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Regional Trade Agreements Could Hurt China Exports
Hong Kong Could Help Mainland Boost its Competitiveness

 Speakers at today’s press conference were (left to right): HKTDC Principal Economist (Global Research) Daniel Poon, Director of Research Nicholas Kwan, Deputy Director of Research (Greater China) Pansy Yau, and Principal Economist (Asian and Emerging Markets) Dickson Ho
17 September 2013 – Rising protectionism and the growth of Regional Trade Agreements (RTAs) are making international trade more difficult. And China could be among the biggest losers, according to Hong Kong Trade Development Council (HKTDC) Director of Research Nicholas Kwan, speaking today at an HKTDC press conference.

China has been among the major beneficiaries of an open, multilateral trade system, particularly since its accession to the World Trade Organization in 2001, according to Mr Kwan. “Between 2000 and 2012, mainland China’s total trade grew 715 per cent, making it the world’s largest exporter and second-largest importer. The mainland’s share of world trade has also jumped, from one per cent in 1980 to 10 per cent in 2011.” 

Trans-Pacific Partnership
The increase in the number of exclusive trade blocs, however, could dampen Chinese mainland exports, according to Mr Kwan – especially if the mainland fails to join such large RTAs as the Trans-Pacific Partnership (TPP). 

HKTDC Principal Economist (Global Research) Daniel Poon noted that a dozen countries, including the United States, Japan, Australia, Canada and Singapore, are now involved in TPP negotiations. The TPP market represents nearly 800 million people and a combined GDP of more than 38 per cent of the world’s economy. “If secured, the pact will certainly become one of the 21st century’s most important trade agreements,” said Mr Poon. He added that, if the mainland is excluded from the agreement, its export competitiveness could slump. “Countries like Vietnam, Malaysia and Japan could put more pressure on Chinese exports to the US. Industries that would likely suffer include footwear, clothing, vehicles and related components, as well as machinery equipment.” 

Hong Kong Role
Mr Kwan said the mainland needs to adjust its economic structure to cope with today’s complicated trade environment. “Hong Kong,” he said, “could help the mainland enhance its competitiveness, particularly in the services sector.”

“The mainland must continue to boost domestic consumption,” added HKTDC Deputy Director of Research (Greater China) Pansy Yau. She noted that the mainland’s urbanisation drive has expanded production and fostered a growing consumer class.

Building Cities
Based on figures from the top 30 mainland cities, the urban population rose 12 per cent between 2006 and 2011, while GDP more than doubled. “As the consumer class continues to grow in these cities, the size and depth of the retail market will increase swiftly,” said Ms Yau. She added that, since the mainland’s urbanisation policy focuses on expanding small and medium-sized cities, “this will draw in more residents and create jobs. In other words, the growth of second- and third-tier mainland cities will be rapid.” Ms Yau suggested that companies targeting the Chinese market should rethink their retail strategies and reach out to consumers in smaller cities. She also said that these smaller mainland cities offer business opportunities for Hong Kong companies specialising in medical services, childcare, elderly care and other areas.

Export Confidence Down
Mr Kwan revealed that the HKTDC Export Index had dropped to 42.1 in the third quarter. A reading below 50 indicates a pessimistic sentiment during the quarter and signals a contraction in Hong Kong exports over the short term. “This negative sentiment was spread across all major industries and markets,” said Mr Kwan. “Except for the watch-and-clock sector, all major industries showed a positive procurement sentiment, which may indicate export improvement over the long term.” 

Video: “Finding Opportunities Under Regional Trade Deals” – http://youtu.be/Uxj2n0BsFJE

Media Enquiries
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Joe Kainz
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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. 

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