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Hong Kong chief executive says territory will continue to build on strengths
With the shopping season now in full swing in Hong Kong, few people realise what a critical role the small territory plays in the fortunes of mainland China.
The territory of just seven million people has evolved into a financial centre rivalling New York and London, and Donald Tsang, the chief executive of the Hong Kong government, believes that Hong Kong will soon become the international hub for companies operating out of China.
"This is a trend we welcome wholeheartedly, and it is set to continue and deepen as Hong Kong further develops its role as China's major international financial and business services centre, and as a vital cog in the management of global financial flows," Mr Tsang said at a recent presentation to prospective new investors.
Among the global financial services giants, companies including Deutsche Bank, JPMorgan, ANZ and Credit Suisse are planning major expansion in Hong Kong, he said. Time magazine recently went as far as to coined the phrase "NyLonKong" - the grouping of New York, London and Hong Kong as the three major cities that will manage global financial flows in different time zones.
Mr Tsang said that companies in mainland China were increasingly using Hong Kong as the springboard for entering the international market, whether to source quality products or as a platform for sales and marketing.
Although there are other options - thanks to China's market-opening policies introduced 30 years ago - Hong Kong is still by far the most reliable route, particularly for small and medium enterprises (SMEs) that need to manage a China business.
"The number of overseas- and mainland-owned regional operations in our city is now approaching 4,000," he said. "Scarcely a week goes by without news of another company setting up here in Asia's world city. We are the Number 1 base for regional operations, and we work hard to maintain this position."
In the first six months of this year, mainland companies accounted for almost 20% of Hong Kong's completed investment projects and many are using Hong Kong as their base for all international operations.
Hong Kong's other claim to fame is its status as a shopping haven for the nearly 28 million visitors it receives annually.
Traditionally, Hong Kong has marketed itself as a place to do business at four distinct levels: first, as a market in its own right; second, as a co-ordination centre for southern China; third, as a base for all of China; and fourth, as a base for the East Asian region, Mr Tsang says.
This has helped Hong Kong to become one of the top five investment destinations in the world.
In a survey undertaken by the financial advisory firm Ernst & Young, China and Japan shared first place as Asia's best investment destinations for foreign firms.
Singapore and Hong Kong were tied in third place, with 10% each in the poll of more than 200 international company executives. Seven out of 10 of the executives polled were in companies operating in Asia.
China and Japan each were picked by 27% of the respondents for the joint-first spot. The runner-up was India, with 11%. South Korea emerged fourth with 5%, trailed by Vietnam with 4%. Malaysia was selected by 1% of the respondents.
In terms of foreign direct investment, China attracted 1,171 projects or 38% of the investments that went into Asia in 2007. India followed with 676, and Vietnam with 260.
But this has disappointed Hong Kong, where officials hope that performance this year will be better than in the past despite the global economic gloom.
"Hong Kong as a market in itself might seem to be rather modest bearing in mind that we have a population of only seven million.
But, with a per-capita GDP of almost US$30,000 the people of Hong Kong are a market with substantial spending power," said Mr Tsang.
On top of that, more than half of the 28 million visitors to the territory come from mainland China, and many for the specific purpose of shopping.
"Many luxury brands have spotted these opportunities and set up flagship stores to capture this business," he said. "That is why Hong Kong is home to the largest Armani store in the world outside Milan, and why LVMH, Hermes and many more leading brands see Hong Kong as such an important market."
All this has helped shape Hong Kong's role as a nerve centre for South China manufacturing and procurement.
"Our neighbouring hinterland is now widely recognised as the factory of the world. Hong Kong has provided much of the capital, the managerial expertise and the design capability to make that possible," said Mr Tsang.
"Just a generation ago, Shenzhen was a small fishing and farming village. Today, it stands as a modern testament to the determination, flair and acumen of entrepreneurs and businesspeople in Hong Kong and our cousins in adjoining Guangdong. It shows that when we work together, enormous potential can be unleashed."
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