Global reset

Fast-moving geopolitical events are reworking the world’s supply chains and the HKTDC helps SMEs rise to the challenge.

With an open, trade-dependent economy in the world’s most dynamic region, Hong Kong frequently finds itself adapting to new circumstances.

Rapid growth in Asian economies – especially Mainland China and Southeast Asian countries – and developments such as the trade dispute between the United States and the mainland are rapidly reworking supply chains.

Technological advances such as fintech, especially blockchain, are also having an impact on Hong Kong’s key finance industry and rapidly rewriting the (digital) how-to books for the city’s businesses, particularly those trading goods and professional services.

Dr Peter K N Lam, Chairman of the HKTDC, the Hong Kong Trade Development Council

Dr Peter K N Lam, Chairman of the HKTDC, urged small and medium-sized enterprises (SMEs) in Hong Kong to diversify their businesses and markets in order to thrive in this new, fast-changing environment. Here he outlines the HKTDC’s efforts to help the city’s SMEs.

How does boosting SMEs fit in with the HKTDC’s broader role?

Helping SMEs diversify involves several core functions of the HKTDC, including promoting Hong Kong brands and products, cooperating with government efforts to support SMEs, and nurturing a new generation of SMEs. The HKTDC also seeks to enhance enterprises’ competitiveness and support their efforts to capture business opportunities.

The HKTDC has strengthened its business-matching services and put together buyer groups for its various exhibitions to attract new market buyers and exhibitors. For example, the HKTDC Hong Kong Electronics Fair (Autumn Edition) in mid-October attracted more than 67,000 buyers from 141 countries and regions. The number of buyers from a diverse range of markets increased, including the Czech Republic, the Netherlands, Romania, Russia, Turkey, Brazil, Mexico and Iran. Buyers from around the world clearly regard Hong Kong as an important business platform.

The Hong Kong Special Administrative Region Government has also boosted measures to support SMEs, optimising the Dedicated Fund on Branding, Upgrading and Domestics Sales (BUD Fund) and the SME Marketing Fund. Financial support measures such as the SME Financing Guarantee Scheme will ease the burden on SMEs and help them establish business opportunities and find new outlets in emerging markets. The HKTDC will encourage SMEs to use these funds, and advise on ways to explore fresh markets. Realising companies sometimes encounter development bottlenecks, the HKTDC website provides the latest market information to facilitate decision-making. The HKTDC’s SME Centre provides free business consulting services and workshops to help enterprises access new markets.

Which new markets could Hong Kong businesses explore?

With a population of more than 640 million, the Association of Southeast Asian Nations (ASEAN) stands out among emerging markets as an important site for Hong Kong businesses. A large, young and growing middle-class population generates strong internal demand in ASEAN. With the signing of the Free Trade Agreement (FTA) and related Investment Agreement between Hong Kong and ASEAN in 2017, Hong Kong’s exports to ASEAN recorded growth of 4.6% in the first seven months of 2019, making the region the second-largest trading partner for Hong Kong and the mainland.

The vast ASEAN market offers Hong Kong businesses an ideal opportunity to try out the HKTDC’s resources. Events such as “In Style • Hong Kong”, Lifestyle Expo, summits and product exhibitions give businesses a chance to highlighting the advantages of Hong Kong’s brands, design and services.

Has there been a lot of interest in ASEAN as a factory base?

ASEAN is also a popular destination for firms that want to relocate production lines when restructuring their manufacturing. Through the Belt and Road Initiative, mainland enterprises have set up more than 100 industrial parks or overseas economic and trade cooperation zones around the world. About 35 of these are in ASEAN.

The HKTDC has discussed with the Ministry of Commerce and the state-owned Assets Supervision and Administration Commission on how to cooperate in introducing Hong Kong SMEs to the industrial parks invested by mainland enterprises in Belt and Road countries. The HKTDC has also selected five industrial parks in Southeast Asia for key promotion to help Hong Kong companies find new opportunities in the local area.

Hong Kong’s professional services industry can meet the needs of industrial parks for offshore financial services such as financing and settlement, and take advantage of Hong Kong’s position as an offshore renminbi centre.

Are there any other nearby, high-growth markets to explore?

In addition to ASEAN, the Guangdong-Hong Kong-Macao Greater Bay Area offers another huge domestic market for Hong Kong businesses. The Greater Bay Area has a population of 71 million who have strong consumption power. Recognising this, in January 2020 the HKTDC will hold a large-scale trade fair and promotional event, Chic HK, in Guangzhou to promote Hong Kong’s lifestyle trends and fashion brands to Greater Bay Area consumers. The HKTDC also has 40 Design Gallery outlets in Greater Bay Area cities including Guangzhou and Shenzhen as well as new outlets in Foshan, Jiangmen, Zhaoqing and Zhuhai. The Design Gallery also has stores on Taobao, Tmall and Jingdong to help Hong Kong brands and designers enter the huge mainland market.

Are there still opportunities in mature markets?

In its search for new opportunities, the HKTDC is not ignoring mature markets. Many Hong Kong businesses find participating in overseas exhibitions costly, leading the HKTDC to launch a new “Show and Match” alternative to the traditional staffed exhibition booths. This lets Hong Kong companies display products more economically, while the HKTDC will help match them with interested buyers.

The HKTDC has been running a large-scale business promotion event, “Think Asia, Think Hong Kong”, in different mature markets every year to boost the city’s access to these economies since 2011. The HKTDC promotes Hong Kong’s business services and investment platforms to investors interested in entering Asia. The [Sino-US] trade war has led to the reorganisation of the global supply chain. Enterprises all over the world are exploring ways to create a new business and trade order. Hong Kong enterprises must also be prepared to restructure the supply chain and open up new markets with diversified strategies.

This interview originally appeared in the Hong Kong Economic Journal.

“Think Asia, Think Hong Kong”