year, emerging as Asia’s most important centre for executive education. The outstanding achievements of Hong Kong's elite tertiary institutions build a strong foundation for developing education as one of the new economic pillars. Hong Kong Chief Executive Donald Tsang, in his October policy speech, affirmed his commitment to enhancing Hong Kong's status as a regional education hub.

Full marks go to the Hong Kong University of Science and Technology for its world-beating Executive MBA (EMBA) program, run jointly with the United States-based Kellogg School of Management at Northwestern University. The Kellogg-HKUST Executive MBA has surpassed all leading institutions, once again ranking number one in the world on the Financial Times 2009 EMBA global rankings.

The success of the part-time program is largely attributed to the superb career track records of the 2006 graduating class and their geographical diversity in terms of nationality and overseas working experience, according to Professor Steven DeKrey, Senior Associate Dean and Founding Director.

“Our students come in as high-calibre executives working for major organizations with distinguished achievements, but are still able to take their careers to a new height upon graduation.” Their ability to climb further up the corporate ladder after graduation was boosted significantly, as they were able to fetch an average 81 per cent more in salary, he adds.

Global Classroom

Talented students at Hong Kong Polytechnic University, which is ranked second among hospitality and tourism institutions globally

So highly regarded is the program that half of the current class members are based outside Hong Kong, flying in from their offices in London, New Jersey, New Delhi, Bangkok, Seoul, Helsinki, Moscow and a number of cities on the Chinese mainland, to attend weekend classes.

This is the second time since 2007 that the Kellogg-HKUST EMBA program has topped the international rankings. Professor Leonard Cheng, Dean of HKUST Business School, credits the achievement to the Kellogg and HKUST partnership. It is, he says, “in a unique position to bring the best of both worlds, providing an executive education that caters to advanced economies as well as emerging markets.”

Hong Kong Polytechnic University (PolyU) has strengthened its position of excellence in a number of areas this year. In its latest achievement, PolyU’s School of Hotel and Tourism Management (SHTM) has been ranked number two in the world among academic institutions in hospitality and tourism. It is the only non-US institution in the top five.

The ranking, based on total research output in 11 leading hospitality and tourism journals over a 15-year period (1992 to 2006), will be published in the November 2009 issue of the Journal of Hospitality & Tourism Research.

Hospitality Pioneer

EMBA-Global Asia is launched by the University of Hong Kong, Columbia University and London Business School

SHTM Director Professor Kaye Chon says the school is well known as a pioneer in its field, graduating generations of talented students since 1979. “As a global centre of excellence in hospitality and tourism education for the 21st century, the school is well-poised to lead the world's hospitality and tourism education in the years to come.”

PolyU is preparing to open its own hotel in 2010, which Professor Chon says will further strengthen the international status of the school as a world-class institution.

The University of Hong Kong (HKU) was honored by The Economist magazine in October, when its MBA Programme was ranked 38th among the world’s top 100, up 20 places from last year.

Dr Chris Chan, Assistant Dean and Director of HKU's MBA program, says the prestigious ranking, based on independent surveys, shows that critical strategic and curriculum changes were paying off.

“The HKU MBA offers an excellent international student mix, well-established connections within the business community, strong Asia-focused courses and teaching, and world-class partnerships with Columbia and the London Business School. It enables all full-time MBA students to spend up to four months at these world-class schools as an integral component of their studies,” Dr Chan says.

“We are very proud that the HKU MBA has consistently been rated one of the best programs in the region. Of course, we won't stop there. We will continue to strive to be the best.”

HKU also ranked first in the 2009 edition of global career and education network QS.com’s Asian University Rankings. Two more Hong Kong institutions, the Chinese University of Hong Kong and the Hong Kong University of Science and Technology, placed second and fourth respectively in the Asian rankings.

Home-Grown Success

HK University - The Chinese University of Hong Kong’s EMBA program consistently rates among the world’s best

The “home-grown” Executive MBA Program of the Chinese University of Hong Kong scored highly in the Financial Times ranking, listed among the world’s top 20 EMBA programs for the ninth consecutive year (2001-2009).

Professor Andrew Chan, Director of the EMBA program, says the university alumni’s salary is the fifth-highest in the world. Its graduates also achieved a salary increase of 64 per cent this year, despite the volatile global market.

“We are the first EMBA program in Hong Kong, and a truly made-in-Hong Kong product. The programme’s success is, therefore, Hong Kong’s success,” Professor Chan says.

It is distinguished as a uniquely Hong Kong program and one of two programmes in the top 20 in which the medium of teaching is bilingual, the other being IMD in Switzerland.

“As always, ranking is not our foremost pursuit,” Professor Chan says. “What is important is maintaining our ability to nurture top-notch management talent to meet the needs of Hong Kong, the mainland and the region.”

December 1 2009

The High Life - Colin Kelly, Regional Director, Rolls-Royce Motor Cars, says Hong Kong is a good market for the brand

Recent world economic woes notwithstanding, it seems that Asia’s appetite for luxury brands continues unabated. The strength of luxury-product shoppers in Asia is bringing “a glimmer of hope to a beleaguered industry,” according to US-based consultancy Bain & Company, in its latest study on luxury-goods markets worldwide.

Another new report by PricewaterhouseCoopers calls Asia the “standout success” of the luxury sector, which is holding firm as other markets slump. It says Asia has the brightest outlook for luxury brands, noting that, by 2015, the Chinese mainland is forecast to become the world’s top buyer of luxury goods.

The latest Capgemini Merrill Lynch World Wealth Report found the Chinese mainland’s population of high net-worth individuals surpassed that of the United Kingdom, to rank as the world’s fourth-largest in 2008, and is poised to overtake North America for the top spot by 2013.

With all the money there for the taking, Hong Kong, at the gateway, is feeling the force. Brands are reporting robust sales across a range of luxury lifestyle products.

Accelerating Sales

One example is luxury cars. The sector slumped 40 per cent globally during the financial crisis, but, in September, when Rolls-Royce previewed its new super-luxury Ghost in Hong Kong, the dealer was swamped with orders.

The Hong Kong launch was the first in the Asia-Pacific region, and came just two days after the limousine’s global launch at the Frankfurt Motor Show. Rolls-Royce said the fact that it came so soon after Frankfurt “underlines the importance of the Greater China/Hong Kong market to us.”

At the launch, Colin Kelly, Regional Director, Rolls-Royce Motor Cars, said people were showing renewed interest in the luxury sector and said Hong Kong is a good market for the brand.

“We regard Hong Kong as a metropolis for luxury goods, and history has shown that we have had a strong heritage here. It is no coincidence that Rolls-Royce Motor Cars secured its single-largest order to date – of 14 bespoke extended-wheelbase Phantoms – in 2006 from The Peninsula Hong Kong.”

He added that Rolls-Royce orders in Greater China have exceeded 100 cars in less than two months. “We see a great future for Rolls-Royce in Greater China and the Asia-Pacific region, both for Ghost and Phantom.”

Diamonds are Forever

Hong Kong has also sparkled for the De Beers Group, the world’s leading diamond company, at a time when the jewellery industry has been hit hard by the recession. The company launched its Forevermark brand in Hong Kong, Macau, the mainland and Japan last December, and it has been so successful that the brand is now available at about 250 outlets across Asia.

“We actually piloted the Forevermark brand in Hong Kong in 2004, because Hong Kong is a highly dynamic, competitive and self-contained marketplace, with sophisticated and discerning consumers,” said Nancy Liu, Managing Director for China and Hong Kong. “Our thinking was that if Forevermark could succeed in Hong Kong, then it could succeed elsewhere. There was such a positive reaction to the pilot that it made absolute sense to launch it in Hong Kong.”

While De Beers believes Forevermark has the potential to be a successful global brand, its focus is on making it a success in Asia first, where it will expand the rollout to select authorized Forevermark jewellers.

Hong Kong will continue to be very important to the brand, Ms Liu said. “Hong Kong has positioned itself as the aspirational shopping destination for mainland visitors, who are increasingly interested in purchasing diamonds.”

Pretty in Pink - Vickie Sek, Director of Jewellery, Christie’s Asia, says luxury buyers are back in force

The decision by auction house Christie’s to offer the rare Vivid Pink diamond at its 1 December auction in Hong Kong is further evidence of the city’s importance as a market for fine jewels.

“Hong Kong is exceedingly important to Christie’s. In fact, Hong Kong is our third largest sales venue, behind New York and London, a position it has held since 2004,” said Vickie Sek, Director of Jewellery, Christie’s Asia.

Christie’s Hong Kong sales across all categories have grown faster and declined less than any other area of the business, Ms Sek noted. “The tremendous excitement that has been such a feature of this region as the newly wealthy add their weight to the market paused earlier this year, but is now back in force.”

Discerning Consumption

Brands are positioning themselves for a new era of luxury in the wake of the financial crisis, leading industry experts say. A global report commissioned by the De Beers Group found consumers were tired of mass-marketed luxury products and would leave “fast luxury” behind for fewer, better things.

Increased scrutiny of product quality and authenticity, a greater appreciation of fine craftsmanship and renewed calls for exclusivity were noted by the 21 executives interviewed for the report, who represented such brands as Cartier, Christie’s Europe, LVMH, Salvatore Ferragamo and Tiffany & Co. A heightened awareness of social and environmental responsibility is also important to today’s luxury consumers.

The report says that while the wealthy in emerging markets are still driven primarily by status and prestige, they are increasingly influenced by their western counterparts, and their purchasing patterns are transforming rapidly. It notes that this has significant implications for the way luxury players will do business.

De Beers calls this “a marked shift from conspicuous to discerning consumption in luxury,” adding that, in this new era of luxury, “the values of a brand have never been so important.”

It says that as luxury players transform and new niche labels emerge to capitalise on the opportunities, “competition for luxury spending will intensify.”

For Christie’s jewellery sales, in particular, the strength of the Asian market has been building for some time. “In fact, for the past several seasons our jewellery sales in Hong Kong have been the most valuable at Christie's, bringing in more than the historic top centres of New York and Geneva. So Christie's now sees Hong Kong firmly alongside these two cities as a major international centre for the sale of the world’s finest jewels.”

Rock-Solid Investment

Bonhams - This 15-carat, brilliant-cut diamond ring was featured at Bonhams’ fine jewellery auction in Hong Kong last week

Bonhams has reserved some of its most exquisite pieces for its fine jewellery and jadeite auction in Hong Kong, 28 November, citing growing demand. Edmond Chan, Head of Bonhams Hong Kong jewellery department, said the jewellery industry has witnessed a major shift of focus to Asia. “Particularly favourable to the buyer are exceptional and rarely seen pieces that are trickling into the Asian market.”

Mr Chan believes the growing demand for diamonds is an indication that Asians have already started buying stocks and properties in readiness for the next recovery gain. “High-grade diamonds or superb gemstones are bought for security and long-term investments. Perhaps high-risk and high-return products are seen as less desirable now to consumers, while all kinds of tangible assets seem less risky for investments.”

He added that Hong Kong, a financially secure city with its currency pegged to the US dollar, would be a stepping stone for Bonhams as it prepares for entry into the mainland market.

Bonhams will also hold Hong Kong’s first whisky auction, 27 November, offering a prized collection of single-malt whiskies from a private American collector.

October 27 2009

Back to the Future

HSBC Group CEO Michael Geoghegan will relocate to Hong Kong from London next February to be “faster on our feet,” as Europe’s biggest bank builds its business in the region. The announcement is seen as an endorsement of Asia’s resilience during the economic crisis, and the strength of Hong Kong as an international financial centre.

Founded in Hong Kong and Shanghai in 1865, the HSBC Group moved its headquarters to London in 1992, as a condition of its purchase of Midland Bank. Now, the bank is re-focusing on the region that accounts for two-thirds of its profits: Asia and the Middle East.

The banking giant has noted “a shift in gravity from west to east,” and says China will be its key focus.

Mr Geoghegan has described Hong Kong as “the most logical place” to work on a China strategy. As an HSBC spokesman added: “Hong Kong is the gateway to China and a major financial centre in Asia. And HSBC already has a home here: HSBC is the leading bank in Hong Kong and the leading international bank in China. It is the ideal location for our Group CEO to drive the continued development of our business in the region.”

Right Decision

HSBC Group CEO Michael Geoghegan’s relocation endorses Hong Kong as a global financial centre and the gateway to the Chinese mainland

Stephen Green, HSBC Group Chairman, describes the decision as “absolutely right for HSBC and entirely consistent with the strategy we set out in 2006.”

The bank adds that it “makes sense to have the Group CEO here, where we see the greatest opportunities for growth, in terms of trade, investment and wealth.” From Hong Kong, HSBC will continue its strategy of organic growth, expanding its network on the Chinese mainland and in Vietnam, Indonesia and India. “And, of course, we remain open to investments when the fit is right, such as our insurance joint venture on the mainland with National Trust, and the acquisition of Bank Ekonomi in Indonesia.”

Observers see the HSBC move as a positive sign. In Hong Kong, Steven DeKrey, Senior Associate Dean, Master’s Programs Director, at the Hong Kong University of Science and Technology Business School, considers the HSBC relocation to be “great news for Hong Kong and a fine investor-confidence builder.

“As a highly respected bank and the darling of Hong Kong investors, as evidenced by the take-up percentage on the rights issue, HSBC’s corporate re-establishment in Hong Kong is a clear and definite signal of the positive future of Asia's growth potential and Hong Kong’s role in it,” he adds.

Iconic Brand

Professor Kathleen Slaughter, Dean of Ivey Asia - Professor Kathleen Slaughter, Dean of Ivey Asia, sees it as a clear signal of Asia’s global economic power.

“Asia continues to be the stronghold of the world’s economic growth, and Hong Kong has consistently been a key player in the global financial markets. The move is clear recognition that the world economy is moving east and HSBC is in a strong position in this market.

“HSBC has been a source of people development, financial services expertise and solid banking for decades in Hong Kong. The stability of the banking system in Hong Kong is validated with the move to Hong Kong and the focus of the bank’s strategy is reconfirmed.”

Professor Slaughter describes HSBC as “an iconic brand in Hong Kong” and says people will feel it has moved back to where it belongs. “I doubt if there is any place in the world where HSBC is more highly regarded than in Hong Kong. To Hong Kong residents, it’s as welcome as the return of the prodigal son.”

In New York, Knight Vinke Asset Management LLC, which owns HSBC shares, was also celebrating. “We welcome this move, as this is something we have been calling on the group to do since the commencement of our public engagement in 2007,” says Eric Knight, Founder and CEO.

Thumbs Up

Sir David Brewer, Chairman of the of the China-Britain Business Council, says HSBC’s decision is part of a bigger trend of companies moving to Hong Kong to do business with the Chinese mainland. “In London, we see Hong Kong, the leading financial centre in Asia, as a strong partner, and see the move by HSBC as a positive development,” says Sir David Brewer, Chairman of the of the China Britain Business Council. “This sends out a strong message and positions HSBC as a market leader and ready to take part in the economic recovery.”

The former Lord Mayor of London added that HSBC’s decision is part of an even bigger trend. “It’s not just large companies like HSBC; there are lots of smaller firms keen to do business in the market. And if they’re looking to put their toe in the water for the first time, Hong Kong is a good place to start.”

According to Brian Caplen, Editor of The Banker, the HSBC move is a “classic post- crisis decision.”

“For HSBC, it is a kind of no-brainer, as its roots are in Hong Kong and China,” Mr Caplen says. “The scope for expansion is huge, and there is the prospect of a further acquisition in China. Hong Kong remains the obvious choice as a location, given the bank's strong position and history there.”

According to some London media, the “shock move” by HSBC has sparked speculation that other banks, including Standard Chartered, might also turn to Hong Kong as the balance of economic power shifts to Asia in the wake of the financial crisis.

No doubt Donald Tsang, Hong Kong Chief Executive, would welcome any such moves. He says HSBC's decision is “a clear and timely thumbs up for Hong Kong as a stable, reliable and vibrant base for the banking industry.

HSBC operates in 86 countries and territories worldwide, with a global network of more than 100 million customers.

October 1 2009

In home straight after an easy run

When Joseph Yam Chi-kwong clears his desk today after 16 years as head of the Hong Kong Monetary Authority, many of the city's taxpayers will be left wondering whether the world's highest paid central banker gave value for money.

Yam's pay packet of HK$11.93 million last year was fatter than those of the chairman of the US Federal Reserve, the president of the European Central Bank, the governor of the Bank of Japan and the governor of the Bank of England combined. Yet his job was considerably less demanding.

Unlike Ben Bernanke, Jean-Claude Trichet, Masaaki Shirakawa or Mervyn King, Yam never had to grapple with decisions about interest rates or the direction of monetary policy. Under Hong Kong's linked-exchange-rate mechanism, interest rate changes and foreign exchange interventions are triggered automatically by market conditions.

Yam did step in occasionally. In August 1998, during the East Asian financial crisis, he led the HKMA's counter-attack against speculators who were selling the Hong Kong dollar short and driving down the city's stock market. The battle lasted two weeks before the speculators were forced to retire defeated.

Although the Hong Kong dollar's peg survived intact, the victory appeared hollow to most of the city's residents. By the end of 1998 the economy had contracted 8 per cent compared with a year earlier, unemployment had tripled to more than 6 per cent and residential property prices had fallen to half their mid-1997 level as persistent deflation set in. At the time, some economists suggested that Hong Kong would have been better off if the HKMA had devalued the currency.

Since then Yam has made some minor adjustments to the peg, strengthening it against speculative attack and introducing two-way convertibility to prevent the Hong Kong dollar appreciating. But for the most part, the system has effectively run itself for the last 10 years.

That left Yam with responsibility for banking supervision. Yet although Hong Kong's banking sector came through last year's financial crisis relatively unscathed, the city's much vaunted reputation for high-quality regulation was severely damaged by the Lehman Brothers minibond scandal. The HKMA was criticised for focusing on overall banking system stability to the exclusion of customer protection. Yam's critics said he had been asleep at the wheel.

That's not to say Yam has been inactive. In 2002, he oversaw the introduction of the HKMA's first banknote. Apart from being widely recognised as one of the ugliest banknotes in circulation anywhere, the new HK$10 bill was worth just half the value of the smallest denomination note then being issued: a telling demonstration of deflation in action.

Then, in 2003, he snapped up 14 floors of the newly completed Two International Finance Centre tower for the HKMA's headquarters, awarding himself an office on the 88th floor with a commanding view of Hong Kong's financial centre at his feet.

More recently, Yam has supervised the launch of yuan-denominated financial services in Hong Kong, establishing the city as the first offshore centre where the mainland currency can be openly transacted.

Yam retires as surely the only central banker in the world better known among the general public for owning racehorses than for making monetary policy decisions.

It is notable that his successor, Norman Chan Tak-lam, is to be paid 32 per cent less for doing the same job.

September 28 2009

Instant fashion brand Ziti hits the ground running - Andy Lee's mainland stores open 45 days after venture born

Most businesses take years in the planning. Andy Lee Chi-hung probably set a world record when he and a group of 50 Hong Kong exporters took only days to launch a mainland fashion chain. It was a speed born of necessity. With Hong Kong exporters being hit hard by slumping overseas demand, they need to diversify into the potentially lucrative mainland market to boost flagging sales.

Lee and his partners cut the ribbon on their first shops in Wuhan and Nanjing on August 28, a mere 45 days after coming up with the idea. They are hoping the cache associated with the "Hong Kong" name on the mainland will help Ziti become a showcase of the city's fashion brands.

It was a hectic time. Lee, also the sole proprietor of mainland teenage fashion chain Cocolulu, picked brands, bargained with department stores over leasing space and cut deals with renovators to get the Hong Kong-themed shopping zone ready to receive its first shopper.

Lee and his partners are hoping their collective effort will fare better than other retail ventures launched by Hongkongers on the mainland - many of which have failed.

The stakes are high for Lee and the exporters. As president of the newly formed Hong Kong Brand for China Market Association, he is vying for a slice of the country's huge yet very competitive consumer market.

Formed in May only two weeks after Lee met the Hong Kong exporters by chance at a trade fair in Wuhan, the association has until now no office or phone number.

However, it has the support of eight fresh university graduates who work on a voluntary basis.

"We are street fighters and dare to take risks to make our dreams come true," said Lee, who admits he cannot speak Putonghua. "It is the fruit of teamwork."

Hong Kong exporters, which largely built the Pearl River Delta's reputation as the "world's factory", are now seeking to become trailblazers in the nation's rapidly growing consumer market.

But although the distance from factory gate to a mainland department store may be shorter than a Wal-Mart in the United States, it is strewn with stumbling blocks and traps.

Some Hong Kong investors have become frustrated at the failure of mainland landlords to follow the contract.

Some have complained that landlords request retailers to move to another shop even before the contract expires, with some forced out of shopping centres in the first few months of operations.

Lee expected 20 to 30 per cent of Ziti retailers would pull out in the first three months of operation, calling that "normal" in the competitive mainland market.

"I assume some of them won't survive and have thought about possible replacements," Lee said.

"Retailing in China is so uncertain that we have to have plan B once plan A doesn't work.

"The domestic market is too large for an exporter to cope with alone. The Ziti venture works because the exporters are in the same boat."

Despite the economic slowdown, consumers still appear to be spending on the mainland.

Lee recently saw a parent giving a credit card to the teenage daughter to use at a Cocolulu counter in a Nanjing department store. The youngster walked out with an outfit worth more than 1,000 yuan (HK$1,135).

"The spending power of university students alone is incredible, given millions of fresh graduates every year," Lee said.

Lee came to the business world in a roundabout way. Trained as a marine engineer in the 1970s, he worked as a trainee at various dockyards in England and Sweden before joining the marine fire service.

Refusing to accept what he calls the "shoe polishing" culture in the service, he quit to become a volunteer of the Salvation Army and at a windsurfing and sailing training centre in the 1980s.

It was not until the late 1980s that Lee earned his first fortune when he became a supplier of accessories such as belts and earrings. He founded the Cocolulu retail chain in 2004 and today there are about 40 outlets in department stores on the mainland and one at the Megabox shopping centre in Hong Kong.

"I have come across many tricks and traps in the business during the past five years," said Lee, whose favourite sport is sailing. "It is no different from sailing in a competition, which requires endurance, strong will, a clear mind, hard work, teamwork, tolerance and guts."

How did you manage to launch the Ziti venture so quickly?

When I met these exporters at a Hong Kong Trade Development Council fair in Wuhan in May, I found many of them had a strong desire to explore the mainland market yet had no idea and limited resources.

I saw an opportunity in bringing them together to enter the market, giving them greater bargaining power and at the same time allowing us to draw on a group of people with varying talent. Most of them are small and medium-sized enterprises, which means more flexibility in making business decisions.

How does Ziti help exporters break into the domestic market?

Ziti is a collective brand for Hong Kong exporters and appears as a designated shopping zone or floor in a department store offering young female fashion and accessories.

At the Ziti in Wuhan, I selected 26 brands that I believe will work for the local market. On the same day of the Wuhan opening, Ziti opened in Nanjing with about 20 brands. Some brands overlap and some do not.

Ziti will become a platform for exporters to test the waters. If they find it viable, they are free to expand further in the same city or elsewhere.

From customers' perspective, we want shoppers to think of Hong Kong whenever they come across the name Ziti.

Dalian, Ningbo, Beijing, Shanghai and Guangzhou will be the next destinations by the end of the year.

In terms of products, we have started with young female fashion and accessories. After gaining a solid foothold in this area, we will add other things such as weddings, food and confectionery.

Why are you helping these exporters, who are strangers to you and also competitors in your business?

Well, we have seen fruitful outcomes by joining forces. For example, we got a very good deal with Sogo department store in Wuhan because we came to the market as a group.

The department store charged about 20 per cent commission compared with the market average of at least 30 per cent.

Our terms for Ziti in Nanjing such as commission rates were even better. The mainland market is so huge that there is room for everyone.

What important lessons have you gained from taking Cocolulu to the mainland?

Cocolulu was originally a Japanese brand, but the owner was no longer investing in it. I took over its mainland licence and started a fashion chain from nothing.

I learned to overcome the frustrations dealing with the complicated value-added tax system and with landlords who ignored contracts.

If we talk about building brands, we have to choose department stores carefully. Some department stores such as those greeting customers with big trolleys of discounted brassieres and underwear at the entrance and flying many promotional banners have to be avoided.

This signals poor traffic.

Keeping one's integrity and sticking with principles is important. I have four "nos" in doing business - no wine, no meals, no entertainment and no red packets.

We have heard many stories about the difficulties and failures of Hong Kong investors in the mainland retailing market. What are the key challenges to Hong Kong exporters switching to retailing?

China is so large and is not a mono-cultural society. Exporters have to learn to understand the culture, appetites, sense of values and the consumption power of shoppers in each city.

Even weather varies from place to place. Last week, Wuhan's temperature dropped 10 degrees Celsius after an autumn rainfall, but Hong Kong was still in the middle of a grilling summer. This caught Ziti retailers at Wuhan off guard, and they rushed to replenish winter stocks.

In northern provincial cities, people are more fashion-conscious and bold in styles. V-shaped T-shirts and skinny jeans are popular in the north, but they are not people's cup of tea in the south.

Are your competitors hostile to Ziti and what are they doing about it?

Some Hong Kong investors, who spent a lot setting up retailing operations in vain, were so bitter that they stormed into Wuhan Ziti and questioned its viability. The way they looked at us was hostile. They were asking how we did it.

September 20 2009

Spanish vineyards target China's wine drinkers

The Spanish Wine Market Observatory (OEMV) shows wines exported to Hong Kong soared 80% in value to Euros300 million in the year to April 2009, rising 31% in sales.

According to Robert Tinlot, Honorary General Manager of Spain's International Organization of Vine and Wine (OIV), China is set to eventually become the world's premier consumer market for wines and is already the fastest growing globally. He sees Hong Kong as the strategic gateway to unlocking that vast potential market, with the territory an established centre for wines in its own right.

That was mainly down to Hong Kong's abolition of its 40% duty on wine in February 2008, allowing global players to take advantage of the territory's logistics, finance and infrastructure capabilities to set up wine trades.

However, Spanish vineyards and distributors currently rank eighth as wine traders into Hong Kong, well behind market leaders France and the UK. The Director General of OEMV, Rafael del Rey, sees that position changing with Spanish companies more often holding presentations, tastings and symposia to increase their commercial networks.

Spanish distributors are prioritising their target markets as Hong Kong, Singapore and Chinese mainland coastal cities in Asia, as these have more progressive lifestyles and consumers possess greater discretionary purchasing power.

Wines from Spain could penetrate both the Chinese mainland quality and mass markets. Spanish distributors also expect to build sales for re-distribution from China to the rest of the region under different pricing approaches.

Spanish wines underperforming - The UK's Wine Intelligence research company estimates that Spanish wines are consumed by 42 million drinkers in the US, the UK, Germany, Belgium, Switzerland and the Netherlands - but that means that 100 million consumers have not tasted Spanish wines in these developed markets, leaving a huge potential for growth.

