HKB High Flyers 2015

ANNUAL '15

2014 18 TOP INDUSTRIES REVIEWED 10 PAGES KEY ECONOMIC STATISTICS hong kong troubled by declining workforce why the legal industry will flourish in 2015 Display to 20 December 2015

Contents Annual 2015

2015 OUTLOOK 6 8 10 12 14 16

HK economy feared to disappoint in 2015 Property market pressured to perform HK troubled by declining workforce Why the legal industry will flourish in '15 What do experts think of HK's AMLO? Retailers suffer as big-ticket sales vanish

MOST READ IN 2014 18

A month-by-month review of Hong Kong’s top stories in 2014

COMPANIES AND INDUSTRIES 16 24 What's the latest buzz in telecoms equipment exports?

26 What's HK's major source and destination of electronics?

28 HK: Centre for original design in household electronics 30 AV equipment exports decline in major markets 32 Complete set computers lose popularity in Hong Kong 34 Building hardware sales seen to grow in Hong Kong 36 HK competes with India and Thailand in jewellery 38 Hong Kong’s retail market continues to face headwinds 40 China remains HK’s top export market for textiles 42 Hong Kong home to many international publishers 44 Hong Kong’s lighting industry dimmed a little in 2014 46 Hong Kong’s footwear industry wears out in 2014 48 Hong Kong doubled growth in domestic auto exports 50 Chinese mainland putting pressure on HK companies 52 Foreign investment fills Hong Kong’s F&B plate 54 More companies setting up offshore factories 56 Demand for architectural services soars in Hong Kong 58 HK remains a key player in sporting goods industry

42 56

BY THE NUMBERS

60 Population by Age Group and Sex 61 Labour Force, Unemployment and Underemployment 62 Number of Establishments, Persons Engaged and Vacancies 66 Nominal Wage Indices for employees up to supervisory level 67 Real Wage Indices for employees up to supervisory level 67 Seasonally adjusted Consumer Price Indices 68 Underemployment Rate by Industry 69 Statistics on Domestic Households HONG KONG BUSINESS ANNUAL 2015 1

Contents Annual 2015

72

High-Flyers 2014 72 HSBC Life (International) Limited

98

106

76 Ageas Insurance Company (Asia) Limited 78 AIG Insurance Hong Kong Limited 80 Altruist Financial Group Limited 82 Canadian International School of Hong Kong 84 The Cityview 86 www.Crystallize.Me Ltd 88 Fujitsu Hong Kong 90 GODIVA Chocolatier 92 Henley Business School 94 Hyperlink Holdings Limited

108

96 InterContinental Grand Stanford Hong Kong 98 Lan Kwai Fong Hotel @ Kau u Fong 100 MassMutual Asia Ltd. 102 MENCE 104 Mercedes-Benz Hong Kong Limited 106 OZO Wesley Hong Kong 108 Rhombus International Hotels Group 110 Sound Concepts Ltd 112 Thomas Mayer & AssociĂŠs 114 TransUnion Limited 116 Wharf T & T 118 Zchron Design

2 HONG KONG BUSINESS ANNUAL 2015

116

118

Canadian International School of Hong Kong

le rs b i s de ce n po Lea llen s e nd ce R a Ex p s o l en ic e ev itiz dem D To al C Aca ob ugh l G ro Th

ANNUAL 2015

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ECONOMIC OUTLOOK

HK economy feared to disappoint in 2015 GDP growth is forecast to come in at a measly 2.6% and unemployment rate is seen to rise to 3.5%.

H

ong Kong has become a mainstay in news headlines recently as wide protests gripped the Chinese territory by the throat, forcing bank branches to close temporarily and almost destroying the tourism industry. While analysts are generally dismissive about the direct economic impact of Occupy Central, they are worried that longterm troubles might hurt Hong Kong’s main sectors and eventually knock it off the stable economic path it’s been following.

There are concerns that potential investors could be deterred by the threats to political stability stemming from the Occupy Central movement. But, according to analysts, it may be too early to be concerned, as this scenario remains a low possibility. According to the Economist Intelligence Unit’s feature analysis on Hong Kong, although the government and business representatives have, on a number of occasions, warned of 6 HONG KONG BUSINESS ANNUAL 2015

"2015 GDP growth will come in at 2.6% – a modest increase from the 2.1% growth forecast for 2014."

a possible impact on business in the territory, the effects have been negligible thus far.

However, the wound that the protests have inflicted on Hong Kong’s status as an RMB offshore centre cannot be ignored, from either a long-term or a short-term perspective. Chris Leung, an analyst with DBS, says that Occupy Central caused an abrupt reaction in the stock market when it erupted.

“The worry is that China could slow the opening of the capital account amid political upheavals, impacting Hong Kong’s offshore RMB development. While shortterm impacts are inevitable, RMB internationalization is a long-term agenda and Hong Kong is likely to remain an integral part of it."

The same sorry situation can also be seen in Hong Kong’s retail sector. Although it may be easy to overestimate the impact of Occupy Central on the sector as some regions have come to a complete standstill, Leung says

that sector was hurting long before the recent demonstrations. Retail sales of popular tourist items had contracted year-on-year for seven consecutive months prior to Occupy Central, thanks to China’s slowdown and the anti-corruption drive, both of which are expected to last into 2015.

Looking at near-term growth prospects, if unexpected economic or social issues arise in Hong Kong, the realization of risk factors such as tighter credit conditions or an economic slowdown on the Mainland would result in an anaemic near-term growth profile for the city. Ryan Lam, senior economist at Hang Seng Bank, says he does not see much chance of a "stellar reacceleration" in growth for the Hong Kong economy over the next 12 months.

Despite that, he says it is important not to lose sight of other supportive factors that may boost Hong Kong’s growth going forward. “We forecast that 2015

ECONOMIC OUTLOOK GDP growth will come in at 2.6% – a modest increase from the 2.1% growth forecast for 2014. With the economy operating well below its potential level, the unemployment rate is expected to move a tad higher from 3.3% in 2014 to 3.5% in 2015,” he says.

This bleak outlook on Hong Kong’s forecast is also supported by Kelvin Lau, analyst with Standard Chartered. He says that, although resilient domestic consumption and stronger global demand are likely to support the economy’s recovery in 2015, Hong Kong’s economy is set to lose momentum because of rising headwinds from a slowing China. “We continue to forecast ‘underlying’ CPI inflation (excluding the effects of one-off government concessions) at 3.5% in 2014 and 4.0% in 2015, while headline inflation should average around 4.2% over the same period,” he says.

Property prices’ unstoppable rise Graphs predicting the trend of Hong Kong’s property market all seem to be going upwards as demand remains high amidst a tight supply. According to Antonio Wu, deputy managing director of Colliers International Hong Kong, the office, residential, industrial, and retail sectors will be strong during 2015.

Although the government has done a great deal to cool the property market, home prices continue to rise as supply remains insufficient for meeting demand, he explains.

The overall increase is predominantly underpinned by the mass residential sector, with prices surging by 7% over the first ten months of 2014, while the luxury segment declined by 1%.

“Luxury residential prices seem to have stabilized, and we believe the market has bottomed out. The potential interest rate hike is unlikely to create a major disturbance in the Hong Kong property market. We are still in a negative interest rate environment; assuming the inflation rate stays roughly at 4%, luxury residential prices is predicted to see an uptick by 3% next year,” says Joanne Lee, manager of Research and Advisory

Services at Colliers International Hong Kong. Colliers anticipates the overall residential prices to edge up by 5% in 2015. High construction costs, strong fundamental demand and lack of supply – especially of mass properties in urban areas will keep property prices high and help to stabilize prices at current levels.

“The reality is that the interest rate is still low even if the market experiences the first 25 basis points increase in rates; there will not be a drastic correction in prices as supply will remain constrained,” adds Lee. Bad luck for retail?

By contrast with other property market sectors, retail rentals are declining, and are set for slow growth or even further declines over the year ahead. Helen Mak, senior director of Retail Services, Colliers International Hong Kong, confirms that these trends can be traced to changes in Mainland China. She believes that international brands will increasingly enter the China market directly, bypassing Hong Kong.

“Overseas travel for mainland Chinese is increasingly easy, so affluent consumers are less focused on Hong Kong as being akin to an international shopping mall, and there is a strong anti-corruption drive across mainland China. This means that Hong Kong has come to the end of the 10 years of ‘golden expansion’ in retail,” she says.

There could be a further impact on retail sales if the Occupy Central movement intensifies and lingers until early 2015, hampering shopping by Chinese travellers in core districts. “But even if the movement has little effect, we predict overall retail rentals will fall by 6% in 2015,” Mak explains.

“Importantly, though, this decline is by no means uniform – and there are already signs of upturns for mid-tier brands appealing to local consumers, along with significant interest in retail developments outside traditional shopping districts.”

On the other side of the coin, it might not be a totally awful year for Hong Kong’s retail sector as opportunities are still numerous.

Lily Ming Lee Lo, analyst with DBS,

Chris Leung

Kelvin Lau

Lily Lo

Antonio Wu

says that while high-end jewellery and watch retailers may consider downsizing operations or slowing expansion, mid-end retailers are likely to snap up prime retail locations.

“Sales of mid-priced items such as cosmetics and medicines – both tourist favourites – were much more resilient than luxury items.

Second, retailers may quicken expansion to peripheral areas along the Mass Transit Railway (MTR) lines, especially as new stations open in the next few years. Third, shopping attractions closer to the Hong Kong-China border will gradually build up,” Lo says.

Big threat for 2015 Analysts are concerned about a long list of factors that could threaten Hong Kong’s economic stability, but what worries them the most is keeping the business environment robust and intact, despite possible long-term impacts brought by the Occupy Central movement. The EIU says that investors should be concerned about the longterm impact of the social and political strains highlighted by the demonstrations.

As a part of China, it says that the territory will eventually need to integrate with the mainland – economically, socially and politically. However, the lack of political reform on the mainland is making that process difficult.

A much bigger clash might occur between those in the territory and the central government, and EIU fears that this represents the real long-term threat to Hong Kong's business environment.

Lau agrees, adding that the impact on consumption and investment sentiment could become more widespread if political uncertainty drags on or escalates – a risk for 2015. Leung further confirms this threat as he notes that when demonstrations end and tourists return, it will be business as usual. “The real challenge is an extended period of political uncertainty and mistrust among multiple stakeholders in Hong Kong, even after the normalization of economic activities,” he says.

HONG KONG BUSINESS ANNUAL 2015 7

PROPERTY OUTLOOK

Property market pressured to perform Much is expected of the city’s real estate environment, with the retail sector urged to keep up.

A

s buyers are scrambling to find neat property deals for themselves and their companies, Hong Kong’s developers are up all night wondering where to get the needed supply to meet this painfully soaring demand. The tight market has prices shot up across several sectors, resulting in even higher expectations for the year to come.

China maintains its tight grip on Hong Kong, as bright spots that have turned up in the market in 2014 will refuse to dim on the back of a surge of inflows from the mainland.

This growth is forecast to bring with it optimistic results across several sectors - strong office rentals, stable luxury residential prices, and an upturn in the industrial sector. The retail sector remains a laggard, however, as rents are on a downtrend without a near turnaround in sight.

“Office rentals remain strong in key business districts, with 8 HONG KONG BUSINESS ANNUAL 2015

"Colliers forecasts the overall residential prices to edge up by 5% in 2015."

opportunities in up and coming locations such as Kowloon Bay. Similarly, we anticipate the industrial property market shifting somewhat, as Tsing Yi is a new logistics hub,” says Antonio Wu, deputy managing director of Colliers International Hong Kong.

Residential Property cooling measures of the government have helped but a little, as insufficient supply continues to fail in meeting an ever-increasing demand for homes. Oscar Choi, analyst at Citi, crunched an annual supply shortage of 6,000 units in the residential sector from 2015-2017. Over the course of this period, Hong Kongers will experience stabilising mortgage rates, increasing salaries, more competitive buyers and low secondary market supply.

As supply remains constrained, there will not be a drastic correction in prices. Joseph Tsang, managing director of JLL Hong Kong, predicts

a potential interest rate hike to exert downside risk on prices though rising construction costs should prevent developers from reducing prices significantly.

Colliers forecasts the overall residential prices to edge up by 5% in 2015. Prices will stabilise at current levels on the back of high construction cost, strong fundamental demand and lack of supply - especially of mass properties in urban areas.

Tsang agrees that home prices will likely stabilise as sales volumes will be sustained by end-user demand.“Volumes will continue to be largely driven by end-user demand, especially in the mass residential market. Primary sales will remain the focus of market activity in the luxury segment of the market,” Tsang adds.

Office A lot of tenants are choosing to stay put, as rents in the office sector continue to stabilise with

PROPERTY OUTLOOK indications of remaining that way for the year ahead. “We anticipate rents will remain broadly stable, though with some districts proving more enticing than others,” says Wu. However, other companies are riding on the decentralisation trend and moving to other locations such as Kowloon Bay and Kwon Tung.

For instance, banks are relocating their main offices further east and still others are re-evaluating their long-term real estate options in the city given the supply pipeline from 2017.

Office rents in Central will rise by around 5% on a year-by-year basis. Across all submarkets, rents will grow in the range of 0-5%.

Kowloon East is a different case, where new supply continues to weigh on rental growth.

“While Central rents appear to have limited downside risk from today's levels, we do not see any uptrend given the weak GDP growth forecast for 2015E. The non-Central office market has outperformed Central since 2011, but we expect the rental growth to slow sharply in 2015 due to abundant supply in Kowloon East,” says Choi. The launch of direct share trading between HK and Shanghai could also potentially increase office demand by securities houses. “Financial institutions will remain cautious on expansion and the current vacant space in Central should limit rental growth,” adds Choi.

