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Information on doing business in Kong Kong, presented at the International Trade Fair on 12/7/12


<p>Advantages of partnering with Hong Kong</p> <p>Hong Kong:Helping Manage Opportunities and Challenges in ChinaBridget Lee, Director, ChicagoMcHenry, ILLINOISDecember 7, 2012</p> <p>All eyes are still on China! Heres why:Annual GDP growth at 10.5% over 10 yearsAnnual trade growth at 21.1% over 10 yearsMassive annual FDI: US$105 billion (2010)Worlds 2nd largest economyThe China Opportunity</p> <p>No longer just a production base:Growing middle class 300 millionProjected urban population 350 million more by 2025 Domestic consumption on the rise (18.4% growth in 2010) *According to a March 2009 report by McKinsey Global InstituteThe China Opportunity</p> <p>Growing consumer market More than 900 million mobile phone usersMore than 457 million internet usersGrowing demand for imported wine average of 63% p.a. (2006 to 2010)Largest car market in the worldOne of the worlds largest luxury goods markets100 million Chinese tourists expected by 2020Growing rural consumer marketThe China Opportunity</p> <p>Industry moving up the value chain Upgrading industrial processes8.4 million Mainland Private Enterprises (end of 2010) Growing demand for business services and technologies R&amp;D expenditure increased by average of 22.8% per year from 2003 to 2010The China Opportunity</p> <p>Focus on technology in Chinas 11th Five Year Programme</p> <p>Hong Kong: a natural hub for technology flows to and from Chinese mainland</p> <p>Hong Kong: a technology trade centre with the right location, right economy, and right people</p> <p>Hong Kong AdvantagesTechnology Marketplace</p> <p>Hong Kong AdvantagesTechnology MarketplaceLocationSituated next to Pearl River Delta, where 30% of Chinas high-tech production takes place</p> <p>EconomyCommercially sophisticated technology platform with excellent project financing and fundraising options</p> <p>PeopleWell-educated talent pool dedicated to the pursuit of innovation and technology</p> <p>Hong Kong AdvantagesCEPAOne country, two systems Closer Economic Partnership Arrangement (CEPA)</p> <p>Acts as a free trade agreement with the mainland</p> <p>WTO-plus market access for service providers</p> <p>Tariff-free access to the mainland for products</p> <p>Overseas companies can easily benefit!</p> <p>Hong Kong AdvantagesTechnology MarketplaceHong Kong industries technology strengths:InnovationCommercialisationApplicationIndustrial engineering</p> <p>Hong Kong AdvantagesTechnology MarketplaceHK companies are engaged in different kinds of technology transfer:Sharing of proprietary know-how for system integration and software developmentEngineering servicesProviding consultancy</p> <p>Hong Kong AdvantagesTechnology MarketplaceFast Facts:HKs total high tech exports exceed US$130 billion per year (2007)4,600+ HK companies undertaking R&amp;D activities16,000 companies engaged in innovation activities</p> <p>Hong Kong AdvantagesTechnology MarketplaceThe China factor</p> <p>Growing demand for advanced technologies in manufacturing and management</p> <p>Seeking advanced technology to meet new environmental standards</p> <p>Chinese technology companies eager to explore international markets</p> <p>Hong Kong a partner for foreign technology companies</p> <p>Hong Kong AdvantagesTechnology MarketplaceMain driver of technology transfer in PRDThe most advanced technology comes from foreign companies using Hong Kong as a baseHong Kong Shenzhen Technology Alliance</p> <p>Hong Kong Advantages:Technology MarketplaceSourcing and selling high-tech products </p> <p>Hong Kong offers: International experience in technology trade Experience in selling to Chinese mainland markets Strong IP protection Funding and finance options Preferential treatment on goods under CEPA </p> <p>Pacific Bridge InitiativeUS-Hong Kong Business Partnership Program Hong Kong: www.hktdc.com/pacificbridgeFind Opportunities in China &amp; AsiaHKTDC Integrated Marketing PlatformFind the Right Partner via HKTDC Business MatchingITA Certified HKTDC Tradeshows </p> <p>U.S. Partners: USDOC USEAC/ Commercial Service State Agencies - STEP Grant Funding USDA ATO FAS Hong KongUSDOC CS Hong KongTrade Associations </p> <p>Creating opportunities in international tradeHong Kong Trade Development CouncilProviding InformationMatchingBusinessPartnersConnecting Customers</p> <p>HKTDCProviding Information11 offices in Chinese mainland, more than 40 worldwideBeijingHong KongFrankfurtTokyoNew YorkBangkokDubai</p> <p>HKTDCProviding InformationResearch publicationsAnalysis on topical issues and specific industriesExcellent sources for developing business models</p> <p>HKTDCProviding InformationSubscribe for free at www.hktdc.com</p> <p>Matching Business PartnersConnect with 120,000+ quality suppliersNearly 1 million registered buyerswww.hktdc.comProduct Magazines:15 titles from a variety of industriesWorldwide readership of 5 million annuallyHKTDC</p> <p>Matching Business PartnersHKTDC Business MatchingA customized service tailored to your business