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External-oriented Development of Hong Kong and the Pearl River Delta

Mr Peter LeungDirector, Hong Kong Economic and

Trade Affairs, Guangdong

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Introduction of GDETO

Director

Investment Promotion Div.

• Duties: Attract Mainland enterprises to invest in HK

Admin. and Public Relations Div.

• Duties ： Assist HK businessmen to invest in Guangdong

Trade Promotion Div.

• Duties: Support HK businessmen with investments and operations in Guangdong

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Guangdong Province (1)

Area: 180,000 sq. km. Permanent population: 80 million

(over 100 million if including the non-permanent population)

GDP: RMB 1,362.6 billion Primary industry: 109.4 billion (8% of total) Secondary industry ： 730.7 billion (54% of total) Tertiary industry ： 522.5 billion (38% of total)

(The above were statistics of 2003)

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Guangdong Province (2)

21 cities at prefectural level or above in the whole Province Capital city: Guangzhou Special Economic Zones: Shenzhen, Zhuhai, Shantou

Guangdong is not a single market; large differences in the development among various cities Guangzhou’s GDP: 346.7 billion Heyuan’s GDP: 13.7 billion

(The above were statistics of 2003)

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Comparison of Major Cities in PRD (1)

Area (sq. km.)

Permanent population

(10,000 persons)

GDP(billion)

Ratio of the three industries

Guangzhou 7,434 >1,000 346.7 3 : 43 : 54

Shenzhen 1,953 557 286.1 1 : 59 : 40

Dongguan 2,465 156 94.8 3 : 54 : 43

Zhongshan 1,800 138 50.1 5 : 63 : 32

Zhuhai 1,653 82 47.7 4 : 57 : 39

(The above were statistics of 2003)

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Comparison of Major Cities in PRD (2)

Major Industries

Guangzhou

Pillar industries: automobiles; electronic information manufacturing; petrochemicals; fine chemicals; iron and steel; machinery and equipment manufacturing; pharmaceuticals

Focus: conference & exhibition; modern logistics; hi-tech; integrated services

Shenzhen

Pillar Industries: hi-tech; finance; modern logistics

Focus: hi-tech (transforming from processing and assembling to self-R&D, design and manufacture); port logistics; services (logistics, finance, conference & exhibition, tourism, intermediary, international business & information services)

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Comparison of Major Cities in PRD (3)

Major Industries

Dongguan

Pillar industries: export processing (Humen: clothing; Dalang:knitwear; Houjie: furniture)Focus: modern logistics; petrochemicals & gases; conference & exhibition; commerce & trade; real estates; tourism

ZhongshanPillar industries: electronic information; biochemical; electrical machinery; textiles & clothing (Shaxi: casual wear); packaging & printingFocus: home appliances; metals (Xiaolan); lamp & lighting (Guzhen)

Zhuhai

Pillar industries: electronics and communication equipment manufacturing; electrical machinery & equipment manufacturing; biology; pharmaceutical & medical equipment manufacturingFocus: computer software; petrochemical; business travel; conference & exhibition; services

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Comparison of Cities Outside the PRD

Area (sq. km.)

Permanent population

(10,000 persons)

GDP(billion)

Ratio of the three industries

Shantou 2,064 480 52.6 8 : 51 : 41

Zhanjiang 12,471 624 52.1 21 : 43 : 36

Shaoguan 18,400 315 26.8 19 : 47 : 34

(The above were statistics of 2003)

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Guangdong’s Advantages (1)

Advantage 1: Cost Comparison of labour compensation in 2003

(US$/hour):

China India Thailand Korea Japan US Germany

0.80 1.12 1.96 9.99 20.68 21.86 30.60

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Guangdong’s Advantages (2)

Advantage 2: Industry Chain Complete up-stream and down-stream industry

chain Example: Humen in Dongguan

Clothing industry All necessary materials and accessories can be

procured within half an hour　 Production time shortened, overall

competitiveness increased

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Guangdong’s Advantages (3)

Advantage 3: Quality of semi-skilled workers on the rise Experience accumulated since the opening up of

the Mainland market more than 20 years ago 20 million well-trained workers in the Province Strengthen training in hi-tech areas to meet the

needs of industry upgrade

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Guangdong’s Advantages (4)

The largest advantage of Guangdong:

Close to Hong KongClose to Hong Kong

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Hong Kong’s Advantages (1)

Credibility Rule of law, respect for contract

Institutionalisation Well-established legal and professional systems,

procedures and rules

Market-oriented Market economy Government does not participate in or interfere

with market operations

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Hong Kong’s Advantages (2)

International Financial Centre Comprehensive financial system Freedom in foreign exchange Own currency

International Logistics Centre Advanced logistics facilities Robust growth in air and sea transport

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Hong Kong’s Advantages (3)

Information Centre Free flow of information Internet hub

one of the most Internet-savvy cities in the world

Trade Networks More than half a decade’s experience in trade Free trade

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Complementary Advantages of Hong Kong and Guangdong