Industrial In June 2014, the Hong Kong Science and Technology Parks Corporation (HKSTP) announced that operators of industrial properties in three industrial states were restricted to selling them back to HKSTP. According to Colliers International, this has resulted in very limited supply, and has made it more difficult for end-users who are seeking to buy industrial space rather than rent, and now demand facilities more typical of office space.

JLL adds that revitalisation and redevelopment of older industrial buildings will further reduce industrial inventory, but activity is likely to slow as office rentals in

non-core locations face increasing downside risks. A new logistics hub is the second thing to look out for in the industrial sector, next to the increase in industrial rentals as a result of a very tight supply.

“We perceive another notable change – the advent of Tsing Yi as a new logistics hub,” says Wu. “The island now has excellent highway connections to Hong Kong Airport and Kwai Chung Port, and 4 million sq ft of new supply will come online by 2017.” Logistics operators are expected to continue moves to combine several addresses under one roof, improving operational efficiency. Colliers anticipates that the ongoing demand/supply imbalance will result in warehouse rents increasing by 2-3% in 2015.

Retail International brands are finding their way to mainland China without passing through Hong Kong, thus indicating slow growth in retail rentals which are also forecast to experience further declines over the year ahead.

Fewer mainland visitors will take toll on rents, no thanks to the anti corruption drive in China and the change in the profile of the mainland traveller.

Colliers indicates that overseas travel for mainland Chinese is increasingly easy, so affluent consumers are less focused on Hong Kong as being akin to an international shopping mall. The firm believes that Hong Kong has come to the end of the 10 years of ‘golden expansion’ in retail.

The Occupy Central movement has also impacted retail sales, hampering shopping by Chinese travellers in core districts. Despite this, Mak believes that overall retail rentals will still fall by 6% in 2015.

All hope is not lost for the sector, with mid-tier brands appealing to local consumers, along with significant interest in retail developments outside traditional shopping districts.

Healthy inbound tourism and steady local labor will also lend support to retail sales in 2015, according to JLL. However, rising vacancy and lower profit margin of some of luxury retailers should lend further pressure on rents. This

Joseph Tsang

Antonio Wu

will eventually lead to a correction in rents especially for fringe streets in core locations. “Due to the tight vacancy and long waiting lists, rents for prime shopping centres should hold up well in 2015,” Tsang concludes.

Investment The number of investment property transactions declined by 18% yearon-year in the first ten months of 2014, but their value soared by 37%.

Colliers International believes that the value for 2015’s investment property transactions will likely soar further, as flows of inbound capital are increasing, spurred by risks of bad debt and oversupply in mainland China.

Investment demand will find abode in Hong Kong, according to JLL. “Improving economy, albeit at a moderate pace, should lend support to investment demand,” Tsang says. Analysts also foresee developers continuing to off load more non-core assets. While East Kowloon will remain the focus for investment property, there will be more industrial deals in Kwun Chung and the north New Territories, together with a rise in en bloc sales.

Hong Kong warehousing rental (vs retail sales and total exports)

Source: Colliers, HKSAR Government 3-MMA = 3-month moving average

Hong Kong Grade A rents in Central

Source: Colliers, Hong Kong Stock Exchange

HONG KONG BUSINESS ANNUAL 2015 9

Hiring and Salary OUTLOOK

HK troubled by declining workforce

The labour market conditions remain tight despite unemployment rate being steady at 3.3%.

W

ith Hong Kong’s labour force predicted to shrink within the next four years, business owners will find it harder to find the right talent to fill vacant positions.

Hong Kong Business caught up once with VinayKapoor, owner of The Cottage Gastropub in Sheung Wan, and he said they had the “for hire” sign up for almost a month, but they only had two walk-ins and no hires.

Unfortunately, more employers will be sharing Kapoor’s sentiments on talent shortage as the declining workforce is set to persist in 2015.

There are currently 3.9 million people working in Hong Kong and that number is set to peak in 2018. Thereafter it will decline every year until the 2030’s. Peter Yu, director at Randstad Hong Kong, says with the unemployment rate steady at 3.3% and 61% labour force participation, the Hong Kong 10 HONG KONG BUSINESS ANNUAL 2015

"Hiring demand has placed pressure on the supply of skilled workers in many specialties giving way to increased talent shortages."

labour market conditions remains tight. Demographic trends such as an aging population and low birth rates remain unchanged, and with domestic economic activity staying strong, a continued demand for talent will outstrip supply.

According to Yu, hiring demand has placed pressure on the supply of skilled workers in many specialties giving way to increased talent shortages. “More than ever before, employers are challenged with developing a well-rounded Employee Value Proposition (EVP) that holistically addresses a multitude of needs including engagement, flexibility, well-being and career opportunities to ensure they keep a competitive edge in this ongoing war for top talent,” says Yu. Labour contribution will be increasingly constrained by demographics and the limited upside room for an increase in the labour force participation rate,

according to Ryan Lam, senior economist at Hang Seng Bank.

“Because of the gradual nature of human capital accumulation, improvement in the ability of the workforce is not likely to fill the void that is being created by a shrinking working-age population,” he adds.

Talent shortage Meanwhile, Sharmini Wainwright, managing director at Michael Page Hong Kong, says that talent shortages are most evident in the following areas: frontline sales professionals in IT, industrial and healthcare sectors; experienced compliance candidates and senior corporate communications candidates from the financial services sector; diversity & inclusion specialists within the human resources field; commercially oriented HR business partners; and digital marketing and e-commerce experts with a track record in

Hiring and Salary OUTLOOK setting up functions and building a commercially oriented model focused on returns.

But Wainwright still reckons that despite the demographic hurdles and talent shortages, the labour market will be active in the coming year. Whilst historically, levels subside around Chinese New Year (CNY), Wainwright expects market movements and hiring activity to peak across March to May 2015 post-CNY and new budgets for headcount.

“The level of activity in the market in Q4 has created a competitive market environment where we are seeing candidates receive multiple offers, buybacks and upwards pressure on salaries and at the mid-level management level and below. In some markets the situation could be described as more vacant roles being available.

The pull for high calibre talent from China will continue to be present in 2015, where individuals currently employed in Hong Kong may consider a career step to China for more responsibility and a higher salary,” adds Wainwright, noting that hiring at the executive end of the market has been quieter in the second half of 2014 due to the excess supply of talent at this level versus open roles available.

Lee Quane

Peter Yu

Sharmini Wainwright

Salary expectations Despite the tight labour market conditions, analysts are predicting salary increases of 3 to 5% in 2015. According to ECA International, this is up from the 4.5% increases that local employees received this year. However, once inflation is factored in, staff in Hong Kong will see some of the lowest real Hong Kong - forecast vs actual salary increase

Source: ECA International

pay rises in Asia.

"After inflation is taken into account, wages will rise 1.3% on average in Hong Kong next year – the third lowest ‘real’ salary increase in the region after Macau and Japan," says Lee Quane, regional director – Asia, ECA International. "Nevertheless, the salaries of employees in Hong Kong will still increase more in real terms in 2015 than they did this year when they rose just 0.6% above inflation."

Those seeking greater pay increases have better chances if they’re based in China as ECA International notes that companies there are planning to award 8% salary increases again next year, with employees based in Guangzhou set to get the most generous uplifts. The firm adds that even after inflation, staff in China will be among the best off within the region and globally: they can expect to see increases of 5.5% in real terms.

"Despite slower growth in China, wages continue to rise at a significant pace reflecting the ongoing need to attract talent.

Each year we see the salary gap between Mainland China and Hong Kong narrowing, which is consistent with the general trend within the region of wage levels in developed and developing economies getting closer," says Quane.

"While there are fears that pay inflation is causing multinationals to relocate out of China, alternative locations which offer

both cheaper wages and the necessary infrastructure are still limited," he adds.

Meanwhile, Wainwright expects salary increments for job movers to be between 10-15%, with a higher percentage associated for the most in-demand jobs. For those currently employed, she notes that annual increment in their existing role will typically be 2-4% (average across the board).

Pay rises per sector For employees in the banking and financial services sector, basic salary will remain steady in the second half of 2015. However, Yu notes that for critical positions or positions in great demand, i.e. compliance, audit and risk, increments could be more significant at around 15% - 25% when candidates change jobs.

While workers in the IT sales and marketing sectors were able to demand a 15-25% increase on total salary including commission in 2014, Randstad predicts 2015 will see even bigger increments in salary especially in the cloud technology, mobile payment, and data center area where talented workers are scarce and demand is high.

In the retail sector, the average salary increases over the next 6 months are expected to be around 3% - 7% increments, according to Randstad. For new hires, candidates can expect 10% - 15% increments. Company sales performance will determine the part of discretionary bonus.

HONG KONG BUSINESS ANNUAL 2015 11

LEGAL OUTLOOK

Why the legal industry will flourish in '15 Hong Kong’s tax regime, stable currency, and proximity to China complement its legal system.

T

here will be a steady flow of job opportunities on offer this year in Hong Kong's legal industry, with many macroeconomic risks now resolved. A testament to that is the fact that international firms are building their presence in Asia by establishing a base in the city. Data obtained from Hodgart Associates show that, as at May 2014, 70 out of over 150 foreign firms operating in Asia are in Hong Kong.

Alan Hodgart, managing director at Hodgart Associates, notes that a presence in Asia will be critical for winning work going out of the region, but leaders will not be able to be everywhere. They will have to decide which are the core markets in the region. “PRC, Hong Kong, Japan, Singapore, India, and Indonesia are likely to be core,” he says.

More data from HKTDC Research show that 35 foreign registered law firms (including Mainland law firms) had formed associations with local firms as of 25 12 HONG KONG BUSINESS ANNUAL 2015

"As at May 2014, 70 out of over 150 foreign firms operating in Asia are in Hong Kong."

April 2014. Meanwhile, local firms employed more than half of the registered foreign lawyers.

According to Zhang Yi, cochief executive of King & Wood Mallesons (KWM), international firms are on the whole committed to Hong Kong for three main reasons.

Firstly, the attraction of Hong Kong as a location for PRC and other Asian companies to raise money.

Secondly, the requirement of legal services to meet with Mainlandrelated investment is most easily achieved from Hong Kong. Lastly, the listing of Mainland enterprises in Hong Kong boosts demand for a wide range of professional services offered by Hong Kong law firms.

KWM bills itself as the first ever global legal network headquartered in Asia. It was ranked the 6th largest law firm in Hong Kong by Hong Kong Business in 2013, based on the total number of legal professionals.

A preliminary survey for the 2014 rankings shows that its number

grew by 6% to 164 in the past year.

As for 2015, Hayden Flinn, also a co-chief executive of KWM, expects the legal services industry to continue to flourish for a range of reasons. Firstly, the re-energized IPO market is likely to trigger growth in capital markets and M&A requirements, which many firms will aim to service.

Further, Hong Kong’s tax regime, stable currency, proximity to China and world-class infrastructure complement its legal system – which together attract worldwide funds to Hong Kong, and make Hong Kong a preferred base for investments in Asia. And thirdly, enhanced regulatory and banking laws, as well as revisions to the Companies Ordinance resulting in better corporate governance, are positioning Hong Kong ahead of other jurisdictions in Asia as the place to do business.

“These factors, plus many others, place the legal services industry in

LEGAL OUTLOOK is regulatory and compliance law, as the entire industry remains under the scrutiny of governments and regulators alike.

Ben Cooper

Dean Stallard

Hong Kong in high demand for a broad range of work,” he notes.

Law firm’s hiring mood According to Dean Stallard, regional director of Hays in Hong Kong, law firm hiring activity in Hong Kong in 2014 was notably strong in the arbitration and dispute resolution (ADR) and capital markets (CM) practice areas. This pattern, he says, should continue in 2015, and he expects to see particularly high levels of competition for CM talent from firms looking for experienced fee earners.

“We’ll also see flow on demand for in-house CM Lawyers amongst sponsor banks. ADR specialists, across commercial litigation, arbitration and regulatory investigations, will continue to be in demand,” he adds.

Stallard notes that, driven by the clampdown in mainland China, increased scrutiny of business practices will create demand for investigations specialists as well as for non-contentious regulatory specialists. On the financial side, the focus on regulating traditional markets will continue to force down demand for derivatives, structured products and other investment banking specialists. This also means increased demand for specialist lawyers in alternative financial areas such as fund and asset management, private banking and insurance.

Interestingly, while permanent roles in law firms remain steady, Stallard says that they have also

seen an increase in demand for lawyers working on a contract basis.

“The emergence of non-traditional providers has created a market for lawyers who are in between jobs or happy to consider project-based contract positions,” he says.

Ben Cooper, executive director of GRMSearch, meanwhile notes that law firms have once again started hiring corporate finance associates, due to the upswing in the Hong Kong IPO market. Other very busy areas have been Foreign Corrupt Practices Act (FCPA), anti-corruption, and sanctions, especially for in-house roles.

“Regulatory knowledge is highly prized across the board and we see this trend continuing, especially with such recent developments as Stock Connect, which require a lot of regulatory knowledge,” he adds.

According to Cooper, legal firms are all hiring at the moment, due to a lot of IPO work and also an increase in lending. They are especially keen to grow in project finance and leveraged finance, he says.

