For U.S. companies looking to enter the Chinese consumer market, it would probably be a good idea to use Hong Kong as their gateway.
That’s because Hong Kong’s distinctive geopolitical standing as a Special Administrative Region of China — operating under a “one country, two systems” relationship with the mainland that lets it retain a vibrant free-enterprise environment — and a city-state with a history as a global center of commerce and trade puts it and the companies based there in the position to use their expertise to help brands looking to cultivate the burgeoning Chinese market.
Experts at the Hong Kong Trade Development Council’s “Think Asia, Think Hong Kong” symposium on Tuesday stressed these points and explained why Hong Kong is well-suited as a portal to the world’s most populous country with the second-largest economy after the U.S.
C Y Leung, Hong Kong’s chief executive officer, told the hundreds in attendance at the New York Hilton Midtown hotel: “The best route for companies to reach the vibrant Chinese and Asian markets is not a straight line on a map, but the route through Hong Kong. When you think of this huge Chinese market or the potential of the emerging markets throughout Asia, then think of Hong Kong.”
Leung noted that Hong Kong, a city of just 7 million people, is the 10th-largest market for U.S. goods exports that has seen its value triple over the last decade to $37.5 billion. More than 1,300 U.S. companies have offices or Asian headquarters in Hong Kong, Leung noted.
“Hong Kong is a showcase to 1.3 billion potential customers in China,” he said. “When you think of Hong Kong, think of us as a chief information officer or chief knowledge officer of mainland China.”
Leung said the Hong Kong government he heads is working to develop improved government-to-government, people-to-people and business-to-business relationships. He noted that the “one-country, two systems” status Hong Kong has as a SAR of China, has allowed it to maintain Western style common law, including an independent judiciary, “a free flow of ideas and a independent media,” as well as lower taxes and tariffs than China, and its own currency. Leung noted that the Hong Kong dollar is traded freely and has been linked to the U.S. dollar since 1983.
Francisco Sánchez, undersecretary of commerce for international trade at the U.S. Commerce Department, noted how his department has partnered with the HKTDC for the Pacific Bridge Initiative. The program was developed in response to President Obama’s National Export Initiative launched in 2010 with the aim of doubling U.S. exports by the end of 2014 by utilizing Hong Kong’s special place as an entry point and commercial hub to China and the rest of Asia.
“Asia is crucial to the future of the global economy and it will continue to play a key role in supporting the global economic recovery,” Sanchez told the symposium. “Asia is an important reason we have made a great amount of progress toward the NEI goal. Exports to Asia have increased every year since the inception of NEI. China is the third-largest export market for the U.S. Last year, the U.S. exported a record amount of $110 billion in goods and services to China. U.S. exports to Hong Kong were about $37 billion in 2012. I fully expect those numbers to go even higher, supporting our economic growth and putting Americans back to work.”
He said Hong Kong represented the fourth-largest foreign direct investment in the U.S. and that 60 percent of China’s foreign direct investment passes through Hong Kong. FDI from China has grown at an average annual rate of 71 percent since 2006.
Toward that end, the Commerce Department is creating the first “Select USA Investment Summit” in Washington on Oct. 31 and Nov. 1. Sánchez said the summit is meant to “encourage foreign and domestic business investment in the United States and connect them with economic development organizations across the country to support business investment in the U.S.,” which leads to job creation and growth in the country. “Attendees will learn what the United States has to offer and why it’s a great place to do business and meet the people that can help make those investments happen.”
William Fung, group chairman of Li & Fung Ltd., said Hong Kong is said to be a central point of Asia, but not just because of geography.
“Hong Kong has 170 years of Western-style capitalism and free markets,” Fung said.
He noted that Hong Kong has what he calls the “four pillars.” It is the center of trading and logistics, it’s a financial center and hub for professional services, and the focal point for Asian tourism.
“From 1979 to 2009, China became the world’s factory, a manufacturing center of the world for many categories of consumer goods,” he said. “Now, from 2009 to 2039, I predict China will fulfill its next promise and that is to become the world’s largest consumer market. Switching from an export model to one based on domestic consumption is just starting and there’s a long way to go to catch up with the U.S. The U.S. is a $15 trillion economy, while China is half that at $7.5 trillion. Consumption accounts for 70 percent of U.S. GDP, while China’s counts for 30 percent. But it is catching up very fast.”