At the same time, many consumers globally are not aware of the diversity of Spanish wines nor have a studied view as to their merits, since Spanish brands are less well developed.

That doesn't imply individual Spanish wines have not entered the lexicon for excellent quality. When wine lovers around the world talk about Spanish wine, the name Rioja invariably appears. This protected denomination of origin (PDO) has received international recognition.

However, there's a wide range of wines throughout the entire portfolio of Spanish vineyards that offer individual qualities, such as Cava of Penedes and wines from Catalonia, the Ribeiro and Albariños in Galicia.

Denominations of origin include brands such as Ribera del Duero, Toro or Rueda in Castile; Valdepeñas in La Mancha; Jumilla in Murcia; Carinena in Aragon; Utiel-Requena in the Valencian Community and the fine Andalucian wines such as Montilla-Moriles and Jerez de la Frontera.

Luxury Emita wine at Euros1,245 per bottle.

Spanish sparkling wines, Cava, have particularly shown strong sales growth despite being affected by the sales of French champagne at very high prices.

Sparkling Spanish wine exports grew 22% in 2007 and 143 million litres was shipped, worth Euros435 million. Some experts consider this sector to appeal particularly to Chinese mainland drinkers, due to the wine's celebratory aspect.

The US is considered to be where there are good shorter term opportunities for Spanish wine's consumption growth, with the US an ever expanding market of 60 million consumers. Over 2% sales growth was reported in 2008, very similar to 2007, and mainly due to young people becoming interested in Spanish wines.

Italy, Portugal and France are seen as Spain's current bulk markets, as well as China, South Korea and Japan in Asia. In Asia there was a noticeable increase in sales of sparkling and table wines. Other European markets such as Belgium, Germany and Ireland have evolved positively too.

One of the foremost Spanish wine distributors in Asia is Torres, founded in 1870 with headquarters in Vilafranca del Penedès (near Barcelona) with vineyards also in other zones such as La Rioja, Toro, Jumilla or Ribera del Duero, as well as in Chile and California, the US.

Other wines sold under the Torres brand are Viña Sol, Sangre de Toro, De Casta, Coronas, Atrium and Viña Esmeralda.

Among brandies, the brands Torres 5, Torres 10 and Torres 20 are well known and are considered among the best brands worldwide. Torres wines are exported to over 140 countries.

Another coming export to Asia is Spanish sherry. Says Francisco Valencia, President of Marco de Jerez wine cellars: "sherry is particularly relevant to Chinese cuisine. It is very often preferred by Chinese chefs, since dry wines are too acidic."

16 Sept 2009

Living the Dream

 

Mainland consumers aspire to the Hong Kong lifestyle (photo: Xinhua News Agency)

 

They read foreign magazines and books, browse foreign websites and regularly shop online. They’re self-confident, enjoy holidays abroad and indulge in lifestyle pursuits, like going to the gym. 

Consummate netizens, they have the same middle-class aspirations as their Western counterparts. Only they live chiefly in China’s bigger cities – and unanimously defer to Hong Kong as leading the “next big thing” in lifestyle aspirations. 

An HKTDC Research survey in June took a closer look at the mainland’s middle class. The survey, of 1,080 consumers with an average household monthly income of about Rmb10,000 (US$1,464), found that respondents favoured the prospect of better living standards, if not a better lifestyle. Some 73 per cent said they wanted to reward themselves by having “a rich material life,” while 64 per cent said it was worth paying more for a product or service they liked. 

Of those polled, 61 per cent said they liked to “try and own trendy things,” and 63 per cent said they liked to share and discuss with friends their “trendy activities and experiences.”

Mainland Aspirations

%

China Total

Age 20-24

Age 25-44

Age 45-44

Read foreign book/magazines/newspaper (including e-version) once a month or more

33

41

44

24

Browse foreign websites once a month or more

25

35

42

13

Play online games once a month or more

50

78

68

24

Shop or acquire services online regularly

28

36

45

9

Source: HKTDC survey

Hong Kong à la Mode

 

 

 

Trendsetting Hong Kong: mainlanders see Hong Kong
as a place that offers a broad international vision and
modern lifestyle
 

Mainlanders view Hong Kong as an advanced international financial centre, believing Hong Kongers have a broad global vision and know how to enjoy life. 

A majority said Hong Kong is ahead of the mainland in responding to the latest trends, and that most of the world’s latest products and trends can be found in Hong Kong. 

Of those surveyed, 73 per cent agreed that Hong Kong’s products and services reflected the latest trends, while 72 per cent said they would use Hong Kong as a window for the latest global trends. 

In the study, 68 per cent expressed an interest in keeping in touch with Hong Kong trends and culture, while 49 per cent indicated that their clothing, lifestyles and tastes were influenced by Hong Kong.

Mainland Consumers: the Hong Kong Connection

%

Guangzhou

Shanghai

Beijing

Chengdu

Wuhan

Dalian

I like to keep in touch with Hong Kong’s trends and culture

74

81

64

48

65

72

My clothing, living style and leisure activities are influenced by Hong Kong’s trends

62

61

40

26

51

49

Source: HKTDC survey

Beyond Shanghai

 

Hong Kong trends are more compatible and accessible for mainland consumers than those
in the United States
or Europe

 

Reflecting how attitudes and perceptions pervade large cities such as Guangzhou and Shanghai is not to understate the impressions of those in second-tier cities, who have had fewer opportunities to visit Hong Kong. 

Their lifestyles and tastes seem to have been more subtly and indirectly influenced by Hong Kong popular culture, including movies and television shows, magazines and websites. 

 

In Touch with Hong Kong Trends

 

chart

 

Clothing, Living and
Leisure Influences

 

chart

 

Hong Kong Trends Attractive to Mainland Middle Class

 

chart

Hong Kong is viewed as a city where “east meets west,” a culture that has “a broader vision” and “international experience,” a place where there is “good quality control and design.” 

Mainland consumers aspire to the Hong Kong lifestyle. Indeed, Hong Kong trends are more compatible and accessible than those in the United States or Europe, while Hong Kong celebrities and professionals are universally admired.

The survey revealed that 56 per cent of those polled wanted to travel to Hong Kong for products that can only be found there. Nearly 80 per cent said they hoped the services or products available in Hong Kong would also be available on the mainland. 

Respondents were particularly interested in clothing and fashion accessories, electronic products, including mobile phones and cameras, and leisure and entertainment. Food, restaurants, movies and concerts were all associated with Hong Kong’s enviable lifestyle. 

The mainland’s perception of Hong Kong products and services is not, of course, a static one, and perception does not always translate evenly into sales. Nevertheless, it offers a compelling snapshot of how Hong Kong brands can be marketed in these and other mainland consumer markets. 

For more details, please see the forthcoming HKTDC Research report: "Middle Class Consumers in China," which can be ordered at http://www.hktdc.com/bookshop. 

 

September 2 2009

Getting Closer: Hong Kong and Guangdong

Rex Chang, Director of the Hong Kong Economic and Trade Affairs office in Guangdong, says businesses using Hong Kong as a base can expect "huge opportunities" under the new agreement.

One of Asia's most vibrant alliances is taking another major step closer after Hong Kong and the Chinese mainland province of Guangdong signed a series of eight pacts, 19 August, to strengthen their cooperation. The agreements cover a variety of sectors, including services, finance, health care, education and the environment. The deals were finalised at the 12th plenary session of the Hong Kong-Guangdong Co-operation Joint Conference in Hong Kong.

Officials from neighboring regions are now rushing to develop the pacts into proposals. These would be presented to the mainland's Central Government in time to be included among next year's national economic development initiatives.

"Hong Kong-Guangdong cooperation on development strategies has been moving on a national level since January this year, when the Outline of the Plan for the Reform and Development of the Pearl River Delta by the mainland's National Development and Reform Commission was announced," says Rex Chang, Director of the Hong Kong Economic and Trade Affairs Office in Guangdong.

The new framework agreement fills in details on that plan, adds Mr Chang. He points out that the challenge will be to "transform the macro policies into concrete measures" and incorporate the content into the national government's 12th Five-Year Plan.

"This will definitely create huge opportunities not only for Hong Kong businesses, but also overseas and mainland enterprises. And another aspect of the Guangdong pilot schemes is that, if they are successful, they can be expanded. If this proves successful, we can liaise with the central authorities on wider application of initiatives under the pilot schemes to other parts of the Chinese mainland," says Mr Chang.

Greater Collaboration - Mr Tsang said that the agreements have the potential to "promote further economic development" in Hong Kong and Guangdong Province "and even the country." as a whole.

Mr Huang said he believed the measures will aid economic recovery in both areas. He also predicted that better collaboration among Hong Kong, Guangdong and the nearby Special Administrative Region of Macau could make the Pearl River Delta (PRD) the most competitive area in the Asia-Pacific region.

Guangdong Province, particularly the PRD, has long been Hong Kong's economic hinterland and closest business and trading partner. Home to the largest number of Hong Kong companies operating outside Hong Kong, it is also the main destination of Hong Kong's outward investment. Economically, the PRD and Hong Kong have complemented each other's development. By some estimates, more than 100,000 Hong Kong-invested enterprises had established themselves in Guangdong as of the end of 2008.

The eight agreements are described as part of a continuous effort by both governments. They comprise specific actions in response to the recent PRD Outline Plan and the six new growth industry sectors indentified by the Hong Kong Special Administrative Region Government.

Do Your Homework - New agreements strengthen ties in the Greater Pearl River Delta region, which comprises Hong Kong, nine municipalities in the mainland's Guangdong Province, and Macau

Mr Chang advises small and medium-sized enterprises (SMEs) using Hong Kong as a base to closely monitor developments in the agreements, and Hong Kong-Guangdong cooperation overall, so that they can move when the time is right.

With the services sector likely to be the first to benefit from the evolving deal, Mr Chang advises SMEs to study cities in the PRD to determine which are strongest in their target industries. Government websites (see links below), including one operated by Mr Chang's office in Guangdong, should prove to be useful resources.

"When this takes off, it will be moving very fast. This is a huge opportunity companies should be ready to seize," he says.

Environmental industries may also find opportunities, with the two governments promising to build the pan-PRD region into a "green and quality living area." Other proposals include the construction of cross-boundary infrastructure facilities, a boundary control point at Liantang/Heung Yuen Wai and construction of a Guangzhou-Shenzhen-Hong Kong Express Rail Link.

Details are also being worked out to establish Hong Kong bank sub-branches in Guangdong and joint-venture securities-investment advisory companies by Hong Kong securities firms. Studies are also being conducted on arrangements to reduce pollution in the region, and to cooperate on education – including the possibility of a Hong Kong curriculum being offered at private schools in Shenzhen.

Regarding health-care services, the administrations will encourage cross-border research on vaccines and medication. This month, officials will meet to review accreditation for Hong Kong practitioners wishing to set up clinics in Guangdong.

Steady Steps - The Basic Agreement

Main points of the 19 August agreement between Hong Kong and Guangdong Province:

* Promote and develop modern service industries in Qianhai, just across the boundary from Hong Kong
* Implement sixth Cepa supplementary agreement in October
* Form a task force on financial cooperation
* Liaise on a rail link between Hong Kong and Shenzhen airports, with a checkpoint at Qianhai
* Cooperate on disease control and prevention, vaccine research and production
* Encourage local tertiary institutes to establish schools in Guangdong
* Improve regional air quality, promote recycling and clean production
* Enhance intellectual property protection

Officials working on the agreement say an initial focus will be on the mainland's special economic zone in Shenzhen, north of Hong Kong, and in Qianhai, a 10-square-kilometre zone in nearby Shekou. China's Central Government and Guangdong authorities have targeted the two areas for developing modern producer services in cooperation with Hong Kong.

Experts from Hong Kong and Shenzhen must also hammer out details of the implementation plan for Qianhai, recognised as a strategic hub for sea, air and rail transportation. Though the recently signed document does not outline specific cooperation projects for now, the two sides say they will study ways to promote service industries in Qianhai and encourage Hong Kong businesses to set up operations there. It may also offer a means of implementing pilot measures under the Closer Economic Partnership Arrangement (Cepa), which grants Hong Kong service industries easier access to Guangdong's market.

In a further sign of closer cooperation between the two regions, the Guangzhou government and the Hong Kong Trade Development Council (HKTDC) plan to sign a cooperation agreement to bring in Hong Kong companies to help develop the exhibition business in the province.

Among the trade events being considered are fairs showcasing mechanical, biological, chemical and electronic communication technology products.

August 19 2009

Opportunity to Go at Food Fair

Tens of thousands of visitors packed Hong Kong's annual trade food fest - First-time Food Expo exhibitor ProSource, from the Philippines, said it was important to be in Hong Kong to tap the China market. "We could have exhibited at Chinese mainland fairs, but it's easier here because it's more international. English is widely spoken here," said Cel Barba, Sales and Marketing Manager.  Celebrating its 20th edition, this year's Food Expo, 13-17 August, hosted more than 600 exhibitors from 24 countries and regions, including companies from 10 countries participating for the first time.

Debuting at the fair was the Mexico Pavilion, which featured products from 13 companies, showcasing such premium products as abalone, oysters and the country's signature tequila.

"Our presence in the region is small at the moment," said Cesar Lopes, Trade Commissioner of the Mexico Consul General in Hong Kong. "We know the potential in this market is huge, and Food Expo is a good platform to start."  Mr Lopes said Mexican food companies are also eyeing the huge mainland market. "At the moment, it's hard to do direct business on the mainland. Our strategy is to meet Hong Kong distributors with mainland connections to help introduce our premier products there."

Mexican oyster exporter, Sol Azul, has been exporting to Hong Kong for about a year and, according to company executive Pedro Noriega, "we hope to find other opportunities in the region by being here."  "Our products are already well known in Hong Kong," said Celina Garcia, Marketing Director of abalone exporter Sociedad Cooperative de Produccion Pesquera. "But with Hong Kong close to the mainland, we're trying to open new markets. We're looking for Hong Kong distributors to help us do that."  "Hong Kong is a good place to gauge the taste of Chinese consumers," said Arita's Senior Managing Director Yonezou Arita. "And through Hong Kong, we hope to introduce our product to mainland consumers."

Fresh produce from Japan's Miyazake prefecture on display at this year's Food Expo - Indeed, Hong Kong has overtaken the United States as a top importer of Japanese food. While the city in itself is a prime market for high-quality Japanese produce, it is also a major re-export point for Japanese products to elsewhere in Asia, particularly the mainland. Iranian exhibitors, meanwhile, want to expand their exports of dried fruit and nut products to other parts of Asia. "Hong Kong is an important market for Iranian companies," said Ali Khaksar, Overseas Exhibitions Director of Mashad International Exhibition Company, which organized the Iranian pavilion. He noted that, while Iran has been doing limited business in Asia for the last 30 years, now is the time to expand business in Asia.

Amid the global economic downturn many exhibitors are looking to the mainland market. "Hong Kong manufacturers and suppliers should take advantage of Food Expo to seek global buyers and attract Chinese mainland consumers," said Raymond Yip, HKTDC Assistant Executive Director.

For All the Tea in China

Simon Wong of Kampery Group is keeping tradition alive - That Simon Wong is a bit of a traditionalist at heart is revealed when you first enter the boardroom at his Kampery Group's trading headquarters in Kowloon.

The walls that surround the main meeting table are adorned with antiques and memorabilia, from the ancient camera in one corner, to the series of framed, sepia-tinged shots of yesteryear stacked in another. And it's a fitting setting as Mr Wong wastes no time in explaining that the business he's here to talk about – the tea business – owes a lot to its traditions in Hong Kong and the Chinese mainland.

Mr Wong addressed the inaugural HKTDC Hong Kong International Tea Fair, 13-15 August, in his role as Chairman of the Association of Coffee and Tea of Hong Kong, a group he started a year ago after a lifetime in the tea trade. "I started when I was born,'' he explains. "My family started in the tea trade 80 years ago. But up until last year, there was no organization that was representative of this industry – so I decided to start one. I wanted to tell people we need our traditions but we need to look forward, too. "In many ways, China has opened the door for expanding the tea business in Hong Kong. And while the tea market in Hong Kong is very stable, the opportunity for growth on the mainland is very large. This is something we all have to look at.''

Bottomless Cups

MingCha Tea House holds regular tastings in its Quarry Bay shop - Over the past 12 months, Mr Wong has been charting the flow of tea both in and out of Hong Kong – from the markets of China, Sri Lanka, India, Kenya, Indonesia – and says it now amounts to some 8,300 metric tons per year. About 2,500 tonnes of that tea travels through the city, he says.

"That, for me, says that the quantity left here – around 5,800 tonnes – amounts to about 900 million cups of milk tea. That's how much we love our tea,'' he laughs. Mr Wong says he supports the notion that Hong Kong can be a hub in the international tea trade. "This idea is a strong one,'' he says. "Because of our position in Asia and in regards to China, we can distribute the tea not only into the mainland, but into Japan, Korea – all these countries.

"We are also in a position here to educate, to explore such avenues as tea tourism. Everyone who comes here wants to taste a cup of tea, Hong Kong style, and even international fast-food outlets have started serving them in this way – milky, strong, aromatic.'' Mr Wong believes the fact that this "Hong Kong-style'' tea has made inroads into the mainland shows that a little innovative thinking can reinvigorate a traditional market. "People are open to new ideas,'' he says. "Sometimes you just have to take a chance.''

Tea with a Twist

MingCha founder Vivian - Mak's artistic training gives tea-drinking a sophisticated edge

Taking traditional methods and giving them a modern twist is what has made a success of Vivian Mak's MingCha brand. Ms Mak fell into the tea trade almost by accident, but within two years of setting up shop in 2000, bags of MingCha were being handed out as part of gift packs given to guests at the Academy Awards ceremony in Hollywood.

Ms Mak originally studied to be an artist but after building a business consultancy firm with her then-husband, one of their first clients by chance was a young man who wanted some advice on how to market tea sets. "We started researching, and the more we evaluated the history of tea, we actually found that we liked our Chinese culture very much,'' she explains in her shop in Hong Kong's Quarry Bay area.

"We were drawn to exploring different aspects, and tea just seemed to be something we kept getting drawn back to. It is something we all drink every day. But we found no one really cared, or that it had become such a daily thing, that the history was forgotten. So we looked at taking another angle.''

Ms Mak looked specifically at Chinese tea – and how to make the ancient product somehow appear "different.'' "Usually tea merchants come from generations and generations, which is great, but we were nothing like that,'' she says. "We came in from a different approach – looking at how to do things differently. But like them, we have a passion for tea, for its history and its place in our culture.

"Everything in the beginning was hard, but we had studied the market. I don't want to be boastful, but we had done our homework. We had looked at price, the types of tea available and the packaging and presentation. We gave something that looked very different, very modern.''

Multimillion Dollar Turnover

While keeping her business manageable – "very much in the family,'' she says – Ms Mak is now able to turn over around HK$5 million per year. Not a massive fortune, but almost exactly what she initially aimed for. She says the secret is an attention to detail, again made manageable because she remains very much "hands-on'' in her approach.

"Traveling through China, we found the farmers there were very traditional when it came to making tea. And they are very proud of what they grow,'' says Ms Mak. "This was good for us because we knew when we started we didn't just want to build a brand, we wanted to build a community of people who appreciate tea. "If the people don't work very hard to keep the quality – from the soil, to the environment, to the production to the packaging – our business could never be sustained. We are not a major player, but we are doing something we believe in.''

MingCha now produces tea under six varieties – Teguanyin, Phoenix, White Teas, Gungfu Red, Wuyi Teas and Puers – and holds regular tastings and tea education sessions in the Quarry Bay shop. "Today, the market is very sophisticated,'' she says. "People ask me why do we stick to Chinese tea and I tell them, ‘well, this is the origin. This is where tea comes from.'

"In some markets, people seem scared of Chinese tea because of the ceremonies they attach to it. So I say to them, ‘if you eat rice, do you need to be an expert? No, you just enjoy it.' And sometimes we need to tell people it's the same thing when it comes to Chinese tea – just enjoy it.''

Tuesday, July 07, 2009

Chinese Yuan trade deals take off by Alfred Liu and Natallie Cai

Banks yesterday kicked off a long- awaited scheme allowing firms to settle trading transactions with the yuan - a major step to Hong Kong becoming the Chinese currency's offshore center.

At least 16 pairs of enterprises settled cross-border transactions in yuan yesterday. Bank of Communications (3328) was the leading institution, processing eight of the deals.

Bank of China (Hong Kong) (2388) was the second most active institution with seven deals, while HSBC (0005) and Industrial and Commercial Bank of China (Asia) (0349) also began cross- border yuan-denominated trade settlement services.

Fang Xinghai, director general of the Shanghai municipal government's financial services office, said three firms in the city - Shanghai Electric, Shanghai Silk and Shanghai Huanyu Import & Export - signed contracts worth 14 million yuan (HK$15.87 million) with customers in Hong Kong and Indonesia.

"I do not expect the volume of yuan trade settlements to be strong at the initial stage as only 400 mainland corporate customers are under the pilot program," said Stephen Chan Man, deputy general manager of corporate banking and financial institutions at BOCHK.

Sources said BoCom's eight deals included six in Shanghai and two in Shenzhen. ICBC (Asia) said it completed one deal.

Ten companies have signed a clearing and settlement agreement with the BOCHK, which is the sole clearing bank in Hong Kong for yuan trades.

Trade between Hong Kong and the mainland surged from HK$1.53 trillion in 2003 to HK$2.78 trillion in 2008, with average annual growth of 12.7 percent, Chan said, quoting data from the Census and Statistics Department.

The Hong Kong Monetary Authority yesterday issued a circular to banks participating in the program reminding them to employ internal and risk controls.

Meanwhile, Bank of China (3988) president Li Lihui said Hong Kong is ready to become an offshore yuan center, Bloomberg reported.

And Wong Kai-man, a member of the Hong Kong Ideas Centre's yuan study group and non-executive director of the Securities and Futures Commission, suggested the mainland increase the number of pilot cities and enterprises with which Hong Kong companies can do yuan business.

July 1 2009

Hong Kong and Macau Doctors Can Now Sit for Mainland Qualifying Exams

The Ministry of Health recently announced the Administrative Measures for Medical Practitioners of the Hong Kong and Macau Special Administrative Regions to Obtain Mainland Medical Practitioner Qualifications Through Accreditation and the Administrative Measures for Medical Practitioners of Taiwan to Obtain Mainland Medical Practitioner Qualifications Through Accreditation. Hong Kong, Macau and Taiwan doctors may apply for qualifications as mainland medical practitioners in accordance with these two documents and the qualifications cover clinical practice, traditional Chinese medicine and oral medicine.

In the Administrative Measures for Medical Practitioners of the Hong Kong and Macau Special Administrative Regions to Obtain Mainland Medical Practitioner Qualifications Through Accreditation, medical practitioners of the Hong Kong and Macau Special Administrative Regions refer to Chinese citizens who are permanent residents of the Hong Kong and Macau Special Administrative Regions and are legally qualified to practise medicine in these two places.

Chinese citizens who are permanent residents of the Hong Kong and Macau Special Administrative Regions who possess the following qualifications concurrently and meet the relevant requirements in the Law of the People's Republic of China on Medical Practitioners may apply for qualifications of mainland medical practitioners through accreditation: Permanent residents of the Hong Kong and Macau Special Administrative Regions who have obtained the legal qualifications to practise medicine for five full years before 31 December 2007, who possess specialist certificate issued in the Hong Kong and Macau Special Administrative Regions, and who are serving in medical institutions in the Hong Kong and Macau Special Administrative Regions.

Applicants are required to submit the following materials: Application form for the accreditation of medical practitioners of the Hong Kong and Macau Special Administrative Regions as mainland medical practitioners; two two-inch half-length photos taken within the past six months showing a full front view of the face with no hat; proof of identity as permanent residents of the Hong Kong or Macau Special Administrative Region; proof of medical qualifications relevant to the category of medical practice applied for; medical licence or proof of right to practise medicine issued in the Hong Kong or Macau Special Administrative Region; specialist licence or proof of specialist qualifications in the category applied for issued in the Hong Kong or Macau Special Administrative Region; proof of employment in relevant medical institutions or proof of registration of practice in the Hong Kong or Macau Special Administrative Region; and proof of no unsatisfactory records during their practice; and proof of no criminal records.

AQSIQ Reminds Chinese Enterprises to Observe New EU Directive on Toy Safety

The European Parliament recently adopted the draft of a new directive on toy safety. In other words, it was revising the existing legislation on toy safety published by the European Parliament just a little more than a year ago on 25 January 2008. In this connection, China's quality supervision, inspection and quarantine departments are reminding toy enterprises concerned to conscientiously exercise control in designing, technological processes and quality management in the light of the characteristics of their products, with special attention to the following four areas:

1. Chemical safety

Chemical safety falls into the category of material safety. Since different toys are made of different materials, their control methods also differ. Enterprises must understand the nature of the materials used in the making of their products, what testing and control are necessary for particular materials, and which materials need registration. They must clearly specify their requirements in agreements signed with suppliers, and keep records traceable.

2. Structural safety

The new rules put stricter requirements on small toys parts which may be swallowed by children and lead to suffocation, or toys which may be put in the mouth and cause children to choke. These problems have to do with the structural design of products. European Toy Safety Standards have special requirements for these toys (such as pre-school dolls and hemispheric toys).

3. Product labeling

The new rules put greater emphasis on warning label requirements. Enterprises processing for brand-name products probably would not have any problems with product labeling, but those processing for small importers should make an effort to learn more about warning labels to protect their own rights and interests.

4. Product conformity assessment

Enterprises should strive to do a good job of product conformity assessment in accordance with the requirements set out in the EU's toy safety directive. Under the new rules, the EU will strengthen market monitoring in member states and member states must ensure that their market supervision authorities conduct full inspection within and outside the EU and that hazardous toys are immediately banned.

June 16 2009 - Seeing the Light: A strong Export Index – the highest in a year – shows confidence is returning

Hong Kong exporters felt the full brunt of the global economic downturn in the first quarter of the year, prompting the Hong Kong Trade Development Council (HKTDC) on 16 June to revise downwards its 2009 forecast for Hong Kong exports. The HKTDC now predicts a decline of 10 per cent to 12 per cent in exports this year rather than the previously estimated drop of six per cent.

The revised forecast, published in the latest HKTDC Trade Quarterly, was sparked by worse-than-expected world trade. The new forecast predicts that Hong Kong exports will perform at their lowest level since 1954.

"A drastic inventory drawdown by overseas buyers, amid falling consumer demand and an appetite for low-priced products, has led to the increasing price pressures observed since the global financial crisis emerged," said HKTDC Chief Economist Edward Leung.

Confidence Rising - Still, there is cautious optimism that industries have seen the worst, with the global economy expected to bottom out in the second half of the year. Such optimism is being fuelled by renewed orders from overseas buyers to replenish inventories, although orders remain conservative. The latest HKTDC Export Index, which monitors export performance and prospects of Hong Kong traders, rebounded strongly to 42.9 for the second quarter, up from 25.8 in the first quarter.