For non-financial services inhouse positions, Oliver Allcock, manager, Legal & Compliance Robert Walters Hong Kong, believes that IP and patent law remains a major issue for companies. Businesses, he says, are becoming increasingly aggressive in protecting their products, leading to the demand for corporate and commercial legal professionals with experience in listed companies and intellectual property. In the financial services industry meanwhile, he cautions that the major driving force

Hayden Flinn

Oliver Allcock

Zhang Yi

The right candidates In the commercial in-house market, Stallard notes that demand will continue to increase for candidates who are Hong Kong-qualified with Chinese language skills. Meanwhile, Hong Kong conglomerates are increasingly receptive to junior candidates straight out of law firms to fill in-house roles, although prior in-house experience is still preferred.

“Higher demand is projected for property and construction lawyers, as well as those with leasing and IT&T industry experience. Changes to the Hong Kong Companies Ordinance in 2014 have created more roles for listed company secretaries,” he adds.

The bad news, however, is that while there are plenty of jobs in the legal sector, the salary expectations may not be satisfying for all.

According to Stallard, with more firms opting to pay Hong Kong lawyers on the New York scale, salary has become a challenge for cost-conscious in-house employers, where average increments range from three to seven percent.

Allcock, on the other hand, laments the shortage of candidates with both Mandarin languages and strong technical ability, particularly in sought-after areas such as corporate, litigation and funds in 2014. As Mandarin is increasingly required for conducting business, there is intense competition, both for law firms and in-house positions, for quality candidates with Chinese language skills. This trend, he believes, looks set to continue in 2015, especially in private practice.

The Asian legal market is lower in concentration than many mature markets - although Hong Kong is getting close

Source: Hodgart Associates

HONG KONG BUSINESS ANNUAL 2015 13

ACCOUNTING OUTLOOK

What do experts think of HK's AMLO? Find out why they believe the extension of accountability existed even before the AMLO.

H

ong Kong’s recently enacted Anti-Money Laundering and CounterTerrorist Financing (Financial Institutions) Ordinance (AMLO) and related legislation, has boldly redefined accountability in the banking and finance industry of what is arguably Asia’s financial centre. Although there is definitely no debate over the wrongness of money laundering and terrorist financing, the financial industry is still largely stumped over what the new legislations may mean for, or demand of, financial practitioners and firms, and whether those demands are justified.

Key requirements of the AMLO, such as more rigid customer due diligence, and the required reporting of suspicious transactions or customers, have wide ranging implications for financial firms – issues that are, in general, difficult to distill.

14 HONG KONG BUSINESS ANNUAL 2015

"Regulators and legislators are now reminding the financial industry that they are fiduciary institutions."

The effect of AMLO’s and related laws’ new requirements extend not only to banks, but also to financial firms of all sizes that offer financial transactions services locally and internationally. Hong Kong Business synthesizes the views of several experts to give concerned professionals a better view of the key issues and challenges of AMLO and related laws.

Justifying the extensions of accountability For many practitioners and financial firms, the expansion of accountability for money laundering and terrorist financing crimes is one of the central controversies surrounding the law. Whereas prior to the enactment of the legislations, only money launderers (ie the perpetrators) were accountable for their crimes, AMLO now extends the responsibility of

deterring money laundering to financial institutions. Penalties such as fines or even jail time could be imposed on those who have been proven to be complacent in their dealings with suspicious clients. Note that previously, complacency was, in general, not equated with complicity.

Although many find this extension of accountability worrying, some believe that this level of accountability existed even before AMLO, and that recent legislation merely serves to concretize the responsibility. “Regulators and legislators are now reminding the financial industry that they are fiduciary institutions,” says Martin Muirhead, senior advisor Financial Crime at PwC Consulting Hong Kong.

Muirhead also emphasizes the importance of concretizing this responsibility by pointing out

ACCOUNTING OUTLOOK the context of the laws. “The AMLO should be looked at in the context of the global changes of attitude towards financial institutions. The ‘ordinary man’ has been shocked at the abuse of the banking system by drug traffickers, the risks of terrorist financing and a perceived lack of probity in the everyday dealings of banks.”

Dealing with technicalities From a definitional or technical perspective, some professionals believe that the AMLO and other related laws do little to clearly draw the lines of accountability by virtue of the fact that the criminal activity in question is loosely defined. “Money laundering and terrorist funding are very difficult to describe and identify, and the Hong Kong laws are not much help because they are written so broadly that individuals or organizations can potentially be held criminally liable for involving themselves in activities that are commonly regarded as legitimate,” says Paul Phenix, consultant at Baker Tilly Hong Kong.

KT Tam, audit partner at CK Yau& Partners CPA, echoes Phenix’s concerns. “As a professional accountant, I understand the importance of anti-money laundering in the commercial world but in practice, as a service provider, the new legislation bestows a huge burden on us to identify and verify the identity of customers, beneficial owners and persons acting on behalf of customers, monitoring customers’ activities and reporting suspicious transactions. The legislation also does not seem to give much practical guidance and recommended procedures to overcome the practical difficulties in fulfilling our responsibilities in assisting the combating of money laundering and terrorist financing.”

A direct and pertinent risk associated with the vagueness of AMLO and related laws is the potential for mere involvement to be grounds for criminal liability, according to Phenix.

To avoid realizing this risk, Phenix recommends a simple principle: prevention is better than cure. According to Phenix, effective due diligence initiatives by practitioners and firms are essential in avoiding criminal liability by virtue of involvement.

“Due diligence has to be positive, not just a form-filling or boxticking exercise. You must take up references, do searches, Google potential clients or customers, and follow all their links.”

Phenix points out another pertinent risk associated with legislative catch-alls. A basic requirement of AMLO and related laws is for professionals or firms to report suspicious transactions.

However, as Phenix points out, the fact that these crimes are difficult to define raises the question of how ‘suspicious’ firms should be in order to comply with the law. In the absence of adequate legal clarity, Phenix emphasizes the importance of the role that management plays in defining this for their firms and employees. “Checklists such as types of money laundering or terrorist financing transactions, countries, types of persons, etc, play an important role in the identification and evaluation process but, as with all checklists, should not be followed slavishly.”

Beefing up internal controls “The new legislation imposes a heavy compliance burden on financial institutions, which have to ensure that they have enough manpower, resources and systems to meet the anti-money laundering requirements of the relevant legislation,” according to Barry Tong, partner at Grant Thornton Hong Kong Limited.

As with any new legal requirements, a firm’s compliance department carries the burden of ensuring that the firm and its employees adjust and adhere to the laws’ requirements. Given the AMLO’s and other related laws’ relatively new and many pragmatic considerations, a key challenge faced by financial firms today is concern over how exactly to reform their compliance departments and

Barry Tong

KT Tam

Manhim Yu

Martin Muirhead

Paul Phenix

procedures in order to adhere to laws and regulations regarding money laundering and terrorist financing. “The increased regulatory scrutiny means the overall cost of compliance is boosting up – there is a greater need for a bigger compliance department, staffed with adequate personnel who are qualified and experienced, as well as system development and enhancement in crime monitoring and risk assessment systems,” says Manhim Yu, partner at Fraud Investigation & Dispute Services, EY Hong Kong. “The biggest challenge so far has been in the sourcing of the right candidates and personnel to fill the expected compliance structure.”

A unique offshoot of AMLO’s compliance requirements is the fact that small or emerging financial firms are at a unique disadvantage as far as compliance is concerned. “Medium and small firms who traditionally have less complicated infrastructures have a bigger gap to make up for,” says Yu. This is especially true today when, “Hong Kong’s talent market for compliance and regulatory reporting has been very tight,” according to Yu. Client care and privacy Finally, an important casualty of the industry’s compliance with AMLO and related legislation is the greater scrutiny and, possibly, reduced privacy that prospective (legitimate) clients could face.

Since AMLO and related laws require a higher level of customer due diligence from financial institutions and practitioners, law-abiding clients may be bothered by more questions and suspicious attitudes. This is a challenge especially for financial firms, where maintaining healthy and trustful client relationships are important to generating sustainable business.

“There is a potential friction between financial institutions and customers due to increased regulatory scrutiny. Clients may feel more ‘controlled’ and inconvenienced because of rigid regulatory requirements regarding due diligence,” says Yu. HONG KONG BUSINESS ANNUAL 2015 15

RETAIL OUTLOOK

Retailers suffer as big-ticket sales vanish Brace for a tough year ahead as cautious Mainland tourists forgo luxury purchases.

T

he contents of local retailers’ cash drawers failed to match the surge in tourist arrivals in 2014, and analysts warn that this dismal sales trend is likely to continue this year. Hong Kong’s retail sector has been pounded by headwinds over the past year, foremost among which were the severe anti-corruption crackdown in China and the protracted Occupy Central protests.

Well-heeled Mainland tourists used to drive Hong Kong’s robust luxury goods trade, but retailers can no longer bank on these once-reliable stalwarts. Although tourist arrivals recorded doubledigit growth in 2014, luxury retail sales suffered massive year-onyear losses.

Overall retail sales also recorded six straight months of decline from February to July, while sales growth remained distinctly muted from August to

16 HONG KONG BUSINESS ANNUAL 2015

"Travellers from the Mainland now prefer to keep a low profile in order to avoid garnering unnecessary attention by showing off their wealth."

October.

Analysts attribute this plunge to the changing consumption patterns of Chinese tourists. This shift, in turn, was caused a variety of factors.

Miserly Chinese tourists According to Helen Mak, senior director of retail services at Colliers, the biggest culprit is China’s strict anti-corruption measures. The Mainland’s crackdown has caused many Chinese tourists to abandon the traditional practice of gift-giving.

Travellers from the Mainland now prefer to keep a low profile in order to avoid garnering unnecessary attention by showing off their wealth.

Joe Lin, executive director, Retail Services at CBRE, adds that luxury goods are losing their lustre for Chinese tourists who frequently visit Hong Kong.

“When tourists first come to

Hong Kong, they are usually overwhelmed by the availability and affordability of a wide range of good brand names, gold, and jewellery.

Products in Hong Kong are also much cheaper compared with those in Mainland cities, so they would usually buy a lot of these items and bring them back as gifts to friends, colleagues, and relatives in the Mainland. But once they’ve frequented Hong Kong, their spending patterns change, as they wouldn’t want to give expensive items as gifts on every trip. Under the anticorruption measures, they also don’t want to call attention to themselves and make it seem like they have an excessively luxurious lifestyle,” he says.

Mak also states that Mainland tourists are also now very selective when it comes to shopping.

“Many visitors have been visiting Hong Kong many times in the

RETAIL OUTLOOK last 10 years, and unlike in the past, they are no longer buying luxury items in bulk. The current trend is shopping for more basic goods, instead of luxury goods,” she notes.

Apart from changing consumption patterns, the shifting demographic of Mainland visitors is also to blame for the plunge in retail sales. Mak says that, although tourist arrivals have increased year-on-year, the increase in Mainland Chinese tourist arrivals are driven mainly from 2nd or 3rd tier cities. These tourists are not ‘luxury’ shoppers.

There is also the increasing trend of same-day visitor arrivals from the Shenzhen area, who mostly shop for daily necessities.

As tourists from less affluent regions flood the city, Mainland high rollers are ditching Hong Kong for newer destinations.

“They are now heading to countries in Europe, or to America or Japan to buy these products directly in those countries instead of buying through Hong Kong. This is a new trend; five or seven years ago most Chinese tourists didn’t have the experience to shop in distant destinations. But now that they have better knowledge and more experience, they are choosing to go directly to Europe to do their shopping,” says Lin. But there is also a slight silver lining for local retailers. Though 2014 luxury retail sales figures are underwhelming, the massive plunge can also be explained by the so-called gold rush of 2013.

Marcella Chow, Emerging Asia economist at Bank of America Merrill Lynch, notes that the price of gold plummeted by close to 22.7% and 25% year on year in the second and third quarters of 2013, respectively.

The decline has boosted stellar purchases of gold by tourists, particularly from the Mainland, during this period.

“In particular, luxury goods surged by an average of +33.1% (in value) and +35.0% (in volume) in 2Q13-3Q13. Amid an unfavourable base, luxury goods declined by an average of 19.8% (in value) and 19.0% (in volume)

in 2Q14-3Q14 this year,” Chow says.

Against this unfavourable backdrop, Lin states that retailers who had previously only catered to wealthy clients are now shifting their strategy to attract mass-market shoppers. “We noticed that luxury brand names and some jewellery shops have changed their marketing strategy.

Watch and jewellery retailers, in particular, are now focused more on mid-priced products and are adopting volume strategies in order to align with tourists' changing consumption patterns.

They are now showcasing more mid-range items to attract shoppers,” he notes.

A report by Colliers says that mid-tier brands have the upper hand in the current market. “We have observed that mid-tier brands have outperformed luxury brands in pressing ahead with their expansion plans. The midtier brands are expected to benefit from several optimistic market factors such as sophisticated consumers who are looking for more mid-priced or affordable luxury products,” according to the report.

Locals snub shopping The blame shouldn’t fall solely on the shoulders of Chinese tourists, because local spending has also been muted in the past year.

According to Chow, domestic spending actually stayed weak last year, especially if the elevated sales of iPhones in October and November are not taken into account.

“This may be due to the political uncertainty, stagnant local property market and subdued consumer confidence.

In particular, the softness in local consumption was evident in the moderating trend in other consumer goods sales as well as clothing and footwear, which points to potential downside risks to domestic demand, despite a solid labour market and positive income growth,” she says.

Domestic demand also suffered a slight dip due to the Occupy Central protests. Mak notes that the height of the protests

Helen Mak

Joe Lin

Marcella Chow

has severely affected retailers in Central and Causeway Bay, but the movement’s effect on retailers was cushioned by the fact that shoppers eventually got used to the demonstrators.

