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Hong Kong Companies Urged To Take Advantage Of Market Opening in China's West

Hong Kong companies should take advantage of the opening up of the consumer market and infrastructure development in China's western region, said a Trade Development Council (TDC) report.

The report entitled "Opportunities for Hong Kong in Western China" also looks into Hong Kong companies' investment opportunities in the industrial and services sectors in that region.

Presenting the report today (January 18), TDC's Assistant Chief Economist Pansy Yau said: "Though the average per capita spending on consumer goods in the region is still lower than that in coastal region, spending in major cities of the region is catching up fast. There is an existing huge market for Hong Kong consumer products."

"The consumer market in the region is catching up fast. The progress of urbanization will change the pattern of consumer spending. The emergence of a larger, younger consumer group, as well as the growth of a middle class, will expand the size of the consumer market along with further economic growth."

"Hong Kong companies may consider capitalizing on the relaxation of domestic sales right after China's WTO accession in gaining a foothold in the western region market."

Pansy Yau pointed out that the western region development programme brings to foreign investors a more favourable and less restrictive environment for tapping the advantages of the region. Local authorities will have greater autonomy to approve foreign investment projects and foreign investors will be allowed to participate in a wider scope of businesses.

Regulatory measures governing "restricted" projects and limits on foreign equity ratios will be more relaxed. Projects with foreign investment exceeding 25% will be considered foreign enterprises in the region and can enjoy preferential tax treatment.

Pansy Yau said: " A different mindset is required when investing in the western region. Considering its landlocked location, the traditional form of fast turnover and quick return export processing trade may not be the best choice for investment."

"As products from Hong Kong generally has a good reputation among consumers in the western region, Hong Kong manufacturers may consider capitalizing on technical strength of the indigenous manufacturers, and forming partnership with them to upgrade their product design, marketing and management to produce for the domestic market by means of a licensing agreement."

Pansy Yau pointed out that most Hong Kong-invested factories in Guangdong have already graduated from the preferential tax treatment and it might be profitable to invest additional production lines that target the domestic market in the western region.

According to the report, the Chinese government has already introduced a number of liberalization measures in pricing to encourage private and foreign investment in infrastructure and public utilities. It suggests Hong Kong investors to consider to participate in the region's infrastucture development by means of TOT (transfer - operate - transfer). With TOT, an investor pays the local authority for the right to operate an existing facility for a specified period of not more than 30 years.


For press enquiries, please contact Lawrence Yau of TDC's Corporate Communication Department at 25844510.

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Content provided by Hong Kong Trade Development Council