Unlike previous economic downturns, the current recession has sparked a lifestyle change among overseas consumers. There has been a significant shift towards cheaper items and staying at home. As consumers trade down, sales of competitively priced products that are stylish, safe and environmentally friendly are sought after.

Discount retailers have particularly strong bargaining power, demanding more from their suppliers in terms of quick response and flexible delivery to reduce inventory while responding to changing market demand. This means that suppliers are required to handle more orders of even smaller quantities but wider variety, along with even shorter delivery lead times.

In light of further retail concentration in overseas markets, alongside slackening consumer demand, exporters and manufacturers are under mounting operational pressures. Bigger and leaner suppliers, able to adapt to the changing trade environment, are surviving the global recession, while less efficient producers have been wiped out. The Export Index, based on a quarterly business confidence survey covering Hong Kong's major industries, may signal a slower rate of contraction in exports.

The 17-point increase is the highest level in a year. Among the industries leading the way is the electronics sector, at 45.1, suggesting that the export contraction in electronics, one of the worst hit, may be less severe in the near term. In terms of market sectors, the Chinese mainland rose further, almost reaching the threshold for expansion.

"Although emerging economies have also suffered considerably from the crisis, the Chinese mainland is expected to be the first major economy to recover," said Mr Leung. He said the mainland's fiscal stimulus package and loosening bank credits should drive the recovery. While far from being immune to the global financial downturn, the mainland's consumer market is outperforming its overseas counterparts. For the first quarter of this year, mainland consumer retail sales grew by 15 per cent, while results in the United States dropped 10 per cent.

Mr Leung suggested that companies might find sales opportunities in the mainland's inland provinces and second- or third-tier cities, which are less reliant on exports than coastal areas.

A survey conducted by the HKTDC in March found that 33.4 per cent of 500 Hong Kong companies with production, merchandising or marketing activities on the mainland had already begun doing business there. Among those who haven't, more than 30 per cent said they would enter, or would consider entering, the mainland market within the next six months.

"Given that the whole consumption structure is set to move positively over a medium- and long-term timeline, export-oriented manufacturers also have the luxury of time to formulate strategies for entering what could well turn out to be the greatest consumer market on earth," Mr Leung said.

Long-Term Outlook - Looking ahead, Mr Leung said sales would likely return to normal growth once a global economic recovery takes hold. That, however, would hinge on the normal functioning of the global banking and credit systems, a bottoming out of the US housing market and a revival of business and consumer confidence in developed economies.

The HKTDC Chief Economist said the global economy could bottom out in the second half of the year – if various stimulus measures by world governments take effect. But he said the greater medium-term challenge was to avoid a prolonged global recession. That would involve rebalancing excessive savings in Asia against overspending in the US and other rich countries. Intensified protectionism and the outbreak of human swine flue may also threaten global economic recovery, Mr Leung added.

June 11 2009

Following are the opening remarks made by the Secretary for Food and Health, Dr York Chow, at a press conference on the First Cluster of Indigenous Human Swine Influenza Cases today (June 11 2009):

As the Chief Executive announced earlier today, we have the confirmation of the first cluster of indigenous cases of human swine influenza in Hong Kong. Twelve secondary school students are infected. Dr Tsang will talk more about the cases later.

As there is no identifiable link to a place affected by Human Swine Influenza (HSI) outside Hong Kong or an imported index patient with them, our Fight the Pandemic campaign is now transiting from containment to mitigation phase in gradual steps. We will gear up our medical services and beef up our health advice to the public, particularly those people who are at risk.

This morning, the Steering Committee reviewed the preparatory plans and also agreed on the implementation of a number of measures.

On school closure, the Secretary for Education has already ordered all primary schools, kindergartens, kindergarten cum child care centres and special schools to suspend classes for 14 days from tomorrow, and will review the need to continue the class suspension thereafter.

Let me explain why we close schools. Cases in Mexico, US, Canada and Japan have all shown that schools, particularly primary schools, are more vulnerable to flu attacks and are the first place to get a flu cluster, with young school children having a more than two-fold attack rate compared with older teenagers and adults. We do not want to see the young kids coming down with HSI.

Furthermore, as past flu seasons have shown, young children especially those under six with flu are more likely to get complications and hospitalised, and also a higher mortality rate.

We believe that by closing primary schools, kindergarten and special school for two weeks, we could substantially slow down community spread, protect the very young and reduce the risk to the general public, thereby reducing the worries of parents, families and teachers as well as burden on our hospital and clinics.

Let me take you through our other public health measures endorsed by the Steering Committee:

* The Hospital Authority (HA) will open eight Designated Flu Clinics (DFCs) from the coming Saturday for managing patients with influenza-like-illnesses (ILI), to be expanded to 18 DFCs contingent on demand. The clinics will open from 9 am to 5 pm. They shall cater for all patients with influenza-like symptoms (self-referred or referred by other medical practitioners), and shall operate similar to General Outpatient Departments, but without the need for prior booking. Dr Leung will talk more about it later.

* Current port health measures at border control points for inbound travellers will continue. These include health declaration, temperature screening, and boarding of flights by port health officers when alerted by crew of sick passengers. Port Health will post notices in all exit points and advise all departure and transfer travellers not to travel if they are having fever or flu symptoms.

* On the management of index patients and contacts, HA will isolate and treat all index patients in HA hospitals during this early mitigation phase. They will increase surge capacity when necessary to commensurate with disease incidence and demand.

* Department of Health will subject very close contacts, such as family members, to the directly observed chemoprophylaxis (DOC) and medical surveillance, as with the current practice. But if the number of local cases continues to increase, the department will gradually phase out the DOC arrangement and close the DOC clinics. The precise programme for phasing out DOC will depend on the spread and speed of build-up in confirmed local cases.

* The Centre for Health Protection will no longer perform tracing of social contacts, given that their risk approximates that of the general public since the disease has taken root in the community by this time.

* On treatment, HA, in consultation with DH, will assess the treatment protocol on a continuous basis, and may vary it as circumstances change. Specimens from selected patients may be taken for his surveillance, based on clinical assessment and contact history. Mild cases will be discharged home and only severe cases will be admitted to hospitals.

* On the use of antiviral, as the number of local cases accumulates to a certain point, DH will order post-exposure prophylaxis for close contacts to be generally stopped, reserving antiviral medication for treating more serious hospitalised inpatients.

Let me turn to other community and public institutions.

* For elderly homes, existing measures for outbreak at elderly homes will continue. Patients will be isolated and treated in HA hospitals. Others to stay in institutions and wear masks and observe good personal hygiene.

* We advise people at workplaces to observe good personal hygiene and ensure proper disinfection of public places. Those with influenza-like illness should stay at home and wear masks if necessary only if they really need to go out.

* All conferences, exhibitions and public events may continue as usual. Organisers must ensure all participants to observe good personal hygiene and disinfect all public places of the relevant premises properly. Organisers must advise those with influenza like illness not to participate, stay at home and wear masks if necessary when going out.

* Public transport companies will have to step up vehicle cleansing and disinfection, and advise staff and passengers to maintain good personal hygiene, and wear masks if not feeling well.

* Public utilities companies will also have to step up cleansing and disinfection, advise staff to maintain good personal hygiene, and initiate pandemic preparedness plans to ensure no disruption to essential services.

As the Chief Executive has said this morning, the public has no need for panic. For the four high-risk groups, I have the following advice.

* For healthcare workers, they should take proper infection control measures to protect themselves and patients. Public sector workers have ample supplies of protection gear and training in infection control. Guidelines on infection control in clinics are available on CHP's website

* The private medical sector and elderly care sector are advised to follow these guidelines closely to minimise their risk.

* For young children, parents should be watchful for fever and flu-like symptoms, bring them see a doctor early if the child is sick. Sick children should stay home. They should also avoid contact with other children who are unwell, avoid playgroups, tutorial classes especially large groups, avoid sharing toys, towels, eating utensils etc. with other children, and do not take aspirin unless approved by doctors.

* For pregnant mothers and persons with chronic diseases (such as diabetes, ashma, chronic lung diseases, renal disease, cardiovascular diseases, cancer patients, patients with immuno-suppression therapy or on steroids), they should maintain good personal hygiene, especially handwashing, avoid contact with persons with flu-like symptoms, and overcrowded places. They should make sure that there is good ventilation around and be mindful of fever and flu-like symptoms, and seek medical attention early. They should inform doctors of their medical condition when consulting for flu-like illnesses. I would also like to take this opportunity to appeal to the public that do not smoke. And particularly you have chronic illnesses, do not smoke.

* For elderly, the advice is the same as for persons with chronic illnesses. Elderly homes should remain vigilant of infection control measures and report influenza outbreaks to CHP.

I would also like to appeal to parents that during the school closure, they should look after their children well, make sure that they observe good personal hygiene, and that they are taken care of and stay at home when sick.

The Government will try its utmost to minimise the impact of human swine influenza on Hong Kong. There is no need for panic and the last thing we want is complacency.

All our measures are taken to go an extra mile in our fight against the pandemic. At the same time, life must go on, only with the necessary heightened precautions and social distancing.

As the Chief Executive has said, we can only overcome crisis and win against the pandemic when people and the Government unite together. It means the following:

* Look after oneself,
* Care for the others, especially family members, friends and neighbors,
* Care for the environment.

We have witnessed great community spirit, compassion, co-operation and self-sacrifice from our citizens since the beginning of the pandemic since early May. I am sure we can uphold this spirit, and are able to win this war against the pandemic and keep our society together.

June 5 2009

Traders Toast Wine Pacts

Australia’s Minister for Agriculture Tony Burke (centre left) and Financial Secretary John Tsang (ce  
Australia's Minister for Agriculture Tony Burke (centre, left) and Financial Secretary John Tsang (centre, right) toast the success of the Hong Kong-Australia trade agreement on wine  

More Australian, Italian and Hungarian wine may be destined for Asian tables following agreements brokered in Hong Kong to provide easier access to Chinese mainland markets.

Separate Memorandums of Understanding (MOUs) on wine-related businesses have been signed with Australia, Italy and Hungary recently, as part of a bilateral cooperation on wine and food. They are the latest initiatives in the promotion of wine-related investment and tourism following the Hong Kong Government's scrapping of duty on wine imports in February 2008.

The signings are also seen as another step in positioning Hong Kong as Asia's wine trading and distribution hub.

Australia's Minister for Agriculture Tony Burke, in Hong Kong to sign the MOU in April, said the agreement would give wine producers simplified, improved access to the Hong Kong and mainland markets, addressing such issues as certification and labeling. "In a country the size of China, a single window to government will make it easier for the Australian Wine and Brandy Corporation to help exporters ship wine to this important market," he said.

Hong Kong Secretary for Commerce and Economic Development Rita Lau said Hong Kong has all the ingredients necessary to play an important part in tapping the mainland's growing appetite for quality wine. "We have the infrastructure, the expertise and the desire and determination to be Asia's wine trading and distribution hub."

Business to Benefit

  South Australia’s premier wine region, the Barossa Valley, is set for more exposure in Greater China
  South Australia's premier wine region, the Barossa Valley, is set for more exposure in Greater China
A rare bottle of vintage Krug set a Champagne world record at auction in Hong Kong in March  
A rare bottle of vintage Krug set a world record for Champagne at a Hong Kong auction in March  

Australian wine traders welcomed the latest initiative. Malaysian George Tham moved to Hong Kong earlier this year to co-found Parade Artwine Ltd, a trading company specialising in South Australian wines.

"This is very good news for our business – it will definitely help us," said Mr Tham. Parade Artwine was established to introduce new Australian wines, primarily from the Barossa Valley, to emerging markets in the region. Mr Tham and his South Australian business partner chose Hong Kong as their launching pad because of its geographical location. "There are plenty of opportunities for the wine business in Asia, and now getting wine into Chinese markets will be so much easier," he said.

 

     
 

Sizzling” Market

 
 

John Kapon

 
  Wine worth US$4.82 million was sold at Acker Merrall & Condit's fine and rare wine auction in Hong Kong last week  
  Another successful auction in Hong Kong last week by American fine wine trader Acker Merrall & Condit showed the Hong Kong market remains strong. Vintage wine worth US$4.82 million changed hands at the latest Acker Merrall auction, its fourth in Hong Kong since its inaugural sale in May 2008.  

"The result is a testament to the strength of the wine market in Asia and underlines Hong Kong's leading role as a regional hub of fine and rare wines," said President and Auction Director John Kapon. "Such an enthusiastic response from buyers indicates a renewed confidence in the wine market and proves there is a continuing strong demand for fine wines of superb quality and rarity. We are fully committed to further developing our business in Hong Kong."

Among the items sold was a lot of six bottles of rare 1985 Henri Jayer Richebourg, which went to a Hong Kong collector for US$68,432, well above the pre-sale estimate.

The latest result follows the company's "sizzling" March auction, during which 96 per cent of the lots were sold, and a new world record set for a bottle of Champagne – US$21,091 for a bottle of rare Krug Collection, vintage 1928. 

 

Peter Chu, Cellar Director, Cellarmaster Wines (HK) Ltd, said the MOU would give his business increased exposure and further elevate Hong Kong as a platform for Australian wine. He welcomed the opportunity to promote the various wine regions and different characteristics of Australian wines to Asian consumers, who, with their maturing palates, no longer think of wine in a generic way.

"My personal mission is to promote mature Australian wines, not just the fresh, new varieties, as I believe there would be a huge market for it," Mr Chu said.

Peter Riha, Managing Director of Solar Max Ltd, which imports wine from South Australia, agreed that this latest wine initiative is "another move in the right direction."

Spotlight on Italy 

The agreement with Italy, signed last month, will forge closer cooperation in a wide range of areas, including the promotion of wine trading, investment and wine-related tourism, as well as wine education and appreciation, Ms Lau said.

"Specifically, the two sides will work closely to engender a good showing of Italian wines and canapes, wine accessories, as well as wine-making technology and equipment in the annual international wine fair organised by the Hong Kong Trade Development Council (HKTDC)."

Ms Lau said the Italians will be encouraged to organise wine exhibitions in Hong Kong. Vinitaly, the leading wine exhibition in Italy, is planning to stage its first wine roadshow in Hong Kong as part of the HKTDC's annual wine fair in November.

Hungarian First

The Hong Kong-Hungary wine MOU, signed 27 May in Hong Kong, is the first trade agreement of any kind between the two economies. Under the agreement, the two sides will strengthen cooperation in the promotion of wine-related trading, investment, tourism and education. They will also fight against counterfeit wine.

"Hungary produces quality wine. Wine exports from Hungary to Hong Kong increased by as much as 78 per cent by value in 2008," said Hong Kong Permanent Secretary for Commerce and Economic Development Yvonne Choi, during the MOU signing.

"We expect this trend to continue as Hungarian wines become more widely known and enjoyed here," added Ms Choi. "And, more significantly, Hong Kong provides easy access to the mainland market, where the potential for growth is enormous."  

 

May 13 2009

City of Hope

Hong Kong is the "action centre" for foreign businesses that want to enter the huge Chinese mainland market, according to the Canadian Minister of International Trade, Stockwell Day. Mr Day, who is also Minister for the Asia-Pacific Gateway, headed a seven-day trade mission to China, where he wrapped up his visit in Hong Kong last "Hong Kong is really the action centre in so many ways," Mr Day said. "One of the messages that we want to send to innovators, producers and researchers in Canada is: ‘Hong Kong is, of course, the gateway into China, and what we can learn here - the platforms that are developed here in Hong Kong - are absolutely essential, and need to be contacted and worked with.'"

Mr Day said Hong Kong's strengths need to be fully explored in order to take advantage of the huge opportunities offered by the China market.

Leading an 11-member trade delegation, Mr Day took in the four mainland cities of Beijing, Shanghai, Shenyang and Chengdu, and came away impressed.

"I see more than glimmers of hope; I see hope with a capital ‘H.' I see great opportunity," he continued. "It's one thing to read briefing material about what's going on in Hong Kong, what's going on in China and Asia. It's another thing to get over here and spend time. The opportunities are huge and need to be followed."

Trade to Triple

  Canada, with its strong economy, can be a key partner for China
  Canada, with its strong economy, can be a key partner for China

The Canadian minister said that the growing level of trade and foreign investment between the two countries over the years has been "just scratching the surface." He is convinced that Canada's bilateral trade with China will triple over the next decade.

"Before I got here I thought that was a good goal, but a little optimistic. Now after a week here, I believe that it's entirely realistic to see trade more than triple over the next 10 years."

Mr Day said that Canada has much to offer China, not just in the way of natural resources, but also in advanced technology that will help minimise the impact of growth on the environment. China, he said, has "been very clear" that it wants sustainable development, so "the fit there is natural and needs to be pursued."

Natural Links

The trade minister noted the shared links between the two countries, pointing out that there are 1.4 million Canadian-Chinese living in the country. Chinese, he said, is the third most-spoken language in Canada. "These are natural components to a vibrant relationship," he said.

The visit to China was an opportunity to make further inroads into the mainland market. Several agreements were signed during the trip, including seven construction contracts. Both sides also announced joint science and technology initiatives to be funded by Canada, while Toronto opened new trade offices in Chengdu and Shenzhen, with four more - Nanjing, Qingdao, Shenyang and Wuhan - scheduled to open before year's end.

In his meetings with Chinese Minister of Commerce Chen Deming and other mainland trade officials, Mr Day said he was "very encouraged" that China is committed to "pushing back the wave of protectionism" that has arisen amid the global economic downturn.

Working Together

"We really want to go shoulder-to-shoulder against the impulse to protectionism," he said. "They understand that if you build a protectionist wall, economies will come down. So on the bilateral side with China, with Hong Kong, we need to continue to stay aggressive. We can work together at the World Trade Organization (WTO) as partners."

The minister, meanwhile, was confident that Canada's new Consumer Safety Act, set to be introduced soon, will not be used as a trade barrier. "We take a very rigorous approach to health and safety, maintaining that it has to be science-based," he said. Mr Day said that the law will be fair, adding that Chinese manufacturers and producers understand clearly that "if a product is deemed to be unsafe after it hits the market, the impact on the investors in that product is huge, [as is] the impact on the buying public."

As efforts continue to rebuild the world economy, Mr Day said he's encouraged that analysts consider Canada one of the strongest economies. Still, he said, it cannot afford to overlook the world's fastest-growing economy. "China is on the move; China is focused. Its growth is dramatic, and Canadians cannot sit back."

May 12 2009

Smartest export - Hong Kong has the potential to become a regional centre of excellence in education by Anthony Cheung

To cope with the needs of economic restructuring and to rise to new challenges resulting from the global financial and economic crisis, the government is geared towards developing new economic pillars, including educational services. As the Task Force on Economic Challenges puts it, developing the educational services industry is a long-term investment in human resources. It points to many developed countries that compete in "exporting education" and attracting more non-local students.

There's no doubt that Hong Kong has a strong cluster of tertiary education institutions. Making education in Hong Kong more widely available to students in the region is one way to consolidate its position as an education hub. In charting such a course, however, some fundamental issues have to be confronted.

First is the tension between meeting local needs and responding to the potential outside market. Hong Kong has no problem attracting non-local students; mainlanders make up 90 per cent of the total.

With the aid of generous entrance scholarships, local universities have been attracting top-grade students, much to the envy of mainland universities.

However, there is growing concern among some local students that their educational opportunities and benefits would be reduced if more non-local students were admitted. Some legislators are making similar complaints.

While there is a visible side of education costs, the intangible benefits from recruiting non-local students to our education system should not be overlooked. If Hong Kong, as a regional hub, is able to attract some of the best minds to study, teach and research here, it will create synergy, help lift standards, and enrich the learning and research environment, something that money cannot buy.

Local students who have had the opportunity to go overseas on exchanges or internships can attest to the immense benefit of studying and living on a cosmopolitan and multicultural campus. The same applies to the internationalisation of local campuses.

There is really no place for educational nationalism or localism. However, local students' grievances should not be casually discarded. By 2012, given 12-year subsidised education, more secondary-school students will reach pre-university level and, if the current cap of 14,500 publicly funded "first-year first-degree" places remains unchanged, many of them will be disappointed.

Hence, there must be a comprehensive and proactive private university policy to support a viable private sector that can provide affordable, quality tertiary education to these local aspirants. From the human resources development perspective, local talent is as important as non-local.

Second, in the internationalisation discourse, educational services are often described as an industry. Indeed, they earn huge revenue for countries such as Britain and Australia. Because of its immense export-earning capacity as a commodity, higher education provision has become a battleground in the international education market.

If, however, education is primarily conceived as an industry, then quality may be sacrificed for the sake of income. There is no lack of news about some overseas universities recruiting non-local students indiscriminately with little regard to their academic ability.

The commercialisation of education programmes has led to more foreign "diploma mills" and low-quality providers internationally. Quality-assurance procedures are often relaxed to help attract students from abroad or set up offshore "business".

Finally, many academics have also pointed to the worrying trend of treating quality assurance and accreditation as strategies for "international branding" and market positioning rather than for academic improvement. The international ranking "game" has become a preoccupation, with international standings based on sometimes questionable and biased indicators.

Education is a "soft power". What ultimately attracts non-local talent to our universities should not just be the award certificates, but the high standard of scholarship, plus the significant features of Hong Kong that distinguish it from other places.

Does Hong Kong possess a knowledge-rich environment, and a free-thinking, inquisitive and creative ambience that should form the basis of a vibrant education hub?

Anthony Cheung Bing-leung is an executive councillor and president of the Hong Kong Institute of Education

April 29 2009

Seafarers' Mission

photo  
Wallem Group’s Sustainability Report shows the responsible side of its shipping business  

Hong Kong ship owners are on a mission to help clean up the maritime industry.

Shipping is responsible for the transport of 90 per cent of world trade, which has doubled in the past 25 years. This has led to an inevitable consequence: rising carbon dioxide emissions from shipping, a factor contributing to global warming.

The main culprit is fuel. It’s been estimated that global shipping used 280 million tons of fuel in 2001, and could reach 400 million tons by 2020. Until now, much of this has been the dirtiest, cheapest fuel – residual oil, a tar-like refinery product.

Last year, the International Maritime Organization agreed to tighten emission caps by 2020 for sulphur oxides, nitrogen oxides and other pollutants. But Hong Kong ship owners are pressing for earlier targets, particularly for the Pearl River Delta (PRD). Arthur Bowring, Managing Director of the Hong Kong Shipowners Association, which has 160 members, explained Hong Kong’s role.

"Hong Kong’s shipping register is now in the top-10 registers in the world. Our members own or operate about 95 million deadweight tons of ships, making Hong Kong the fourth-largest maritime centre. On the world stage, we usually speak for Asia, which accounts for about 50 per cent of the global cargo-carrying fleet, so we leverage our presence in ways that can make a difference."

Intensive Lobbying

  photo
  Taking a stand: HKSOA Managing Director Arthur Bowring says Hong Kong's shipping industry wants to be part of the environmental solution

This has involved lots of "banging on tables" internationally.

"We trod the boards, we wrote articles, we did a lot of lobbying," Mr Bowring said. "We work closely with the [Hong Kong think-tank] Civic Exchange and the various universities to help them with their studies into marine-related air pollution. We also work with our owners, at least those who call in to Hong Kong, to find ways for them to reduce emissions without making them uncompetitive."

"We are taking this stand for two reasons. We live in Hong Kong, and want to do something about air pollution; and second, we recognize that the general public and politicians are very concerned about maritime emissions. We want to be part of the solution."

Mr Bowring believes that the shipping community in Hong Kong is "very responsible and very committed." He cited individual initiatives, such as China Navigation’s decision to voluntarily use low-sulphur fuel on its ships docking in Hong Kong. "It’s always nice to work with people who have the best interests of what they’re doing at heart."

Marine-Air Emissions

  photo
  China Navigation is voluntarily using low-sulphur fuel on its ships docking in Hong Kong and the PRD

China Navigation Co Ltd is the deep-sea shipping arm of John Swire & Sons Ltd. In March 2008, the company announced it would burn only low-sulphur marine diesel fuel, which contains less than one per cent sulphur, on its own vessels calling at Hong Kong and within the (PRD) region.

The move was significant, since deep-sea vessels customarily burn heavy fuel oil, which contains up to 4.5 per cent sulphur, while in ports and on entering and leaving harbor. Managing Director CR Kendall said the move was in response to research showing marine-air emissions to be a significant contributor to reduced air quality in Hong Kong.

"As a signatory of the Hong Kong General Chamber of Commerce’s Clean Air Charter, we are making proactive commitments despite the additional cost to us," Mr Kendall said.

"We hope this unilateral action and our other supportive efforts, although minor in themselves, will provide additional impetus within the industry to enhance the maritime sector’s contribution to improved air quality for our communities here in Hong Kong and in the PRD."

Sustainable Shipping

Hong Kong’s Wallem Group is also speaking out on sustainability for the shipping services industry by releasing its first Sustainability Report this year.

Wallem Group Managing Director Rob Grool said it was time that the shipping industry spoke out on how it is carrying out its business in a responsible way – socially and environmentally.

"I think this is the first sustainability report published by a shipping services company, and we’re prepared to take the risk because it is time we all did something about shipping’s reputation," Mr Grool said.

"Shipping in general has a poor image and that is mostly undeserved. The vast majority of goods are transported by sea in a very safe, reliable and responsible way."

"Obviously, ships and shipping have an effect on the environment, and the way we conduct our business has an effect on how we are regarded in the neighborhood. In this report, we want to demonstrate how seriously we take our social responsibility."

The Wallem Group Sustainability Report sets out the Group’s activities and challenges in operating responsibly. The report addresses three key issues: people, environment and business.

A sustainability report will be prepared annually to track the efforts and progress of the Group and is available online at the group’s web site.

March 11 2009

Child's Play  
  photo photo
  Wayne Jacobs receives
his award
at the
Nuremberg Fair
WA Jacobs' Light Pen Writer won the Creativity and Design Innovation Award last month at the Nuremberg
Toy Fair

Three Hong Kong companies have been recognised from among thousands of toymakers worldwide for innovation at last month's Nuremberg Toy Fair. WA Jacobs Toymaker (Asia) received a Creativity and Design Award for its latest product, the Light Pen Writer. Amazing Toys Ltd and Silverlit Electronics won nominations in the Toy Innovation Award's Electronics and Technical Category for their Eco Power Station Series and Heli Mission respectively.

"I was shocked," said Wayne Jacobs, Managing Director of WA Jacobs, who said he only signed up on a customer's suggestion. The Light Pen Writer uses an LED light pen and a light-sensitive board to produce multiple images, allowing the user's creativity to run free. Mr Jacobs hopes the publicity gained from the award "will translate into sales."

A Crazy Mind Helps

The company, formed with the 2000 Sydney Olympics in mind, is behind the creation of four children's characters, including Kiki Koala and Sparkle Unicorn. WA Jacobs (Asia) opened in Hong Kong seven years ago because "this is where the buyers and sellers are."