needsHKTDC</p> <p>HKTDC30+ International Trade FairsConnecting Buyers and Sellers through:Ten of the largest fairs in AsiaThree of the largest fairs in the world</p> <p>Bridget Lee, DirectorTel:1 (312) 726 4515 Email: bridget.lee@hktdc.orgChicago Office</p> <p>***In a globalised world, all economies will inevitably be affected by the global turmoil, and China and Hong Kong are not excluded.However, China has been relatively less affected, and most agree that it has led Asia out of further depression. </p> <p>So China is still a major focus for the business world. Why is the whole world so captivated by the China story? </p> <p>Annual Growth Rate 10.5% over last 10 years (2001-2010) this is unprecedented in world history. And the long-term outlook on China is good. In the first nine months of 2011, Chinas GDP grew by 9.4%.Why? Firstly, on the external economy, China is transforming its manufacturing as well as export structure, by expanding along the value-added chain.They are moving from assembly of imported parts to the production of higher value-added parts and accessories. Such development can be evidenced by (a) the rising share of electronic products in Chinas exports, (b) China turning from a net importer to net exporter in certain key electronic components, (c) and more foreign companies setting up R&amp;D centres in China.</p> <p>Secondly, domestically, China has a huge population. As the general income level continues to rise, this is turning into a huge consumer market. One of Chinas policy directions is to have more growth stimulated by domestic demand, and domestic consumption will therefore continue to grow ata faster pace.</p> <p>Total trade growth average 21.1% over the last 10 years (2001-2010). ~ While Chinas exports are certainly affected by a sharp slowdown in overseas demand, forceful fiscal and monetary stimulus policies can cushion the external shock, i.e. creating effective demand to sustain output growth. Expanding bank loans is vital to sustain investment growth and China has the means to orchestrate that.</p> <p>33 years ago, in 1978, China was ranked 28th in world trade. It is now the worlds 2nd largest economy. </p> <p>**In the past, China was a base for production. Now, its a market for consumer goods especially branded consumer goods.</p> <p>Chinese people are earning more. They want to raise their standard of living.Despite global woes, domestic consumption is still growing. Chinas domestic retail sales of consumer goods went up 15.5% in 2009 and 18.4% in 2010 in nominal terms. Continued growth in disposable income has contributed to the steady increase in retail sales. In the first nine months of 2011, retail sales grew by 17%Middle class of over 300 million &amp; growing steadily according to a recent Deloitte report. (This is more than the entire population of Japan!). The Deloitte report also estimates that if China's GDP continues to grow by 8-9% annually, the size of middle class population can grow by as fast as 15-20% every year. (Definition of middle class = families with an annual household income of US$10,000, according to a definition by Deloitte. )</p> <p>** With increasing wealth, Chinese consumers have more money to spend on the latest gadgets and technology. </p> <p>There were 906 million mobile phone subscribers as at June of 2011. This is more than eight times that of Germany, which has an estimated 110 mn mobile phone subscriber base.China had some 457 million internet users, as of end 2010. This represents a rise of 73 million compared to end 2009, or a 19% increase. China became the largest car market according to the China Association of Automobile Manufacturers. As at June 2009, sales of 6.1 million automobiles, surpassed that of the US and of course Germany, representing a growth of 17.7% from the year earlier. In 2010, total sales of automobiles grew by 32% to 18 million. In the first nine months of 2011, sales of automobiles grew by 3.6% to 13.6 millionAccording to a report released in Feb 2011 by HK-based investment bank CLSA Asia-Pacific Markets, mainland consumers will snap up 44 per cent of luxury goods sold in the world by 2020, up from 15 percent in 2010. This growth momentum, driven by rising personal incomes, social aspirations and more stores on the mainland, means a compound annual growth rate of 23 per cent in the current decade. And the Chinese are travelling more prediction 100 million Chinese travelling abroad by 2020.</p> <p>(Starting from Feb 2009, China has implemented the electrical household products for rural areas project, subsidizing rural households to buy electrical household products in the coming four years. The project is projected to stimulate consumption by Rmb 920 billion.)