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Geographically, Hong Kong is in the vicinity of south eastern Asia, and has been the gateway for tourists and commodities into the Chinese mainland over the past 170 years. It is the bridging role of Hong Kong between the Chinese mainland and the rest of the world that makes it one of the world’s leading trade hub. With China’s participation into ASEAN+3 dialogue, Hong Kong’s position as the “pivot for the chunk of countries becomes more crucial.
According to the Hong Kong Trade Development Council, the international marketing body for Hong Kong-based traders, the territory’s total trade with ASEAN in 2012 was 94.1 billion U.S. dollars, up by 0.5% year on year, and 43% from 2009. The Council’s principal economist of Asian and emerging markets Dickson Ho said the growth rate of trade activities of Hong Kong with ASEAN has been faster than that with many other parts of the world. So far, ASEAN is the second biggest trading partner of the city, behind the Chinese mainland.
Products traded
According to estimates, there are more than 130 million middle-class persons based in ASEAN member states. With a reasonable amount of discretionary income as their counterparts in other parts of the world, they are keen to splash on consumer goods, many of which are fashionable items. Thanks to the trend, in 2012, Hong Kong exported consumer goods with a total value of 6.44 billion U.S. dollars to ASEAN countries, up by 3% and 20 % compared to 2011 and 2010 respectively.
Not surprisingly, Ho said, clothing and accessories are one of the key contributors of the city’s trade with ASEAN. Hong Kong’s total exports of clothing and clothing accessories to the bloc in 2012 were 753 million U.S. dollars, up by 1.5% compared to 2011.
But Ho added that it is electronic products that top the list in the amount of Hong Kong’s traded products. Hong Kong’s total export value of electronics products to ASEAN in 2012 was 15.32 billion U.S. dollars, an increase of 3.7% compared to 2011. Hong Kong’s imports of electronics products from ASEAN in 2012 were 44.526 billion U.S. dollars, gaining 0.5% year on year.
Destinations
While Hong Kong is closely connected to many ASEAN countries, Ho said Singapore and Vietnam are now the top two markets of Hong Kong exports in ASEAN.
Singapore is the eighth largest export market for Hong Kong in the world. In 2012, Hong Kong’s total exports to and imports from Singapore were about 7.17 billion and 31.5 billion U.S. dollars respectively. Although both figures contracted by 0.5% and 3.2% year on year respectively, Singapore remains Hong Kong’s biggest trade partner amongst ASEAN countries. Major traded items, Ho said, are electronic parts and components. In 2012, Hong Kong’s exports and imports of such products to Singapore were about 4 billion U.S. dollars and 22 billion U.S. dollars respectively.
As Hong Kong’s second biggest trade partner in ASEAN, Vietnam imported about 6.5 billion U.S. dollars of goods from Hong Kong, and exported 4.7 billion U.S. dollars of goods to the city in 2012. Major traded items are meat & edible meat offal, telecom equipment and parts, rotating electric plant and parts, electrical apparatus for electrical circuits and so on.
Not only is Vietnam a rising star in international trade, Ho said it has also become increasingly attractive as a production base, in particular for Japanese companies, many of which have adopted a “China-plus-one strategy.
Ho said China has always been the first choice to set up manufacturing base by foreign manufacturers. But given the surging costs of production in the “World’s Factory, part of the operation processes, mainly the low-end, labor-intensive ones, would be shifted to one of its neighboring countries with lower costs of production. Vietnam is a popular pick as the “plus-one among foreign manufacturers.
“It is because Vietnam is easily accessible, including by land from Guangdong Province, said Ho.
Myanmar: the new wonderland
Ho said the “head to toe changes in Myanmar have opened up the door to business opportunities for itself and the rest of the world.
Myanmar has registered fairly steady economic growth in recent years. After expanding 5.5% in 2011, its economy is expected to hit a growth rate of 6.2% in 2012, with the IMF denoting Myanmar as a country with a “high growth potential. Cumulative FDI into Myanmar reached 42 billion U.S. dollars as of January 2013. Major sources of FDI were the Chinese mainland, Thailand, Hong Kong and South Korea. Myanmar’s continued liberalization progress is expected to encourage greater inflows of foreign investment from western countries.
Hong Kong’s exports to Myanmar expanded by 44% to 84 million U.S. dollars in 2012, surpassing the 10% export growth reported in 2011. Major Hong Kong exports to Myanmar in 2012 included optical goods (31%), telecom equipment and parts (23%), textiles and fabrics (8%) and watches and clocks (6%).
But Ho said that Myanmar should better equip itself with fundamental facilities, such as transportation system and electricity supplies.
Hong Kong - ASEAN win-win situation
There have been some analyses asserting that Hong Kong would be the “unwitting victim of moves towards the elimination of duty rates on most goods traded between ASEAN member states, due to the loss of its attractiveness as a tax effective “go-between location through which transactions between ASEAN countries are channeled. Ho roundly rejected this assertion.
“Hong Kong mainly deals with electric products. Before 2005, the WTO passed an Information Technology Agreement, under which tariffs for many kinds of electric products had been drastically reduced, if not down to zilch. As such, tax effectiveness may not necessarily be the sole or upmost consideration for countries trading through Hong Kong, even though the city is not a member of the ASEAN-China Free Trade Area (ACFTA). It would be the other edges of Hong Kong that really matter to them. said Ho.
Hong Kong’s Edges
As businesses between China and ASEAN keep swelling, Hong Kong can serve as the “midpoint to provide various kinds of services for the two economies, such as logistics, Ho said.
“For the time being, no airport in southern China can match the Hong Kong International Airport in terms of throughput and efficiency, he added
To examine more closely, he said, Hong Kong is in fact a preferred location for regional headquarters for many multinational corporations (MNCs), and it is a good starting point for companies from ASEAN countries to expand their businesses abroad, especially if they wish to cover the Northeast Asian market, including the Chinese mainland.
“As they stand, the ACFTA commitments between China and ASEAN countries have been phased in since its establishment in 2010, contrasting with the Closer Economic Partnership Agreement (CEPA) between the Mainland and Hong Kong, under which a new supplement in liberalization measure is added every year, said Ho. “In other words, the Chinese mainland market gets more and more open to Hong Kong year after year.
Ho added that over the past nine years, there had been nine supplementary clauses added on top of the preexisting terms of CEPA. Sectors of services accessible to Hong Kong increased from 27 to 48, with more than 300 liberalization measures unfolded.
Ho said the ASEAN-China bilateral trade will continue to blossom in the future. As the linchpin between the two gigantic economies, Hong Kong’s status is unlikely to be replaceable or decay. With the innate advantages in logistics, expertise and accessibility to the Chinese mainland market, Hong Kong can and will continue to play a pivotal role between ASEAN and China, and enhance the prosperity of the region.