While manufacturing is done with partner factories in Shenzhen, Nanjing and Qingdao in the Chinese mainland, concept designs are carried out in Australia. For Mr Jacobs, the best part about the business is coming up with new ideas that could be the next must-have toy.

Anything can spark an idea, he said. "There's no structure to it. You have to have a crazy mind, I suppose," he said adding that electronics, fashion – anything, but toys – can trigger a new idea. "You end up with something between that crazy idea and what's practical," Mr Jacobs said.

No Batteries Required

photo  
Amazing Toy's Samuel Sy shows his range of green-power toys, the
Greenex Series
 

"Customers are always looking for something new," said Samuel Sy, General Manager of Amazing Toys. "But they don't have anything specific in mind. You have to come up with the idea." Mr Sy, who spent 10 years marketing other people's toys, set up his own company about two years ago.

The Greenex series has proved popular for its educational slant and environmentally friendly theme. Debuting at the Hong Kong Toys and Games Fair last year, the Eco Power Station series is driven by natural energy, solar or wind, or through a crank generator. Children learn and gain an appreciation for alternative forms of energy.

"Our customers loved it. But because we were the new kids on the block, they first wanted to try the product," Mr Sy said. It seems the customers are sold. Despite the economic downturn, he has seen more business this year, as buyers become more familiar with the Greenex series. Europe and Asia are the company's main markets.

Heli Mission

  photo
  Silverlit Electronic's Heli Mission Pack improved on an existing model, capturing the attention of Nuremberg's Toy Innovation Award judges

Silverlit Electronics, meanwhile, improved on its popular ultra-light indoor helicopters, unveiling a new model that comes with a helicopter and truck operated through one remote control.

The Heli Mission and Amazing Toy's Greenex series were two of only three products that clinched nominations in the Toy Innovation Award's highly competitive Electronics and Technical Category.

The two companies were among the more than 160 Hong Kong exhibitors that unveiled new products at the Nuremberg Fair's Innovation Centre. As companies brace for a tough year ahead, the onus is on toymakers to come up with bright ideas amid the economic slump.

Toymakers are cautious about the future, emphasising the importance of cultivating ties and building brands. Mr Jacobs, who hopes to open new markets in Asia, says he intends to put more time in trade fairs.

Still with an even more competitive market, the temptation for many, according to Amazing Toy's Mr Sy, is to merely copy what's popular, because it's safe. "Coming up with a new idea may be riskier, but it's more creatively satisfying seeing your own ideas come to life."

March 4 2009

Hong Kong Budget Champions Business  
  photo
  Financial Secretary John Tsang unveils his fiscal bluepri

Tough times demand a multi-pronged approach to combating the global financial crisis. Delivering his annual budget last week, Hong Kong Financial Secretary John Tsang outlined measures to do just that, while laying the foundation for an economic recovery.

As Hong Kong faces its first economic contraction since the 1998 Asian financial crisis, Mr Tsang unveiled plans to boost public spending in the next fiscal year to more than HK$300 billion (US$39 billion), with HK$39 (US$5 billion) billion devoted to capital works projects. Mr Tsang projected Hong Kong's GDP would fall this year by two to three per cent.

The new government spending follows earlier measures, implemented late last year, to provide funding for small and medium-sized enterprises (SMEs).

The challenges brought on by the economic downturn have also spurred the government to play an increasingly prominent role as a "champion" for business, Mr Tsang said. "We will review pragmatically the future directions for Hong Kong's economic development and provide a suitable platform for sustainable economic growth where necessary."

This, he said, will be accomplished by promoting regional economic development and continuing Hong Kong's economic integration with the Chinese mainland, allowing Hong Kong enterprises to tap into new business opportunities.

Going Green

photo  
Boosting capital works spending is among the new budget's measures to revive the economy  

In addition to boosting government spending, Mr Tsang also unveiled initiatives to further diversify the Hong Kong economy. "During an economic downturn, it is vital that we are far-sighted in encouraging high value-added economic activities that open up new sectors for sustainable economic growth." The financial secretary identified three key areas: technology, creative industries and green industries.

The government will continue working with neighboring Shenzhen to encourage more overseas enterprises to conduct scientific research in Hong Kong, similar to the recent collaboration with DuPont. The US company set up its solar energy photovoltaic research base in Hong Kong, with manufacturing located in Shenzhen.

The budget initiatives also include a new area of research – biotechnology. Two laboratory buildings have been set aside at the Hong Kong Science Park to support biotechnology research, which Mr Tsang said, is already being conducted in Hong Kong by a number of overseas companies.

Mr Tsang, meanwhile, unveiled measures to develop Hong Kong's design industry, including the setting up of a dedicated office to coordinate the development of Hong Kong's creative economy. The government will also set aside HK$300 million (US$39 million) for other creative industries over the next three years. The industry already contributes more than HK$60 billion annually to Hong Kong's GDP, with about 32,000 creative industry-related businesses set up in the city.

Hong Kong is collaborating with Guangdong authorities to transform the Pearl River Delta region into a green area. Under the plan, Hong Kong and Guangdong will cooperate to turn the region into a cluster of high-tech, low-pollution and low-energy consumption cities, by developing regional high-tech recycling industries and encouraging enterprises to adopt advanced technology for cleaner production, energy saving and emission reduction.

In Hong Kong, the government will promote the use of electric vehicles to improve the environment and create new business opportunities.

Quality Bonds

  photo
  Hong Kong's bond market is set to get a boost with the issuance of government bonds

To reinforce Hong Kong's position as an international financial centre, the government will set up a bond program, its first in five years. Mr Tsang said the government's bond issue would promote the development of Hong Kong's bond market and provide more choices to institutional and individual investors. "In view of the current investment market conditions and low interest rates, we believe that there is demand for quality bonds," he said.

Hong Kong's bid to become the regional Islamic finance hub also remains on track. Tax law changes, set to go to the legislature, will create a level playing field for Islamic financial products.

Promoting Hong Kong

The Hong Kong Trade Development Council (HKTDC) has thrown its weight behind the government's initiatives. "The HKTDC has been working toward the same goals as the government," said HKTDC Executive Director Fred Lam. "We will continue to play our part in support of the Financial Secretary's strategies."

Economic integration with the mainland and promoting Hong Kong's role as Asia's international financial centre and a premium hub for business support, professional services and logistics, are centerpieces of the HKTDC's mission, Mr Lam noted.

"With its fast-growing domestic consumption, the mainland is now a huge domestic market for Hong Kong products and services, apart from being a production base for export. One of the Council's priorities in the coming year is to help Hong Kong companies develop domestic sales in the mainland, as well as to promote various service industries there."

Testing Times

"The current financial turmoil is undoubtedly a severe test that poses challenges to individuals, families, enterprises, societies and governments," the Financial Secretary said. He added that Hong Kong is up to the challenge, citing its experience with the Asian financial crisis and SARS as proof of the city's resilience. "The people of Hong Kong have weathered tough times before and will weather them again."

February 11 2009

Accounting Adds Up  

photo  
Anthony Thompson, Michael
Page International
 

In an economic downturn, Hong Kong remains one of the markets financial professionals would like to be working in.

So says Anthony Thompson, Managing Director, Hong Kong and Southern China, at Michael Page International, explaining that Hong Kong's standing as a financial services hub holds it in good stead, despite the current economic conditions.

Economies across Asia are still growing – albeit at a reduced pace – and Hong Kong is the hub for that, Mr Thompson said. The city's strong links with the Chinese mainland are particularly valued.

Mr Thompson said that while the picture now was "not as positive as a few months ago, Hong Kong remains very strong" relative to the rest of the world.


"Hong Kong is also a proactive and dynamic economy. The market might fall quickly, but tends to bounce back very fast," said Mr Thompson.

A survey of accounting and finance sector employers conducted by recruitment firm Michael Page International and the Association of Chartered Certified Accountants Hong Kong (ACCA) late last year, revealed that most did not expect to be cutting back staff in the next 12 months.

The survey of more than 1,330 industry professionals conducted in Hong Kong and the southern Chinese mainland, found that 54 per cent of responding employers believed the demand for accounting and finance staff would remain the same, with more than a quarter (29 per cent) expecting to recruit for new positions this year.

Strength in Numbers

  photo
  Hong Kong remains one of the world's most attractive markets for
financial professionals

Meanwhile, major accounting firms KPMG, PricewaterhouseCoopers and Deloitte Touche Tohmatsu plan to recruit at least 2,000 graduates each in the mainland and Hong Kong this year. KPMG is also expected to recruit about 200 professionals for senior positions, as reported in the Financial Times.

John Harrison, KPMG Global Deputy Chairman, said the firm could not afford to take a knee-jerk reaction to the global economic slowdown and stop recruiting "new blood. Graduates are our future," he said in an interview with the South China Morning Post.

"In time, the economy will come back; in time, we will need to have more qualified accountants," Mr Harrison said. "It is important we continue to recruit some of the great graduates that the universities turn out, both in Hong Kong and the mainland, and develop those people for the future."

Spotlight on Talent

photo  
Kelly Chan, President,
ACCA Hong Kong
 

Kelly Chan, President of ACCA Hong Kong, agreed that demand for accounting and finance professionals remained steady, despite the economic slowdown.

"Accounting professionals are equipped with a wide range of technical expertise, and the supply of such professionals is still lagging behind demand. We expect the market will have a higher demand for talent, with a focus on internal audit and internal control, under the current market situation." Mr Thompson added that, with almost half of survey respondents saying they had been actively searching for a new job last year, now is the time for employers to focus on retaining valued talent.

"Continuing professional development and training is crucial for accounting and finance professionals, especially in a challenging economic and business environment," he said.

He added that with career prospects topping the list of job-change decision factors, employers should talk to their staff about training needs. They should also consider whether training resources could be better allocated.

"While most of the responding employers said they provide cash subsidies for courses and examinations to their employees, less than half of the responding employees mention that they received such support."

February 4 2009

Hong Kong - World's Freest Economy - Topping the freedom scale

Hong Kong has once again been named the freest economy in the world. It's the 15th straight year the city has been ranked number one on the list published annually by Washington-based think-tank the Heritage Foundation. "Hong Kong continues to do the right thing," Heritage Foundation President Ed Feulner told CNBC. The study, which has been conducted annually for 15 years, measured the economic freedom of 179 economies by assessing 10 factors: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.

Heritage Foundation President Edwin Feulner (right) presents Chief Executive Donald Tsang with a copy of the 2009 Index of Economic Freedom

Open Economy -"Hong Kong is one of the most open economies in the world. That openness gives it a flexibility with which to respond to events, and also options to continue the growth path in many different kinds of ways," Terry Miller, Director of the Heritage's Centre for International Trade and Economics, and co-editor of the Index, told the South China Morning Post. "I think that kind of flexibility will keep prosperity very high here in future." Mr Miller added that Hong Kong is likely to maintain its leading position even in the midst of the economic downturn. "I think what we'll see is that Hong Kong is better positioned to withstand any turmoil in the international economy than many countries," he said.

Extra Boost - Hong Kong even improved on last year's performance, scoring 90 in the 2009 Index of Economic Freedom, up 0.3 points, and well above the world average of 59.5. "Hong Kong did a little bit better because of the cuts in the marginal rates for both individual and corporations last year," said Mr Feulner.

Hong Kong: China's Financial Hub - Hong Kong and Guangdong last month agreed to set up a coordination team to work on ways to boost cooperation in four major industries: finance, services, infrastructure and urban planning, and innovative technology. This is in response to the January release of the "Framework for Development and Reform Planning for the Pearl River Delta Region," from the Central Government's National Development and Reform Commission. The report reaffirms Hong Kong's status as an international financial centre. The report supports expanded areas of cooperation among Hong Kong, Guangdong and Macau, under the Central Government's guidance. It also supports the listing of Pearl River Delta (PRD) enterprises on the Hong Kong stock market, underscoring the city's role as an international financial centre.

For Hong Kong, strengthening cooperation with Guangdong will focus on three key areas: developing its services industries in the PRD and Guangdong; working closely with the region to ensure clear division of work and complementary approaches in port development; continuing to play the role of an international financial centre, as well as helping the financial services industry explore opportunities in the Chinese mainland.

The government will also encourage the services industries to expand into other parts of the mainland, based on experiences learned from pilot schemes launched in Guangdong under CEPA – the Closer Economic Partnership Arrangement.
"It is already very high in virtually all 10 of our measures, but that particular activity gave Hong Kong an extra boost over number two-ranked Singapore." The city topped the list in the areas of trade, investment and financial freedom. It also ranked in the top 10 in freedom related to business and monetary and property rights. Hong Kong fared better than Singapore in trade, fiscal, financial and investment freedom.

Banking Pays Off - The study noted that Hong Kong's institutional strengths have allowed it to achieve high levels of prosperity, reinforced by vibrant entrepreneurial activity. It considered the city's income and corporate tax rates very competitive, and its overall taxation relatively small as a percentage of GDP. It also noted that Hong Kong's business regulation was straightforward and the labour market flexible.

Citing Hong Kong as one of the world's leading financial centres, the Heritage Foundation noted that the city's banking and financial services regulatory system was transparent and efficient. An independent and corruption-free judiciary, it said, also ensured that property rights were well protected.

The Hong Kong Government pledged to continue its role as a facilitator. "We provide a business-friendly environment, where all firms can compete on a level-playing field and establish an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market," said Hong Kong Financial Secretary John Tsang. "We are determined to uphold Hong Kong as the freest economy in the world."

The latest ranking reinforces a similar accolade Hong Kong received last year. The Fraser Institute also put Hong Kong number one in its Economic Freedom of the World Index. Hong Kong has topped the Vancouver-based think tank's economic freedom list every year since it began in 1970.

Looking for Angels

Industries with a China focus attract angels, says Mingles Tsoi of the Chinese University of Hong Kong's Center for Entrepreneurship

Angel investors are high net-worth individuals who invest in companies before a private placement or venture capital comes into play. They also may offer a more prominent role in the management of a company as it evolves. Experts say investors and owners of small and medium-sized enterprises (SMEs) who had hoped to list their companies will have to wait 12-18 months for the market to revive. There are some, however, who remain hopeful about the chances for SMEs to attract angels investors to their firms.

One of those is Mingles Tsoi, Project Director for the Hong Kong Social Enterprise Challenge and an executive at the Chinese University of Hong Kong's Center for Entrepreneurship.

Mr Tsoi, who spoke at the recent World SME Expo in Hong Kong, said SMEs can still attract angel investors if "they have been operating their business for a period of time and it is not a new idea; if they're really in need of capital, they can still find people."

Do Your Homework - Mr Tsoi said the problem with many Hong Kong SMEs is a lack of preparation. "After my speech at the expo, I received quite a few contacts from SMEs, and all of them just asked me to help them look for angels," Mr Tsoi said. The problem, he added, was that they didn't prepare well.

"There were no projections, no market analysis, nothing like that. I told them that if you just give people a catalogue, no one will invest."

Mr Tsoi said SMEs need to work on "how they present themselves" to potential angels because of the old saying, "You never get a second chance to make a first impression." Mr Tsoi said there are still people around "who have money and are willing to invest, but they are waiting for better timing."

Angels are also driving hard bargains, Mr Tsoi said, but not any harder than before. "I think most of the angels will stick to their own investment philosophy," Mr Tsoi said. "Some want majority shareholdings, others will take a minority shareholder. It's not a matter of timing. If they really want more shares they will insist on that."

Industries still attractive to angels include any with a China focus, Mr Tsoi said. Those that are only doing business in Hong Kong will most likely not attract major funding. Dot-com companies are still attractive, he added, but only if they have a global focus.

What Angels Want

Cash is king, says Robert Clarke, 7bridge Capital Partners Chairman

Angels are also looking to know management much more than in the past, perhaps, said Mr Tsoi, because "you need to prove to the angels that you are reliable and dedicated. SMEs need to be transparent so the angels can believe in them. Knowing the people is the most important thing."

Among the problems facing SMEs in finding angel investors is a lack of organised angel groups in Hong Kong. Mr Tsoi added that most angel investors work alone or in loose clusters within a closed network. He also said some angels in Hong Kong suffer from a lack of knowledge in valuing a business.

In general, it won't be easy to attract investors for the next six to 18 months, and those that are interested will drive hard bargains, said Robert Clarke, Chairman of 7bridge Capital Partners Ltd in Hong Kong.

"Things are extremely tough," Mr Clarke said. Even though investors "may like the opportunity, they are loathe to make new commitments. Liquidity is poor, and the appetite for risk is very poor. I do know some cases where people are trying to put together cash pools to go bargain hunting, but it's very tough under the current circumstances."

Angel investors are different, Mr Clarke said, because they're usually high net-worth individuals with relatively deep pockets. "If an SME can find one, it may be the only viable alternative. In the current environment, cash is definitely king."

The many middle- and senior-level managers who have been laid off and may be looking to start their own companies is another aspect of angel investing, according to Ganesha Leung, Managing Director of Intershores Fiduciary Services Ltd.

"The financial turmoil may push them to start their own business, perhaps on a part-time basis," she said, "because they have the connections and the ability to run their own business."

Christian Rommel: Set Yourself Apart

ROX Asia Consultancy is a sourcing, printing and packaging consultancy based in Hong Kong. Christian Rommel's firm was among three small and medium-sized enterprises singled out to receive the inaugural Success Story Award from the Federation of Hong Kong Business Association last October. The company's impressive international clientele includes Audi, Merck, Zwilling and Deutsche Bank. In "Six Questions," he tells us why the "future is bright."

How did you get into the packaging business?
I'm a printing and packaging engineer by profession. Everything sold on the market needs reliable packaging. But our focus has always been on the design element, with premium packaging for branded goods. Of course, the company didn't start out packaging for high-end products. Our first project was quality control for a Swiss chocolate tin box.

How has the economic downturn affected your business?
Whatever we do relates to the spending power of consumers. If our clients don't sell, we don't sell. We had already seen a 25 per cent drop in business even before the start of the financial tsunami, so it will continue. Meantime, we have seen a tightening in payment terms from our mainland suppliers. They won't start a project unless there's a deposit – in cash. But we don't complain.

Since setting up your business, you have seen your fair share of crises: SARS, the Asian financial crisis, 9/11. What is your advice to SMEs during the current economic instability?
Be prepared to work even harder, but also find a work-life balance. It is important to believe in yourself and stay focused. If you can identify with your work, clients will feel it, and that builds trust.

Has the green trend affected your business?
Not really. For daily consumption items, there certainly has been the trend toward more economical, environmentally friendly products. But for branded goods, environmental packaging is not an issue. For the value-added packaging that ROX focuses on, we use a mix of materials designed to last and meant as a keepsake.

Why Hong Kong?
The key here is to set yourself apart. People have said, 'why Hong Kong? It's expensive.' But we're not competing with the thousands of mass-packaging businesses on the Chinese mainland, where products are offered cheaply. The clientele we aim for is not interested in ready-made packaging. What they want are tailor-made, high-quality products to promote their brands. To deliver that, you need to be based in a place that has the infrastructure, the creative agencies and the variety of specialty shops with the materials to provide for that. Hong Kong does all that. Another reason for being here is that I find the city's entrepreneurial spirit very motivating.

What is your plan for riding out the current economic storm?
We will identify new areas of business by approaching clients directly. We will also invest in sales staff who are knowledgeable about China and the region, and who are able to market China as the best alternative to do their business. The future is bright and we never look back.

January 14 2009

Hong Kong ranks world's freest economy for 15th straight years

Hong Kong continued to take the top place in the ranking of the 2009 Index of Economic Freedom for the 15th consecutive year, revealed the U.S. Heritage Foundation here Tuesday. According to the ranking, Hong Kong scores 90 this year, 0.3 point better than last year, well above the world average of 59.5.

Among the 10 individual areas assessed, Hong Kong ranks first in trade freedom, investment freedom and financial freedom. Hong Kong also ranks in the top 10 in another three areas, namely business freedom, monetary freedom and property rights.

The Heritage Foundation noted that Hong Kong's institutional strengths had allowed it to achieve high levels of prosperity reinforced by vibrant entrepreneurial activity. The income and corporate tax rates in Hong Kong were very competitive, and overall taxation was relatively small as a percentage of gross domestic product (GDP), according to the Heritage Foundation.

The foundation also noted that Hong Kong's business regulation was straightforward, and the labor market was flexible.

The foundation said Hong Kong was one of the world's leading financial centers, and the regulation of banking and financial services was transparent and efficient. The study noted that property rights were well protected by an independent and corruption-free judiciary.

In the Heritage Foundation ranking, Singapore, Australia, Ireland, New Zealand, the United States, Canada, Denmark, Switzerland and the United Kingdom took another spots in the top 10 ranking.

Compared with Singapore, Hong Kong fares better in trade freedom, fiscal freedom, investment freedom and financial freedom, while Singapore fares better in business freedom, government size, monetary freedom, freedom from corruption and labor freedom.

Welcoming the study, Financial Secretary of Hong Kong John Tsang said, "We are determined to uphold Hong Kong as the freest economy in the world and we see the role of the government as that of a facilitator."

Tsang noted that the Hong Kong government provides a business-friendly environment where all firms can compete on a level playing field and establish an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market.

The study measured the degree of economic freedom of 179 economies worldwide by assessing 10 factors: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.

December 12, 2008

Hong Kong to host world’s first Asian wine competition
Pairing Wine with Chinese food and Introducing "Best Wine from China"
Executive Director of IWSC, Allen Gibbons (left) and Assistant Executive Director of HKTDC, Raymond Yip (right) sign the memorandum of understanding to incorporate the inaugural Hong Kong Wine & Spirit Competition as a new initiative of Hong Kong International Wine & Spirits Fair next year.
 
(From left to right) Competition Director Simon Tam, Allen Gibbons, Raymond Yip and Competition Director and Asia's first Master of Wine*, Debra Meiburg toast together for the success of both the competition and wine fair next year.

The Hong Kong Trade Development Council (HKTDC), together with a panel of Asia's most respected wine experts and the world's most prestigious wine and spirit competition organiser has announced it will host the world's first truly Asian wine competition as part of the 2009 HKTDC Hong Kong International Wine & Spirits Fair.

The HKTDC has been instrumental in creating a favourable environment for the wine industry by initiating the Hong Kong International Wine Fair which will be renamed as Hong Kong International Wine & Spirits Fair in 2009.

Raymond Yip, Assistant Executive Director of the HKTDC, says: "Following the Hong Kong SAR Government's elimination of duties on wine in early 2008, the HKTDC responded by creating the first Hong Kong International Wine Fair, which took place in August. The event was immensely successful and, to further enhance fair experience for both suppliers and visitors, we decided to incorporate the first Hong Kong International Wine & Spirit Competition (HKIWSC) in 2009 as a new initiative of our Wine Fair."

"We are delighted that the International Wine and Spirit Competition (IWSC) has accepted HKTDC's invitation to organise this 40-year old competition for the first time in Asia, which we are confident will attract huge interest from both the trade and media worldwide. It will be one of the key highlights of the 2009 fair, and along with activities such as wine tasting, seminars, a conference and voting for favourite wines, will add value and prestige to the event."

The 2008 fair attracted 240 exhibitors from 25 countries and regions, and 8,758 trade visitors from 55 countries and regions, and was attended by 10,096 public visitors on the final day.

The HKIWSC is being developed in conjunction with the IWSC in London, the world's leading wine and spirit competition, which has been at the forefront of recognizing and rewarding quality in wines and spirits. Allen Gibbons, Executive Director of the IWSC said: "We are very excited by the opportunity offered by the Asian market and working with such fabulous partners will allow us to offer the definitive guide to quality wines and spirits in Asia."

The competition will feature food and wine pairing categories, where judges will identify the top wines to match popular traditional Chinese dishes, including braised abalone, Peking duck, Cantonese dim sum and Kung Pao Chicken.

The competition will also include the "Best Wine from China" category, the first trophy of its kind anywhere in the world to represent the authentic Asian flavour of the competition and in view of China's bourgeoning wine production industry.

The HKIWSC will see a top class panel of Asia's most esteemed wine judges from China, Japan, Korea, Singapore and Taiwan - including the first International Guest Chairman of Judges, Dr Tony Jordan as well as
the competition's Director, Debra Meiburg, who is Asia's first Master of Wine*. Categories will be judged by country, region, variety and style, and trophies awarded will reflect the unique sensibilities of the Asian palate.

The competition results will serve as a definitive guide for contemporary Asian wine consumers. Additionally, price point categories for the most popular styles of wines will offer wine consumers a comprehensive directory of the world's best wines for all occasions and situations.

Results of the judging process will be announced during the opening night of the 2009 Hong Kong International Wine & Spirits Fair, which will be held from 4 to 6 November, 2009 at the Hong Kong Convention and Exhibition Centre.

Hong Kong International Wine & Spirit Competition's website: www.asiasbestwinesandspirits.com

*Jeannie Cho Lee became the first Asian to earn the Master of Wine qualification at the same time.

December 3, 2008

"Hong Kong Film: New Action" project launched - Hong Kong Film Development Council:

The Hong Kong Film Development Council (FDC) launched today (December 3) a large-scale project “Hong Kong Film: New Action” to promote the long-term development of Hong Kong's film industry. The project aims to help local films develop Mainland and Southeast Asian markets and introduce the new generation of Hong Kong directors to these markets.

To mark the commencement of the project, the FDC held today a launch ceremony cum Christmas reception. It was officiated by the Financial Secretary, Mr John C Tsang; the Secretary for Commerce and Economic Development, Mrs Rita Lau; the Chairman of the FDC, Mr Jack So; members of the film industry, and film directors participating in the project.

Addressing the ceremony, Mr So said, “The project will be implemented in phases. From this month to February next year, a delegation comprising members of the FDC and the film industry, and the participating film directors, will pay visits to the Mainland, Singapore, Malaysia and Taiwan. The delegation will introduce Hong Kong films and the new generation of directors to the buyers, distributors and producers of the four places.

“We hope that through direct exchange of ideas between Hong Kong film practitioners and investors and distributors outside Hong Kong, we can help foster mutual understanding and establish solid market networks, thereby boosting the demand for local film productions and attracting foreign investments.”

Mr So said he was glad to note that the project was well-received with 33 directors joining it so far. The FDC has compiled a brochure showcasing the participating directors for promotion outside Hong Kong.

“Our film industry has an abundance of talent. The participating directors either have been nominees for film awards, or have won prizes in various film festivals. We hope the project will help them open up more opportunities and new markets, thus enabling the industry to nurture successors and enhance both the quality and quantity of local film productions,” he said.

The FDC will also organise exchange forums and seminars under the banner of “Hong Kong Film: New Action” during the “Hong Kong International Film & TV Market” to be held in March next year. Luncheon gatherings and individual promotional booths will be set up for the 33 directors to meet with buyers, distributors and producers from the Mainland and Southeast Asia, and to foster mutual understanding and pave the way for future co-operation (including investments, sales and distribution).

