24 June 2010
Hong Kong Maintains Role as High-quality Services Provider
HKTDC Survey Shows Increased Production, Sourcing and Sales on Mainland
24 June 2010 – Research conducted by the Hong Kong Trade Development Council (HKTDC) indicates that Hong Kong remains an operation centre for Hong Kong companies to coordinate and manage their businesses, despite an expected increase in offshore trading activities.
“Our survey confirms that Hong Kong’s role as a provider of high-quality trade-supporting services will persist,” said HKTDC Assistant Chief Economist Daniel Poon at a press conference today. Mr Poon also predicted that demand for high-quality services “will generate more top quality, skill-intensive, high paying, and high-value jobs in the city.”
The findings are drawn from the latest in a series of large-scale surveys which have been done by the HKTDC Research Department every three years since 1988. The surveys trace where Hong Kong companies produce or source exports and respective shipping arrangements as well as trends relating to offshore trade by Hong Kong companies.
Offshore trade, which is not reflected in Hong Kong’s trade statistics, refers to trade in goods either transhipped through Hong Kong or directly shipped overseas. The most recent survey in the series was conducted in the first quarter of 2010, and covers 4,520 Hong Kong traders and manufacturers who responded about their business situations in 2009.
Production, Sourcing and Shipping Patterns
According to the newly-released report Expanding hinterland of Hong Kong traders and manufacturers, through the years China has remained the major production base and sourcing origin for Hong Kong companies. In 2009, 93 per cent of respondents said they produced or sourced on the mainland. The percentage of those producing/sourcing solely on the mainland increased quite significantly from 56 per cent in 2006 to 62 per cent in 2009, suggesting that to Hong Kong companies, China’s attractiveness as a production base or a sourcing origin has increased in the past few years.
For overseas exports of China origin, the proportion of offshore trade – including direct shipment from the mainland to overseas destinations and transshipment via Hong Kong – dropped from 56 per cent in 2006 to 51 per cent in 2009. The share of re-exports through Hong Kong increased from 44 per cent to 49 per cent.
Mr Poon attributed the decrease in offshore trade activities for China’s overseas exports to changes in buying patterns amid the global economic downturn. “Although a gradual recovery was evident in late 2009, overseas importers and retailers remain conservative and tended to place only small orders and require short delivery times, leading to higher demand for cargo delivery from Hong Kong.”
Mr Poon said that considering delivery time, costs and risks, the more distant the origin of manufacturing and sourcing from Hong Kong, the lower the incentive for the manufacturers and traders to ship their products back to Hong Kong for re-export.
Shipping arrangements, however, were dependent on other factors, according to the 2009 survey. Products which are high in value but small in size and lightweight tended to be re-exported through Hong Kong, and usually by air. The survey found that to be the case for 79 per cent of the jewellery, 62 per cent of the watches and clocks, 58 per cent of the electronic parts and components and 57 per cent of computers and telecom products reported.
Growing sales to China have also had a significant impact on offshore trade. The survey found 27 per cent of respondents had sold goods on the mainland in 2009, virtually unchanged from 2006, but the share of respondents with a very high sales amount increased. For example, the figure for those reporting sales above HK$10 million increased from 27 per cent in 2006 to 29 per cent in 2009.
Mr Poon also noted that the product mix has changed in recent years. "In past surveys, raw materials, parts, components, and semi-manufactures constituted more than half of the goods sold to the mainland by Hong Kong companies,” he said. “Amid the growing popularity of local sourcing, this share has decreased gradually – whereas the share of consumer or finished products has increased from 37 per cent in 2006 to 44 per cent in 2009.”
The rising trend toward offshore trade, along with the gradual extension of producing and sourcing from the Pearl River Delta to other regions may also indicate that Hong Kong’s role as a logistics hub is diminishing.
Despite that, some 60 per cent of Hong Kong companies surveyed said that over the next three years they would maintain air cargo and sea shipments via Hong Kong, and continue warehousing and cargo consolidation in the city. More than 10 per cent of the respondents even predicted they will increase such cargo shipments and expand logistics-related activities in Hong Kong.
Trade Support Services
As increasing offshore trade poses a threat to logistics-related activities, it also appears to be generating demand for high-value, trade-supporting services. When the 2009 survey asked respondents about their plans for using Hong Kong support services over the next three years, 88 per cent said they would perform finance and accounting, 88 per cent trade financing and insurance arrangement, 83 per cent corporate management and strategic planning, 73 per cent sales and marketing, and 71 per cent trade documentation.
“After all, Hong Kong’s services sectors are gaining, and are expected to continue gaining more business from offshore activities,” Mr Poon said. “More importantly, such demand will generate more top quality, skill-intensive, high paying and high-value jobs in Hong Kong.”
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About the HKTDC
A statutory body 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 global offices, including 11 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and throughout Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and on the mainland, while providing information via trade publications, research reports and online. For more information, please visit: www.hktdc.com.