23 Feb 2009
China Stimulus to Benefit Hong Kong Services Companies
New HKTDC Report Shows Opportunities for Services in Rmb4 trillion Package
A new study by the Hong Kong Trade Development Council (HKTDC) has concluded that Hong Kong's infrastructure and real estate services can expect to play a role in construction and infrastructure projects in the Chinese mainland, especially if foreign investment projects are included. The stimulus package, introduced to boost domestic demand, centres on construction and infrastructure investment.
"Under the Closer Economic Partnership Arrangement (CEPA), Hong Kong services sectors are allowed to set up wholly owned enterprises on the mainland to provide a variety of construction and related services," said HKTDC Assistant Chief Economist Dickson Ho, author of the report.
Of the Rmb100 billion in investment projects announced last December, Rmb81 billion is tied to infrastructure and related projects.
The report suggests that Hong Kong companies with strong funding and technical expertise will want to explore opportunities to become main project contractors or sub-contractors, through BOT (Build-Operate-Transfer) and PPP (Public-Private-Partnership), supplying capital, technical skills and project management.
"CEPA also allows Hong Kong services providers in the environmental protection industry to operate as wholly owned enterprises on the mainland to provide a range of environmental protection and related services," said Mr Ho. "In the mainland, Hong Kong companies' strengths in excellent project management, effective communication, and introducing advanced environmental technology for customised applications are well recognised."
The stimulus package, he said, will create opportunities for services providers in sewage and solid waste treatment, water conservation, energy efficiency and pollutant abatement projects.
In addition, the stimulus package will focus on industrial upgrades and services sector development. "Under the stimulus package, local governments have undertaken to promote industrial upgrade and brand development," Mr Ho said.
Hong Kong design and marketing companies should target mainland enterprises wanting to develop and promote their brands, added Mr Ho, especially those, such as Guangdong, Jiangsu and Zheijiang, situated in production bases for light consumer goods.
Hong Kong can also become an effective exhibition platform for mainland enterprises intent on promoting their products and brands internationally. "Under CEPA, units set up by Hong Kong services providers in Guangdong, Beijing, Tianjin, Chongqing and Zhejiang are allowed to organise overseas exhibitions for enterprises there," Mr Ho pointed out.
Modernising rural infrastructure and raising rural income feature prominently in the stimulus package as well. In a State Council meeting held in late 2008, it was recognised that enhancing rural distribution and logistics could be a key to boost domestic demand. "Hong Kong services providers are renowned for their expertise in distribution, international logistics and supply chain management," said Mr Ho. "They may like to explore opportunities in developing rural distribution centres and logistics services along with mainland counterparts."
To boost domestic consumption, China's annual central economic work conference, held last December, concluded that authorities should increase efforts to raise rural consumption and spending on housing, cars, services and tourism.
The Chinese government last month indicated that it will also be rolling out a series of new, industry-specific policy measures to support nine key industrial sectors: iron and steel, automobiles, petrochemicals, textiles, shipbuilding, light manufacturing, non-ferrous metals, machinery, and electronics and communications. Most of these measures will likely be unveiled before the National People's Congress convenes next month.
"With the active fiscal measures, alongside the adoption of a moderately loose monetary policy and other pump-priming measures, including tax rebates, it is expected that the mainland's economy will pick up steam in the second half of 2009," Mr Ho said.
The findings of the new HKTDC study will be published in a Trade Watch report entitled "The Chinese Mainland's Rmb4-Trillion Stimulus Package and Opportunities for the Hong Kong Services Sector."
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About the HKTDC
Established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, www.hktdc.com