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Hong Kong has been playing the role of a trade facilitator for developing countries, offering them an extraordinary platform in Asia, an economist told the APD just days before a UN forum on south-south cooperation kicks off in the city.
Compared with the exports in products, the city is more of a technology marketplace, said Louis Chan, an economist at the Hong Kong Trade Development Council (HKTDC). “Hong Kong is helping developing countries to sell their products to the developed nations and to buy technologies -- the intellectual property licenses from them, he added.
A statutory body established in 1966, HKTDC is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. It also organizes trade fairs and business missions to connect companies with opportunities in Hong Kong and on the Chinese mainland.
Referring to trade fairs the city organizes more than 30 each year, Chan said that it is an important way for Hong Kong to facilitate the economic growth of the developing countries. Citing garments or textiles, one of Hong Kong’s traditional industries, Chan said: “We host some large-scale clothing expos here to assist overseas businesses in sourcing and creating.
Hong Kong trade fairs，forinstance, are becoming more popular venues to meet East African traders. Chan cited Mombasa, Kenya's "city of merchants", saying that it is Hong Kong traders' gateway and sea hub to the rising riches of East Africa. Kenya itself represents 40% of East Africa's GDP, so there are promising prospects for Hong Kong-supplied products like electronics and clothing, he said.
With regard to the city’s export mix, Chan said that the consumer electronics segment accounts for the lion's share. “It makes more than half of the overall exports here, he said. “Hong Kong has a great number of companies involving in the manufacturing of electronic parts.
The electronics manufacturing is also a traditional industry of many Southeastern countries, which are Hong Kong’s crucial trade partners, Chan added. The cooperation between Hong Kong and these countries benefits both.
The best practice of global cooperation is to achieve a win-win situation through sharing, Chan said.
Furthermore, Chan said, Hong Kong is an open market for overseas investments, and businesses from developing countries in particular take advantage of the city’s efficient financial services and logistics infrastructure. That’s why many companies from the southern countries have set up their Asian headquarters in Hong Kong.
Developing countries out of Asia, Chan said, are immature in overseas investment, but have a lot more opportunities to achieve further development in Hong Kong. Some emerging economies have come to Hong Kong to issue the RMB bonds, and a number of Russian companies have launched IPOs here.
Nicholas Kwan, director of research at HKTDC, presented a bigger picture in an interview with the APD. "The economic growth of the traditional industrial powers has entered a long-term slowdown, or even recession in some areas since the 2008 financial tsunami," he said. "A transformation in the global economy has taken place and both Hong Kong and the developing countries ought to take the chance."
Kwanwho joined HKTDC earlier this year has 35-years of experience of economic and business research and previously worked at Standard Chartered Bank, the Hong Kong Monetary Authority and Merrill Lynch. He emphasized demand while talking about “the dramatic transformation that the global economy has been going through.
“Demand is the King, Kwan said. “All market players are seeking demand, and only demand can create purchase. The demand is now moving from developed countries to the developing world, he added.
Hong Kong has stronger economic momentum among the neighboring regions and the city is changing its trading patterns to echo this transformation, according to the HKTDC economist. “Hong Kong’s manufacturers are producing smaller shoes for example, he said. “Asian people have smaller feet than the Europeans and the city’s exporters are changing their export targets and their strategies at the same time.
While Hong Kong's export to EU dropped 4.4% in the first quarter, it enjoys a two digits growth in the market of the Middle East and the East Europe, he said.
On the other hand, although the demand in developed economies has dropped, Kwan analyzed, they need more investment. "The Chinese government has asked its enterprises to 'go out'," he said, "I believe the businesses of Hong Kong and other developing countries should also make more investment in the advanced economies."
Although the developed economies such as the US and EU have been constantly suffering the sluggish economic growth and the dim demand, Hong Kong Trade Development Council (HKTDC) has projected a four percent increase in total exports of 2013, which is a stable and relatively optimistic outlook.
Due to the export data of the first quarter of 2013 released by the Hong Kong Census and Statistics Department, while the sales to the US and the EU fell, overall exports to the Chinese mainland and other developing countries climb impressively.
The Hong Kong mode****l
Mo Pak-Hung, an associate professor of economics at Hong Kong Baptist University, shared Nicholas Kwan’s take on demand. He told the APD that in order to maintain economic growth, developing countries need to boost domestic demand by expanding the middle-income class.
To breed a larger middle class, Mo suggested the governments acquire the ownership of important natural resources and allocate them wisely.
File photo of the Hong Kong Convention and Exhibition Center. Located along the Victoria Harbor in Wan Chai, HKCEC is one of the two major convention and exhibition venues in Hong Kong. (Xinhua)
He cited Hong Kong as one of the most successful cities to increase the scale of the middle-income class and promote its developing economyinto an advance economic entity. According to a report of the Silk Road Associates, a Hong Kong-based consultancy, the city with a population of 7 million currently has $229bln in consuming power, ranking the ninth in the world.
“The government of Hong Kong controls the most important natural resource -- the land, Mo said.When housing prices roar, the government build cheaper houses to help the poor with the accommodation. By doing so, Mo said, the purchasing power of great many local residents is increased. The fair allocation of natural resources would narrow the income gap and the whole society could get benefit, he said. As the middle-income class can be fragile, he added, the government should know how to protect them and their consuming power.
Low tax environment and education have also contributed to Hong Kong’s success, Mo said. The simple tax system stimulus motivate people to pursue higher income.
According to a report from Silk Road Associates, in the 1997 Asia financial crisis, the Hong Kong’s rising prices of food, housing and energy ate into a family’s daily spending and weakened the purchasing power. The rising costs quickly left little spare income to spend on discretionary goods sold by foreign companies, such as phones, clothes, or beauty products.
The inflation in Hong Kong has maintained below 2% for the last decade, according to the data of the International Monetary Fund. Hong Kong has successfully become an advanced economic entity, and the sufficient protection of the citizens’ property offered by the government is crucial in achievingthe prosperity.