“Among retailers, high-end restaurants are the most affected, as their clientele mainly drive cars and would like to stay away from traffic and avoid the affected areas.

In other areas, the retail business are not affected significantly,” she notes.

A not-so-prosperous new year Lacklustre tourist spending seems to be the new norm for Hong Kong’s retailers. Lin notes that Mainland tourists’ consumption patterns will remain largely the same as long as the Chinese government keeps its iron grip on anti-corruption policies. “We don’t believe that the Chinese government will change the anti-corruption policy overnight.

They will keep these rules for some time, possibly for a few years. In the next couple of years, I believe that Chinese tourists’ consumption pattern will be the same. They will buy more midrange items and try to stay away from too-expensive items,” he notes.

Mak echoes this sentiment, and warns of tougher headwinds ahead. “The Hong Kong tourism business is facing keen competition from Taiwan, Seoul, and European cities. Mainland tourists are not expecting to do more than just shopping at the moment, but in the near future, Hong Kong may not be able to pump up retail sales because of a lack of new sightseeing attractions or retail facilities,” she says.

Value index of total retail sales

Note: The above retail sales statistics are compiled based on the Hong Kong Standard Industrial Classification Version 2.0. # Provisional figures.

Source: Hong Kong Census & Statistics Department

HONG KONG BUSINESS ANNUAL 2015 17

TOP NEWS IN 2014

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Daily news: www.hongkongbusiness.hk

In a release, Cathay Pacific Airways today announced the combined Cathay Pacific and Dragonair traffic figures for December 2013 that show passenger numbers increasing in line with the capacity increase for the month.

Cargo and mail tonnage, however, showed a year-onyear decline despite more capacity being available.

HOTELS & TOURISM

COMMERCIAL PROPERTY

Asia's office leasing sector to remain 'steady' this year

MEDIA & MARKETING

Hong Kong's first international auction of Chinese stamps seen to bring over HK$60m

HOTELS & TOURISM

Almost 8m tourists expected to flock in over the holidays

According to a release, the Immigration Department estimates that about 7.93 million passengers will pass through Hong Kong's sea, land and air control points during the upcoming Lunar New Year holidays from January 29 to February 6, which reflects a 9.2% increase over last year. About 5.65 million passengers will pass through land boundary control points.

18 HONG KONG BUSINESS ANNUAL 2015

A total of 3,600 lots with a pre-sale estimate in excess of HK$60 million (US$7.7 million) go under the hammer in what is expected to be the largest auction of Chinese stamps anywhere in the world this season. Each season Interasia’s semi-annual auction of Chinese, Hong Kong and Asian stamps is the largest Chinese stamp auction anywhere in the world, dwarfing the other stamp auctions in China and Hong Kong, and this weekend’s sale promises to be no exception.

AVIATION

Cathay, DragonAir passenger load factor inched higher to 82.4%

Cathay Pacific Airways attracted about 700 applicants to a cabin crew recruitment day held at the airline’s headquarters, Cathay Pacific City. The airline plans to recruit about 1,000 cabin crew in Hong Kong this year to cope with growing operational needs.

Hong Kong cracks down on unlicensed guesthouses during Chinese New Year

COMMERCIAL PROPERTY

Six big trends that could shake up Hong Kong's office market by 2020

According to Colliers, overall, Asia’s office leasing sector will remain steady, with rents increasing by an average of around 3% across the region in 2014. However, there will be some big variations. Jakarta and Manila are expected to remain the hot spots.

Cathay Pacific eyes boosting cabin crew to 1,000 this year

HR & EDUCATION

Hong Kong issues black travel alert for Bangkok

According to a report, the Security Bureau raised the outbound travel alert for Bangkok to black, while the alert for other parts of Thailand remains amber. The level was raised after the Thai government declared a 60day state of emergency.

AVIATION

In 2020, Hong Kong’s office market will have considerably diversified, providing more opportunities for landlords and occupiers than exist in the current market. This trend was anticipated in the ‘Hong Kong Office 2020’ report that was recently released by Jones Lang LaSalle, the professional services firm which specialises in real estate.

The Home Affairs Department’s Office of the Licensing Authority has stepped up enforcement action against unlicensed guesthouses during the Lunar New Year. Since January 27, the office has made surprise inspections, sent undercover officers in as tourists, and worked with other departments to crackdown on such guesthouses throughout the city.

HR & EDUCATION

Unemployment rate hits record-low at 3.1%

FOOD & BEVERAGE

Restaurant receipts up 2.1%

The value of total receipts of the restaurants sector in the fourth quarter, provisionally estimated at $25.4 billion, rose 2.1% year-on-year, the Census & Statistics Department announced. The provisional value of total purchases by restaurants increased 1.4% to $8.9 billion.

According to a release, the seasonally-adjusted unemployment rate dipped to 3.1% in the three months from November to January, the lowest since the December 1997 to February 1998 period. The Census & Statistics Department said the underemployment rate also dropped to 1.3%, marking a 16-year low, while total employment hit a record high and the number of unemployed people declined for the fifth consecutive month.

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Daily news: www.hongkongbusiness.hk HOTELS & TOURISM, RETAIL

Property buyers from Mainland jumped to 8.2%

BUILDING & ENGINEERING

Why construction costs are likely to rise 7-8% in 2014

Barclays, citing HKET, said the RLB’s tender price index, which measures tender price movements of builders’ works in the private sector in Hong Kong, rose 7.5% y/y to 2,230 in 3Q 2013, compared with 4.3% y/y inflation over the period. Construction costs have been rising in the past four years, with the index up from 1,620 in 3Q 2009 to 2,230 in 3Q 2013, +37.7%.

Citing data by Centaline, Barclays says the percentage of mainland buyers in Hong Kong’s property market rose from 5.8% in 3Q 2013 to 8.2% in 4Q 2013 by transaction volume. In the primary market, Chinese buyers increased from 11.2% in 3Q to 13.7% in 4Q by volume.

BUILDING & ENGINEERING

Government eyes shelling out $227m for artificial islands

According to Barclays, the Hong Kong Government proposed the funding of HK$227mn for the study on building artificial islands in central Hong Kong waters.

In his Policy Address in January 2014, Hong Kong Chief Executive proposed to build a third business district on the artificial islands in central Hong Kong Water, in addition to Central and Kowloon East.

HR & EDUCATION

Salary expectations of Hong Kong's fresh grads hit $17,314 per month

MEDIA & MARKETING

Office of Communications Authority clarifies issue on TV licence

According to a release, holding a unified carrier licence under the Telecommunications Ordinance does not exempt a company from having to comply with licensing requirements under the Broadcasting Ordinance.

COMMERCIAL PROPERTY

TRANSPORT & LOGISTICS

Real estate investments in Asia Pacific reach recordbreaking heights

Brace yourselves for fewer parking spaces

CBRE, in a release, reported that total real estate investment turnover in Asia Pacific for 2013 reached US$90.4 billion, a rise of 24% year-on-year and the highest figure recorded since CBRE began collecting data in 2005.

and the distance from rail station, Barclays says.

According to the announcement by the Planning Department, parking standards for private housing now include the assessment of a development’s intensity ratio apart from the development’s flat size

matching the DecemberFebruary figure. The underemployment rate also remained unchanged at 1.2%.

RETAIL

Strong January spending keeps retail sales up by 6.6%

According to Barclays, January/February combined y/y Hong Kong retail sales growth normalised after a strong January (that was boosted by Chinese New Year timing difference), as anticipated. Jan/Feb y/y growth was back at just +6.6% y/y by value, similar to the monthly readings in 2H13 that only saw mid-high single-digit % y/y growth, and slightly better than December 2013 that saw +5.7% y/y growth.

According to the latest findings from a global survey conducted in Singapore and Hong Kong earlier this year, it would cost an employer more to hire fresh graduates in Singapore as their average expected monthly salary amounts to $3,308.

FINANCIAL SERVICES

Hong Kong banks’ deposit growth lags at 1.6%

HR & EDUCATION

Hong Kong's unemployment rate stood steady at 3.1%

According to the Census & Statistics Department, the seasonally adjusted unemployment rate stood at 3.1% in January-March,

According to Barclays, the HKMA’s February monetary statistics again showed tighter system liquidity, led by broad-based demand for loans (+3.2% m/m) while deposit growth lagged (+1.6% m/m). Trade finance growth remains strong at +2.6% m/m. We believe foreign banks have driven system loan growth higher while the domestic retail banks remain disciplined on keeping the loan-to-deposit ratio stable.

HONG KONG BUSINESS ANNUAL 2015 19

TOP NEWS IN 2014

MOST READ

rise lately, then it is time to start making a game plan for getting the salary you deserve.

That is because the majority of your peers in Hong Kong are likely to have

Daily news: www.hongkongbusiness.hk

HOTELS & TOURISM, LEISURE & ENTERTAINMENT

Macau's gaming table revenue edged 13.2% to $845m

consideration of AUD2.37bn (HK$17bn) or AUD1.32/ share.

TRANSPORT & LOGISTICS

Kerry Logistics Network core earnings expected to soar by 16%

COMMERCIAL PROPERTY

Land premium hits HK$1.72 bn in Q1

According to Barclays, the Hong Kong Government’s efforts to speed up land supply have resulted in a decline in private land use modifications. In the Q1 2014, there were only 20 cases of land use modification and land exchange, of which only seven cases involved the payment of a land premium.

According to Barclays, Kerry Logistics Network (KLN) is well positioned to benefit from increased demand for valued-added logistics services in China and the ASEAN region. Its core earnings are expected to rise at a CAGR of 16% for 2014E-16E.

A consortium comprising Cheung Kong Infrastructure (CKI), Cheung Kong Holdings (CKH) and Power Assets Holdings (PAH) submitted a non-binding takeover proposal to acquire all the shares of Envestra, a distributor of natural gas in Australia, at a cash 20 HONG KONG BUSINESS ANNUAL 2015

COMMERCIAL PROPERTY

Lantau development strategy under way

Secretary for Development Paul Chan says Lantau has room for diversified development that can boost Hong Kong's social and economic development.

Speaking to the media, Mr Chan said Lantau's strategic position, development direction and proposals were explored at a meeting of the Lantau Development Advisory Committee.

Hong Kong again hailed as Asia’s most expensive office market

HK-Guangzhou railway to be delayed by 2 years

Cheung Kong to acquire Australian gas distributor for HK$17b

their base salaries increased.

According to Barclays, June month-to-date average daily table revenue at HK$845mn remained much lower than the HK$973mn a day seen in May, and noted that it believes this is due to the continued weakening VIP volume trends with potentially some impact from the World Cup.

COMMERCIAL PROPERTY

TRANSPORT & LOGISTICS

ENERGY & OFFSHORE

Cathay Pacific Airways, in a release, announced that it will launch a nonstop daily service from Hong Kong to Zurich, offering passengers travelling from Hong Kong direct access to this leading financial centre that is also one of the world’s most attractive tourist destinations.

According to Barclays, the HK$67bn high-speed railway linking Hong Kong to Guangzhou will be delayed by up to two years. The MTR attributed the delay to damage to a tunnel boring machine as well as problems with the construction of the West Kowloon Terminus.

According to CBRE, Hong Kong’s CBD office rentals averaged at US$ 242 per square feet per year.

Just across the bay, West Kowloon is US$81 cheaper at US$161 per sq. ft. per annum.

It’s the only Asian location to exceed $200 per sq. ft. per

HR & EDUCATION

69% of HK companies raise pay for finance professionals

According to a Robert Half survey, if you are a finance and accounting professional and you have not had a pay

year.

AVIATION

Cathay Pacific launches nonstop flight to Zurich

HR & EDUCATION

Asia's ultra rich rocketed to a whopping 4.32m in 2013

While North America remains the wealthiest region with the world's largest High Net Worth Individual population in 2013, AsiaPacific narrowed its lead to less than 10,000 individuals, and led the global HNWI population growth in 2013 by expanding at 17.3 percent to reach 4.32 million.

According to the World Wealth Report 2014, jointly released by Capgemini and RBC Wealth Management, Asia-Pacific also led in HNWI wealth growth at 18.2 percent, reaching US$14.20 trillion. Hong Kong, meanwhile, experienced increases in HNWI population and wealth of 9.4 percent and 11.9 percent to reach 124,000 and US$626.9 billion respectively.

TOP NEWS IN 2014

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Daily news: www.hongkongbusiness.hk boost in headcount in second half of 2014

COMMERCIAL PROPERTY

Hong Kong is city with most supertall office buildings

According to the research report "The Emergence of Asia Supertalls" from CBRE, Hong Kong is followed by Chicago and Guangzhou, both with five supertall office buildings, while rounding up the top five are Dubai and New York with four apiece.

The latest Hudson Report: Employment Trends that has been released shows that nearly half (47.8%) of employers expecting to increase headcount over the second half of 2014.

According to a release from Hudson, this is a jump of 9.6 percentage points (pp) from the first quarter and the strongest reading since Q4 2011.

Facebook finds its new home in Hong Kong at One Island East Building, Quarry Bay. Unveiled last week on July 24, the design of the Hong Kong space is centered around making life easier for staff and guests so they can focus on the work they love to do.

HR & EDUCATION

Hong Kong employers eye

COMMERCIAL PROPERTY

These districts get the most bang for their buck as demand for industrial space persists

According to a research and forecast report from Colliers International on 2Q 2014, thus, it has seen an increase in requirements from industries such as tableware cleaning companies. The increased difficulties in hiring base-level staff have resulted in more restaurant operators outsourcing their tablewarecleaning process to thirdparty companies.