</p> <p>*Rising number of MPEs mean there is a growing demand for business services and technologies especially in the PRD. Chinese Government is determined to upgrade the countrys manufacturing industry with new technology, especially to make the sector more environmentally friendly. Chinese companies have huge needs in areas such as accounting and legal, logistics and technology, design and packaging.Many of these 8.4 million Mainland Private Enterprises (as at end 2010) are also looking to go out and do business internationally. Around 948,202 of these are based in Guangdong Province, neighbouring Hong Kong. Only 43% of Chinas GDP (2010) is made up of the service sector, and the Government is keen to expand this proportion to more than 50% by 2020 (according to a Chinese State Council Paper). So there is a large gap to fill. According to the 12th Five Year Programme, the share of service will be expanded to 47% by 2015.</p> <p>Hong Kong is well placed and well prepared to reap the rewards of the technology trade. Hong Kong is a natural hub through which technology streams to and from the mainland.</p> <p>Mainland Chinas high-tech production hasquadrupledfrom2000 to2006 to US$507 billion and has set targets for developing its own proprietary technology and importing designated technology from overseas, as stipulated in its 11th Five-Year programme. </p> <p>Hong Kong has three critical factors necessary to create and support an elite technology trading centre: the right location, the right economy and the right people. Let me expand on these points. </p> <p>Hong Kong is situated right next to the PRD, where approximately 31 per cent of Chinas high-tech development takes place. It is uniquely placed to oversee regional project management while initiating and coordinating cross-boundary R&amp;D, technology transfers and manufacturing processes. Secondly, Hong Kong also offers a commercially sophisticated technology platform. Its banking and financial services are among the most advanced in the world. The city is a major centre for project financing and fundraising, supported by a robust stock exchange and a strong US$51 billion venture capital market, which is essential for funding technology projects.This platform already supports such companies as Samsung, Microsoft, Motorola, Philips, IBM, Hitachi and Ricoh. Substantial investment has also been made in R&amp;D and incubator centres such as those at the Hong Kong Science &amp; Technology Park. Thirdly, our people are well educated, with a large pool already dedicated to the pursuits of innovation and technology. Hong Kong people are also born traders, with the necessary mainland networksHong Kong speaks the language of international business and we speak your language! With 300,000 SMEs, Hong Kong has one of the largest percentages of entrepreneurs anywhere in the worldUnrivalled experience with China more than 30 years of doing business, as well as language and cultural tiesTech savvy population blending East and West culture ideal test bedHighly educated workforce. </p> <p>Hong Kongs industries excel at certain areas like innovation, commercialisation, application and industrial engineering, which are backed by a technology cluster composed of local as well as foreign enterprises.</p> <p>Coupled with robust demand from the Chinese mainland for various kinds of technology, Hong Kongs role as a centre for technological cooperation and integration in the region is set to develop further in the medium term.</p> <p>Hong Kong companies are engaged in different kinds of technology transfer and cooperation with mainland and foreign companies. </p> <p>While technology licensing is a typical means, other transfers include:Sharing of proprietary know how for system integration and software developmentRendering of engineering services in provision of equipment and componentsProviding consultancy in supply of parts/ components for product development. </p> <p>Hong Kong's total exports of high-tech products in 2007was HK$1,013.7 billion (US$ 130 billion), up 18.7% y-o-y.Major export destinations were mainland (58.2%), USA (8.8%), Japan (3.4%), Taiwan (2.9%), Singapore (2.9%) and others (23.9%). </p> <p>Some 4,644 establishments have undertaken R&amp;D acitivities in 2006, approximately 1.7% of all establishments in the business sector in Hong Kong. </p> <p>The Chinese mainland is both the major source and the major destination of Hong Kong's technology products. China is seeking advanced foreign technology to meet environmental standards, and they are taking the environment very seriously indeed. The 11th Five-Year Plan has laid out standards for nationwide and urban environmental protection. It has enacted its Cleaner Production Promotion Law (CPPL), closing down outdated production facilities, and requiring manufacturers to design and construct pollution-control facilities together with production facilities, and requiring them to adapt their processes and product designs for minimal impact to the environment. It is also beginning to strengthen its enforcement of such regulations. </p> <p>These new clean production policies are demanding new technologies. Energy conservation and environmental protection have emerged as a high priority issues. </p> <p>HK companies are especially skilled at identifying niches in various markets. Foreign companies can use the Hong Kong platform to adapt their technologies for the China market, and achieve sales growth. With Hong Kongs strengths in sales, marke...</p>