As regards the latest position of the Film Development Fund (FDF), Mr So said that since the launch of the Film Production Financing Scheme in October last year, eight applications have been approved and another two are being processed, involving a total approved funding of $21.84 million. The eight approved film projects are of different genres, including animation, kung-fu, romance, ethical and suspense films. These films engage six new directors for commercial films and will be released starting from early 2009.

In addition to financing film productions, the FDF approved 20 film-related projects at a total amount of $37.85 million. The approved items include financing large-scale film events like the Entertainment Expo Hong Kong, the Hong Kong – Asia Film Financing Forum, the Hong Kong Film Awards Presentation Ceremony and the Asian Film Awards; film promotional seminars; participation of local films in overseas film festivals or film financing forums; production of the Safety Manual for Film Workers; introduction of film education in the senior secondary school visual arts curriculum; and production of a short film for promotion of Hong Kong films.

November 25, 2008

World urged: look to Hong Kong trade model - Katherine Ng

Governments should follow Hong Kong's example when extending trade credit insurance coverage to keep the wheels of business turning, the International Chamber of Commerce said after a two-day conference in Hong Kong. "Trade is the life blood of the global economy and trade credit funded about 90 percent of business," Victor Fung Kwok- king, chairman of the Paris-based ICC, said yesterday.

Fung, also chairman of the Li & Fung Group of companies and a member of Hong Kong's Task Force on Economic Challenges, said the ICC had agreed that members will urge their respective governments to work together to unlock liquidity and get trade flowing again.

"The ICC has sent letters to six country leaders and the WTO, and will send to more countries, urging them to use Hong Kong as a case study for extending their trade credit insurance coverage," Fung said. On November 11 the Hong Kong government set up a HK$10 billion loan scheme to provide 70 percent loan guarantees. At the same time it doubled its liability to HK$30 billion for Hong Kong Export Credit Insurance Corp credit insurance coverage.

Despite there being no sign yet that local banks are relaxing their SME lending in line with the plan, Fung said he has had a personal assurance from the Hong Kong Association of Banks that their member lenders will support it. "The plan has only been launched a few weeks - it may take weeks not months for implementation," Fung said.

Meanwhile, the ICC also warned against protectionism. "There have been no signs yet of protectionism but when the financial crisis gets into the real economy it becomes a threat," Fung said. The ICC has concluded two days of meetings in Hong Kong, the first time outside of their Paris headquarters.

It has set an agenda which would next week set priorities for its 150 members to follow during coming years.

The members will meet next Tuesday in Paris to set the organization's priorities.

November 8, 2008

Hong Kong - Where the world wants to be

Hong Kong remains the location of choice for overseas and Chinese mainland firms. The latest InvestHK survey shows the city is home to a record 6,612 overseas and mainland firms representing parent companies outside Hong Kong, an increase of 2.7 per cent over last year.

"In recent years, two emerging trends have strengthened Hong Kong's status as a regional and international hub," said Mike Rowse, Director-General of Investment Promotion. "More multinationals have upgraded their Hong Kong operation by adding regional and even global responsibilities, while more and more mainland companies have established local offices here to capture the business opportunities Hong Kong has to offer."

Out of the more than 6,600 firms that have set up in Hong Kong as of June this year, 1,298 companies established regional headquarters, 2,584 have set up regional offices and 2,730 have opened local offices. Mr Rowse told the South China Morning Post that an additional 250 companies are in the process of setting up or expanding operations in Hong Kong this year, despite difficult economic conditions.

Companies from the United States topped the list of countries with regional headquarters and regional offices in Hong Kong, followed by Japan and the United Kingdom. The major lines of business of the regional headquarters and offices include wholesale, retail and import-export trades, business services (excluding information technology), and transport and related services, as well as finance and banking. As for local offices in Hong Kong, mainland companies led the way, followed by companies from the US and Japan.

Tax system lauded - The survey, conducted in June, found that key reasons for companies choosing Hong Kong included the city's simple tax system and low tax rate, the free flow of information and the absence of exchange controls. Respondents also cited clean government and Hong Kong's communications and transport infrastructure, as well as its free-port status, as other factors.

Mr Rowse noted that Hong Kong has maintained its status as Asia's leading business hub, despite keen regional competition for investors, and the world economic turmoil. "Given the recent global financial difficulties and uncertain economic outlook, companies may delay overseas investments or even reduce the size of their operations. We, therefore, have to work even harder to attract and retain investors from all over the world," he said.

The new survey comes as the latest report by the United Nations Conference on Trade and Development ranked Hong Kong the world's seventh-largest destination for foreign direct investment (FDI). Hong Kong also retained the second spot in Asia – after the mainland, which ranked first – in terms of FDI inflow last year. The amount of FDI Hong Kong attracted last year was more than the combined total of the next three highest FDI recipients in Asia: Singapore, India and Thailand.

The World Investment Report 2008 also ranked Hong Kong first globally in its Inward Foreign Direct Investment Performance Index, signifying that Hong Kong is the world's best performing economy.

InvestHK is the award-winning department of the Hong Kong Government, responsible for attracting and facilitating investment to the city. It provides free services and support to help overseas and mainland companies establish or expand their business presence in Hong Kong.

October 23, 2008

DHL logistics hub now faster, leaner, stronger

Due to demand, DHL's Central Asia Hub expansion in Hong Kong has opened five years ahead of schedule

DHL, the world's leading express and logistics company, is set to significantly boost its operational capability in the region with the recent completion of its Central Asia Hub (CAH) expansion in Hong Kong. Based at the Hong Kong International Airport, the US$210 million facility, which officially opened last month, is the first large-scale automated express hub in Asia-Pacific. DHL said rising demand in the region prompted the decision to expand five years ahead of schedule.

"Currently, more than 60 per cent of express cargo processed by the Central Asia Hub is intra-Asia-Pacific shipment, a figure we expect to continue growing alongside rising intra-regional trade,” said Dan McHugh, CEO, DHL Express Asia-Pacific. "Asia-Pacific continues to be a key growth driver. In the first half of 2008, we grew 13 per cent year-on-year. The expansion of the CAH is testament to the continued growth of intra-Asia trade and the Asia-Europe trade lane."

The expansion doubles the capacity of the CAH to 35,000 square metres. Providing the core backbone to further enhance DHL's services in the region, the upgraded facility will handle 40 million shipments this year alone. With the expansion, the automated facility will see a 114 per cent increase in throughput capacity, and a decrease in throughput cycle time from 12 to seven minutes.

Strategic location - "Strategically located within a four-hour flight time to major cities in Asia-Pacific, the CAH is complemented by a well-established Asia Air network, which is served by more than 20 aircraft and about 500 commercial daily flights. The expansion of the CAH brings with it heightened speed, efficiency, accuracy, and significantly bolsters DHL's operational capacity in Asia-Pacific,” said Jerry Hsu, President, Greater China Area, DHL Express.

The Hong Kong Government pledged to continue doing its part. "To support further development of the express cargo industry and the aviation sector in the years ahead, the government is dedicated to improving our airport's links to the nearby markets,” said Hong Kong Secretary for Transport and Housing Eva Cheng. Hong Kong, she added, plans to increase its airport capacity, by possibly building a third runway.

"With CAH fully operational, we look forward to taking our network capability up another notch when our North Asia Hub at Shanghai Pudong International Airport is complete in 2010,” Mr McHugh said. The company said the North Asia Hub in Pudong will complement its Hong Kong facility and will result in transit time improvements across North Asia, benefiting especially customers in the Yangtze River Delta.

"Currently, nearly 50 per cent of the shipments through the Central Asia Hub are destined for China, Japan, Korea and Taiwan,” Mr Hsu noted. "With the expected long-term projections in volume growth, a dedicated North Asia Hub will further enhance operational efficiencies, and enable DHL to keep pace with growth.”

September 30, 2008

HKMA Takes Action

In the wake of the on-going international credit crisis, the Hong Kong Monetary Authority (HKMA) on Tuesday unveiled five temporary measures to boost the liquidity of licensed banks in Hong Kong.

It said the new measures would take effect from Thursday for a period of six months until the end of March 2009. A HKMA spokesman said the measures were taken in the light of the current crisis affecting world financial markets.

“Continuing stress in the financial systems of developed markets has caused some concern among licensed banks in Hong Kong over the credit worthiness of each other. “This concern, together with a wish to preserve liquidity to meet their own contingent needs, has led to a general shortage of interbank liquidity and difficulties on the part of individual licensed banks in obtaining funding in the interbank market,” the spokesman explained. But he said Hong Kong’s banking system remained “healthy”.

“The existing framework for maintaining banking stability – including the prudential supervision of banks and the arrangements for providing liquidity both at the systemic and institutional levels – have ensured the banking system of Hong Kong is well prepared for turbulent conditions,” he said. The spokesman advised ordinary investors to exercise caution. “The HKMA will continue to monitor the situation carefully and will, as necessary, make use of the tools at its disposal to maintain financial stability in Hong Kong.”

The five new measures are:

* Eligible securities, for access by individual licensed banks to liquidity assistance through the discount window, will be expanded to include US dollar assets of credit quality acceptable to the HKMA. (The discount window is a HKMA location where banks borrow money at a discount rate).

* The duration of liquidity assistance provided to individual licensed banks through the discount window will be extended. This at the request of individual licensed banks and on a case-by-case basis, from overnight money only to maturities of up to three months.

* The 50 per cent threshold for use of exchange fund paper as collateral for borrowing through the discount window at the HKMA base rate will be raised to 100 per cent. (The bank base rate is the rate that the HKMA lends money).

“In other words, the 5 per cent premium [or penalty] over the base rate for the use of exchange fund paper beyond the 50 per cent threshold, as collateral for borrowing through the discount window, will be waived,” the spokesman explained. (The exchange fund is the investment vehicle which backs the Hong Kong dollar).

* The HKMA will, in response to requests from individual licensed banks and when it considers necessary, conduct foreign exchange swaps (between the US dollar and the Hong Kong dollar) of various durations with licensed banks.

* The HKMA will, in response to requests from individual licensed banks and when it considers necessary, lend term money of up to one month to individual licensed banks against collateral of credit quality acceptable to the HKMA.

September 26, 2008

Services in the CEPA spotlight

  CEPA
  Financial Secretary John Tsang and Vice-Minister of Commerce Jiang Zengwei sign Supplement V to the Hong Kong-Mainland Closer Economic Partnership Arrangement
  Andrew Brandler
  Andrew Brandler, Hong Kong General Chamber of Commerce Chairman, welcomes the latest CEPA initiatives

Good news for Hong Kong-based businesses in the services sector. The latest phase of CEPA, the Closer Economic Partnership Arrangement between Hong Kong and the Chinese mainland, will bring with it more opportunities.

The newest additions to CEPA, signed in July, brings to 40 the number of services now covered by the free trade agreement, introduced in 2003. CEPA created 36,000 jobs and attracted more than US$642 million of investment into Hong Kong in its first three years. CEPA gives favorable trading and investment treatment to a range of Hong Kong-incorporated manufacturers and services through tariff exemptions and greater mainland access.

Overseas companies not based in Hong Kong can also take advantage of CEPA by outsourcing to, or partnering with, CEPA-qualified manufacturers or service providers in Hong Kong.

The latest phase, Supplement V, covers sectors such as tourism, accounting, medical and dental services, education, construction and related engineering. Two new sectors have been added: services related to mining, for oil and gas exploration; and associated scientific and technical consulting services for the prospecting and surveying of iron, manganese and copper in the mainland. Supplement V also introduces a mechanism for increased cooperation on branding, trademarks and e-commerce.

The new phase puts special focus on strengthening economic and trade cooperation between Hong Kong and the southern mainland province of Guangdong, making it easier for Hong Kong services providers to open businesses in the province. Among the new CEPA commitments, 25 will be initiated as pilot projects in Guangdong, a testing ground for the rest of the mainland.

Tangible benefits

Industry bodies have welcomed the latest signing. Hong Kong General Chamber of Commerce (HKGCC) Chairman Andrew Brandler said the agreement would bring tangible benefits to many Hong Kong companies and professionals as they expand their operations in the mainland. It would also foster growth in services, he said.

"For example, under the framework of Trade and Investment Facilitation, both parties will promote cooperation in electronic commerce. Under Trademark, they will set up a working team to encourage communication and cooperation in trademark registration, management and protection," said Mr Brandler. "In addition, Brand Cooperation between Hong Kong and the mainland is a new sector under CEPA Trade and Investment Facilitation. The chamber has been calling for these measures to be added to CEPA, so we are glad to see they have been included in the latest supplement."

HKGCC Chief Executive Officer Alex Fong said the services sectors covered were relevant to business needs. Commenting on a CEPA working mission that the chamber organized to Guangdong last year, Mr Fong said the cases observed there "helped to generate proposals for our CEPA wish list." Mr Fong was also pleased to see that the newly signed supplement contains 25 liberalization provisions between Guangdong and Hong Kong. "These should allow more Hong Kong enterprises to operate businesses in the province. At the same time, implementation of CEPA will be improved, which will help Hong Kong companies make use of their competitive edge there."

Faster and easier

The Hong Kong Institute of Certified Public Accountants said the new agreement would bring Hong Kong accountants more opportunities to practise on the mainland.
 
"For the accounting profession, it means that Hong Kong certified public accountants (CPAs) need only pass the tax and law papers of the Chinese Institute of Certified Public Accountants' exam to become CICPA members. Mainland CPAs now only need to pass the taxation module and the final exam of the Hong Kong Institute of CPAs qualification programme to become Hong Kong Institute of CPAs members," said Winnie CW Cheung, Chief Executive and Registrar of the Hong Kong Institute of CPAs.

"These exemptions make it faster and easier for accountants to qualify, or become licensed, in each market. And it's going to bring the two professions another step closer to full mutual recognition."

Chairman of the Federation of Hong Kong Industries Clement Chen said the agreement on trademark cooperation could encourage more Hong Kong companies to develop new products and build their own brands.

"The cooperation mechanism for intellectual property protection and branding will help encourage Hong Kong enterprises to invest in developing new products and branding. This will assist them in targeting the newly emerged middle class consumer market in the mainland," Mr Chen said. "The distribution sector will benefit from the liberalization measures of the new CEPA package. By allowing Hong Kong enterprises to operate on a wholly-owned basis in China, it will be easier for them to open up chain stores in the targeted cities, and to gradually set foot in the massive mainland domestic market."

CEPA Supplement V comes into effect 1 January 2009.

September 15, 2008

HK aims to set a standard for wine - Initiative for storage would be world-first

Hong Kong is exploring the possibility of becoming the world's first city to establish a standard for wine storage facilities as part of its push to become Asia's wine hub. It recently signed Asia's first memorandum of understanding with France on wine-related business, a move aimed at making the city the region's centre for wine.

Sources said a collaboration between the Productivity Council and the Trade Development Council would hopefully be implemented locally and then extended overseas if it were successful. Boris de Vroomen, co-chairman of the Hong Kong Wine and Spirits Industry Coalition, said that setting up the standard would take time and it was important to ensure the certification could be measurable. He said the industry had contributed its expertise to the initiative and he expected more details to be announced soon. "This is a good initiative. Hong Kong will be the only place to have such a standard."

Mr de Vroomen said London has great storage facilities ensuring the right conditions and temperature, but no standard had been set. "Their expertise was built over time," he said. "But we do it differently. We set up a standard as a certificate and guarantee for consumers." The standard will be set up primarily in Hong Kong, he said, but "if it works well, it can go international".

The Trade Development Council said the need for certification of storage facilities emerged during talks with the industry. The council then passed the request to a technical body, the Productivity Council, which is examining the issue.

Mr de Vroomen said Hong Kong had a great demand for storage facilities, especially when local wine consumers began to ship more of their collection back to the city. He said most of the wines were stored in London. "In fact, 40 per cent of the wines in London are owned by Hong Kong collectors," Mr de Vroomen said. "These wines were only shipped to Hong Kong when they wanted to consume them. But after the zero wine duty was implemented, more wines were shipped to Hong Kong."

The government scrapped its tax on wines this year. He said Hong Kong had risen to third in global wine trading, behind London and New York. The Productivity Council declined comment.

How to keep your wine:

Temperature: around 13 degrees Celsius

Relative humidity: around 65 per cent

Light: Keep the wines away from the Sun and minimize their exposure to any light source, as light affects the nature of wines just as much as temperature and relative humidity

Vibrations: Store the wines in a stable environment; avoid any unnecessary vibration

HK's creativity makes its architectural sector top in Asia

Hong Kong Secretary for Commerce and Economic Development Rita Lau said that Hong Kong people's creativity has driven the city's architectural sector to become one of the foremost in Asia and one of its top creative industries, a government press release said on Saturday.

According to the press release from the Information Services Department of Hong Kong Special Administrative Region (HKSAR) government, Lau applauded the creativity of Hong Kong exhibitors while opening the Hong Kong exhibition at the 11th Venice Biennale International Architecture Exhibition in Venice on Sept. 12.

Praising Hong Kong architects' presentation of creative ideas to improve quality of living, she said the pursuit of quality living has propelled people's creativity to develop new ideas and designs.

To facilitate exchange and discussion between Hong Kong's creative talent and their overseas counterparts, Lau hosted a gala dinner for guests including representatives from overseas creative organizations, leading architects and designers of participating countries of the Architecture Biennale.

The HKSAR government has allocated more than 1.8 million HK dollars (231,065 U.S. dollars) in sponsorship to support the Hong Kong exhibition in Venice as well as a response exhibition.

The Hong Kong exhibition features the creativity of Hong Kong in six categories including objects, buildings, landscapes, city, media and text. Nine groups of local exhibitors, comprising architects, designers, photographers, performers, and writers and critics, will showcase their interpretations of architecture at this international platform.

August 15, 2008

Hong Kong is "perfectly located" as a regional headquarters, says Vicente Trius, President and CEO of Wal-Mart Asia. The world's largest retailer is using Hong Kong as an enabling centre for analysing business opportunities.

Multinational coffee chains descend on Russia - There's plenty of coffee in Russia.

While major coffee house brands are closing down outlets in the US and Western Europe amid the global downturn, Russia provides opportunities for opening retail units. Recently, Australia's Gloria Jean's Coffees joined other international names, expanding into Moscow's MEGA Shopping Mall, the largest mall in Europe.

Starbucks also started in the same mall in Russia and has driven hard since then to establish itself as a dominant player.

The Australian newcomer has ambitious plans to. It will launch a chain of 100 coffee shops all over Russia in the next decade. The rational is: the Russian coffee shops market has been growing some 40% annually over past five years, from a relatively low base.

However, Russia is far from being a virgin land for coffee drinkers. To mirror that, serious players like Starbucks and Costa Coffee are raising their standards.

Furthermore local operations, the Coffee House and Chokoladnitsa chains, have set up shops not only all over Russia but throughout the former USSR, definitely outnumbering both Starbucks and Costa Coffee by far in the region.

The Russian chains have a competitive edge by knowing Russian consumer preferences for blinies with jam or honey for breakfast, ice cream coffee in the summer and traditional Russian tea selections with cakes.

The local venues also feature cosmopolitan and modernistic interior and exterior design, western-style management and, not least, cleanliness.

McDonald's, with its McCafe outlets, is another downmarket but serious rival to all coffee houses. The chain is the largest fast-food operator in Russia with outlets located in some places so remote that they are only accessible by plane or by boat.

There's another particular factor to be taken into account with the new Australian coffee shops' strategy. Gloria Jeans is the name of a very well-known jeanswear brand in Russia, developed by a local clothing manufacturer.

The Russian chain's founder and principal shareholder, Vladimir Melnikov, has already confirmed he won't be claiming royalties, as his trade mark is not registered in the corresponding product category. But still, the possible confusion over the name remains.

Coffee shops have become a distinctive feature of modern Russian urban life. They are often equipped with Internet Wi-Fi access points which are offered to patrons free of charge.

Targeted customers are between 16 and 45, many casually making appointments as they drop in to the numerous outlets of Mocco Locco, Coffee House, Starbucks, Chokoladnitsa, Coffee Bean, Coffeemania, Coffee Tune, Coffee Republic and McCafe outlets that are strung out from St Petersburg to Vladivostok.

All chains face intense competition and go for all the marketing opportunities they can, such as offering free or additional coffees, new brews, gifts and coupons.

These promotion techniques open up vast opportunities for interested suppliers from Hong Kong and other Asian centres, particularly in the gifts, premium and electronics sectors.

It might also be the right time for coffee catering chains from Hong Kong and elsewhere in the Asia Pacific to be encouraged to make the most of the largest consumer market in Europe.

July 13 2008

Wal-Mart chooses HK as springboard for Asia

  HKTDC Executive Director Fred Lam greets Vicente Trius at a luncheon to welcome Wal-Mart to Hong Kong
  HKTDC Executive Director Fred Lam greets Vicente Trius at a luncheon to welcome Wal-Mart to Hong Kong
  Vicente Trius 
  Vicente Trius, Executive Vice President, President and CEO of Wal-Mart Asia heads the new regional office in Hong Kong

Wal-Mart, the world’s largest retailer, has opened a regional office in Hong Kong to further develop its customer base in the booming Asian market. The company announced plans to set up the office in May. The regional operation is headed by Vicente Trius, Executive Vice President, President and CEO of Wal-Mart Asia.
 
"Hong Kong is centrally located in the Asia region, and therefore makes a good staging point for continuing to develop our businesses in the hemisphere," Mr Trius said. "This is a concept we’ve applied with great success for our Canadian and Latin American markets, which are overseen by a regional office in Miami, Florida."

After reviewing several cities in Asia, the retailing giant decided that Hong Kong was the ideal location for its regional office. The company informed Hong Kong Trade Development Council (HKTDC) representatives of its decision during their visit to the company’s headquarters in Bentonville, Arkansas, in February.

Wal-Mart has been an important HKTDC customer over the years, attending several trade fairs in Hong Kong last year. It has also been a regular visitor to the Hong Kong Pavilion at the Chicago Houseware Show. HKTDC Executive Director Fred Lam was pleased to be among the first to welcome Mr Trius to Hong Kong at a luncheon organized by HKTDC in May.

Continuous expansion

Wal-Mart has seen strong growth in its international business, posting a 17.5 per cent year-on-year increase in the fiscal year ending in January. The US retailer has been operating in the Chinese mainland since 1996, when it opened its first store in the southern city of Shenzhen. It currently has 206 retail units, which includes a minority shareholding in the Trust-Mart chain.

In its latest overseas expansion, Wal-Mart last year entered into a joint venture with Bharti Enterprises in India. Bharti-Wal-Mart Private Limited plans to open its first wholesale warehouse stores there next year. Unlike Wal-Mart's mainland operation, which focuses on retail, the Indian business will for now concentrate on developing supply chain and wholesale cash-and-carry operations, setting up stores ranging from small supermarkets to hypermarkets and wholesale outlets.

"Emerging markets such as China and India, where organized retail is a fairly new phenomenon, present potentially large business opportunities, no question about it," Mr Trius pointed out. "But the common thread wherever we operate stores around the world is to save people money so they can live better, which is a theme that resonates with customers no matter where we operate."

Key to success

Wal-Mart also operates Seiyu in Japan, where it runs 392 units. It recently took full control of the Japanese retail store, instituting changes such as creating a more streamlined distribution system, and focusing on low prices.

"Regardless of the market Wal-Mart operates in, we think globally, while acting locally. This formula is the key to our success in the 13 markets outside the US where we operate retail stores. It means tailoring formats, merchandise and also brands to best meet the needs of local consumers," Mr Trius said.

Its new retail format of neighborhood markets, first launched in the US, has also been introduced in several mainland cities. Wal-Mart said that the small-format store concept is proving successful in both markets.

And Mr Trius said Wal-Mart continues to see other business opportunities across Asia. "Part of the success of our international business is using our global leverage to deploy best practices, share talent, technical expertise and other resources to our markets around the world. We draw from experience gathered from all our markets to find new ways to serve customers around the world."

June 11 2008

Medium-Term Prospects for Hong Kong Exports: Diversifying from US Slowdown

Summary

  • Given the lingering impact of the US-led global slowdown, Hong Kong exports are projected to grow by a modest 7% in 2008, unchanged from our previous forecast.
  • The US economy is expected to pick up slightly in the latter half of 2008, on the back of fiscal stimulus, interest rate cuts and special measures to support the financial system.
  • Yet intra-Asia trade, with the mainland in particular, will be the main engine for Hong Kong's export growth, while demand from the EU should remain firm.
  • Product-wise, continued popularity of digital products should be conducive to electronics sales. But clothing exports will likely be impeded by shrinking orders from the US.
  • Meanwhile, certain risks and challenges exist, notably a worse-than-expected US downturn, rising global inflation and a difficult production environment.

Hong Kong's export performance in the first quarter of 2008 was better than expected, as growth of total exports, at 9% last year, quickened to over 10% during the January-March period. This good showing, in spite of the US-led global slowdown, has been prompted by the sizzling intra-Asia trade, not least with the Chinese mainland. Yet exports to the developed markets have been less encouraging, featured mainly by declining sales to the US but firmer demand from the EU.

In the US, where the economy only showed marginal growth in both the final quarter of 2007 and the first quarter of 2008, demand has been particularly anaemic, reflecting continued corrections of the housing market as well as the ensuing sub-prime fallout, credit turmoil and deterioration of the labor market, in tandem with rising inflation due to high oil and commodity prices. By contrast, exports to the EU have been in better shape, thanks to its stronger economy and a firm euro.

Falling exports to the US but expanding sales to the EU have helped bring a setback in direct shipments from the mainland, and in turn served to lift Hong Kong's re-exports. For one thing, the impact of cargo diversion is particularly noticeable in exports bound for the US. Quite a few giant US buyers have set up warehouses in Shenzhen, and secured agreements with ship-liners to load their merchandise in Shenzhen ports. EU buyers, for their part, are more inclined to use Hong Kong as a consolidation centre. Separately, the solid export performance of electronics, mainly involving air shipment through Hong Kong, has likewise propped up Hong Kong's re-exports.

Firmer unit values of Hong Kong exports, spurred by rising input costs, have further contributed to the inspiring sales performance. Not surprisingly, given sustained demand from the EU and the strong euro, price rises for exports to Europe are more prevalent. Price increases for exports to the US, on the other hand, tend to be less significant amid the economic headwinds faced by American consumers and a weakening US dollar against the RMB. The depreciation of the US dollar has also galvanized Hong Kong exporters into shunning the currency to settle non-US transactions to reduce exchange risk.

Going forward, the tempo of Hong Kong's export growth is forecast to slow, as the contagious effect of the US economic downturn will probably linger on for a while. But the US economy, on account of the US$168 billion fiscal stimulus, aggressive interest rate cuts and a slew of special measures to support the financial system, is expected to pick up slightly in the latter half of 2008, thereby easing its drag on the world economy. Meanwhile, demand from the EU should remain fairly decent.

