Hong Kong bets on its economic strength
During the third quarter of 2012 Hong Kong’s export sentiment turned negative, according to the Hong Kong Trade Development Council (HKTDC), but a recent survey by the same organisation revealed that Hong Kong is the city makes the most of its position as a leading trade port and services hub ranking number one and followed by Singapore and Shanghai as top central business district (CBD)
Among the assets Hong Kong is presenting is the excellent geographical location the ease of doing business and strong institutional structure. The survey was conducted in the first half of 2012 by interviewing more than 500 senior executives from companies based in the Asia-Pacific and in 10 cities. The survey was focused on Hong Kong as Asia’s CBD., as well as its competitiveness in six industries: merchandise trade, banking and financial services, professional services, intellectual property trading, logistics and tourism and MICE (meetings, incentives, conventions and exhibitions).
More than half of the respondents placed Hong Kong ahead of either Siungapore or Shanghai as Asia’s top CBD, some 52 % selected it as top choice and 77 % chose Hong Kong for top two choices combined. Of 10 “essential Asian CBD functions” listed in the survey, marketing and sourcing platform, the gateway to the Asian market were considered the two most important, followed by financial and fund raising centre.
Hong Kong enjoyed a comfortable lead over Singapore or Shanghai in the top three CBD functions. Some 56 % of the respondents ranked Hong Kong as the top marketing and sourcing platform, 59 % ranked it the top gateway to the Asian market and 60 % considered Hong Kong as the top financial and fund raising centre.
Further results of the survey: Hong Kong enjoys a lead as a CBD in specific industries and it extends if the market is considered Greater China rather than Asia as a whole. Hong Kong enjoys also its prominent role in offshore fundraising for Chinese mainland companies and as the largest offshore CNY centre. Additionally it has a clear lead in serving Greater China with banking and financial services (61 %), tourism and MICE (61 %) and merchandise trade (60 %).
Since the gravity of the global economy is shifting from West to East, Hong Kong became the mainland China’s most important external investment destination, as well as a platform for foreign opportunities. Hong Kong currently channels annually more than half of Chinas direct investment overseas and has attracted over 3000 mainland-funded enterprises to the city with bonds in excess of CNY 150 billion issued.
With the Closer Economic Partnership Agreement (CEPA) in place since 2004, the share of Hong Kong-mainland trade in Hong Kong’s overall external trade has soared from 36 % before the handover to 49 % in 2011. Hong Kong successfully contributes also to China’s foreign trade with its re-exports of Chinese made goods and they were doubling from US 152 billion in 1996 to more than USD 419 billion in 2011.
Edward Leung, Director of Research of HKTDC confirms that the respondents are optimistic over the sustained lead of Hong Kong as Asia’s CBD over other regional counterparts in the next five years. However he adds: “to truly capitalize on its advantages, Hong Kong may need to now seriously consider measures to meet the challenges that a more competitive, dynamic, economic order will present”.
Looking ahead, he suggested that Hong Kong should enhance it s economy by seizing opportunities under China’s 12th Five-year-Plan” and by assisting mainland enterprises to “go global” and engaging international companies to tap vast opportunities in China. Hong Kong will assist China’s economic drive in sectors like high-end services and further internationalization of the CNY and this in turn enhances Hong Kong as a strong regional competitor.
He made also clear that his export forecast for Hong Kong’s export growth in 2012 has been revised to minus one percent, from an original plus one percent. The revision was necessary to take into account the deteriorating export confidence across all major industries and markets. The HKTDC Export Index dropped to 35.3 points (machinery to its lowest level with a reading of 29.6 %, while jewellery was highest at 41 %) in the third quarter, the lowest reading since the second quarter of 2009. He explained that export confidence has plunged largely due to weaker demand from buyers, an unfavourable exchange rate and keen competition.
One should not forget that Hong Kong means also manufacturing, but it has been moving to lower cost regions and local production activities have diminished. Hong Kong rather became a place where corporate headquarters are planning their entire production processes, their existence has also generated a huge demand for trade support services but many factory workers lost their jobs and experienced difficulties to find a new job. In 2010 services accounted to a record high of 93 % of GDP Gross Domestic Product. In the same year four sectors, trading and logistics, financial services, producer and professional services and tourism contributed 58 % of the GDP and employed nearly half of the total workforce. Now the Government is rather expanding the following six industries (now only contributing 8 % to the GDP): cultural and creative industries, medical services, education services, innovation and technology, inspection and certification service and environmental industries.