emba 2007– the chinese university of hong kong g4 trading and manufacturing in hong kong – an...

EMBA 2007– The Chinese University of Hong KongG4

Trading and Manufacturing in Hong Kong

– An Asset or Liability?

By Group 4: Sunny Chai, Cally Chan, Raymond Ho, Tian Jie, Freda Lam


Controversial quotes

• 香港愈不像中国愈有利 - 信报社评

• （失去制造业调整经济）香港好象一个美丽的姑娘，一旦失去阔老男友，又没有工作收入，面对月租五万的豪宅，开着未供满的宝时捷，只能欲哭无泪。 - 臧文仲

• 当市场机制的运作有一些政府才能解决的问题出现时，适当的干预是实事求是的。 - 任志刚

• 香港明天會更好基金警告，香港未來三至五年可能因工序北移，流失十萬個相關職位


Agenda

• Scope of Trading and Manufacturing industry

• Analysis of Current Situation in HK

• Economic Considerations – What is our future?

• Possible Directions of HK

• Conclusion


Scope of Trading & Manufacturing Industry

• Manufacturing

• Import and Export Trading (merchandise)

• High value-added supporting services – value chain

• How about Offshore Trading?


Analysis of Current Situation - Trend

• Development Trend of Industry Relocation

– 1970’s– 1980’s– 1990’s

• Complementary role between HK and Mainland– R&D– Design– Sales and marketing– Order processing– Manufacturing– QC & packaging– Shipping– Trade financing and

insurance

VALUE CHAIN !!!

Survey Result - Place of origin of goods by export value

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Hong Kong China Other places

Made in

1998

1991

1994

1997

2000

2003


Analysis of Current Situation – Offshore Trade

• Why Offshore Trade?– Direct shipment vs. Re-export/ Tran-shipment– Improved China port facilities– Increased production hub in YRD– Cost, speed and efficiency consideration

2000 2001 2002 2003 2004 Jan-Jun 05Imports 1,657,962 1,568,194 1,619,419 1,805,770 2,111,123 1,085,440 Exports: - Domestic 180,967 153,520 130,926 121,687 125,982 52,070 - Re-exports 1,391,722 1,327,467 1,429,590 1,620,749 1,893,132 981,981

• Why re-export still increased (36% from 2000 to 2004)?

• Throughput of HK cargo rose by 1.3% but Shenzhen’s by 23%


Analysis of Current Situation - Globalization

• Can offshore trade contributed to our GDP?

• Globalization of HK manufacturers– Low cost production and sourcing– Offshore trade (China, Indonesia, Cambodia, ….)– Overseas presence such as sales agents, R&D, etc.


Analysis of Current Situation - GDP

• GDP of manufacturing drops from 23% to 3.5% from 1980 to 2003 while for trading – increase from 20% to 26%

• Dollar value of GDP contribution significantly increased for trading

GDP by major economic activity at current price

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1 3 5 7 9 11 13 15 17 19 21 23

1980 - 2003

Perc

en

tag

e c

on

trib

uti

on

to

GD

P a

t

facto

r co

st

Manufacturing

Wholesale, retail andimport/export trades,restaurants and hotels

Financing, insurance, realestate and business services

Value added at current prices of selected economic activities

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1 3 5 7 9 11 13 15 17 19 21 23

1980 - 2003

HK

$ m

illi

on Manufacturing

Import/export trade

Financing

Total


Analysis of Current Situation - Employment

• A lower unemployment rate from 7.9% in 2003 to 6% in 2005 does not help the manufacturing sector.

• Where can we house the manufacturing labor?

Extracted from Census and Statistics Department and HK Social & Economic Trend 2003 Ed.