TRANSPORT & LOGISTICS

Logistics sector gets neglected in Hong Kong economy

According to a release from CBRE, in addition, vast amounts of current industrial stock is being rezoned or revitalized to facilitate residential and commercial developments, further depleting available options for industrial occupiers.

Franck Muller opens a Maison for luxury and cravings

Hong Kong government’s restrictive measures hound residential market

Take a tour at Facebook Hong Kong’s new office

look to enhance their security.

FOOD & BEVERAGE

RESIDENTIAL PROPERTY

INFORMATION TECHNOLOGY, LEISURE & ENTERTAINMENT

growth to 0.7 percent y-o-y.

According to a release from JLL, a small pick-up in sales activity was recorded in April and May after the government relaxed conditions associated with the Double Stamp Duty (DSD).

RETAIL

April suffers sharpest drop in Hong Kong retail property segment

According to the quarterly summary on the Hong Kong property market (2Q14) by JLL Hong Kong, this was the sharpest year-on-year drop in a month since February 2009 – trimming year-to-date

Situated at the new fourstory maison of Swiss luxury young watchmaker, Franck Muller, are two new restaurants to satisfy your cravings. Found at the second floor is FRANCESCO

by FRANCK MULLER which offers an Italian flare with a Japanese twist and on the third floor is EIGHTEEN SHARP which offers Chinese cuisine with a western identity. Both restaurants opened along with the Maison Frank Muller’s grand opening last June 27, 2014.

INFORMATION TECHNOLOGY

Wanted: Web security skills to fight Hong Kong cyber threats

According to a release from Hays, in its latest Hays Quarterly Report, the recruiter notes that there is strong demand for Software Developers and Web Security professionals as organisations

RESIDENTIAL PROPERTY

3 reasons why Hong Kong's home property prices won't crumble

It has been observed that by most measures, Hong Kong’s residential property market is overpriced and the possibility of a large correction is much talked about, in light of the fact that prices are already coming down. According to JLL, since reaching all-time highs in 2013, transaction volumes have dropped to generational lows and prices have retreated by about 7% as the government’s cooling measures have started to weigh on the market.

However, unlike others in the market, JLL thinks the risk of an outright collapse in residential property prices is unlikely.

HONG KONG BUSINESS ANNUAL 2015 21

TOP NEWS IN 2014

MOST READ

government recommends seven new railway projects be implemented on or before 2016.

ECONOMY

Daily news: www.hongkongbusiness.hk

BUILDING & ENGINEERING

Global construction industry propelled by emerging markets

on the other hand, office sales transactions from the owner-occupier pool have doubled since last year and the trend looks set to grow.

“The prolonged low interest rate environment since the outbreak of the global financial crisis has drawn more office occupiers to acquire offices for their own use,” says Joanne Lee, Manager of Research and Advisory Services at Colliers International Hong Kong.

According to a release from AIG, the discussion took place in conjunction with the launch of new research

by AIG which found that for the first time construction in emerging markets is now outpacing developed markets.

According to a research note from Barclays, this is up 31% y/y and has reached 99% of the full year housing starts in 2013. The report noted that sequentially, the 3Q 2014 new housing starts of 1,600 units is down from 4,300 units in 2Q 2014.

Here's how Hong Kong developers were hurt by the Occupy Central protest

RESIDENTIAL PROPERTY

Hong Kong Land still hurt by poor market status in China

According to a release from Fitch Ratings, the affirmation reflects the delivery of stable rental income from Hongkong Land's investment properties portfolio at prime locations in Hong Kong, which provides strong gross rental income coverage ratios.

Roughly two weeks have passed since the Occupy Central protest began on 28 September 2014, and it has been observed that based on the Hang Seng Property Index’s initial 3.8% correction during the week of September 28 and last week’s 1.5% rebound, it is believed that investors are starting to move beyond the initial uncertainties and business disruptions.

HOTELS & TOURISM

Hong Kong struggles to make tourists stay longer

In the past, the Hong Kong Tourism Board (HKTB) has undertaken several measures such as waiving the Hotel Accommodation Tax since 1 July 2008, to attract visitors to extend their length of stay in Hong Kong.

HOTELS & TOURISM

China tourists to Hong Kong climbed 12.8% y-o-y in July

COMMERCIAL PROPERTY

Why Kowloon's office space market will be the hottest hub by 2015

While office rents are rising fast in Hong Kong office leasing market, sales momentum in the Kowloon office has picked up, and with fit-out and renovation costs going through the roof every year, new leasing transactions have witnessed a drop in recent years.

According to a release from Colliers International, 22 HONG KONG BUSINESS ANNUAL 2015

According to a research report from JLL, this was stronger than the 7.8% y-o-y recorded last month. In other market news, the Link REIT is planning to dispose five properties by private tender, namely the shops and car parks at Choi Fai Estate in Ngau Chi Wan and Choi Ha Estate in Ngau Tau Kok. TRANSPORT & LOGISTICS

Hong Kong unveils plan for 7 new railway projects

According to a research note from Barclays, this provides a framework for further expansion of Hong Kong’s railway network up to 2031.

The report noted that the

COMMERCIAL PROPERTY

Space availability constraints stunts industrial market

Trade figures improved in Q3 as total exports and reexports both increased, while improved trade environment was offset by tight space availability which resulted in a limited level of leasing activities.

According to CBRE's preview of the Hong Kong property market's Q3 2014 performance, meanwhile, overall warehouse vacancy rates stood at sub-1% level for third consecutive quarter in Q3 2014.

RESIDENTIAL PROPERTY

New housing starts rocketed 31% to 13,900 units

HOTELS & TOURISM

The Langham Hong Kong completes US$30 million refurbishment

According to Bob van den Oord, Managing Director & Vice President of Brands of The Langham HK, Hong Kong remains to be a robust destination with so much to offer. The USD30 million refurbishment allows them to stay competitive.

TOP NEWS IN 2014

MOST READ

optimization will be done through reducing Galaxy Macau’s mass tables count by ~30, which resulted in mass table yield up 27% yoy.

LEISURE & ENTERTAINMENT

Galaxy Entertainment's earnings slipped 5% to HK$3.3b

Daily news: www.hongkongbusiness.hk global air trade outlook

COMMERCIAL PROPERTY

Asia's office leasing sector to remain 'steady' this year

According to Colliers, overall, Asia’s office leasing sector will remain steady, with rents increasing by an average of around 3% across the region in 2014. However, there will be some big variations.

Jakarta and Manila are expected to remain the hot spots. These two cities saw substantial increases in rents last year, and the trend is set to continue with 13% and 9% growth in 2014. Its recovery from a cyclical downturn and growing demand will probably fuel a hefty 12% increase in Singapore too.

COMMERCIAL PROPERTY

Here's how much the local property market was hurt by the Occupy Central

It has been noted that pro-democracy protests in various core business districts in Hong Kong have stolen the spotlight over the last fortnight as road blockades in Central, Admiralty, Causeway Bay and Mong Kok have had a larger-than-expected adverse effect on traffic conditions.

AVIATION

Hong Kong SMEs getting spooked by the gloomy

The key finding of the DHL Hong Kong Air Trade Leading Index (“DLI”) showed that air trade outlook had shrunk for two consecutive quarters due to weak demand from Europe and declining trade of high value commodities.

According to a release from DHL, the overall drop revealed by the index is indicative of cautiousness among air traders about the outlook of the global economy.

HR & EDUCATION

Almost 2 in 5 Hong Kong employees expect worse economic status in 2015

Over half (59 per cent) of employees in Hong Kong expect the economic situation to improve in 2015.

According to a release from Randstad Workmonitor, the research also showed that two thirds (66 per cent) of employees expect to receive a pay rise and six in ten employees expect a one-time bonus at the end of this year.

COMMERCIAL PROPERTY

Hong Kong overtaken by London as costliest city for living, working space

RESIDENTIAL PROPERTY

Global elite still eyeing Hong Kong residential market

Despite previous introduction of stamp duty measures.

While various stamp duty measures introduced last year were aimed to dissuade overseas buyers from the residential market, it has been noted that there is still continual interest in Hong Kong from the global elite.

LEISURE & ENTERTAINMENT

Galaxy targets site investigation for Phase 3 & 4 by end-2014

Galaxy Entertainment Group is focused on table yield optimization, and it involves a three-pronged approach.

According to a research note from Nomura, the

The pressure of Chinese money on the market has pushed prices to high levels in recent years – particularly in the prime markets.

According to a report from Savills, a combination of falling residential rents and, most importantly, a weakening currency, has increased cost competitiveness in the city.

The report said that this means London is the most expensive city in which to accommodate staff. Working against London has primarily been sterling’s appreciation against the US dollar, up until June 2014.

RESIDENTIAL PROPERTY

Prime prices in Hong Kong, at just over $4,000psft, are four times those of Dubai and more than twice those of Singapore.

According to a report from Savills, space, particularly prime space, is at such a premium in this high-rise city that units are particularly small and expensive.

Galaxy Entertainment Group's 3Q14 group EBITDA of HKD3.3b, up 1% YoY and down 5% QoQ, brought 9M14 group EBITDA to HKD10.6b, up 17% YoY, which was within expectations at 74% of Maybank Kim Eng's full-year forecast.

TRANSPORT & LOGISTICS

MTR bent on growing recurring businesses

According to a research note from Nomura, hence, MTR is focused on growing the recurring businesses, i.e. new railways in HK - target of more than 50% market share from current 47%; and more station commercial and investment property rents.

AVIATION

Dragonair boosts Airbus A320 fleet inflight offerings

Dragonair has announced the introduction of a suite of new products across its fleet of Airbus A320 aircraft, in line with its committment to offering passengers a premium travel experience.

According to a release from Dragonair, since early 2013 it has been rolling out a comprehensive upgrade of cabins across its Airbus A330 and A321 fleets. The upgrade includes new First Class, Business Class and Economy Class seats together with a brand-new on-demand inflight entertainment system, StudioKA. HONG KONG BUSINESS ANNUAL 2015 23

company and industry - telecommunications industry

What's the latest buzz in telecoms equipment exports?

Consumer demand in the US and EU soared amid a marginal slump in exports to the mainland.

H

ong Kong exports a variety of telecommunications equipment, ranging from basic telephones to sophisticated system products. Major export items include corded phones, cordless phones, mobile phones, etc. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephones/mobile phones in value terms in 2012.

Another major export category is parts and accessories, including parts for system products and a variety of mobile phone accessories. Hong Kong also exports different kinds of telecommunications apparatus with radio reception, like walkie talkies and base stations for telecommunications.

Other items include navigational apparatus like GPS devices and telephone switching/exchange equipment.

Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to reduce cost.

Their Hong Kong offices now focus

24 HONG KONG BUSINESS ANNUAL 2015

mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers.

Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc.

Hong Kong’s total exports of telecommunications equipment increased 8% in the first seven months of 2014. Exports of major items like

"Hong Kong companies emphasise quick response to ensure effective services to their customers." parts of telecommunications equipment, and telephone sets/mobile phones all increased by different degrees, although exports of other apparatus for transmission/reception of voice, images or other data were lacklustre.

Exports to the Chinese mainland, the largest market, declined by 3% in the first seven months of 2014. But exports to the US and the EU increased amid continued consumer demand for telecommunications products, while sales to ASEAN expanded 12% in the period.

Distribution Channels Hong Kong companies usually sell their products on OEM and ODM basis to overseas telephone companies and specialised importers of telecommunications equipment, which are capable of obtaining approvals from relevant telecommunications authorities in the corresponding markets. On the other hand, a few Hong Kong companies promote their own brand products in markets like the US and the EU. Some companies also have offices in overseas countries to monitor local distribution and/or after-sales services.

Notably, Hong Kong is an important trading hub for parts of telecommunications equipment and related finished products in Asia-Pacific.

Many items from the US, Europe, Japan, Taiwan, and South Korea are reexported via Hong Kong to the Chinese mainland, and vice versa. A number of multinational manufacturers of parts and components have set up their offices in Hong Kong, engaging in R&D, distribution and/or sourcing activities in the region.

Promotion via participation in trade fairs is an effective way for Hong Kong’s telecommunications equipment companies to explore market opportunities.

Important trade fairs include the CES Show held in the US, CeBIT in Germany, Japan Electronics Show and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC).

Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies

telecommunications industry - company and industry Performance of Hong Kong’s Exports of Telecommunications Equipment ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total exports by Major Market Chinese mainland US EU Netherlands Hungary ASEAN Thailand India Total Exports by Categories Parts of Telecommunications Equipment Other Apparatus for Transmission or Reception Telephone Sets/Mobile Phones Radar/Radio Navigational Aid Apparatus

2012 HK$Mn. Growth % 377 -85 413,269 +17 362,394 +15 413,646 +16

2013 HK$Mn. Growth % 163 -57 505,211 +22 451,754 +25 505,374 +22

Jan-Jul 2014 HK$Mn. Growth % 126 +12 289,670 +8 259,620 +9 289,796 +8

2012 Share % Growth % 47 +25 10 +18 11 * 4 +6 1 +39 6 +4 1 +13 5 +4

2013 Share % Growth % 49 +29 8 +5 11 +22 3 +11 1 +21 5 +19 1 +82 5 +18

Jan-Jul 2014 Share % Growth % 44 -3 9 +6 12 +21 3 +2 2 +92 6 +12 1 +66 5 +20

2011 Share % Growth % 49 +20 28 +16 22 +7 1 +17

2012 Share % Growth % 49 +24 23 +1 26 +46 1 +7

Jan-Jul 2013 Share % Growth % 47 +3 22 -6 30 +33 1 +20

* Insignificant ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

to establish connections with potential buyers.

CEPA Provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.