In any event, intra-regional trade, especially with the mainland, will provide the main impetus to Hong Kong's export growth. Outside emerging Asia, sales to other fledgling markets should remain relatively strong too. While non-commodity exporting economies will be impeded by the US-led global slowdown, commodity exporters, alongside countries with sustainable domestic demand, should continue to perform well. Taken together, the expected value growth of Hong Kong's total exports is maintained at 7% for the whole of this year.

In terms of product, sustained popularity of digital products should hold up Hong Kong's electronics exports. A still-healthy appetite for non-traditional toys and a stable demand for value-for-money timepieces should also facilitate sales. Clothing exports, in contrast, will likely be dragged by falling orders from the US, while jewellery exports in value terms will be inflated by stubbornly high prices of precious materials, stones and diamonds, but volume sales should fare less well.

Apparently, the biggest threat to the global trade environment comes from the still-unfolding adverse developments in the US. While the US economy is expected to bottom out in the second half of 2008, it cannot be ruled out that the prevailing downturn will be longer and deeper than anticipated. The consequences will not only hinder US growth, but also dampen the world economy, and Hong Kong exporters are unlikely to be left unhurt. Rising overseas protectionism is another concern, especially in the run-up to presidential election in the US.

Mirroring the price surge in commodities and, to a lesser extent, manufactured products, risks associated with rising inflationary pressures have also increased. In view of the global economic slowdown, rising inflationary pressures pose a dilemma for policy makers worldwide, making it difficult to take a loose monetary stance if necessary. The resulting negative impact on global growth, along with rising raw material costs, will undoubtedly have a detrimental effect on Hong Kong exporters.

Hong Kong companies will be further confronted with immense cost pressures incited by soaring labor costs amid rapid wage increases, rising social security benefits, as well as the introduction of the new Labor Contract Law effective from January 2008, which also puts an extra administrative burden on Hong Kong manufacturers on the mainland. To compound problems, the sustained appreciation of the RMB, aggravated by higher safety compliance costs, will translate into even higher production costs.

Recent Performance of Hong Kong Exports

Hong Kong's merchandise export performance in the first quarter of 2008 was better than that which had been widely anticipated. On the back of a 9% increase last year, Hong Kong's total exports rose by more than 10% during the January-March period, driven principally by a solid 11% growth in re-exports, notwithstanding a stagnation in domestic exports. Yet there has been a trend of moderation. Hong Kong's total export growth stood at 16% in January, followed by a scant 8% in both February and March.

The sturdy performance of Hong Kong exports during January-March 2008, in the main, was buttressed by the burgeoning intra-Asia trade. In particular, sales to the Chinese mainland, which constituted 48% of Hong Kong exports, surged by 11% amid the mainland's hearty appetite for machinery and semi-manufactures for export production, while sustained export growth in the region has elicited greater demand for capital goods and production inputs. By contrast, sales have been less encouraging in the traditional markets, although exports to the EU have been in better shape, thanks to its stronger economy, as well as a firm euro, which has appreciated against the US dollar by 7% so far this year. Exports to the US, the centre of the prevailing global economic slowdown, have been particularly dreary. Sales to Japan have also remained weak, despite a 7% appreciation of the yen against the dollar.

Product-wise, electronics, which shared 51% of Hong Kong exports, continued to shore up overall growth with a 12% leap, given the sustained demand for digital products from overseas markets and parts and components from the mainland. Despite recent product recalls overseas, successive releases of electronics game consoles and the continued demand for electronics toys have further bolstered toy exports. Stubbornly high prices of precious materials, stones and diamonds, on the other hand, have magnified jewellery exports in terms of dollar value, but volume sales have been in the doldrums. Regarding watches and clocks, sales have been robust, against the backdrop of a sturdy world demand for value-for-money timepieces. As for clothing, sales have been hobbled by sluggish demand from the US, although exports to the EU were stable in the wake of its removal of textile quotas against the mainland.

Firmer unit values of Hong Kong exports, in the meantime, have contributed to the inspiring sales performance, as the juxtaposition of the mainland's processing trade policy changes, continued revaluation of the RMB, rising labour costs, higher product safety compliance costs, as well as skyrocketing prices of crude oil and certain other commodity prices, have exerted immense upward pressures on production costs. Partly reflecting the surging production costs, the unit value of Hong Kong's total exports increased by 2.6% during January-March 2008, quickening from a 2.3% rise for last year as a whole. Assuredly, the production environment has become increasingly formidable, and tended to weed out less efficient manufacturers. Yet this consolidation process has resulted in bigger orders for the surviving players, which also have stronger bargaining power over prices.

To no one's surprise, given sustained demand from the EU and the strong euro, price rises for exports to Europe are more prevalent. Price increases for exports to the US, on the other hand, tend to be less significant amid the economic hardships borne by American consumers and a weakening US dollar against the RMB. The depreciation of the US dollar has also prompted Hong Kong exporters to avoid using the currency to settle non-US transactions to reduce exchange risk.

In addition, a setback in direct shipments from the mainland, due in part to falling exports to the US but expanding sales to the EU, has served to lift Hong Kong's re-exports. For one thing, the impact of cargo diversion is particularly noticeable in exports bound for the US. Quite a few giant US buyers, including Wal-Mart, Target and Toys"R"Us, have set up warehouses in Shenzhen, and secured agreements with ship-liners to load their merchandise in Shenzhen ports. EU buyers, for their part, are more inclined to use Hong Kong as a consolidation centre. Indicative of the changing shipping arrangement, growth of Hong Kong's cargo throughput accelerated to almost 8% in the first quarter of 2008 from 2% last year, while Shenzhen's slowed to 9% from 14% in 2007.

In another development, the solid export performance of electronics, making up the bulk of intra-Asia trade, has further propped up Hong Kong's re-exports. For the most part, these were parts and components shipping from neighbouring economies to the Chinese mainland for assembly. As they were high in value, small in size and light in weight, transportation costs might be of little concern to shippers compared with the risk of delay or loss. As such, shipment by air through Hong Kong was preferred, given the efficiency of the Hong Kong International Airport and its unrivalled connections with mainland cities.

Medium-Term Global Economic Outlook

World economic activity, which showed a decent 4.9% growth last year, is losing momentum because of the uninspiring US economy, where the housing downturn has reverberated to other sectors and, worse still, to other economies worldwide. In this context, world growth is expected to decelerate to less than 4% in 2008, and only quicken slightly in 2009. No wonder the US will register the poorest showing in the developed world, as growth in the EU, though dragged by the US, should fare better. As regards the emerging economies, growth should remain relatively strong. While non-commodity exporting economies will be impeded by the US-led global slowdown, commodity exporters, alongside countries with sustainable domestic demand, should continue to fare well. But rising commodity prices, especially oil and food prices, will boost inflation worldwide, serving to further depress consumption and economic growth and limit the leeway for fixing monetary policies.

In the US, where the economy showed marginal growth in both the final quarter of 2007 and the first quarter of 2008, a recession is likely to have eventuated. Continued corrections of the housing market and the attendant sub-prime fallout have led to a credit crisis and deterioration of the labour market, aggravated by rising inflation due to high oil and commodity prices. Yet the economy is forecast to pick up modestly in the latter half of 2008 and into next year. The US$168 billion fiscal stimulus, which will likely lift economic growth by 1.5 percentage points in the second half, coupled with aggressive interest rate cuts and a slew of special measures to support the financial system, will inject the much-needed vitality into the economy. Robust exports, sound corporate positions and a relatively unscathed stock market are other positive developments. On balance, however, the US will likely remain a less promising market over the medium term, and even the higher-end segment is not immune.

Across the Atlantic, the EU economy is expected to continue to moderate amid the lacklustre US performance. But it should remain fairly decent, and could give some buffer to Hong Kong exporters facing softer demand from the US. Country-wise, Germany should benefit from sustained demand for capital goods from emerging markets, whereas Italy will continue to suffer from intense competition from emerging suppliers. In France, where structural reform will be the priority, consumption should remain quite stable. For its part, the UK, under the twin bite of a feeble housing market and credit crunch, consumer spending will likely become less strong. On the whole, continued economic expansion in the EU should lead to steady consumption and sustained demand for imports. A strong euro, which serves to maintain the price competitiveness of Hong Kong exports, is another favourable factor.

Likewise in Japan, economic growth should decelerate somewhat. While the exposure of Japan's financial sector to the US sub-prime market is limited, its merchandise export sector will likely be constrained by the US downturn, despite the growing importance of the mainland market. On the domestic front, a tightening in building standards, which has dampened residential investment and hence economic growth in the early part of 2008, should ease its drag in the latter part of the year. A sluggish job market and meagre wage increases, however, are not conducive to consumption. Although a firm yen may uphold Japan's power of absorbing consumer goods, this currency movement will not bode well for Japanese exports, thus suppressing the imports of semi-manufactures, parts and components.

Given the modest appetite in the traditional markets, Hong Kong exporters are advised to look to the emerging markets around the globe for sales expansion. In particular, developing Asia is expected to remain the most dynamic region on the world economic scene, although its medium-term economic performance will inevitably be constrained by the global slowdown. To some extent, sustained intra-regional trade, primarily driven by continued demand from the Chinese mainland, should be able to cushion some of the negative impact engendered by the slowing world economy in general and a dwindling US demand in particular. Over the medium- to long-term, the change in government in Taiwan should contribute further to economic integration and regional growth. Hong Kong is poised to benefit from growing trade between the mainland and Taiwan, despite a weakening of its intermediary role in the near term.

In developing Asia, the Chinese mainland will continue to be the axis of growth. In spite of the temporary impact of natural disasters and policy curbs in response to signs of overheating, the mainland's economic growth will remain solid over the medium term. Consumption, now sought by the government as the driver of growth, will stay strong. While mainland exports will moderate amid policy changes, currency appreciation, rising production costs and cooling US demand, such impact will unlikely be substantial, as sales to markets outside the US, not least other emerging markets, are expected to be sturdy. If anything, the central government may ease its policy curbs in view of any drastic fall in domestic and overseas demand. The mainland's appetite for finished goods for local consumption and capital goods for export production will therefore remain relatively healthy.

Elsewhere in developing Asia, sound economic fundamentals should be largely in place too. Within ASEAN, Vietnam, spurred by the continued positive impact of WTO membership, is expected to lead the pack in economic growth, while Indonesia, with sustained efforts to encourage investment, will likely maintain its robust expansion. Being potential markets aside, Vietnam and Indonesia are also viable alternative production bases for Hong Kong. Meanwhile, domestic demand should remain the mainstay of growth in Malaysia, and a stabilising political outlook will facilitate an improvement in business and consumer sentiment in Thailand. Outside ASEAN, the economic prospects for India are again decent. Its services sector, fuelled by buoyant IT outsourcing activity, should stay in good shape, although slower exports are expected to dampen overall growth.

While developing Asia will lead growth in the emerging world, the medium-term outlook for other fledging economies is likely favourable. In Central and Eastern Europe, economic growth, to a certain extent, will benefit from the continued expansion of Western Europe, although Hungary will be hit by fiscal consolidation. Outside the EU, Russia will once again take advantage of sustained oil and commodity prices and, likewise in the Middle East, lofty crude prices will boost the economic health of oil-exporting countries, notwithstanding a moderation in growth among non-oil exporting economies. As regards Latin America, economic activity should retain its momentum amid sustained commodity prices. Yet the pace will ease, as mundane demand from the US will cap regional growth, particularly affecting nations with closer links with the US, notably Mexico.

In all, Hong Kong exports should continue to expand in the rest of 2008. Yet the rate of growth is forecast to slow. The repercussion of the US-led global slowdown on Hong Kong exports will probably linger on for a while, although the US is expected to emerge, in the second half of 2008, from the recession in the first half, thereby easing its drag on the world economy. Given the likely stronger-than-expected sales performance in the first quarter, however, the expected value growth of Hong Kong's total exports is maintained at 7% for the whole of 2008. Looking further ahead, the growth of Hong Kong exports should only be steady next year, as the world economy, albeit expected to pick up a tad, will need some time to get rid of the residual impact of the US economic woe. But while the medium-term prospects for the global trade environment will likely be stable, Hong Kong exporters will find themselves no lack of risks and challenges.

Risks and Challenges

Worse-than-Expected Downturn of the US Economy

Seemingly, the biggest threat to the global economy stems from the still-unfolding adverse developments in the US. While the US economy is expected to pick up in the latter half of 2008, it cannot be ruled out that housing corrections and, more importantly, the credit crisis will be longer and deeper than that which is widely anticipated. The unfavourable consequences of housing and financial turmoil will not only hamper US growth, but also dampen the world economy, especially countries more vulnerable to housing and financial market turbulence, such as the UK, as well as nations more dependent on the US market like Mexico. In this context, there could be a serious effect on global trade, and Hong Kong exporters are unlikely to emerge unscathed from such developments.

In particular, a worse-than-expected downturn of the US economy may reverberate globally through a sell-off in the financial markets worldwide. Under the worst-case scenario, consumer confidence and business sentiment in the US will be badly hurt by a prolonged recession. US financial markets will then be seriously undermined, and plunges in US asset prices will have strong contagious effects worldwide, compelling consumers and businesses to hold back consumption and investment harshly. Indeed, recent vagaries of the US stock market, in spite of their rather limited extent, serve as a reminder of the potential financial risks. Even though the stock market has become more stable for now, it still trembles over data showing troubles in US corporations and indications of any economic weaknesses, especially signs that inflation might be out of control.

Heightening Global Inflationary Pressures

Risks related to rising global inflationary pressures have evidently increased, despite the moderating world economy. Surging commodity prices, driven by strong demand from emerging economies, supply constraints and a weak US dollar, are the major source of inflationary pressures. In particular, the global oil market remains worryingly tight. Given limited production capacity, any supply disturbance or rising geopolitical concern will likely push up crude prices to increase further from the prevailing high levels. In the meantime, food prices, already bolstered by unfavourable weather conditions, may continue to rise amid sustained demand from emerging economies and increased biofuel production. To make matters worse, the deflationary price pressures on manufactured products have waned, exemplified by a 3.6% rise in prices of US imports from China in the first quarter of 2008, reflecting the unabated rise in production costs on the mainland.

In view of the global economic slowdown, rising inflationary pressures, while further hurting consumption, pose a dilemma for policy makers worldwide. In the US, accelerating inflation may make it difficult for the Federal Reserve to lower interest rates further, while necessitating a hike if the economy stabilises. Other economies, such as the EU, may also be unable to lower interest rates as an offset to slackening US demand, or even need to raise interest rates to stem inflation. Evidently, while higher commodity prices are a boon to commodity-exporting economies, their negative impact on global growth and inflation is a concern for policy makers, as well as Hong Kong exporters, who are increasingly faced with a softer overseas demand and rising production costs.

Intensifying Overseas Protectionism

Hong Kong's medium-term export outlook is further overshadowed by the undercurrent of protectionism in overseas markets. Especially in the US, Hong Kong exports will be affected by trade relations between the US and the mainland, in particular in the run-up to the presidential election. While the US administration is not expected to deviate significantly from its general policy of co-operative engagement with the mainland, calls for a tougher stance have increased, and the US government has, for instance, initiated countervailing (CV) actions against a number of products from China. In addition, given the expiry of its quotas against mainland textile products by end-2008, the US will likely resort to a variety of measures to restrict clothing imports from the mainland. Likewise, Hong Kong exports will be affected by regulatory developments in the EU, which is expected to take a tougher stance on trade issues with the mainland, although the reform of its trade defence instruments will be postponed.

A Challenging Production Environment

An increasingly difficult production environment on the mainland will pose another big challenge for Hong Kong exporters. Now that promoting the transformation and upgrade of processing trade and restricting the development of high energy-consumption, heavily polluting and resource-intensive industries are the mainland's long-term development objectives, it will continue to make adjustments to the processing trade policies. Such policy changes, covering VAT rebate adjustment, expansion of the restricted/prohibited category and access threshold for processing trade enterprises, could have a significant impact on Hong Kong manufacturers, perhaps in terms of the mode of operations, use of technologies, sources of raw materials, manufacturing localities as well as production costs.

Hong Kong companies will be further confronted with immense cost pressures incited by soaring labour costs, against the background of rapid wage increases, associated rising social security benefits, as well as the introduction of the new Labour Contract Law effective from January 2008, which also puts an extra administrative burden on Hong Kong manufacturers on the mainland. Furthermore, the sustained appreciation of the RMB, which has appreciated against the US dollar by over 4% so far this year, will translate into even higher production costs. To compound problems, the recent product recalls, dominated by toys, will also elevate safety compliance costs, whereas soaring commodity prices will jack up input costs, especially for precious metals and stones, as well as plastic raw materials due to skyrocketing oil prices.

Analysis by Industry Sectors

Electronics and Household Electrical Appliances

After an 11% growth in 2007, Hong Kong's exports of electronics products, which accounted for over half of Hong Kong's total overseas sales in the first three months of 2008, expanded by 12% during the period, aided by the continued popularity of digital products in overseas markets, sustained demand for parts and components from the mainland, as well as a weak US dollar. Yet sales of household electrical appliances, in the wake of a 4% fall last year, declined further by 7% in the first quarter of 2008, given intense competition in the global market.

For the rest of 2008 and 2009, electronics exports will moderate amid the US-led slowdown of the world economy, notwithstanding a still-healthy appetite for digital products, not least in the emerging markets. To be sure, exports will be constrained by weaker consumer sentiment, particularly in the US, along with intensified price competition sparked by the slower world economy. Meanwhile, sales of electrical appliances will remain lacklustre over the medium term, dragged again by the sluggish demand in the global market.

Market-wise, sales to the US and the EU will continue to benefit from the popularity of digital products like DVD recorders, digital cameras, flash memory products (e.g. MP3 and MP4 players) and flat-panel TV sets. In particular, demand for digital TVs and set-top boxes will boosted by the digitisation of TV broadcasting in the US, which has set a timetable to require all commercial TV broadcasters to phase out analogue TV broadcasting by early 2009. Exports of IT and telecom products, for their part, will become soft in view of the sluggish economy, despite ongoing computer replacement and a steady appetite for price-competitive and user-friendly mobile phones.

While the medium-term prospects of the EU market look more promising than the US's, Hong Kong exporters are required to acquaint themselves with the increasingly stringent EU regulations relating to environmental protection. On the heels of the WEEE Directive and RoHS Directive, the EU's new Directive on the Eco-design of Energy-using Products (EuP) is now in place. The EuP Directive does not set out substantive standards for product design, but rather sets up a framework within which standards will be promoted for specific groups of products through implementing measures, probably necessitating manufacturers to consider altering their product design processes.

For the Chinese mainland and ASEAN, sales of parts and components, which dominate Hong Kong's electronics exports to the region, will be affected by slower production of electronics and electrical products for exports to overseas markets. Regarding exports to Japan, however, sales will benefit from sustained consumer preference for value-for-money products, although exports of parts and components to the market will become soft over the medium term.

Clothing

After edging up by 2% last year, Hong Kong's clothing exports saw a 3% decline during January-March 2008, with sales to the US and the EU taking up more than 70% of Hong Kong's total clothing exports. While sales to the EU rose by 5% in the first quarter, those to the US fell by 11%. Amid continued worry of the slowdown of the US economy and the resultant spillover across the globe, expenditure on clothing during the rest of 2008 is expected to be unassuming, and so is the performance of Hong Kong's total clothing exports.

In the US, utilisation of safeguard quotas on Chinese textile and apparel articles has increased at a very modest pace since the beginning of 2008, and no limit is currently in any real danger of embargo. Evidently, the retrenchment in clothing expenditure amid economic slowdown plays no small part in this subdued quota utilisation, especially considering that these restraints will expire in a few months' time. The relatively high utilisation of the 2007 limits on Chinese apparel, the 14-17% increase in 2008 quota limits, and the fact that some of the orders that used to be filled in China have migrated to other Asian locations, most notably Vietnam, are other possible factors leading to the subdued quota utilisation. In this context, it is likely that Hong Kong's total clothing exports to the US will remain lacklustre in 2008.

EU's textile quotas, on the other hand, expired by the end of 2007. Thenceforth, a joint system with China has been established to monitor EU imports of Chinese textiles and apparel. This system, which will operate for one year, covers eight out of the 10 previously restricted categories. Following the expiry of EU's textile quotas and introduction of the surveillance system, Hong Kong's clothing exports to the EU have been able to sustain the growth trend prevailing in the past years. Looking ahead, relatively decent economic performance in the EU and a strong euro will help lure more EU buyers to Hong Kong and the mainland for sourcing, and therefore lend support to Hong Kong's total clothing exports in the rest of 2008 amid the slowdown in exports to the US.

As for 2009, the outlook for Hong Kong's clothing exports will remain lacklustre, given the tentative prospects of a global economic revival. In addition, the impending elimination of US safeguard quotas on Chinese textiles and apparel is expected to lead to calls for increased protection for US and regional manufacturers. While US textile manufacturers are expected to seriously consider the possibility of filing anti-dumping and/or countervailing duty actions against Chinese products, the anti-dumping monitoring system in place on imports from Vietnam could possibly be extended to cover China as well. These will certainly pose challenges to Hong Kong's clothing exports, especially if the US economy cannot regain growth momentum by the end of 2008 or on entering 2009.

Toys

Hong Kong's toy exports expanded robustly by 20% in the first quarter of 2008 after the tremendous growth of 23% in 2007, with non-traditional toys, such as video games and electronic toys, being the main driver of the growth. In contrast, traditional toys, such as dolls, construction sets and wheeled toys, have experienced a period of stagnation. Among mature markets, sales to the EU, which has benefited from a strong euro, have outperformed the US and Japan. Emerging markets, such as the Chinese mainland and ASEAN, were also in good shape.

For the rest of 2008 and 2009, Hong Kong's toy exports should continue to expand, albeit at a slower pace. Growth will still be underpinned by non-traditional toys, given the sustained popularity of video games and electronic toys. However, the craze for the latest generation of video game consoles like Wii and PS3 should start to fade later this year, as they have been on the shelf for more than a year already. The outlook for traditional toys is less promising amid keen competition and a shift in consumer preference towards more sophisticated products.

With the global economy expected to enter a period of adjustment triggered by the US subprime loan crisis, demand from most developed economies should slow. But emerging markets, particularly the Chinese mainland, will be less affected because of a strong appetite for quality toys on the back of higher purchasing power. Meanwhile, the coming Beijing Summer Olympic Games 2008, which is expected to cheer up a buying spree for souvenirs, festive items and related goods, will provide added opportunities for Hong Kong exporters.

Increasing product safety awareness in overseas markets, on the other hand, will remain a major challenge for Hong Kong exporters. As a result of the high-profile toy recalls last year, Hong Kong's major toy exporting markets, especially the US and the EU, have tightened up the enforcement of their existing product safety regulations. While tougher regulatory regimes are in the pipeline, a number of retailers, notably Wal-Mart and Toys 'R' Us, have already responded to consumer demand for safer products by adopting more stringent sourcing requirements. In any event, Hong Kong companies, which excel in production experience and quality compliance, should be able to adjust to tighter testing and inspection imposed by overseas buyers, as well as increasingly stringent safety standards.

Watches and Clocks

On top of a 6% increase in 2007, Hong Kong's watches and clocks exports grew by 16% during January-March 2008. Sales to most major markets, including not only the EU, but also the US and Japan, managed to record increases, whereas those to the Chinese mainland exhibited even stronger expansion. In the medium term, however, exports are expected to become slower against the background of a slackening global demand for timepieces.

Not surprisingly, sales to the US will be affected by the sluggish consumer market. Given a deteriorating economy and subdued sentiment, demand for timepieces is expected to become uninspiring, especially for opening-price-point luxury watches, although the top-end segment will likely remain promising. Yet in view of growing consumer cautiousness, the appetite for competitively priced items will remain stable. Hong Kong's exports of low-priced timepieces will continue to be hampered by intensified competition from local Chinese companies, however.

The EU, for its part, is a fairly mature market characterized by a penchant for watches with fashionable designs for formal as well as casual occasions. In all likelihood, there will still be potential in the middle- to high-end segment, focusing on quality but value-for-money timepieces. In addition, the price competitiveness of Hong Kong's timepieces will continue to be facilitated by stronger European currencies. Spurred by the continued strength of the European currencies, sales to the EU would remain steady over the medium term.

As regards the Chinese mainland, sales of timepieces, apart from the positive effect of the imminent Beijing Summer Olympic Games 2008, will be well supported by its growing purchasing power. Now that mainland consumers are increasingly looking for higher quality items amid the improvement in income levels, watches bearing Hong Kong labels should enjoy a premium in the market. Regarding Japan, sales to the country will only remain steady, as the market is already saturated, although the stronger Japanese yen will enhance the price competitiveness of Hong Kong timepieces.

Jewellery

On top of a 17% rise last year, Hong Kong's exports of fine jewellery grew by 27% in value terms in January-March 2008. However, the surging prices of precious materials for jewellery fabrication, such as gold, silver and diamonds, have in fact hit jewellery sales. In volume terms, for example, after dropping by 14% in 2007, Hong Kong's exports of jewellery items of precious metals further declined by 6% in the first three months of 2008. Marketwise, supported by the appreciation of the euro, sales to the EU managed to register strong growth, while those to the US and Japan dropped on their weaker demand.

For the rest of 2008 and 2009, the overall business sentiment will be clouded by softer global demand brought by the US slowdown. In mature markets, notably the US, even better-off consumers are tightening their budgets. Consumers, in general, will tend to shift away from luxury jewellery articles towards lower-priced items, although very affluent customers tend to be less price-sensitive. Emerging markets, such as Russia and the Chinese mainland, should outpace the developed ones because of their higher purchasing power due to their stronger currencies or rising disposable incomes. Yet some of these exports may be semi-finished products for further processing.

With high global inflation and an expansionary monetary stance in most developed economies, the prices of precious materials, stones and diamonds will likely remain at high levels. Therefore, usage of karat gold and other metals, especially silver, is expected to increase. The industry is also tackling the rising precious metal costs through exploring new markets, developing innovative technologies, adjusting product designs and providing better services.

May 30, 2008

Airport eyes Shenzhen and Zhuhai

A third runway is not merely an option, said outgoing Airport Authority chairman Victor Fung Kwok-king - more are needed if there is full-fledged cooperation with Shenzhen Airport. He told Sing Tao Daily, sister publication of The Standard, the authority is currently developing a 20-year plan that includes ways to improve "the efficiency of the airport, the runways and airport capacity."

The key to maximizing efficiency at Hong Kong International Airport, he said, is cooperation with Shenzhen and Zhuhai airports in which Hong Kong's role is that of a "gateway for passengers coming from Shenzhen and Zhuhai" and they will serve as a gateway to other mainland cities in return." "If HKIA cooperates with Shenzhen, we would be needing fifth, sixth, and seventh runways," Fung said. Fung is not worried about such cooperation opening up a pandora's box of airlines preferring Shenzhen Airport.