Number of persons engaged in 1992 %　 2002 %

Manufacturing sector 565,100 22.6% 184,500 5.3%

Import/ export trade sector 398,000 15.9% 501,000 14.4%

Wholesale, retail, restaurants and hotels sector

516,800 20.7% 482,000 13.8%

Financing, insurance, real estate and business services sector

314,500 12.6% 441,300 12.7%

Community, social and personal services sector

268,100 10.7% 402,600 11.5%

Others (including unemployment) 435,600 17.4% 1,475,700 42.3%

Total Labor force 2,498,100

100%

3,487,100 　

100%


Economic Considerations – What’s our Future?

• Michael E. Potter’s research on competitiveness of countries: – Factor driven– Investment driven– Innovation driven

• HK’s competitive advantages:– Geographical location– Nature resources - land– Human capital– Labor cost

• Shrinking advantage of re-export and port facilities



• International finance center and business hub

• High value-add processes in value chain

• Innovative driven industries (not primary driver)



• Survey by Enright, Scott & Associate in 2005 – best Asia Pacific city for regional HQ

• Survey by TDC in 2002 on investors in PRD:– 19.7 % has office in HK– 14.5% has a plan to place an office in HK– 49.3% has great interest and potential of opening

an office in HK in the future– 16.6% is having no plan to do so


Possible Direction of Hong Kong Industries

• Role of Hong Kong Government

• Participation of Investors and Business Owners

• Education and Community Support and Development


Role of Hong Kong Government

• Non-intervention Policy

• Not Clearly Defined Industrial Policy

• Comparing to other Asian countries

• “Market Leads, Government Facilitates”


Well-defined Industrial Policy

• Establish of Industrial Policy to support Hong Kong as an International Business Hub

• Set up of Industrial Technology Board to help monitoring the policy


Encouraging R&D Investment

• Diversify Activities in Research & Development

• ASTRI (Applied Science and Technology Research Institute)

• “High Tech, hi-yeah (problems and losses); Low Tech, lo-yeah (gains and profits) by Elite Ind. Holdings founder – 劉永齡

• High-Technology vs. Applied Technology


Encouraging R&D Investment

• R&D Investment Comparison

3.22%

1.93%

1.83%

0.85%

0.50%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%

Korea

Japan

Canada

PRC

Hong Kong

R&D Investment vs. GDP (2003)


Further Promoting the Business Hub

• Hong Kong Trade Development Council

• InvestHK

• Nerve Centre – Business Hub


Opportunities through Value-added Approach

• Proactive Thinking

• Invest in Value-added Products and Services

• Maintain Design Expertise and Core Technologies in the organization

• Make a Difference among your Competition


• System Improvement through varies Management Tools

• Just in Time (JIT); Failure Mode and Effect Analysis (FEMA); Standard Practice Time (SPT); 6 SIGMA; Statistical Process Control (SPC); Total Productive Maintenance (TPM); Quality Control Circle (QCC); 5S, etc..

• Employees Training through System Qualification or Participation in Award Competition




• Value-added through Brand Building

• For Manufacturing, from OEM to ODM, from ODM to OBM



• Creative Industries (arts, film, music production, publishing, theme park, tutoring and training, healthcare and beauty care, organic food production, and business consultation )

• Environmental Protection Industries (300 establishments with employment of some 26,000 persons)

• Tuen Mun EcoPark ($316 million to build a 19-hectare EcoPark in Area 38, Tuen Mun by the Environmental Protection Department)

• Directives from EU and other countries


Education & Community Support and Development

• Education system and Syllabubs in pace with Business Hub development

• Community Awareness of Technology Change


Conclusion

• Hong Kong is not feasible for low-value and labour intensive process; look into area which value can be added

• Continue to provide stable political and social economy, upholding of law, low tax, and free trade policy

• Enhance development as a Nerve Centre and an International Business Hub


Trading and Manufacturing in Hong Kong – An Asset or Liability

Thank You

Q & A

emba 2007– the chinese university of hong kong g4 trading and manufacturing in hong kong – an...

Documents

trading slide

policy slide

development slide

hong kongchinaother

applied technology slide

primary driver slide

freda lam slide

export value