GDP per capita in PRD: ~US$ 5,000

Services sector developing in Guangdong　 Heading towards the comprehensive “well-

to-do” (全面小康 ) stage

Strong complementarity between HK’s services sector and Guangdong’s manufacturing sector　 Complementary advantages bring mutual

benefits to each other

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Major Markets of Guangdong & Hong Kong (1)

Europe

AfricaMiddleEast

Asia

Oceania

America

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Major Markets of Guangdong & Hong Kong (2)

Around 70% of Guangdong’s products are exported to other places through Hong Kong

Guangdong & HK: External-oriented economy

Much similarity and room for cooperation

Major export markets (2003)

Guangdong Hong Kong, US, EU, Japan, ASEAN

HK Mainland China, US, EU, Japan, ASEAN

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Major Problems Faced by Hong Kong Businessmen (1)

Problem 1: Do Hong Kong businessmen know well about the situation in the Mainland? Status-quo and advantages of various places of

Guangdong Partners for cooperation in the Mainland Modes of cooperation in the Mainland

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Major Problems Faced by Hong Kong Businessmen (2)

HK businessmen have extensive international market networks, with clients spreading over Europe, US, Canada, South-east Asia, etc.

Problem 2: How to make better use of these networks and fully cooperate with Guangdong’s enterprises to increase the market shares together?

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Major Problems Faced by Hong Kong Businessmen (3)

Guangdong’s services sector has been growing rapidly in recent years

HK’s services sector is also actively extending their businesses to the Mainland

Problem 3: How can HK’s services sector help their counterparts in the Mainland to develop? Do they understand their target customers in the

Mainland? How to reduce the worries of their counterparts and

to avoid causing barriers to cooperation?

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Organised by the Trade Development Council (TDC), World SME Expo is a SME-focused exposition which serves as a one-stop platform for SMEs to access a full range of trade services, market knowledge and business advice provided by the TDC, the private as well as the public sectors.

Date: 16 - 18 / 11 / 2004 (Tue - Thu)Venue: HK Convention and Exhibition Centre

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Objectives: • To create a platform for companies and organisations to exhibit products and

services to support the development of SMEs. • To provide a one-stop shop where SMEs can access a full range of useful

services, attend informative seminars, participate in forums, and obtain market advice which addresses their unique business and marketing needs.

• To establish a marketplace where SMEs can explore a bonanza of business opportunity and enter into co-operation with appropriate partners.

• To develop World SME Expo into a trade platform for SMEs all over the world.

Attendance: • SMEs from different product and service sectors in Hong Kong and the region

are expected to attend World SME Expo. They will include owners, directors, senior executives, marketing managers, financial controllers, entrepreneurs and new business start-up executives. In addition, local enterprises from mainland China and SMEs from around the world will also visit World SME Expo and conduct business discussions with Hong Kong SMEs.

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Exposition: • The Exposition will feature a wide array of products and services targetting at

SMEs, provided by all relevant trade and service sectors of the Hong Kong economy, including banks and finance companies, accounting firms, lawyers, professional services and training consultants, IT companies, industry and trade support organisations, government departments, associations, and many more. Mainland trade promotion organisations, mainland enterprises which provide support services for developing the China market, consulates, trade commissions, international chambers of commerce in Hong Kong, various Asian trade promotion organisations, world trade organisations and worldwide SME associations will also showcase their services that may facilitate partnership between SMEs in Hong Kong and their home countries.

• Ten Thematic Pavilions: (i) China Opportunity; (ii) Global Business Connections; (iii) Industry Support; (iv) IT and E-Commerce; (v) Management and Marketing; (vi) SME Financing; (vii) Professional Services; (viii) Trade Services; (ix) Training and Information; (x) World Market Access

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International SME Conference and Seminars

"Sustaining SME Competitiveness in the Global Context"

China Trade Global Markets SME Growth and Development

Industry-specific Networking Seminars

16 November 2004 (Tuesday)

CEPA II Opportunities for SMEs China's Latest Policy on Customs and Electronic Declaration  Latest Policy of China Taxation - Profit Tax, Value Added Tax and Personal Income Tax  Recent Market Trend in China : Beijing Olympics & Environmental Protection Start-ups of Private Business in Mainland  Hong Kong - Trade Platform for Mainland Enterprises to Go International  

Path to Indian Market The Growing Middle East Market  Opportunities for SMEs in Central and Western China  

Design - A Key to Business Success in Today's Competitive MarketplaceHK Forum: HK -Your Best Platform for Selling, Sourcing & Manufacturing in China Hot Issues in Trade: Anti-dumping and Hi-Tech & Strategic Product Trade  Financing Support for Developing New Markets  Q-Mark Expert Series: Enhancing Quality Management and Customer Service through Quality Certification HK Forum: Experience Sharing on How Hong Kong Can Facilitate Overseas Companies to Enter the Chinese Market  