"We are concerned more about capacity. Those passengers will still be HKIA customers," he said. Fung acknowledged the challenge posed by the increasing likelihood that there will be direct links across the Taiwan Strait amid a thaw in relations. The key to seeing off that challenge, Fung said, is with Hong Kong adopting an open-skies policy.

He said direct links may have an impact in the short term, but "it should not be a big problem ... it will eventually increase opportunities," Fung said. On budget carriers and the recent demise of Oasis Hong Kong Airlines, he said cooperation with Shenzhen and Zhuhai airports will create openings for budget airlines, as the flight time between these airports is less than an hour. "In the future, there may be more Oases," he quipped.

Fung - who steps down tomorrow - had pushed for HKIA's listing but the move has been postponed. He said: "When an enterprise reaches a certain maturity, it should be given a chance to become listed."

May 11, 2008

443 mainland enterprises got listed in Hong Kong

A total of 443 mainland enterprises have got listed on the Main Board and GEM of Hong Kong Stock Exchange by the end of April 2008, including 148 H shares, 93 red chips and 202 non-H-shares of the mainland private enterprises.

According to the latest statistics released from Hong Kong Stock Exchange, the mainland stock shares account for 58.6% of the total market value and 74.2% of the total market turnover of the Hong Kong stock market.

By the end of April, there were 1,244 listed companies with a total market value of about 18 trillion Hong Kong dollars. Only one Hong Kong company got listed during the first quarter this year. By the end of April, Hong Kong owned in total 4,808 derivative warrants, 260 callable bull/bear contracts, 26 trust funds, and 173 bonds.

April 11, 2008

French wine traders cheer Hong Kong's duty-less regime


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Measures enhance prospects for French wine makers.

When the Hong Kong government eliminated all duties on wines and beer imports in February, winemakers and exporters across France raised a glass of their finest vintage to celebrate.

"Next year will be a big, big market," says Yves Lambert, owner of Domaine de Saint-Just and an agent for other French vineyards.

Asia, especially the Chinese mainland, was already becoming a major market, and this can only strengthen the trend, says Lambert. Alcohol sales to the Mainland in 2007 totaled Euros247 million, sparked by a growing middle class, and France has had a large share of the market.

Sales of French wines to the Chinese mainland grew 145% last year, according to the Fédération des Exportateurs de Vins et Spiritueux de France (FEVS). The trade association, which represents the interests of 550 French wine and spirit producing and exporting companies, says the Mainland was the 11th largest market by value for French wines and spirits in 2007.

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Mainland is a developing market for French wines.

Sales of French cognac and other spirits grew 162% year-on-year by value, making the Chinese mainland the third largest market for the products, behind the US and Singapore (which tranships to the Mainland). Wine and liquor are France's second largest exports after Airbus aircraft.

Rising incomes, a growing interest in Western lifestyles and tastes, and better wine education, have driven the rise in consumption on the Chinese mainland.

Drinking wine has a strong social status in China, and French wines have that certain cachet. According to a recent MasterCard survey, 80% of Chinese consumers prefer it.

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Bordeaux wines selling on the Chinese mainland.

So, French winemakers - both small and large - are looking to Asia for new markets. France mainly sells Bordeaux, Champagne and Vins de Pays (a regional wine, a step up from table wine).

French vineyards interested in Hong Kong

"We think the market [to Asia] will increase," says André Barlier, deputy director of Viniflhor, a public body based in Paris. Viniflhor promotes wine as well as gathering industry information, which it distributes through publications and on the Internet (www.frenchwines.com). 

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Body promotes wines and information about them.

"A lot of French companies will be interested in Hong Kong," Barlier says. "Five years ago, the trend was through Hong Kong to [the Chinese mainland] but in the past two or three years, wine has been exported directly to [the Mainland]. Now this will change and Hong Kong traders will acquire a new position."

Wine producers and exporters say that French companies have had problems finding a suitable business partner on the Chinese mainland. "It is difficult for the French to get a good company to work with," Barlier says. Hong Kong partners know how to sell to the Mainland better than the French do, he believes.

Will Chinese mainland winegrowers cover the market, or will the country import, he asks. "They are planting a lot of grapes, but the imports are rapidly increasing."

Exporters say that if Hong Kong does realize its aspirations to become the wine hub of Asia, storage should pose no problems. Exports will be mainly bottles, delivered in containers, not bulk wine. The only storage needed is space, such as a warehouse, with temperatures controlled. As long as the wine is not left outside, and is kept cool, it can be stored safely.

Label development in Asia

Barlier mentions an opportunity for importers to create their own labels. They can buy wine in bulk and create a label in Europe, Hong Kong or on the Chinese mainland.

One concern for French dealers is that the Mainland may not respect trademark rules, he says, producing a bottle of cheap Chinese wine with the Eiffel Tower on a faux French label. "But the customer can tell it isn't authentic by the price."

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Barlier: problems with labels.
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Unreal quality: fake French label.

Another problem is that many people on the Chinese mainland don't know about wine, or even how to open a bottle. "There is a lot to learn and producers should teach consumers how to buy and consume wine," says Barlier.

Yves Lambert, who represents an association of vineyards from Bordeaux, Languedoc and Côtes de Provence, agrees. "Wine is part of the social life; it is good for socialising and for health," he says. "Consumers start by buying cheaper wine; when they have more money, they buy more expensive wines," he says. "And rich people buy expensive wine because it is good for face. So there are two markets, for cheaper and more expensive wines."

Wine experts say that when their incomes increase, people prefer drinking wine rather than beer, and whenever taxes decrease, wine consumption increases. They see a market for well-off Chinese mainlanders interested in grand cru (the top growth of a region), but also another market for very cheap wines.

More attractive trade environment

The new Hong Kong law will make exporting to the territory more attractive, says Lambert, who is looking for a representative importer in Hong Kong. "I can sell 300,000 bottles of my own wine and one or two million other bottles," he says. "We have good wine and a good price, and our wines are getting better and better."

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Lambert: looking for a representative in Hong Kong.

His initial efforts on the Chinese mainland last year were positive. "I sent a container to Shenzhen, and they have already asked for another," he says. "The importer sold 12,000 bottles in a month."

In February, Lambert added Chinese to his French and English web site (http://st-just.net/chine/index_chine.php). The company also has a new project on the Chinese mainland, designing special red and rose wines for weddings. "Young Chinese like this," he says.

The company sells a minimum per container, which is 12,000 bottles. "We sell 90% red wine," Lambert says. "White wine is only popular along the coast, in fish and seafood restaurants."

Lambert also expresses a sentiment common among French businessmen: it is easier to work in Hong Kong, as the law is not the same as on the Chinese mainland. "British law is better for us," he says. "For Europeans, it is easier to sell to Hong Kong, a major business centre, and let Hong Kong importers sell to [the Chinese mainland]."

Hong Kong tax change reduces currency fluctuations

A number of exporters point out that the Hong Kong tax change will help offset the high Euro, as its recent increases against the Chinese Yuan and the US dollar have hurt sales in two of the biggest markets for French wines.

Geneviève Chavignon, export assistant of Les Vins Jean-Pierre Teissèdre, says her company, which plans to sell to Hong Kong and China, also welcomes the recent change.

So far, the demand from the Chinese mainland for her company's wine has been for very low-priced wines, and for wine in bulk. However, Chavignon believes that Hong Kong buyers will want more expensive wines.

"We would certainly prefer to deal with Hong Kong importers, as selling directly to [the Chinese mainland] is not easy," she says, echoing comments from other exporters.

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Fu with Teissèdre: handling wine business on the Mainland.

Managing director Jean-Pierre Teissèdre believes his Rhone Valley wines, such as the Côtes du Rhône, and the Vins de Pays from southern France will appeal to Chinese tastes, as will Beaujolais Crus such as the Chénas or Morgon.

The company has hired Youxia Fu, a young woman from Sichuan who has a master's diploma in business from Burgundy Business School in Dijon, to handle its wine business in China.

Larger companies already exporting to the Chinese mainland also anticipate an increase in sales. Étienne Godard, in charge of overseas exports for Vins Skalli, says dropping the duties will be good for premium wines bound for Hong Kong. The company, which sells 30 million bottles worth Euros85 million annually, also finds Hong Kong a useful gateway into the Mainland.

"The recent tax change will definitely help us develop our premium wines such as Domaine du Silène and Maison Bouachon, and especially Côtes Rôties, Hermitage, Gigondas and Châteauneuf du Pape," says Godard. "We are convinced that the market will trade up."

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Hong Kong a window for French wines.

Thanks to this change, Hong Kong will remain a great window for wine in Asia, especially for premium wines, he says. Skalli exports to Hong Kong through the distributor Maxxium and to the Chinese mainland through ASC. The company sells just 10% of its production to Asia, but the region is its fastest growing market.

"The trend we have seen in recent years is for consumers' taste for rounder, easier to drink and more fruity wines," Godard says. "We have worked all our wines to meet consumers' expectations, with very fruity wines and silky tannins."

However, he adds, the company considers it's important to keep wines well-balanced. Fortant wine is now the number 10 imported brand in the Chinese mainland market, and the third largest French brand. "Once consumers are more educated, they go for more complex wines and move to premium varietals or AOC wines (Appellation d'Origine Contrôlée, the highest classification)," Godard explains.

Exporters in the more rarified market of spirits sales also greeted the tax change with enthusiasm. Florence Castarède, director of Armagnac Castarède, exporter of Armagnac (an exclusive brandy) and a newcomer to the Asian market, says the Hong Kong move to cut duties is great news. "Some new companies will be happy to be in Hong Kong," says Castarède. Her company began exporting to Hong Kong last year.

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Castarède: new companies happy to be in Hong Kong.

"It is an opportunity," she says. "[the Chinese mainland] is the future for the wines and spirits market, the biggest in the world by population."

However, she cautions that producers will have to adapt to the taste of the market. "For each market, we have to adapt packaging, taste and price."

Guillaume de Guitaut, director of public affairs for Moët Hennessy, says the company, as part of the Hong Kong Wines and Spirits Industry Coalition, pressured the government for the change, so it came as no surprise.

He agrees that Hong Kong could become a wine hub for Asia as there is a growing interest in wine. "It could be a place for tasting, for auctions," he says. However, importers must concentrate on quality wines.

"Volume is part of the equation, but value is more important," de Guitaut explains. "You do not want to have a lake of the worst wine in the world."

Hong Kong is not a market for cheap wine but for quality, as wine is an elite drink, he says.

"I think wine marketing and auction houses will set up in Hong Kong, and wine collectors will speculate," adds de Guitaut, noting that many Asian customers now attend London wine auctions.

He also does not anticipate problems with storage facilities in Hong Kong. "I think they will make the right investment in order to store wine," de Guitaut says. "The key is not to leave a container in the sun for a month, but rapidly put it in the right place."

Wine merchants, eagerly looking East, are certainly heartened by Hong Kong's new tax regime and the opportunities it represents.

 
Company/Association/Contact Person
Tel/Fax/Email/Web

Armagnac Castarède
Florence Castarède, Director Tel: (33) 1-44-05-15-81
Email:
florence.castarede@wanadoo.fr
Web:
http://www.armagnac-castarede.fr ASC Fine Wines Tel: (86) 20-8666-8683
Fax: (86) 20-3631-5005
Email:
allysonhu@asc-wines.com
Web:
http://www.asc-wines.com Domaine de Saint-Just
Yves Lambert, Managing Director Tel: (33) 2-41-51-62-01, (33) 6-07-27-07-78
Fax: (33) 2-41-67-94-51
Email:
infos@st-just.net
Web:
http://www.st-just.net

Fédération des Exportateurs de Vins et Spiritueux de France (FEVS)

Tel: (33) 1-45-22-75-73
Fax: (33) 1-45-22-94-16
Email:
contact@fevs.com

Les Vins Jean-Pierre Teissèdre SARL
Geneviève Chavignon, Managing Director

Tel: (33) 4-74-03-45-08
Fax: (33) 4-74-03-46-33
Email:
jp-teissedre.earl@wanadoo.fr
Web:
http://www.vins-teissedre.com MasterCard
Chris Monteiro Tel: (1) 914-249-5826
Fax: (1) 914-249-4207
Email:
chris_monteiro@mastercard.com
Web:
http://www.mastercard.com

Maxxium Hong Kong Limited

Tel: (852) 2891-8086
Fax: (852) 2838-4664
Web:
http://www.maxxium.com Moët Hennessy
Guillaume de Guitaut, Director of Public Affairs Tel: (32) 2-372-96-30
Fax: (32) 2-372-96-19
Email:
gguitaut@moet-hennessy.com
Web:
http://www.lvmh.fr

Skalli
Étienne Godard, Directeur Grand Export/International Manager

Tel: (33) 4-90-83-58-59
Email:
etienne.godard@skalli.com
Web:
http://www.skallifamilywines.com Viniflhor
André Barlier, Deputy Director Tel: (33) 1-42-86-32-00
Email:
andre.barlier@viniflhor.fr
Web:
http://www.viniflhor.fr

March 27, 2008

Hong Kong Trains 1,000 People from Jiangsu Each Year

Jiangsu's Personnel Department recently announced its decision to further expand the Jiangsu-Hong Kong Personnel Training Cooperation Program after a successful four-year run. In the six years between now and 2013, the province will be sending over 1,000 professionals to Hong Kong each year for training. By 2013, over 10,000 professionals from Jiangsu would have benefited from the most advanced professional and technical expertise that top-notch universities and training institutions in Hong Kong have to offer through the training program.

It is understood that the first batch of this year's trainees will leave for Hong Kong on 8 April. During the four years since the implementation of this training program, the biggest of its kind in the history of Jiangsu, 4,850 people have received training in Hong Kong in more than 70 professional fields, including major service sectors such as accounting, finance, securities and auditing. The trainees came from different trades and professions in Jiangsu.

The Jiangsu-Hong Kong Personnel Training Cooperation Program has been adopted by the government of Jiangsu as one of its priorities this year. This year, the scope of training has been extended from modern services to various sectors relating to economic and social development. More than 10 new professional fields have been added, including housing planning; airport operation, management and control; hotel management; corporate financing and listing; information services; construction engineering consultancy; and volunteer community work. The program currently covers over 100 fields, and the trainees range from personnel in the service sectors to specialized personnel of all kinds.

The New Media Olympics - Expectations High for New Technology at Beijing Olympics

Nothing short of a media frenzy is expected to converge on Beijing during this year’s Summer Olympic Games in the Chinese capital. Top-ranking Chinese media executives discussed the possibilities for the country’s new media industry at the 17 March FILMART (www.hkfilmart.com) International Forum on the Beijing Olympics – Media Convergence and Cooperation. President of the Chinese mainland’s Harun Media Group, Liu Yanming, said the international sporting event was much more than a chance to promote social harmony and China’s market prosperity. “It’s also a very important event for our media because, with this opportunity, our media can show their might and establish a well-known brand for themselves,” said Mr Liu.

Miracle Event - “With new technology, we will be able to keep improving in areas such as digital telecasting and production values,” said Mr Liu. “The Beijing Olympics is a miracle event for us. It’s a chance to apply the latest technology and bring about multi-functional media for our creative industries, so that we can develop a competitive edge over our rivals and make full use of digital technology.” Yang Zhen Hua, CEO of the Shanghai New Culture Media Investment Group, said that the Beijing Olympics was a rare opportunity to interact with global media and exchange views, experience and technological know-how. “It will be a convergence point for media all over the world, because they’re all concerned about how Beijing is going to present these Olympics,” said Mr Yang. “It is an unprecedented opportunity,” he added.

High Expectations - There is a lot of pressure, he said, because China will be broadcasting to the rest of the world, and expectations are high. “We have to keep raising our standards to satisfy their needs and aspirations. We’d like to have good cooperation with our friends overseas, particularly in Hong Kong, Taiwan and Southeast Asia, as well as Japan and Korea.” Mr Yang pointed out that not many Chinese productions are being seen in the western world, and that the globalization of economies doesn’t necessarily imply a globalization of culture. “Our cultural programs will have to satisfy the needs of those outside China, so as to arouse the interest of the western world,” he said. “We have produced a lot of Chinese programs in recent years but not many of them can do us proud.” Peter Lam, Vice President of the Hong Kong Televisioners Association, also raised the question of how to produce attractive programming for an overseas audience. Documentaries, he said, are an interesting and effective way to promote the achievements of China’s many athletes. “An overseas audience could be introduced to our training techniques and understand our athletes,” he said.

Chinese ESPN - Mr Lam pointed to the successful international career of basketball star Yao Ming, as well as track star Liu Xiang. These and other sports celebrities, he said, can be used to promote Chinese culture. “China has these international stars,” he said. “We want the world to know about their training and the spirit behind their hard work.” The proliferation of new media distribution channels provides an opportunity to discuss how they can converge with traditional media outlets, he added. “The Olympics has so many sporting events and activities. How are we going to make use of the multi-level broadcasting channels and media to provide immediate information for a sports-hungry audience? Given the global nature of the Olympics, Mr Lam wondered whether it might be time to promote a Chinese sports channel, “a Chinese ESPN that could broadcast different sporting activities.” Wang Chang Tian, President of mainland Enlight Media, cited a statistic about China’s cultural industries. He said the total market was about RMB500 million. Based on the cultural industries standard of developed countries, he said that “current market demand in China could be RMB2 trillion, but we are now only satisfying a quarter of the demand.

New Media Triumph - Mr Wang said that the mainland could not rely simply on imported songs and TV programs. “We have to have our own productions. The games will trigger this demand and release it. Somebody will have to light the detonator so that the industry will explode.” He warned, however, that the opportunity could create a crisis of sorts for such traditional media as television. “They may well have the broadcasting rights, but they’ll be affected by the convergence of the Internet and the fact that people will be able to read about the Olympics on blog sites or on their mobile phones,” he said. “New media will triumph over traditional media during these Olympics.”

March 22, 2008

International Accent Highlights 3rd Hong Kong Music Fair Fair's Musical Doors Open to Industry Professionals and Public

The 3rd Hong Kong Music Fair opened today and continues until 21 March. Officiating at the opening ceremony were (left to right): Hong Kong performers Joey Yung, Charlene Choi and Justin Lo; Ng Yu, Chairman, Working Committee, Hong Kong Music Fair; Fu Yanmei, Assistant Ombudswoman, Department of Cultural Market, Ministry of Culture, PRC; Esther Leung, Deputy Secretary for Home Affairs, HKSAR; Benjamin Chau, TDC Assistant Executive Director; Hung Tik, Chairman of IFPI (HK Group) Ltd; performers Denise Ho and Hins Cheung

The 3rd Hong Kong Music Fair opened today with about 70 exhibitors from Hong Kong, the Chinese mainland, Germany, Korea and Singapore. Record companies, new media content providers, music portals and mobile and hardware manufacturers, along with music industry artists and other professionals, are taking part in the three-day fair, which continues until 21 March at the Hong Kong Convention and Exhibition Centre.

Jointly organised by the Hong Kong Trade Development Council (TDC) and the IFPI (Hong Kong Group), the fair caters to business as well as public interests, promoting music products and raising awareness of legal downloads.

"Thanks to the 10 German companies joining us for the first time, our fair is more international than ever," said Benjamin Chau, TDC Assistant Executive Director, speaking at the opening ceremony. "With the development of new media, music's business model can no longer focus solely on the sales of CDs and other traditional music products. That makes artist management, including concert management and celebrity endorsements, an even more important aspect of the industry," he added.

As such, a series of star seminars will be staged on 20 March, with artist managers from all over Asia sharing their management secrets. Managers Virginia Lok, Paco Wong and Mani Fok, along with such local artists as Law Ka Leung, Jade Kwan and Eric Suen, are sure to shed new light on this hot topic.

For the first time, the IFPI Hong Kong Top Sales Award presentation ceremony and the Hong Kong Music Fair will be held at the same venue. To promote the public's awareness of intellectual property rights, visitors are free to download segments of the presentation ceremony at the fair's Cyberport booth, 20 March to 21 March. Among the other new features this year is the Talent Showcase, giving promising singers and composers from Hong Kong and the Chinese mainland a chance to be discovered by industry professionals. The showcase is a new initiative introduced by the IFPI (Hong Kong Group).

The music fair will open to public from 5pm to 9:30pm on 20 March, and from 10:30am to 9:30pm on 21 March. Exhibitor promotion sessions will be held on 21 March, with local singers Fiona Sit, Ivana Wong, Stephy Tang, Alex Fong, Kary Ng, Kay Tse, Chet Lam and others performing at various times. Visitors who purchase music products of at least HK$50 in value at the fair will be admitted free.

Also presiding at today's opening ceremony were: Esther Leung, Deputy Secretary for Home Affairs, HKSAR; Fu Yanmei, Assistant Ombudswoman, the Department of Cultural Market, Ministry of Culture, PRC; Ng Yu, Chairman, Working Committee, Hong Kong Music Fair; Hung Tik, Chairman of IFPI (HK Group) Ltd; and performers Joey Yung, Hins Cheung, Charlene Choi, Denise Ho and Justin Lo.

The Hong Kong Music Fair is one of the core events of Entertainment Expo Hong Kong. Other Expo events include: the Hong Kong International Film and Television Market; the Hong Kong International Film Festival; the Hong Kong Film Awards Presentation Ceremony; the Asian Film Awards; the Hong Kong - Asia Film Financing Forum; the IFPI Hong Kong Top Sales Music Award; the Digital Entertainment Leadership Forum; and the Hong Kong Independent Short Film and Video Awards.

March 12, 2008

HK will lead billion-dollar boom in region's wine trade, survey finds - Dennis Eng

Hong Kong will dominate the region's booming trade in wine after scrapping the 40 per cent wine duty and reap valued-added economic benefits expected to top HK$1 billion by 2012, a study has found. The economic benefits, including the creation of thousands of jobs, were projected to reach almost HK$3 billion by 2017, said Edward Leung Hoi-kwok, the Trade Development Council's chief economist.

The wine market in Asia was predicted to grow by between 10 per cent and 20 per cent annually over the next five years, with the mainland alone expected to import HK$7 billion worth of wine by 2017, the council's study said. The value of wines consumed in the region, excluding Japan, would reach HK$130 billion in 2012 and HK$210 billion by 2017. Since the government announced two weeks ago that wine duties would be abolished, excitement in the industry has been considerable. Fine-wine auctions are planned and various wine-related businesses intend to set up offices in Hong Kong.

"It's not going to give you the opportunity to become a world wine-trading centre, truly, because of the location of Hong Kong, but you're going to run Asia," said Gil Lempert-Schwarz, chairman of the Wine Institute of Las Vegas. On May 31, New York-based Acker Merrall & Condit, the oldest wine merchant in the US, will visit to auction fine wines worth more than US$6 million.

"This is going to be gigantic in terms of the wines that are involved and in terms of this potentially being one of the top 10 sales of all time," Mr Lempert-Schwarz said. "Somebody said that two or three of the big clients of Acker in Hong Kong, who were going to bid on stuff in New York this last weekend, are now holding back from that because they want to put all their effort into the sale here in Hong Kong."

Mr Lempert-Schwarz, a consultant for Acker Merrall, said he expected 85 per cent of the roughly 1,000 lots on sale to go to either local or mainland buyers, and maybe some Taiwanese collectors. The company will hold another auction in the city in November, with wines valued at US$4 million to US$5 million. According to Mr Lempert-Schwarz's brother, who runs a wine hedge fund for Merrill Lynch out of Japan, a number of major collectors in Japan are talking about storing wine in Hong Kong to capitalize on the zero duties, provided storage facilities are suitable.

Mr Lempert-Schwarz also said three of the top 10 wine collectors in the world were in Hong Kong, one of whom was looking to relocate a significant portion of his wines from London. It is estimated that at least 2 million cases of wine stored in London are owned by Asian collectors.

To capitalize on the market potential, the council will hold the first Hong Kong International Wine Expo from August 14 to 16.

March 8, 2008

Agreement reached on bridge link funding - Hong Kong-Zhuhai-Macau Bridge.

The new bridge will dramatically speed up connections between Hong Kong, Macau and Zhuhai Hong Kong, Zhuhai and Macau have reached a consensus on the financing of the Hong Kong-Zhuhai-Macau Bridge linking the three places. Once completed, the bridge is expected to be a major landmark which will enhance Hong Kong's connections with other cities and port facilities in the Pearl River Delta in southern China. The project would soon proceed to public tenders but arrangements have been made to cover any shortfall between construction costs and investment by the private developer that wins the bid to build the bridge. Hong Kong would cover 50.2 per cent, Guangdong 35.1 per cent and Macau 14.7 per cent.

Secretary for Transport & Housing Eva Cheng said: "The three sides agreed that the three governments would be responsible for the construction and operation of the boundary-crossing facilities and connecting roads to the bridge within their own territory. We agreed to share the amount of the subsidy under the cost-to-benefit ratio which takes into account the economic benefits to each side."

Improved cargo flows - Dr Billy Mak from the Department of Finance at Baptist University told South China Morning Post (February 29) the bridge was likely to lead to more cargo flow from western Guangdong and Guangxi region to Hong Kong container terminals and the airport. The bridge would also stimulate the development of North Lantau as a tourist zone.

The connecting roads are about 12.6km on the Hong Kong side and 13.9km on the mainland side. The main body of the bridge measuring 29.6km is expected to run from San Shek Wan in Lantau to Gongbei in Zhuhai and A Perola in Macau. Travelling time between Hong Kong and Macau and Zhuhai will be shortened from an hour to between 15 and 20 minutes.

The bridge was first proposed in 1982 by Hong Kong entrepreneur Gordon Wu whose company Hopewell Holdings is expected to be one of the bidders for the project.

Foreign and Domestic Banks Actively Build QDII Brands
 
Since the launch of the qualified domestic institutional investor (QDII) program on the mainland in 2006, various large foreign and domestic banks have rushed to build their own brands and launch different types of QDII financial products to meet the increasing demand for wealth management from mainlanders.
 
 As of the end of October 2007, a total of 154 QDII bank products had been launched by 16 foreign and domestic banks and the sales volume amounted to Rmb35.196 billion and US$1.012 billion. Of these 154 products, 64 were offered by 11 domestic banks capturing Rmb29.349 billion and US$0.317 billion in sales, while 90 were sold by five foreign banks raising Rmb5.848 billion and US$0.695 billion.
 
 Many of these QDII bank products have established a name in the market and have built a brand in wealth management. The Industrial and Commercial Bank of China launched the first wealth management product making offshore investment on behalf of clients on the mainland and built the "Pearl of the Orient" brand. Among this series, "Pearl of the Orient I" is the first QDII product investing in offshore stock markets following the liberalization policy and record-breaking sales have been attained. Other well-known investment product brands established by domestic banks include "Huideyin" and "Haiyin I" of the China Construction Bank, and "Delibao" and "Huijutong" of the Bank of Communications. Investment products offered by foreign banks include "Dynamic Return Investment" of the Standard Chartered Bank and "Jihuibao" of the Bank of East Asia.
 