In the main, the CEPA origin criteria for Hong Kong items include: (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; and (3) fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong.

Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the valueadded percentage. With effect from 1 April 2012, costs of raw materials and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the valueadded content originating in Hong Kong is greater than or equal to 15%.

Product Trends Mobile communication has become part of the daily lives of consumers in most countries. In particular, sales of highend smartphones are rising rapidly. Enhanced features, especially those related to enhanced processing capabilities with higher mobile data transmission speed, have been added on to the majority of the models, in addition to others like digital cameras, multimedia playback functions and GPS.

"Those operating at higher frequency, such as the DECT phones for Europe, and 2.4GHz and 5.8GHz cordless phones for the US, are sought after due mainly to their better communication quality and enhanced security."

Some high-end models are even compatible with certain wearable electronic devices.

This has lured demand especially from youngsters and higher-income consumers.

Nevertheless, fixed-line network will continue to play a vital role in the communication world.

Spurred by the demand for high-speed data transmission and Internet access via the fixed-network, broadband applications, especially those making use of optical communications technologies, are hot areas for development.

With respect to domestic telephone products, there is a constant appetite for cordless phones. Those operating at higher frequency, such as the DECT phones for Europe, and 2.4GHz and 5.8GHz cordless phones for the US, are sought after due mainly to their better communication quality and enhanced security. Yet corded telephones are not expected to obsolete in the medium term.

HONG KONG BUSINESS ANNUAL 2015 25

company and industry - electronics industry

What's HK's major source and destination of electronics?

Electronic parts and components increased steadily on the back of continued expansion of mainland’s outward processing production.

H

ong Kong’s electronics industry is the largest merchandise export earner of the territory, accounting for 59% of Hong Kong’s total exports in 2013. A substantial portion of such exports are regarded as hightech products, especially those related to telecommunications equipment, semiconductors and computer items.

The Chinese mainland is both the major source and the major destination of Hong Kong’s trading in such electronic products.

According to the latest available statistics, Hong Kong was the world’s largest exporter of telephones/mobile phones; the second largest exporter of electronic integrated circuits, computer parts/accessories, and video recording apparatus; and the world’s third largest exporter of electric micro motors in value terms in 2012. This is thanks to the huge re-export business handled through the territory, as Hong Kong is among the major trading hubs in the globe.

Parts and components constitute about three quarters of Hong Kong’s electronics

26 HONG KONG BUSINESS ANNUAL 2015

exports, of which the majority are reexported to the Chinese mainland for outward processing production. Finished goods constitute about one quarter of the exports, of which the majority are consumer electronics for domestic use, including a wide range of audio-visual equipment, computer products and telecommunications equipment.

Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to reduce cost. Their Hong Kong offices now focus mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong

"Hong Kong’s electronics exports rose by 5% during January-July 2014." companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc.

Hong Kong’s electronics exports rose by 5% during January-July 2014.

While exports of semiconductors and telecommunications equipment/parts grew by different degrees, exports of IT and AV equipment/parts were lacklustre.

Exports to the Chinese mainland, which accounted for about two-thirds of the total electronics exports, grew by 4% in the period. Exports of electronic parts and components, the major items of Hong Kong’s electronics exports to the mainland, increased steadily on the back of continued expansion of mainland’s outward processing production.

While electronics exports to the EU and the US grew steadily, exports to Japan also rebounded. But exports to ASEAN, which constituted mainly of parts and components, performed less well in the period.

Distribution Channels Hong Kong companies engaging in parts and components business are capable of producing on custom-made basis and offering total solutions for famous US, European and Japanese companies, e.g. parts and accessories of computers, RF modules for telecommunication purposes, chip-sets for LCD modules, etc. Meanwhile, standard components are usually exported directly to distributors and manufacturers in overseas markets, while some Hong Kong companies also have their own sales offices and/ or representative offices on the Chinese mainland and other overseas markets.

Notably, Hong Kong is an important trading hub for electronic parts and components in Asia-Pacific. Many items from the US, Europe, Japan, Taiwan, and South Korea are re-exported via Hong Kong to the Chinese mainland, and vice versa. A number of multinational manufacturers of parts and components have set up their offices in Hong Kong, engaging in sales, distribution and sourcing activities in the region.

As regards finished items, Hong Kong

electronics industry - company and industry Performance of Hong Kong’s Exports of Electronics ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets Chinese mainland EU (28) Germany Netherlands US ASEAN Singapore Japan Total Exports by Categories Finished Products Parts & Components Total Exports by Products Semi Conductors, Electronic Valves & Tubes Telecom. Equipment & Parts IT Equipment & Parts AV Equipment & Parts

companies mostly produce on ODM basis for reputable brand names in overseas markets. Some of these major buyers have set up buying offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in North America and Europe, who distribute the merchandises under their own channels or re-sell to their clients for further distribution.

There are also a number of Hong Kong companies marketing electronic products under their own brand names, including Truly, V-Tech, Group Sense, Venturer, GP and ACL. Their sales network covers not only the advanced countries, but also economies like Latin America, Eastern Europe and various parts of Asia.

Product Trends On the back of technological advancement and falling prices amid keen competition,

2012 HK$Mn. Growth % 7,393 -22 1,973,389 +7 1,310,755 +9 1,980,782 +7

2013 HK$Mn. Growth % 5,199 -30 2,108,332 +7 1,393,011 +6 2,113,531 +7

Jan-Jul 2014 HK$Mn. Growth % 2,541 -24 1,223,068 +5 773,309 * 1,225,609 +5

2012 Share % Growth % 65 +9 7 -2 2 -4 1 +5 7 +9 6 +4 2 * 3 +8

2013 Share % Growth % 66 +8 7 +8 2 +1 1 +1 6 +1 6 * 2 +1 3 -9

Jan-Jul 2014 Share % Growth % 65 +4 7 +8 2 +9 1 +9 6 +5 6 +1 2 -2 3 +6

2012 Share % Growth % 27 +9 73 +6

2013 Share % Growth % 26 +2 74 +8

Jan-Jul 2014 Share % Growth % 25 -1 75 +7

2012 Share % Growth % 27 +1 21 +16 22 +13 12 +4

2013 Share % Growth % 29 +13 24 +22 19 -4 9 -10

Jan-Jul 2014 Share % Growth % 32 +20 24 +8 19 -3 8 -16

conventional IT products like notebook computers have become mass products.

Now, the industry is focusing on further technological enhancement to sustain their business. Notably, mobile computer devices with wireless connectivity, in particular the tablets, are well received in the market.

Meanwhile, the industry is exploring business opportunities by applying 3D display technology to computer products. Indeed, a number of industry players are in the pipeline to promote their 3D computer devices, such as shutter glass and naked-eye 3D monitors. Also, some of the players are keen to introduce their 3D printers into the market in view of the falling printing and other material costs.

Mobile communication has become part of the daily lives of consumers in most countries. In particular, sales of high-end smartphones

"The market for digital camcorders and digital cameras has expanded robustly, while DVD recorders/players are gradually replaced by Bluray disk apparatus."

are rising rapidly. Enhanced features, especially those related to enhanced processing capabilities with higher mobile data transmission speed, have been added on to the majority of the models, in addition to others like digital cameras, multimedia playback functions and GPS. This has lured demand especially from youngsters and higher-income consumers.

As regards consumer electronics, one of the developments is digital imaging. In particular, the market for digital camcorders and digital cameras has expanded robustly, while DVD recorders/players are gradually replaced by Bluray disk apparatus. Largescreen digital TVs with 3D effects and connectivity for Internet surfing, as well as the ultra high definition TVs (UHDTVs) with display resolution of 2160p or higher, are also among the industry foci for further development.

HONG KONG BUSINESS ANNUAL 2015 27

company and industry - household electrical appliances industry

HK: Centre for original design in household electronics This is despite manufacturers relocating to the Chinese mainland to maintain cost competitiveness

H

ong Kong produces and exports a wide range of household electrical appliances, including: (1) kitchen appliances ranging from food grinders, mixers and juicers to thermic appliances like coffee makers, toasters, electric knives, electric kettles and ovens; (2) home care appliances like electric fans, air conditioning machines, vacuum cleaners, floor polishers, space heaters and irons; (3) personal care products like hair dressing and hand drying apparatus, shavers, hair clippers, massagers, face steamers and electric toothbrushes; and (4) household lighting products.

According to the latest available figures, Hong Kong was the world’s second largest exporter of hair dressing apparatus in value terms in 2012.

Today, most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to maintain cost competitiveness. Their offices in Hong Kong are mainly responsible for R&D activities, product development, quality

28 HONG KONG BUSINESS ANNUAL 2015

control, management, marketing and logistic support.

Apart from original equipment manufacturing (OEM), a large portion of Hong Kong companies have their principal business based on original design manufacturing (ODM). These cover product design and development, mechanical drawing, prototyping and sampling, tool-making and production, with buyers providing the industrial/ conceptual design only, such as cosmetic drawings and features. In some cases, the industrial/conceptual designs are undertaken by Hong Kong companies.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO

"Hong Kong’s total exports of household electrical appliances decreased 1% during January-July 2014. " 14000 - a standard for environmental management system, etc.

Hong Kong’s total exports of household electrical appliances decreased 1% during January-July 2014. Although exports of major items like household lighting products and thermic domestic appliances expanded, sales of hair dressing/hand drying apparatus and domestic vacuum cleaners declined in the period.

The US, EU and Japan were the largest export markets, together constituting about two-thirds of Hong Kong’s total exports of household electrical appliances. While exports to the US and the EU rebounded, sales to Japan were lacklustre in the period.

Distribution Channels Hong Kong manufacturers of household electrical appliances mostly produce on OEM and ODM basis for famous US, European and Japanese brands, of which some have set up buying offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in advanced countries, who may distribute the merchandises through their own channels or re-sell to their clients for further distribution.

There are a few large Hong Kong manufacturers like Goodway and Megaman marketing electrical appliances under their own brand names, while a number of smaller companies also sell their own-brand products to overseas markets. Their sales network covers not only the developed economies, but also emerging markets like Latin America and Eastern Europe.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of household electrical appliances to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Home Fair and Domotechnica in Germany, and Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC).

Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide

household electrical appliances industry - company and industry Performance of Hong Kong’s Exports of Household Electrical Appliances ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market US EU Germany United Kingdom France Japan Chinese Mainland Australia Total Exports by Categories Household Lighting Products Thermic Domestic Appliances Hair Dressing/Hand Drying Apparatus Table/Floor/Wall/Window Fans, Output <125W Domestic vacuum cleaner

opportunities for Hong Kong companies to establish connections with potential buyers.

In the main, the CEPA origin criteria for Hong Kong items include: (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; and (3) fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong.

Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the value-added percentage.

With effect from 1 April 2012, costs of raw materials and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the value-added content originating in Hong Kong is greater than or equal to 15%.

2012 HK$Mn. Growth % 34 -37 21,617 -2 20,888 -1 21,651 -2

2013 HK$Mn. Growth % 38 +10 20,141 -7 19,299 -8 20,179 -7

Jan-Jul 2014 HK$Mn. Growth % 21 -13 11,305 -1 10,764 -2 11,326 -1

2012 Share % Growth % 27 -11 18 -11 5 -7 3 -4 3 -10 23 +13 7 +1 2 +12

2013 Share % Growth % 23 -21 20 * 5 -12 4 +7 5 +45 23 -7 7 * 2 +25

Jan-Jul 2014 Share % Growth % 25 +10 20 +2 4 -5 3 -3 5 +6 20 -17 7 -12 3 +53

2012 Share % Growth % 24 +2 19 -20 10 +6 6 +44 6 +15

2013 Share % Growth % 29 +11 12 -42 10 -7 8 +27 7 +7

Jan-Jul 2014 Share % Growth % 29 +1 11 +7 8 -10 7 -4 7 +5

Product Trends Household electrical appliances carrying a single function are much sought after in western markets.

These include heating-based products, like coffee/tea makers and toasters; and motor-based appliances such as food choppers, blenders and juice-extractors. Yet many electrical appliances are now featured with electronic controls and LCD/ LED displays. To enhance user friendliness, some wired appliances have evolved into wireless versions powered by charged batteries, including wireless coffee makers, electric irons and vacuum cleaners.

Along with the growing concern on environmental protection, provision of environmentally appealing electrical appliances which comply with, for instance, European or North American eco-labelling and energy-saving schemes, is becoming a competitive edge of Hong Kong exporters of household electrical appliances.

"To enhance user friendliness, some wired appliances have evolved into wireless versions powered by charged batteries, including wireless coffee makers, electric irons and vacuum cleaners."

On the other hand, lighting models of high efficiency and longer lifetime are in demand.

In particular, a number of industry players are focusing on the development of LED lamps and lighting apparatus, which can reduce power consumption with an even longer lifetime than the electronic compact fluorescent lamps.

In addition, the industry has continued to focus on Internet application and networking technology to develop the so-called smart appliances, aiming at bringing the fully automated households to life. Smart appliances for air-conditioning, security, entertainment, lighting, etc. can be remotely controlled via the Internet.

Coupled with the mobile technology for Internet access, a touch of a button on the mobile phones will let consumers turn on the airconditioners before arriving home, or programme their recording and lighting apparatuses.

HONG KONG BUSINESS ANNUAL 2015 29

company and industry - audio visual equipment

AV equipment exports decline in major markets

Exports of major items like parts and accessories and TV cameras/ digital cameras registered declines by different degrees.

