5 Dec 2018
Technology Innovation Opportunities in the Bay Area: The Hong Kong-Guangdong Synergy
Interview with Pionmi Innovation & Technology (Guangzhou) Co Ltd
Guangdong is an important technological innovation base. In 2016, over 6,500 high-tech enterprises, one fifth of China’s entire total, were based in Guangdong, more than in any other mainland province. In order to capitalise on this, the Guangdong Provincial Government enacted the Guangzhou-Shenzhen Technology and Innovation Corridor Plan in late 2017. The aim is to turn the region into a leading base for technological innovation over the next two years by developing an innovation-driven economic belt covering the cities of Guangzhou, Dongguan and Shenzhen. Because innovation and technology is also regarded as a core area of development under the Guangdong-Hong Kong-Macau Bay Area (Bay Area) initiative, this corridor will be extended to Hong Kong and Macau to make the Bay Area an international hub for science and technology innovation.
To explore how Hong Kong and other cities in the Bay Area can use this opportunity, HKTDC Research conducted a study in Guangzhou, Dongguan and Shenzhen in September 2018, with the assistance of the Guangdong Commerce Department. Local commerce officials and representatives from innovation and technology companies shared their views on the opportunities for co-operation and development that are likely to emerge for Hong Kong and Guangdong under the Bay Area initiative. One of the companies interviewed, Pionmi Innovation & Technology (Guangzhou) Co Ltd (柏安美創新科技(廣州)有限公司), provides a typical example of how Hong Kong businesses can make good use of the innovative and technological resources available in Guangdong to enhance their competitiveness and make further inroads into the mainland market.
Entering the Mainland Market
Pionmi is a high-tech enterprise established in Hong Kong in 1993. It supplies a wide range of metal surface finishing products, aluminum anodic oxidation dyes and related pre- and post-treatment additives, such as degreasing agents, sandblasting agents and pro-oxidants.
In its early years, Pionmi conducted its business in Hong Kong. However, because of pollution-related issues concerning some of its products, it has gradually moved its core operation to the mainland, where environmental requirement is less stringent.
Attracted by soaring demand in the mainland market, Pionmi has relocated its headquarters from Hong Kong to Guangzhou’s South China Advanced Materials Innovation Park. It has also set up branch offices in a number of mainland cities, including Shanghai, Suzhou and Nansha. The company believes that, by establishing a presence in different cities, it can stay in closer touch with local clients and customers and gain a deeper understanding of the market. Explaining how both of these factors are crucial in capturing the immense business opportunities in the Chinese mainland, Pionmi’s president Philip Chan said: “We make our moves with the market in mind.”
Another factor behind Pionmi’s decision to relocate was the need to be able to develop its products quickly in response to market demand. Setting up its laboratory in Guangdong, an important production base with a mature supply chain in the Chinese mainland, allows Pionmi to make rapid improvements to its products based on the market feedback received after their initial launch.
Firm Support from Mainland Government
Government support is very important for innovative enterprises, particularly so for start-ups. Currently, the HKSAR Government offers support to the innovation and technology sector mainly through the Innovation & Technology Fund, a programme managed by the Innovation and Technology Commission, and provides funding for research and development projects in selected focus areas. The Commission also launched the Guangdong-Hong Kong Technology Cooperation Funding Scheme to enhance the level of collaboration between research institutes and enterprises in Guangdong and Hong Kong.
High-tech enterprises in Hong Kong also receive extensive support from the mainland government when entering the mainland market. This support is an important consideration for Pionmi when it looks to move further into the mainland market. Describing the sort of support on offer, Chan said: “The mainland government is very proactive in facilitating innovation. They offer financial incentives and comprehensive support to encourage business transformation, innovative technology development and patent registration.”
High-tech enterprises conducting business in the Chinese mainland can get preferential treatment from central, provincial and municipal governments, as well as the support of industrial parks. For example, the South China Advanced Materials Innovation Park provides Pionmi with a wide range of auxiliary services, including a corporate facility sharing platform, investment and financing services, and marketing and consultation services.
According to Chan, the Chinese mainland has helped create a friendly environment for start-ups and innovative and technological development. Because innovative technologies are vital to high-tech businesses like Pionmi, the company works closely with mainland universities and actively acquires patents for new technologies. Chan said these acquisitions have hugely bolstered the company’s technological abilities and competitiveness.
Connecting with Overseas Markets through Hong Kong
Although Pionmi has turned its attention to the mainland market, Hong Kong still plays a role in its business development. At present, it sells most of its products in the mainland market, while 20-30% is exported to South-east Asian countries. Hong Kong accounts for only about 10% of its total sales. However, the company still re-exports its goods to South-east Asia through Hong Kong, demonstrating the latter’s continuing role as an important logistics hub.
Hong Kong also serves as a base from which Pionmi can control its overseas operations. As a sophisticated international financial centre, Hong Kong offers an array of financial services to companies like Pionmi, making it easier for them to handle matters related to their overseas business, such as clearing and remittance. Hong Kong can be an ideal springboard for companies looking to expand into overseas markets and seize opportunities arising from the Belt and Road Initiative.
Explaining how important Hong Kong is to Pionmi, Chan said: “A well-established financial system and an efficient logistics network are essential for the growth of small and medium-sized enterprises.” He added, however, that in recent years mainland cities have developed faster than Hong Kong. With the gap between Guangdong and Hong Kong in terms of competitive edge gradually narrowing, Chan made it clear that he felt Hong Kong must continue to build on its solid foundations and make further improvements.
Meanwhile, the increasing links between Hong Kong and Guangdong are likely to stimulate further development in both regions. For example, the completion of major infrastructure projects like the Hong Kong-Zhuhai-Macau Bridge and the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link will make travel between Hong Kong and Guangdong increasingly fast and convenient. This will promote collaboration between the two and should create opportunities for even greater synergies, significantly boosting the development of companies in the Bay Area.