 According to Li Fuan, director of the business innovation and supervision department under the China Banking Regulatory Commission (CBRC), banks offering offshore wealth management services are characterized by having a steady client base, good reputation, extensive operation network, flexible and diversified product designs, and rich product variety. The many offshore wealth management products offered by them can meet the various demands of clients.
 
 However, these products also have room for improvement. For instance, the sales channels and coverage are limited, the marketing effort is not strong enough, the brand advantage has yet to be formed, manpower support and backup system are inadequate, etc. Also, policy constraints such as restrictions on investment types, proportion and minimum amount have stifled the growth of QDII products.
 
 With respect to the demand for wealth management, the vigorous boom in the capital market in the last two years has greatly boosted the demand of mainland investors for wealth management. The wealth effect of the stock market has also caused saving deposits to flow in its direction. According to the statistics of the People's Bank of China, in October 2007 the level of savings of mainlanders dropped Rmb506.2 billion, the greatest drop ever in a single month. At the same time, the trend of mainlanders terminating their insurance policies and diverting the money to the stock market was obvious. The number of people investing in securities and fund has continued to rise.
 
 To meet the increasing demand for wealth management, CBRC will continue to strengthen its support for commercial banks in providing offshore wealth management services. Efforts will be made to create the conditions for further liberalizing the investment market, allowing investors to participate more in the international capital market. CBRC is also planning to extend the scope of offshore stock market beyond Hong Kong to include other mature stock markets so as to achieve a rational global distribution of assets for diversification of risks.
 
 According to Li, CBRC will conduct studies on the QDII business of commercial banks, collecting information on the banks' development strategies, product designs and marketing plans in relation to their QDII business. Meanwhile, CBRC will call on the commercial banks to strengthen their ability in risk and investment management, and will also continue with its efforts in enhancing investors' investment experience and risk awareness so as to safeguard their interests.
 
 It can be expected that the demand for offshore wealth management of mainlanders and the support of the central government will bring enormous business opportunities for Hong Kong's professional service sectors such as financial services, financial accounting, legal services and marketing.
 
 Amid the increasing demand of mainlanders for wealth management, foreign and domestic banks engaged in QDII business on the mainland have offered a large variety of financial products but none of them have emerged as the leading brand. Hong Kong financial institutions, with their rich experience in designing and marketing financial products, coupled with the fact that Hong Kong is the first stop of the mainland's QDII offshore wealth management business, have first-mover advantage in formulating relevant marketing strategies and developing QDII brands.
 
 QDII can also drive the development of Hong Kong's marketing, accounting and legal services sectors which can provide professional services for QDII business such as market consultation, financial and legal services.
 
 As China's QDII business is going to extend to international capital markets beyond Hong Kong, Hong Kong's financial and other professional services sectors stand to benefit by assisting the mainland to "go global" via Hong Kong.

February 24, 2008

Hong Kong retains mantle as world's freest economy

Chief Executive Donald Tsang receives his copy of the 2008 Index of Economic Freedom from Heritage Foundation President Dr Edwin Feulner

Hong Kong claimed the top spot as the world's freest economy for the 14th straight year in a study released by Washington-based think tank, the Heritage Foundation.

The 2008 Index of Economic Freedom covered 157 economies worldwide after assessing them on 10 economic freedom factors. Hong Kong scored top marks on four factors: trade freedom, investment freedom, financial freedom and property rights. The city also ranked among the top 10 in other areas such as freedom, government size, monetary freedom and labour freedom.

Second and third place went to Singapore and Ireland respectively.

Financial Secretary John Tsang said the government was determined to uphold Hong Kong's position as the freest economy in the world. "We see the role of the government as that of a facilitator. We provide a business-friendly environment where all the firms can compete on a level playing field and establish an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market," he said.

The report also noted the city's simple business regulation and highly flexible labour market. Investment in Hong Kong was strongly encouraged with virtually no restrictions on foreign capital.

A separate report released recently showed that more Hong Kong people wanted to start their own businesses amid the rosy economic outlook. The 2007 entrepreneurship study showed one out of 10 Hong Kong people had tried starting their own businesses, up from 3 per cent in a 2004 similar study. It was also the second highest rate among so called "high income countries", following Iceland where the rate was 12.5 per cent. The United States came third with 9.6 per cent.

The findings coincided with the latest Hong Kong Company Registry figures, showing a record 22.9 per cent rise in newly registered companies in 2007.

The study was conducted by Global Entrepreneurship Monitor (GEM), a non-profit research oganisation led by Boston's Babson College and the London Business School. Last year's study was the fourth GEM Hong Kong report, in which 2,000 people were interviewed between May and October.

February 1, 2008

Hong Kong's World-class services a platform for growth

(From right) HKTDC Executive Director Fred Lam; HKSAR Chief Executive Donald Tsang; Ali M Thunayan Al-Ghanim, Chairman of the Kuwait Chamber of Commerce & Industry and H.E.Sheikh Dr Salem Jaber Al-Ahmad Al-Sabah, Adviser to the Kuwaiti Prime Minister.

Hong Kong is well placed to become a centre for Islamic finance in Asia, said Chief Executive Donald Tsang at a business luncheon organized by the Hong Kong Trade Development Council (HKTDC) and the Kuwait Chamber of Commerce. He invited Kuwaiti banks and financial services companies to extend and diversify their global reach through the city. Attended by more than 200 Kuwaiti business people, the luncheon held in late January was the first stop in a week-long business services sector trip to the Middle East which also covered Riyadh, the Saudi Arabian capital, along with Abu Dhabi and Dubai in the United Arab Emirates.

Mr Tsang said Hong Kong's sound financial services infrastructure and well-established system make it an attractive location for investments. The first Islamic retail fund launched recently in Hong Kong had attracted about US$45 million worth of orders by December. Noting Hong Kong is already a market of first choice for Middle Eastern companies, Mr Tsang said average annual bilateral trade with Kuwait grew 20.5 per cent from 2002-2006. In 2006, it was worth US$264 million.

Cepa good for business - "One way to further deepen the trading relationship is for Kuwaiti companies to capitalize on Hong Kong's special status within China," said Mr Tsang, adding that the Closer Economic Partnership Agreement (Cepa) is especially good for this purpose. "We welcome investments by sovereign wealth funds, which are becoming more prominent in financial markets and are a positive force for global markets."

Hong Kong Trade Development Council Executive Director Fred Lam added that Time magazine in its January 2008 cover story had called Hong Kong "China's Wall Street at the dawn of the Asian century", noting the city's world-class financial services sector and bustling stock market.

"We believe we can also become the Middle East's Wall Street," said Mr Lam. He added that there is much more to Hong Kong than finance. A delegation of more than 20 of Hong Kong's most senior players including international bankers, top property developers, architects, urban planners and interior designers as well as heads of major legal services and media companies accompanied Mr Tsang and Mr Lam for the Middle East mission to explore areas of cooperation with Middle East investors.

Asian filmmaking hub scores starring role

Wouter Barendrecht, pictured with actress Michelle Yeoh, says no other country apart from America has so many international stars

In 1991, Dutch-born Wouter Barendrecht founded Fortissimo Films with Hong Kong film director and distributor Shu Kei due to his passion for Asian films. Seventeen years later, with present business partner Michael J. Werner, he was honoured at the annual CineAsia convention in Macau for his "significant achievements in the development, financing, co-production, promotion and distribution of award-winning films globally".
Fortissimo is responsible for bringing to the world Hong Kong cinema classics such as director Wong Kar Wai's Chungking Express and In the Mood for Love. The latter film won Best Actor award for Hong Kong actor Tony Leung Chiu Wai at the 2000 Cannes Film Festival. But their presence is felt all around Asia. For example, they helped bring Thailand's booming film industry into the international limelight with hits like The Eye trilogy and The Iron Ladies.

"I have always loved Asian films," said Fortissimo's Co-Chairman. Mr Barendrecht had previously worked as a programmer for the Rotterdam Film Festival and as a press officer for the Berlin Film Festival.

"I think Asian films have more to offer than either European or American films. The film industry in Europe is subsidised and there is no business element. Sometimes, it is just art for art's sake. There is nothing wrong with that but Asian filmmaking is more interesting as there is more variety in the genre and overall, there are more auteur aspects," he said. "Asian films have entertainment and art. It proves that both elements can co-exist at the same time."

Quantum leap - Asian films have come a long way, according to Mr Barendrecht. "Back then when we were selling Asian films, people referred to it as Oriental films, which smacks of neo-colonialism. Now, everybody can differentiate between Japanese, Korean or Thai films."

He started Fortissimo Films as a hobby, with just a "fax machine in my bedroom in Amsterdam", while his partner Shu Kei was in Hong Kong doing film distribution. "We went to Cannes in 1991 and pitched ourselves as a new company involved with Asian films. At the beginning, we focused on Japanese and Korean films. We had no money then, only our passion and integrity and a firm belief that Asian films are artistic and exciting."

The turning point came with Hong Kong director Clara Law's Autumn Moon, which won the Golden Leopard award at Locarno Film Festival in 1992. Fortissimo distributed the film and things progressed from there and he moved to Hong Kong. "Hong Kong is my home now and it is good operating from here. There are now about 10 other companies in Hong Kong doing what we do but we are the only company distributing foreign films as well as Asian films." Fortissimo is also distributing a documentary on The Rolling Stones called Shine a Light which is scheduled to open in Hong Kong around March/April.

He said he couldn't find a better place in the world for his kind of business. "Hong Kong is really the heart of Asian filmmaking. With the exception of America, there is really no other place which has exported such talents as international stars Michelle Yeoh, Maggie Cheung, Tony Leung Chiu Wai, Andy Lau, Jackie Chan, Chow Yun Fat and directors like John Woo, Wong Kar Wai and Johnnie To."

Promising future - Mr Barendrecht said Hong Kong's film industry is doing well these days. In the past, the Chinese mainland regarded Hong Kong films as foreign films. But the good news is that Hong Kong filmmakers have discovered co-production which helps to spread the risks financially. "The film industry is a risky business so it is good to spread the risks around with all parties. It also guarantees that we can distribute the film to a wider audience. Best of all, depending on how we structure our films on a co-production basis, we can distribute to the huge mainland market." Any film over US$5 million has to be co-produced, he said, as the Hong Kong market is too small.

He cited the successful co-production example of Lust, Caution, produced by Hong Kong's Bill Kong, directed by Taiwan's Ang Lee (he won an Oscar for Brokeback Mountain), starred Hong Kong's Tony Leung Chiu Wai and Chinese mainland actress Tang Wei. The film won the Golden Lion for Best Film for Ang Lee at the recent Venice Film Festival and the Golden Horse Best Actor award for Tony Leung Chiu Wai at the Taiwan Golden Horse. "This film has everything - star power, an auteur script based on a famous novel and beautiful production. But can we repeat the success? There are no guarantees in the film making business."

Mr Barendrecht is also actively involved with Hong Kong Asian Film Financing Forum (HAF) which he founded in 2000 together with the Hong Kong Directors Guild. "It was a particularly trying time as Hong Kong and the rest of the Asia Pacific region were just coming out of the Asian financial crisis. A year later we were hit by Sars: nobody was going to the cinema, and China was not opening its market to Hong Kong films. We looked at the European business model, reached out to other countries, discovered co-production in Asia and we are now all working on a pan-Asian level. This is the model that the Asian film industry in Korea, Hong Kong, Thailand, Japan, China and Singapore are working on now."

Entertainment Expo shines - Mr Barendrecht had been lobbying, along with the entire Hong Kong film industry, for HAF and Filmart to come under one umbrella – Entertainment Expo – for some time and is very glad that it has taken off.

"People want to do business efficiently and the timing for the Entertainment Expo is great as it is held six weeks before the Cannes Film Festival. Entertainment Expo is a very compact event – everything takes place under one roof and it is an important event for buyers around the world. I meet a lot of people at the event and all my clients love to come to Hong Kong because of its great food and shopping…but of course, business is the most important, and they feel that they get a lot done here."

With five staff in its Hong Kong office and almost 20 in Amsterdam, Fortissimo handles around 20 films a year – two to three productions, five to six co-productions and the rest are acquisitions. Besides Hong Kong, Fortissimo Films has offices in Amsterdam, London, New York, Sydney and Paris and agents in the US, Europe, Tokyo, Beijing and the Middle East.

Footwear Design Competition Winners Announced Dazzling Footwear and Bags on Display at Awards Show

A dazzling array of footwear and bags were showcased at today's 8th Footwear Design Competition Hong Kong - Belle International and Lam Wing Yee were the big winners at today's 8th Footwear Design Competition Hong Kong awards show, held at the Hong Kong Convention and Exhibition Centre.

Ms Lam picked up the Staccato Award for Grand Champion, the Millie's Award for the Most Promising New Talent 2008, and the Ladies' Boots award for her Amphitrite design theme. Belle International swept all three corporate prizes, including the Shoemaster Award for Best Corporate Design and the Texon Award for Corporate Creativity, impressing the judges with her Flying Belle design theme. The company also received the Licheng Award for the Best Commercial Prospect.

Belle International swept all three corporate prizes, including the Shoemaster Award for Best Corporate Design and the Texon Award for Corporate Creativity

More than 1,100 entries were submitted, and Tang Yiu, Chairman of the Federation of Hong Kong Footwear Ltd, was impressed with the high design quality. "The competition is meant to develop young design talent and to enhance creativity and quality in the Hong Kong footwear industry. All these are vital to the growth of the industry," said Mr Tang, who chaired the organising committee for this year's Footwear Design Competition.

Ladies' Shoes and Bags was this year's new category, joining six others: Children; Sports; Men's Shoes; Ladies' Boots; Ladies' Sandals; and Ladies' Shoes. Judging was based on creativity, fashion aesthetics and ease of design production.

Prizes were awarded in each category. In addition, a number of special awards were presented: the Joy & Peace Award for Creativity; Fiorucci Award for Most Eye-catching Design; le saunda Award for Modern Chic; Amann Award for Intelligent Design; Y-NOT KiDS Award for the Most Smart Kid's Shoes; Classical Award for the Best Charismatic; APLF Global Market Award; and China Shoes for Best Fashion Sense Award.

The winning designs will be featured in Hong Kong Footwear, published by the Hong Kong Trade Development Council (TDC). They will also be displayed at several major fairs, including Style Hong Kong and Fashion Access.

Hong Kong footwear exports amounted to US$5.4 billion (HK$42.1 billion) in the first 11 months of 2007, with the United States, Japan and the Chinese mainland the top three markets. Exports to the Chinese mainland, Italy and Germany grew substantially over the same period last year, up 15 per cent, 16 per cent and 12 per cent respectively.

The competition was organized by the Federation of Hong Kong Footwear and the TDC (Hong Kong Trade Development Council).

January 30, 2008

Olympic torch relay set for May 2

Olympic spirit: Secretary for Home Affairs Tsang Tak-sing (third left) announces the Olympic torch relay will take place on May 2 in Hong Kong.

The Olympic flame will arrive in Hong Kong April 30 and the Olympic Torch Relay will be held May 2. The flame will be carried by 120 torchbearers across Hong Kong and the torch relay will last eight hours. Secretary for Home Affairs Tsang Tak-sing today said Hong Kong will be the first stop on Chinese soil after the Olympic flame is carried through 19 cities around the world.

A launch ceremony for the torch relay will be held at its starting point in the Cultural Centre Piazza in Tsim Sha Tsui. It will finish at Golden Bauhinia Square in Wan Chai followed by a closing celebration at Sha Tin Racecourse. Torchbearers will pass Tsing Ma Bridge, the Shing Mun River, the Olympic Equestrian Venue in Sha Tin, Sha Tin Racecourse, the Avenue of Stars, Victoria Harbour, the Legislative Council Building, Olympic Square in Hong Kong Park and the Convention & Exhibition Centre.

Students and residents' associations will be invited to cheer the torchbearers along the relay route, and people can witness the historical moment live on television. Roving exhibitions will be held in the 18 districts from March to May.

After Hong Kong the Olympic flame will head to Macau and major Mainland cities before arriving in Beijing on August 8 for the opening ceremony of the Beijing 2008 Olympic Games.

January 22, 2008

Hong Kong's Jewellery sparkles in upbeat Malaysia - Developing the Hong Kong brand.

Hong Kong's Chow Tai Fook, which has 750 retail outlets in the territory, Macau, Taiwan and on the Chinese mainland, has opened its first store in Kuala Lumpur. It's a move to take advantage of Malaysia's growing prosperity and higher-income consumers - and forge ahead of other foreign designers who may not take account of Malaysian tastes and jewellery requirements.

The new store was established in November 2007 in prestigious The Gardens in Mid Valley City, and is presenting a dragon-themed line of jewellery inspired by ancient Chinese craftsmanship. The work is aimed at modern-minded women who appreciate the richness of Chinese designs.

The Kuala Lumpur store is the first step by Chow Tai Fook into South East Asia, and the pieces are guided by design guru Yip Kam Tim. The firm says it chose the Malaysian capital as an opening to the region because Malaysian retail offers modern, dynamic appeal to an emerging consumer pool.

With a growing demographic for youthful, affluent shoppers, Kuala Lumpur offers plenty of potential for mid-priced and well-designed jewellery.

In fact, Hong Kong brands have an established reputation for stylish offerings, thanks to the popularity of the territory's movie stars, films, TV programmes and singers. Hong Kong's cachet is particularly strong among Chinese Malaysians.

The Malaysian jewellery sector has been opening to a wider range of jewellery and methods of retail in recent months. Jeweller Poh Kong Holdings Bhd recently opened franchise operations in Kelantan, Terengganu, Sabah, and Sarawak, aiming to draw on sales from greater prosperity in the provinces.

January 17, 2008

Lampposts to house Wi-Fi facilities

Wi-Fi facilities will be installed into 669 lampposts across Hong Kong. Secretary for Commerce & Economic Development Frederick Ma told legislators today the Office of the Telecommunications Authority supports the move and has provided detailed lamppost data to Wi-Fi service operators.

Three operators have applied for Wi-Fi installation on lampposts. One has already presented its technical proposal to the Highways Department.

The Housing Department has made 1,000 estate lobbies available to operators for Wi-Fi services. The Housing Authority also plans to reserve ducts between lampposts in new estates for the installation of Wi-Fi or other electronic services.

January 14, 2008

Hong Kong ranks world's freest economy again for 14 consecutive years by Heritage Foundation

Hong Kong has been ranked as the world's freest economy for the 14th consecutive year by the Heritage Foundation in the foundation's 2008 Index of Economic Freedom study released on Tuesday, a press release from the Hong Kong Special Administrative Region (HKSAR) government said.

According to the study report, Hong Kong scores exceptionally well in almost all areas of economic freedom.

Among the 10 individual areas assessed, Hong Kong ranks first in trade freedom, investment freedom, financial freedom and property rights. Hong Kong also ranks in the top 10 in another four areas - fiscal freedom, government size, monetary freedom and labor freedom.

The report noted that Hong Kong's income and corporate tax rates were very competitive, and overall taxation was relatively small as a percentage of gross domestic product (GDP).

It also said that Hong Kong's business regulation was simple, the labor market was highly flexible, and investment in Hong Kong was strongly encouraged with virtually no restrictions on foreign capital.

The foundation also complimented Hong Kong as one of the world's leading financial centers, with its regulation of banking and financial services both non-intrusive and transparent. The study noted that property rights were protected by an independent and virtually corruption-free judiciary.

Compared to Singapore, Hong Kong fares better in regard to trade freedom, fiscal freedom, investment freedom and financial freedom, while Singapore fares better in business freedom, government size, monetary freedom, freedom from corruption and labor freedom. Both Hong Kong and Singapore are ranked first in property rights.

"We are determined to uphold Hong Kong's position as the freest economy in the world," Hong Kong Financial Secretary John C Tsang said while welcoming the study report.

"We see the role of the HKSAR government as that of a facilitator. We provide a business-friendly environment where all firms can compete on a level-playing field and establish an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market," Tsang said.

The study measured the degree of economic freedom of 157 economies worldwide by assessing 10 factors: business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, labor freedom. Hong Kong retained its position as the freest economy in the world, followed by Singapore and Ireland.

Make HK top source of talent, urges new AmCham HK chief

Developing Hong Kong into a regional hub for top talent is key to maintaining its stature as an international business centre, according to Steven DeKrey, the new chairman of the American Chamber of Commerce. Dr DeKrey, an associate dean and director of MBA programs at the Hong Kong University of Science and Technology, said yesterday he was aware of the region's growing need for talent.

In his first speech in his new role - "Face to Face with AmCham: 40 Years in Asia's Business Capital" - made at an AmCham luncheon at the Ritz-Carlton Hotel, Dr DeKrey urged the government to put more effort into becoming a source of talent for Asia.

"Much progress has been made on educational fronts and visa policies, but more can be done," said the new chairman, who succeeds Gary Clinton.

He said the chamber would continue to pursue the provision of quality education for expatriate children - especially the availability of school places, which had become a significant concern for its members.

"It has made it difficult for many incoming executives to find school places for their children, which affects the ability of companies to bring their top talent to the city," Dr DeKrey said.

Another top priority would be to work closely with the other seven AmChams in Greater China, including those in Macau, Taiwan, Beijing and Shanghai.

Referring to a survey conducted by the chamber, he said he was optimistic about this year's economic outlook. "Firms are very satisfied being in Hong Kong. Regional headquarters are also staying," he said.

Dr DeKrey said he believed the mortgage crisis in the US was not over.

"It is still not clear for the future, and its impact has not been fully reflected in the market," he said.

January 13, 2008

Invesco chief economist John Greenwood, also dubbed the `architect of the dollar peg,' says local currency appreciation is not an effective measure to alleviate inflationary pressure in the long run. "Let's say the dollar peg appreciated from 7.8 to 7.6, inflation will temporarily decline but the inflation rate will resume to its previous course later," Greenwood told The Standard, warning that currency appreciation would have more of a downside as it would invite more speculation activity. Under the currency peg, the Hong Kong dollar is fixed at 7.8 to the US dollar, though the widening of the trading band in May 2005 allowed it to be traded between 7.75 and 7.85. On January 2, the China Securities Journal published a report suggesting the Hong Kong dollar should appreciate from its current 7.8 to 7.5, to help ease inflationary pressure and avoid an asset bubble. Greenwood, who has been on the Hong Kong Monetary Authority's currency board committee since 1988, said he does not see an asset bubble in the local economy, stressing that the HKMA has an effective mechanism to maintain stocks of the Hong Kong dollar. A strong advocate of the currency peg since the 1980s, Greenwood also insists the current peg system is the best for Hong Kong. "Hong Kong's business cycle is determined by the global business cycle, not that of China. When you talk about the global economy, the United States is still the most influential." Greenwood said the Hong Kong dollar cannot be pegged to the Chinese yuan as it is not freely convertible. "It will take more than 15 years for the yuan to become fully convertible. "If the yuan is freely convertible then the Chinese government will lose control over it. Do you think the Chinese government will abandon its control?"

January 11, 2008

Delicate Balance of Creativity and Functionality - Hong Kong Product Shines in China Red Star Award

Yip states with Hong Kong celebrating the 10th anniversary of the reunification with its mother country, local product designers have to re-position themselves accordingly.

Yip Chi Wing was awarded the China Red Star Award with his "Li Ning Power-pack" camping backpack (top) and "Life-power LP6500" massage chair (bottom).

"China Red Star Design Award" is one of the most distinguished awards in the Chinese Mainland's design industry. The Award aims to promote the development of Chinese design industry, and enhance international competitiveness of Chinese products by encouraging Mainland enterprises to carry on independent innovation and brand building. Among over 1,500 entries for this year, the renowned Hong Kong product designer Alan Yip Chi Wing snatched highest awards with his "Li Ning Power-pack" camping backpack and "Life-power LP6500" massage chair. This reiterates the prominent presence and reputation of Hong Kong product designers in the international design world.
Broadening Horizons through Expos and Competitions

Alan Yip has been a product designer for over 20 years. He graduated from Dept of Industrial Design of Hong Kong Polytechnic University in 1987. After winning a working scholarship in 1986, he worked as an intern for Frog Design Inc. in California, USA. Upon his graduation he was hired at the Philips Eindhoven, the Netherlands. Yip returned to Hong Kong in 1990 and founded his own Yip Design Ltd. He comments, "For a relatively small market like Hong Kong, it is paramount for product designers to participate in different kinds of expositions and competitions, so as to strive for room for better development and opportunities. For instance, I have been participating promotional activities organized by Hong Kong Trade Development Council (HKTDC) continuously; that is not for awards or benefits but the experiences I gain. Joining expos and competitions offers a great opportunity for me to appreciate the excellent works from designers around the world, helping me cultivate an international perspective about design. In additional, meeting Mainland and overseas industry players is also crucial for business development in the long run. "

Leverage on Hong Kong's Competitive Advantages

Alan Yip's awarded products are for him merited by their bold embrace of creativity. He explains, "Li Ning Power pack is quite a breakthrough design-wise. Apart from its swift flowing outer shell, it is made of hi-tech plastic materials. The strength of cushioning is also ergonomically fine-tuned befitting different parts of the wearer's body. It could be said an innovation of its kind in the leisure product market in China. Life-power LP6500, on the other hand, resembles first class in-flight seating in its design. It offers a luxuriant comfort and comes in a vibrant, spray-painted outlook. As of purchasing a car, the buyers can also select their favourite colour of paints when they place their order for the chair. Such customized service proves successful in appealing to the younger market, generating 'talking points' as well as sales."

Yip furthers that with Hong Kong celebrating the 10th anniversary of the reunification with its mother country, local product designers have to re-position themselves accordingly. He adds, "As Hong Kong product designers, our competitive advantages are highlighted: there is much room for creativity in Hong Kong and we are backed by the huge Mainland market. It is high time we moved forward with a globalized point of view, and leveraged our unique position to explore new business opportunities for our design industry."

January 10, 2008

Hong Kong and Macau Doctors Allowed to Open Private Clinics on Mainland

The Ministry of Health has recently issued a circular on the implementation of Supplement IV to the Mainland-Hong Kong and Mainland-Macau Closer Economic Partnership Arrangement (CEPA) with regard to medical services. According to this circular, qualified Hong Kong and Macau service providers who are holders of the mainland Certificate of Practicing Physician (for clinical treatment, traditional Chinese medicine and oral care) may apply to open private clinics in mainland cities after 1 January 2008.

The applicants must be licensed to practice medicine in Hong Kong and Macau and must have a medical license for over five years in either Hong Kong or Macau, have practiced continuously in both Hong Kong and Macau for a total of five years, or have served in clinical posts in the same field on the mainland for over five years.

Each Hong Kong or Macau service provider may only open one private clinic. He or she must be the sole proprietor and responsible person of the clinic.

In principle, a private clinic may not employ other physicians. However, if circumstances so require, the Hong Kong or Macau service provider may employ one to two practicing physicians (mainland residents) in the same area of practice to meet the needs for medical services. A suitable number of mainland registered nurses may also be employed based on medical service needs.

 

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