H

ong Kong exports a wide range of audio-visual (AV) equipment. According to the latest available statistics, Hong Kong was the world’s second largest exporter of sound recording apparatus, radios, and video recording/reproducing apparatus (including optical disc players); and the world’s fourth largest exporter of video cameras/recorders (including digital cameras) in value terms in 2012.

The largest export item is parts and accessories, including parts and accessories for recorders, radios, microphones and speakers. Meanwhile, exports of finished items are mainly for domestic use. Major items include digital cameras and camcorders, headphones/ earphones and microphones, as well as video recorders/players like the Blu-ray disc players. Other items like digital radios and car radios, hi-fi equipment and large-screen TV sets are also among Hong Kong’s exports.

Most Hong Kong manufacturers have relocated their production facilities to the

30 HONG KONG BUSINESS ANNUAL 2015

Chinese mainland to reduce cost. Their Hong Kong offices now focus mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary. Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc.

Hong Kong’s total exports of AV equipment declined by 16% during January-July 2014. Exports of major items like parts and accessories and

"Hong Kong’s total exports of AV equipment declined by 16% during January-July 2014. " TV cameras/digital cameras registered declines by different degrees.

The Chinese mainland was Hong Kong’s largest export market, constituting over half of the total AV equipment exports. During January-July 2014, exports to the mainland, of which the majority were parts and accessories for processing production, decreased by 18%. Exports to the US and the EU were also lacklustre.

Distribution Channels Hong Kong is a popular sourcing centre for high-end AV products. Notably, most Hong Kong companies produce for reputable American, European and Japanese brand owners. A number of overseas buyers have also set up offices in Hong Kong for direct sourcing in the region. In view of intensified competition, especially those related to OEM production, Hong Kong companies have enhanced their value-added and put more focus on ODM business, rendering increased value-added services to overseas customers. The most important attribute of their success is their product design and development capability, while knowledge of world product trends and consumer preferences in different markets is also their edge.

There are also a number of large Hong Kong companies marketing AV equipment under their own brand names, while smaller companies also sell their brand products to smaller importers and distributors in overseas market. Their sales network covers not the advanced countries, but also emerging economies like Latin America and Eastern Europe.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of AV equipment to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Fair in Germany and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.

Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets.

audio visual equipment - company and industry Performance of Hong Kong’s Exports of AV Equipment ^ 2012 Domestic Exports

2013

Jan-Jul 2014

HK$Mn.

Growth %

HK$Mn.

Growth %

HK$Mn.

Growth %

644

-20

559

-13

310

4

Re-exports

222,854

5

199,587

-10

94,537

-17

of Chinese Mainland Origin

178,788

6

156,185

-13

73,213

-19

Total Exports

223,498

5

200,146

-10

94,848

-16

Total Exports by Major Markets

2012

Chinese Mainland EU

2013

Jan-Jul 2014

Share %

Growth %

Share %

Growth %

Share %

Growth %

56

18

57

-8

55

-18

9

-6

8

-16

9

-16

Germany

3

*

3

-24

3

-12

Netherlands

2

-1

2

-17

2

-17

US

9

-3

9

-9

10

-6

Japan

8

-2

7

-24

7

-22

ASEAN

7

-10

7

-11

6

-29

Total Exports by Categories

2012

2013

Jan-Jul 2014

Share %

Growth %

Share %

Growth %

Share %

Growth %

Parts and Accessories

59

9

61

-7

62

-15

TV Cameras and Digital Cameras

11

-3

11

-13

9

-34

Headphones, Earphones, & microphones

6

45

6

-3

6

-16

Audio/Video Recorders and Players

6

-28

4

-34

4

-29

TV Receivers

5

-5

5

-17

5

-17

Radios

4

-5

3

-30

3

*

These include the safety requirements of UL/ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. With regard to electromagnetic compatibility, Hong Kong companies can well observe that products sold to the US require compliance with FCC standard, while EU’s CE-mark has also required the compliance with relevant EMC directives. As for sales in the China market, most electronic products have to be in compliance with the safety and other requirements of a unified compulsory product certification system known as 3C (China Compulsory Certification or CCC).

Meanwhile, Hong Kong companies are also attentive to the growing popularity of green consumerism in the marketplace. Especially

in Europe, consumers are generally conscious of environmental protection.

Not surprisingly, the EU has adopted a number of directives for environmental protection, which may have an impact on the sales of electronic products. These include the restrictions on batteries and accumulators that contain mercury, the Directive on Waste Electrical and Electronic Equipment (WEEE) and the Directive on Restriction of Hazardous Substances (RoHS).

The Chinese mainland has adopted similar environmental protection regulations. These include the already effective Management Methods on Prevention and Control of Pollution Caused by Electronic Information Products and the Management Methods on Prevention of Waste Electronic Equipment

"With regard to electromagnetic compatibility, Hong Kong companies can well observe that products sold to the US require compliance with FCC standard, while EU’s CEmark has also required the compliance with relevant EMC directives."

Pollution on Environment.

The regulation on recycling and treatment of waste electrical equipment has also come into effect since 1 January 2011.

Product Trends Amid the growing popularity of high-end home entertainment, demand for high-resolution video apparatus, such as the Bluray disc apparatus, is on the rise. This has stimulated the market for complementary audio systems, including the high quality speakers and amplifiers for home theatre sound effects. Meanwhile, the proliferation of mobile communications have spurred the demand for related audio accessories, including the high-end earphones or headphones, Bluetooth speakers and sound blasters that can work with various mobile devices.

HONG KONG BUSINESS ANNUAL 2015 31

company and industry - information technology equipment industry

Complete set computers lose popularity in Hong Kong But the city remains the world’s second largest exporter of computer parts and accessories.

H

ong Kong exports a wide range of information technology (IT) products, especially computer parts and accessories like motherboards, keyboards, power supplies, display cards, memory cards and cables and harnesses. According to the latest available statistics, Hong Kong was the world’s second largest exporter of computer parts and accessories in value terms in 2012.

Also, a number of Hong Kong companies are engaged in the trading and/or manufacturing businesses of computer peripherals and items like USB flash drives, monitors, hard disk drives and optical disk drives, as well as complete set computers such as notebooks, desktops and tablets.

Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to reduce cost.

Their Hong Kong offices now focus mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely

32 HONG KONG BUSINESS ANNUAL 2015

classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc.

Hong Kong’s exports of IT equipment decreased 3% during January-July 2014.

Although exports of computer parts and accessories continued to increase, exports of complete set computers and office machines declined in the period.

The Chinese mainland was the largest export market for Hong Kong’s IT equipment industry, absorbing over

"Although exports of computer parts and accessories continued to increase, exports of complete set computers and office machines declined." two-thirds of the total exports. Exports to the mainland, mainly parts and accessories, were lacklustre, whereas exports to the US and the EU performed well in the period.

Distribution Channels Many IT equipment manufacturers in Hong Kong are engaging in electronics manufacturing services (EMS) for large manufacturers and reputable brandnames in the US, the EU and Japan.

While some sell directly to the Hong Kong purchasing offices of prominent Japanese, European and US computer companies, some large manufacturers have subsidiaries or sales offices in the US and EU for marketing and after-sales services.

Others export directly to overseas importers/distributors, which may distribute and sell the products under their private labels.

In view of the keen market competition, Hong Kong companies have changed to strengthen their competitiveness by moving towards business of higher value-added and more sophisticated products. Now, they put more focus on ODM business and more sophisticated EMS, aiming to render value-added services to overseas customers.

The most important attribute of their success is their product design and development capability, while knowledge of world product trends and consumer preferences in different markets are also their edge.

Promotion via participation in trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) is an effective way for Hong Kong’s IT equipment companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT in Germany, Japan Electronics Show and Hong Kong Electronics Fair. Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong IT equipment companies to establish connections with potential buyers.

Since the implementation of the third phase of the Mainland and Hong Kong

information technology equipment industry - company and industry Performance of Hong Kong’s Exports of IT Equipment ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market Chinese Mainland US EU Netherland Germany ASEAN Japan Total Exports by Categories Computer Parts & Accessories Computers Office Machines

2012 HK$Mn. Growth % 3,170 +33 423,667 +12 316,592 +15 426,837 +13

2013 HK$Mn. Growth % 1,737 -45 410,001 -3 307,194 -3 411,738 -4

Jan-Jul 2014 HK$Mn. Growth % 625 -51 228,137 -3 165,211 -6 228,762 -3

2012 Share % Growth % 69 +15 6 +21 5 -3 1 -3 1 -19 8 +9 3 +21

2013 Share % Growth % 68 -5 6 -8 6 +15 1 -15 2 +16 8 -11 3 -6

Jan-Jul 2014 Share % Growth % 68 -4 6 +7 6 +5 1 +45 2 +9 8 -7 3 *

2012 Share % Growth % 47 +13 34 +15 20 +8

2013 Share % Growth % 49 +2 32 -10 19 -5

Jan-Jul2014 Share % Growth % 51 +2 31 -9 19 -5

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs.

According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.

In the main, the CEPA origin criteria for Hong Kong items include: (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; and (3) fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong.

Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the valueadded percentage. With effect from 1 April 2012, costs of raw materials

and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the value-added content originating in Hong Kong is greater than or equal to 15%.

Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets.

These include the safety requirements of UL/ ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. With regard to electromagnetic compatibility (EMC), Hong Kong companies can well observe that products sold to the US require compliance with FCC standard, while EU’s CEmark has also required the compliance with relevant EMC directives.

As for sales in the China market, most electronic products have to be in compliance with the safety and other requirements of a unified compulsory product certification

"The industry is exploring business opportunities by applying 3D display technology to computer products. "

system known as 3C (China Compulsory Certification or CCC).

Product Trends On the back of technological advancement and falling prices amid keen competition, conventional IT products like desktop and notebook computers have become mass products. Now, the Information technology equipment industry is focusing on further technological enhancement to sustain their business.

Notably, mobile computer devices with wireless connectivity, in particular the tablets, are well received in the market.

Meanwhile, the industry is exploring business opportunities by applying 3D display technology to computer products.

Indeed, a number of industry players are in the pipeline to promote their 3D computer devices, such as shutter glass and naked-eye 3D monitors. Also, some of the players are keen to introduce their 3D printers into the market in view of the falling printing and other material costs.

HONG KONG BUSINESS ANNUAL 2015 33

company and industry - building materials and hardware industry

Building hardware sales seen to grow in Hong Kong

Amid fast-changing markets, Hong Kong firms manage to keep growing exports to the mainland.

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he largest export item in Hong Kongâ&#x20AC;&#x2122;s building and hardware industry is electrical apparatus for building, including air-conditioning machines, relays, switches, electric conductors, electric insulators, wires and cables. Hong Kong also exports a variety of building hardware like nails, screws, nuts, hand and machine tools, sanitary ware and locks and keys.

Meanwhile, steel/iron such as steel tubes and steel pipes for building, as well as wood/board for building, including fibreboards, wooden doors and wooden window frames, also share a significant portion of total exports. Other smaller export items include plastic tubes, plastic pipes, paints, wallpapers, tiles, floor coverings, sheet glass, lime, cement, marble, stone, sand and gravel.

The success of Hong Kongâ&#x20AC;&#x2122;s building materials and hardware industry lies in efficient management. Against the fast changing markets, Hong Kong companies emphasise quick response to ensure effective marketing services to their customers, and to monitor the

changing product trends. Moreover, due to the growing quality consciousness of overseas buyers, many companies have strengthened their quality assurance systems.

The Chinese mainland is the largest export market, sharing more than 60% of the total exports. Sales to the mainland increased by 9% in 2013 and continued to grow by 1% in the first eight months of 2014. Exports were also affected by the rise of local Chinese suppliers, which have posed a threat to Hong Kong companies in the mainland market.

Sales Channels Hong Kong exporters of building materials and hardware usually sell their products directly to constructors, builders, real estate developers, architects and relevant sub-contractors in overseas markets. Some companies also sell to specialised importers, who then distribute the products to their clients.

As for the Chinese mainland,

" The Chinese mainland is the largest export market, sharing more than 60% of the total exports." potential buyers include real estate developers, builders and subcontractors. Hong Kong companies also sell to commercial project owners who have been authorised to conduct infrastructure and construction projects in the mainland and other Asian countries, as well as construction project developers who undertake private real estate development projects.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of building materials and hardware to explore market opportunities. Important trade fairs related to the industry include the National Hardware Show in Las Vegas, Hong Kong International Building and Hardware Fair, and Light+Building in Franfurt. Business missions organised by the Hong Kong Trade Development Council to specific markets also provide opportunities for Hong Kong companies to establish connections with overseas buyers.

Industry Trends Environmental protection has increasingly affected the production of building materials and hardware.

Against this background, many manufacturers have begun to review their production facilities and processes in order to comply with such regulations. The introduction of management system complying with the international environment standards, notably the ISO 14000, is to be a focus of the industry. On the back of keen competition from the mainland and Southeast Asia in the low-end market segment, Hong Kong companies have diversified their businesses to higher value-added products. Compliance with BS of the UK and ASTM of the US are the cutting edge of companies selling higher-end building materials and hardware, especially to western markets.

CEPA The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and subsequently expanded in following years. All products made in Hong Kong, subject to CEPA's rules of origin, enjoy duty-free access to the Chinese mainland.

