Hong Kong’s New Role In Asia

he handover of Hong Kong from British hands back to China was carried out in 1997. How
does Hong Kong present itself today? What has changed in relation to China and to the world, and
how does the Hong Kong Trade Development Council (HKTDC) see its role as a supporter of the local
industry? In an interview with

Textile World Asia
, HKTDC Economist Wenda Ma answered these and other questions. It must be mentioned that this
interview took place a few days before the collapse of the US mortgage market began.

The main purpose for founding HKTDC was to support the local industry in its export efforts.
Offices were opened all around the world to link interested local people with the exporting Hong
Kong enterprises. The so-called “Trade Inquiries” (TIs) are virtually legendary. The monthly volume
of these inquiries at the country offices is testimony to the importance of these offices to
HKTDC’s mission. The organization of business travel to Hong Kong and Shenzhen, in the hinterland
of Hong Kong in mainland China, were just as important a task.

Hong Kong has been a special administrative region of China since 1997.

Hong Kong Trade Development Council

wenda TW Asia:
What are the HKTDC’s main targets today?

Wenda: Basically, we still have the same tasks; however, the goals were enlarged.
Of course, the amount of TIs dropped with the emerging electronic media correspondingly, since we
offer a very large Internet platform today, where interested parties can get first-hand information
from all around the world. The services also were expanded strongly; today, we also have a service
which is called China Business Advisory Services. Many important personalities from the Ministry of
Trade and Commerce also support the business community to make business relations easier.

TW Asia: Is the customer structure still the same, or has it changed much since
the handover?

Wenda: In principle, not. Small and medium-sized enterprises are still the
majority of our customers.

TW Asia: In the past, the main emphasis of its activity was for certain to
generate TIs. What is this like today?

Wenda: We still want to bring people together – this is our job. The production has
practically moved from Hong Kong to Shenzhen in the mainland Guangdong Province, which is a
two-hour drive from Hong Kong. We help many enterprises to make their first steps into Shenzhen.
Furthermore, and this is a very important activity, we produce industrial and economical reports on
certain industry areas, countries, regions. These are open, accessible data that one also can buy
in our bookshop. The Internet (www.tdctrade.com) shouldn’t be forgotten with
our information center (hktdc@tdc.org.hk), of course.

Same Tasks

TW Asia: Within the last few years the worldwide markets have changed strongly.
Has this also affected the activities of the TDC?

Wenda: Not really. As I mentioned before, we have an Advisory Board with
personalities of large HK enterprises who give us further support. Of all enterprises in Hong Kong,
90 percent are small and medium-sized companies. Out of this, 84 percent produce their goods in
China. With the accession of China to the World Trade Organization, everything got much simpler and
faster. The Hong Kong people always knew how to trade. In 2006, Hong Kong was the second-largest
trade city after London. Now, Hong Kong is at position four, and Shanghai is second. Theoretically,
Hong Kong could be replaced by Shanghai, but one is better protected in Hong Kong in terms of the
law, but also against copying.

TW Asia:
And how was Hong Kong after the handover of 1997?

Wenda: From 1998-2003, it worked quite badly, unemployment increased to 9 percent
– today we are at 4.3 percent. But also before 1997, it was like an air bubble which had to burst
sometime. Yes, we also have many mortgages in Hong Kong, but everything is very stable.

The Hong Kong Trade Development Council is headquartered at the Hong Kong Convention &
Exhibition Centre.

Production Shift

TW Asia: As mentioned, the production has moved to China predominantly. However,
why are most enterprises in Hong Kong still residents?

Wenda: The production is in China; however, the infrastructure remains in Hong
Kong. Internet and logistics, for example, are cheaper today in Hong Kong. We see Hong Kong in a
supplementary role to the mainland – Hong Kong still keeping its position of the top while places
like Shenzhen or Shanghai become more important. However, the safe path and the gateway to Asia is
still Hong Kong. The enterprises also manufacture in Taiwan or Korea and are therefore closer to
Hong Kong than Singapore. And Hong Kong today is a part of China, a fact that is a big advantage
and should not be underestimated at all.

TW Asia: And how you see the role of China in today’s world market in general and
in the textile market in particular?