Cooperation Opportunities for Auto Parts Industry Global Marketing Strategy of Ceramic Industry  Business Opportunity of Service Trade and Development of Private Enterprises in Yangtze River Delta Region Business Opportunities in Changchun Municipal 

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International SME Conference and Seminars

"Sustaining SME Competitiveness in the Global Context"

China Trade Global Markets SME Growth and Development

Industry-specific Networking Seminars

17 November 2004 (Wednesday)

Success of Mainland Private Enterprises in Hong Kong Financing & Credit Risk Management in Mainland  How to Effectively Protect Intellectual Property Rights SMEs Grasp New CEPA Opportunities in Pan-PRD Region 

Growing Opportunities in Russia and North Europe  Business Opportunities in Guangdong Hinterland  A Tale of Two Cities - Exploring European Market via UK & France  Market Environment in South Europe & North Africa Best Practice in Doing Business in the US  

SME Convention: Clustering and Growth Textile & Garment Industry Networking Seminar - Impact of Quota Free After 2005 Cooperation Between SMEs in Hong Kong and Chinese Mainland  SME Convention: Business Creation and Innovation  Development Projects Financed by International Aid Agencies - Current Trends and Opportunities for Goods and Service Providers 

Path to Enter the Cosmetics Retailing Market in China Cooperation Opportunities for Pan-PRD Environmental Protection Industry  Logistics Industry Networking Seminar  Cooperation Opportunities for Chinese Medicine Industry  Business Opportunities in Hunan Province 

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International SME Conference and Seminars

"Sustaining SME Competitiveness in the Global Context"

China Trade Global Markets SME Growth and Development

Industry-specific Networking Seminars

18 November 2004 (Thursday)

Effective Brand Building Strategy in China  China's Recent Liberation of Retail and Distribution Channels for Foreign Enterprises  Quality Control of Production in China - 3C Certification  Marketing Strategy in China's Changing Consumer Market  

Market Opportunities in South East Asia Fast Growing Market in Bohai Bay & Shandong Region  Latest Trend of American MarketThe Evolving Central and Eastern European Market  Exploring European Market from Belgium - Opportunities of New Tax Treaty with HK New Opportunities in Ireland  Challenges in Japanese Market 

SME Convention: Growth in Globalized Market  Ethical Sourcing for Production in China & Corporate Social Responsibility  Mediation: The Effective Tool for SME Management

Business Opportunities in Liaoning Province Exploring the Retail Market in Pearl River Delta Region Cooperation Opportunities of Food Industry in a New Era 

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Major Problems Faced by Hong Kong Businessmen (4)

An official of the National Development and Reform Commission once said:

In the eyes of foreign enterprises, HK is a city of China;

In the eyes of Mainland enterprises, HK is an international city;

In the eyes of HK people, what kind of a city is HK?

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Business Opportunities through CEPA

Legal services:a) Mainland law firms can employ HK lawyersb) (15) qualified HK lawyers to practise in the

Mainlandc) HK residents can take legal qualification

examinations in the Mainlandd) HK firms can set up representative offices and have

joint operation (not partnership) with Mainland firmse) Relax the minimum stay requirements (no

restrictions in Guangzhou and Shenzhen)

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Other Potential Opportunities

Clients:a) Foreign firms

There are 76,000 HK firms in Guangdong There are some 20,000 Taiwanese firms in

Guangdong There are some 10,000 foreign firms in

Guangdong Many foreign firms from Europe want to set up

firms in HK for entering China

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Other Potential Opportunities

b) Private local firms The GDP of private enterprises is about 40% of the

total GDP in the Province. Many of them want to set up firms in HK. There are already over 280 firms listed in the HK

Stock Exchange. Many are queuing up for their turn.

c) Foreign trade Guangdong is the largest export and import centre for

the Mainland, accounting for one-third of the total national foreign trade (about US$250 billion in 2003)

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IP Professional Services

This is a growing sector by itself but is only at the very early stage.

The concept of Intellectual Property Rights is growing but violation to it is widespread.

We need to put efforts to cultivate our market.

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Method of Cultivation (1)

1. Contacts/Promotion2. Diversify our business into related legal field,

e.g.: Legal service for commercial contracts (foreign

trade, merge & acquisition, trademarks registration, patent registration, etc.)

Arbitration – Use HK’s advantage as the arbitration centre between Mainland companies and their foreign counterparts

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Method of Cultivation (2)

3. Joint efforts with other professionals, e.g.: With bankers/accountants for listing With HK designers – IP vs Design With building services for infrastructural

projects With exhibition & conference organisers for

product and trade promotion Other examples as in the SME Exposition

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We need to

1. Understand the needs of our clients2. Let our clients know the benefits of our services to

them3. Coordinate with other services to provide more

“one stop” services4. Understand the global market and our own niches

in the market5. Build up stronger links with foreign partners to

gear up our preparation for the international market

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Thank You!