Wenda: China is now a global player with a great economy. Regarding quality for
textiles, China must be very careful because it does a lot of successful export. Here in Hong Kong,
most of the people are convinced that the whole story with the poisoned toys was not only a quality
problem but also a problem of the toys’ design, and lastly, a political issue.

TW Asia: Due to the increasing energy requirements of China, the worldwide energy
shortage is increasing. Is anything being done to improve this situation?

Wenda: China is very well aware of this fact and tries now to increase the share
of its own power production constantly. This target should be reached using solar energy and wind
power among other technologies. In the actual 11th Five-Year Plan, renewable energy is an important
task to achieve. Among other things, this shall happen also with solar energy and wind power.
Renewable energy is mentioned as an important point in the energy use in the current 11th Five-Year

The First Step To China

TW Asia:
Many Western enterprises are still afraid in a way to step into China. What
should Western enterprises do to establish smooth contacts to Chinese companies without problems?

Wenda: This is the very most important task of the HKTDC. The way over Hong Kong
to China is certainly simpler than the direct way. We have specialists for almost any case and can
transmit tips and also contacts to every interested party. It is most preferable not to go the
direct way because the 4,000 member companies of the HKTDC are ready to serve.

There are no great differences in the individual market segments. If a company is a
successful enterprise or not, the type of business is not that important. This also applies to the
textile industry.

TW Asia: Will China play an even larger role in the future?

Wenda: Yes, for sure. China is already at position one, but other countries are
keeping up. The textile industry has played an important role since the industrialization of China
because the textile industry doesn’t need a lot of money to start. This is for certain different
today. In the textile industry, which is for the whole of Asia of great importance, other countries
are gaining ground. Cambodia, Vietnam, Malaysia and Indonesia are the strongest competitors in the
textile markets today. However, China has the strong will and the resources to claim the first
position. In the 11th Five-Year Plan, it also is primarily written that the general income for
farmers should increase. I am convinced that this will turn out well.

TW Asia: At the end of September 2007, the Hang Seng Index of the stock exchange
of Hong Kong dropped dramatically. What were the reasons for that?

Wenda: The Hang Seng is strongly influenced by the New York Stock Exchange, and
China plays now an important role at this stock exchange too. China has too much money and
encourages everyone to invest. The renmembi was still connected to the US dollar too strongly, and
actually no one could really spend the money at all. In the past, the Chinese could not invest
freely. A new instrument, the Qualified Domestic Institution’s Investor (QDII) was formed. With the
QDII it is possible to invest in funds. As of September 2007, the Chinese could invest directly
over the Bank of China. And that was probably the main reason why the Hang Seng rose that much. Not
to forget is the fact that large Chinese enterprises are also listed on the Hong Kong Stock
Exchange. This fact can cause another possible increase of the Hang Seng Index. And last, but not
least, the share prices are not the same in Hong Kong and China.

The Future Of Hong Kong

Over the past 10 years, the situation of Hong Kong has changed dramatically, and this change
has primarily happened on the economic sector. Today, many enterprises only produce in the
Guangdong province or in neighboring Shenzhen.

TW Asia: As a young economist, how does Wenda Ma see the future of Hong Kong?

Wenda: Hong Kong must play its role. We have a high ranking and a free market.
However, there also are big challenges: the level of the education generally diminishes, and all
students only want to work in the finance area. We must ask ourselves the question: in future, does
Hong Kong still have sufficient talents? We need people and knowledge of everywhere, and the
environmental protection must be further improved.

I would like to say too, that the Pearl River community must be improved. Then I see a bright
future for Hong Kong.

Hong Kong Special Administrative Region

Hong Kong, the so-called Hong Kong Special Administrative Region (SAR), is one of the two
special administrative regions of the People’s Republic of China (PRC), the other one being Macau.
Hong Kong was a crown colony of the United Kingdom from 1842 until the transfer of its sovereignty
to the People’s Republic of China in 1997. Under the policy of “one country, two systems,” the
Central People’s Government is responsible for the territory’s defense and foreign affairs, while
Hong Kong maintains its own legal system, police force, monetary system, customs policy,
immigration policy, and delegates to international organizations and events.

March/April 2008