34 HONG KONG BUSINESS ANNUAL 2015

building materials and hardware industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Building Materials and Hardware ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets Chinese mainland USA EU (28) Germany Japan ASEAN Total Exports by Categories Electrical Apparatus for Building Building Hardware Other Materials for Building Iron/Steel for Building Wood/board for building

2012 HK$Mn. Growth % 962 -1 129,977 +6 89,074 +8 130,939 +6

2013 HK$Mn. Growth % 964 * 138,441 +7 90,229 +1 139,405 +7

Jan-Aug 2014 HK$Mn. Growth % 637 -6 91,160 +3 58,153 * 91,798 +3

2012 Share % Growth % 64 +7 8 +11 8 -3 2 -4 6 +9 5 -2

2013 Share % Growth % 66 +9 8 +6 7 -3 2 -5 6 +7 4 -3

Jan-Jun 2014 Share % Growth % 64 +1 8 +3 8 +11 3 +24 6 +3 4 +5

2012 Share % Growth % 71 +7 13 -1 12 +15 3 +2 1 -1

2013 Share % Growth % 69 +4 12 -3 14 +32 3 +3 1 +20

Jan-Jun 2014 Share % Growth % 66 -2 12 +5 15 +13 4 +17 3 +126

*Insignificant ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies.

General Trade Measures Affecting Exports of Building Materials and Hardware Initiation of anti-dumping proceedings in western countries against goods originating from the Chinese mainland, including certain building materials and hardware, has been a concern for Hong Kong companies with sourcing or production activities in the mainland.

For instance, the US has imposed anti-dumping duties on the mainland-origin iron construction castings, copper pipe and tube, heavy forged hand tools, steel wire rope and steel concrete reinforcing bars. Meanwhile, the EU has anti-dumping duties against certain tube and pipe fittings of iron or steel, steel ropes and cables and certain stainless steel fasteners originated in the mainland.

Product Trends Alongside a steady growth of the markets for building materials and hardware, there is a demand for doit-yourself (DIY) products for interior decoration,

including demand for floorings, wall coverings, paints and fittings serving for DIY purposes, as well as hardware and electrical tools like electric screwdrivers, drill drivers, hand pumps and DIY home security systems. Moreover, building hardware is increasingly designed with emphasis on easiness of installation and maintenance. Products like parts and accessories for sanitary ware and domestic drainage systems have become standard-sized items, thus facilitating repairing and replacement by users.

With the advancement of technology, durability of items like wooden boards has been enhanced by improving fireproof, waterproof and scratch resistance capabilities.

In addition, moulded kitchen sinks of fibreglass have become popular, due mainly to its seamless surface, durability and easiness to clean. New types of materials are being adopted to raise the flexibility, durability, and both environmental and cost efficiency.

"One industry source estimates that global green building material market will grow by about 18% per annum from 2012 to 2016."

Green-building technology is getting more popular as the consumers are becoming more environmentally responsible and are looking way to save money in the long run with green technology, such as waterless urinals and dual-flush fixtures. Wall systems and roofing systems are popular requests to minimize heating and cooling expenses and increase energy efficiency.

Builders also require products that provide more value with little or no maintenance. One industry source estimates that global green building material market will grow by about 18% per annum from 2012 to 2016. More projects now use no or lowvolatile-organic compounds, including adhesives and binders that are more environmentally friendly.

Some manufacturers are adopting the approach of dematerialisation, that is, to use less material, to use materials that can be recycled and to design products with longer term product life cycle.

HONG KONG BUSINESS ANNUAL 2015 35

company and industry - jewelry industry

HK competes with India and Thailand in jewellery Manufacturers trim down profit margins as prices of precious metals fluctuate.

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ong Kong's jewellery industry can be broadly classified into two sectors: jewellery made of precious metal and imitation jewellery. In terms of value, some 86% of Hong Kong's total exports of jewellery are made of precious material.

Hong Kong's jewellery industry is known for its flexibility in accommodating customer needs. Production of fine jewellery encompasses a wide range of medium to high-priced products. The most popular product category is gem-set jewellery, particularly diamonds set in 14K or 18K and yellow/white gold. Hong Kong manufacturers are good at producing small stones jewellery with elements of contemporary fashion. Their gem-setting skills and design capability are competitive compared with world-class European manufacturers.

Hong Kong has a highly skilled and productive labour force capable of handling small orders and making elaborate designs at reasonable prices. The overall technology level of the precious jewellery industry is

perceived by manufacturers to be above competitors like Thailand but below the world leaders such as Italy and Japan.

Most notably, Hong Kong is leading in the production of gold items. Although high value-added processes are still retained in Hong Kong, manufacturing processes are increasingly shifted to the Chinese mainland, mainly to Shenzhen and Panyu.

Hong Kong has long been recognised as a leading centre for the production of jade jewellery. Major items are bangles, rings and pendants. Hong Kong has also evolved into a leading trading and distribution centre for pearls in recent years, partly due to the fast emerging Chinese and South Sea pearl industry and the recent decline of the Tahitian pearl industry.

Hong Kong’s exports of precious jewellery remained resilient, though slowing down in recent years. After expanding by 7% in 2013, export growth experienced a 13% year-onyear decline in January 2014. Yet this may be somewhat distorted by the different timing of the Chinese New Year. The US and the EU remained Hong Kong’s dominant

"The US and the EU remained Hong Kong’s dominant markets for precious jewellery, accounting for some 48% in 2013." markets for precious jewellery, accounting for some 48% in 2013. Export growth to these two markets increased 7% and 10% respectively in 2013. Besides, Macau, Switzerland and ASEAN are increasingly important markets for Hong Kong. In 2013, Hong Kong’s exports of precious jewellery to these three markets increased 83%, 21% and 12% respectively, bringing their total market share from 20.6% in 2012 to 26.5% in 2013.

On the other hand, Hong Kong’s exports of pearls, gem-stones and rough diamonds increased 12% in 2013 and 18% year-onyear in January 2014.

Hong Kong's jewellery exporters are facing intensifying competition from suppliers in the Chinese mainland and other countries, particularly India and Thailand.

This, together with the price fluctuation of precious metals, diamonds, precious stones and materials, has somewhat trimmed down their profit margins. Yet, compared with other industries, jewellery makers are already in a better position to pass cost increases onto buyers and end users if they are caused by price surges of precious materials, which make up the most part of a jewellery article's value. On the other hand, overseas retailers and importers often press Hong Kong suppliers for extended credits, exchange for unsold items, shorter delivery lead time and better designs.

The impact of the RMB's appreciation on the precious jewellery industry is modest compared with other industries because mainland content only accounts for a relatively small part of a jewellery article's value, compared with costs of precious materials, which are primarily imported into the mainland for export processing.

On the other hand, Chinese government’s policy on encouraging consumption will continue to shore up the purchasing power and import appetite of Chinese residents, and facilitate the sales of jewellery articles to the mainland, as well as retail sales in Hong Kong contributed by Chinese visitors.

Hong Kong is the world's second largest exporter of imitation jewellery after the Chinese mainland. In January 2014, Hong Kong’s exports of imitation jewellery increased 13% year-on-year, but this may be somewhat distorted by the different timing of the Chinese New Year.

Sales Channels The jewellery industry of Hong Kong is

36 HONG KONG BUSINESS ANNUAL 2015

jewelry industry - company and industry Performance of Hong Kong’s Jewellery Exports ^ Precious Jewellery (SITC 897.3) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Precious Jewellery by Market US EU United Kingdom France Italy India Switzerland Macau ASEAN UAE Precious Jewellery by Category Articles of Jewellery, of Precious Metal Articles of Pearls, Precious or Semi-Precious Stones Goldsmiths' & Silversmiths' Wares, Precious Metal Pearls, Gem-Stones and Rough Diamonds (SITC 667) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Imitation Jewellery (SITC 897.2) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

2012 HK$Mn. Growth % 8,718 +4 44,535 +17 23,414 -2 53,253 +14

2013 HK$Mn. Growth % 8,373 -4 48,342 +9 24,520 +5 56,715 +7

(January 2014) HK$Mn. Growth % 595 -8 3,559 -13 2,000 -1 4,154 -13

2012 Share % Growth % 29.5 * 17.4 +4 7.6 +56 4.0 -17 2.0 -19 6.1 +4 8.9 +40 5.6 +14 5.3 +85 3.0 +26

2013 Share % Growth % 29.7 +7 17.9 +10 7.7 +9 5.2 +38 1.7 -10 10.5 +83 10.1 +21 5.9 +12 4.6 -8 3.3 +48

(January 2014) Share % Growth % 33.5 +8 17.8 -30 6.7 -49 4.7 -20 2.6 -3 7.7 -18 12.1 +119 5.4 -57 5.1 +15 5.3 +85

2012 Share% Growth% 97.0 +14 2.9 +24 0.1 +37

2013 Share% Growth% 96.8 +6 3.0 +9 0.2 +55

(Jan-Aug 2014) Share% Growth% 96.8 -13 3.0 -7 0.2 +65

2012 HK$Mn. Growth % 137 +32 115,522 -8 7,012 +14 115,659 -8

2013 HK$Mn. Growth % 243 +78 129,231 +12 6,828 -3 129,475 +12

(January 2014) HK$Mn. Growth % 34 +237 11,210 +18 562 +3 11,244 +18

2012 HK$Mn. Growth % 103 +3 8,790 -1 8,133 -1 8,893 -1

2013 HK$Mn. Growth % 77 -25 8,786 * 8,187 +1 8,864 *

(January 2014) HK$Mn. Growth % 8 +12 942 +13 903 +20 949 +13

Note: ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies. * Insignificant.

by and large export-oriented.

The trade is characterised by a subcontracting system under which small- and medium-sized factories provide subcontracting services, such as mould making, precision casting, gem-setting, polishing and electroplating, to larger manufacturers or local jewellery retailers. Mass production of jewellery products is normally restricted to established manufacturers which are equipped with more sophisticated and automated production machines. The jewellery items made for exports usually bear buyers' brand names or logos. Some jewellery makers have set up overseas offices and outlets to promote

sales. Online display is another growing trend.

Some Hong Kong manufacturers are making inroads into retail and distribution in Hong Kong, helped by the flourishing tourist industry. According to Hong Kong Tourism Board’s survey, in 2012, vacation overnight visitors spent some HK$17.6 billion on jewellery, accounted for 18% of their total spending on shopping; as for those from the Chinese mainland, the share was higher at 20%.

Industry Trends Recent technological development allows massive production of jewellery

"While Hong Kong's jewellery industry remains basically a handicraft industry, a number of larger establishments have made use of sophisticated and automated production equipment."

products with good quality and competitive prices.

While Hong Kong's jewellery industry remains basically a handicraft industry, a number of larger establishments have made use of sophisticated and automated production equipment. These manufacturers integrate advanced production techniques, such as electroforming, with handicraft skills to enhance their efficiency.

They install computer-aided design and manufacturing (CAD/CAM) systems, as well as computer numerically controlled (CNC) machine tools in their product design and manufacturing processes.

HONG KONG BUSINESS ANNUAL 2015 37

company and industry - clothing industry

Hong Kong’s retail market continues to face headwinds Retailers battle it out amidst RMB appreciation and stricter environmental regulations on the Chinese mainland.

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he clothing industry is a major manufacturing sector of Hong Kong. It is the third largest manufacturing employer in Hong Kong, with 965 establishments hiring 8,572 workers as of December 2013.

Hong Kong's geographic boundary has never constrained the development of the forward-looking clothing industry.

The majority of clothing manufacturers have set up offshore production facilities in an attempt to reduce operation costs.

Relocation of production facilities offshore has, however, resulted in a largely steady decline in the number of clothing manufacturers in Hong Kong.

Hong Kong is not only a leading production centre but also a hub for clothing sourcing globally. Companies doing garment trade in Hong Kong are experienced in fabrics procurement, sales and marketing, quality control, logistic arrangements, clothing designs and international and national rules and regulations. The professionalism that they command and the combined services offered are not easily matched elsewhere.

38 HONG KONG BUSINESS ANNUAL 2015

They altogether form one of the largest groups involved in import-export trade in Hong Kong.

Performance of Hong Kong’s Exports of Clothing In recent years, traditional markets, such as the US, the EU and Japan, have rendered clothing exporters from developing countries, including ASEAN and Bangladesh, more preferential market access, which has in turn impaired the competitiveness of Hong Kong and mainland manufacturers. Along with rising labour costs, RMB appreciation and stricter environmental regulations on the Chinese mainland, an increasing number of Hong Kong and mainland clothing manufacturers have relocated their production of lower-end and mass products to Southeast Asian countries like Bangladesh, Vietnam, Cambodia and Indonesia. Their manufacturing operations on the mainland are now focused on more sophisticated and higher value-added items or urgent orders.

Hong Kong’s total exports of clothing

"In January-February 2014, Hong Kong’s domestic exports of clothing saw an increase of 11%, while reexports fell by 7%." fell by 7% year-on-year in the first two months of 2014 after a decrease of 3% in 2013. In January-February 2014, Hong Kong’s domestic exports of clothing saw an increase of 11%, while re-exports fell by 7%.

Among the chief export destinations, Hong Kong's clothing exports to the US decreased by 8% in the first two months of 2014, while those to the EU fell by 12%.

Clothing exports to major EU markets including Germany, the UK, France, the Netherlands and Italy fell by 3-15%.

Taken together, sales to the US and the EU accounted for more than 61% of Hong Kong's total clothing exports. Meanwhile, sales to Japan dropped by 7%, but the Chinese mainland market showed 11% gains in January-February 2014.

Product wise, Hong Kong’s exports of woven wear fell by 9% year-on-year in the first two months of 2014, with woven wear for men/boys and women/girls decreasing by 1% and 14%, respectively. Meanwhile, exports of knitted wear edged up by 1%, but both clothing accessories and other apparel articles slid by 7%.

Sales Channels Hong Kong’s clothing manufacturers have comprehensive knowledge about sourcing and products. They are able to understand and cater for the preferences of the dispersed customer bases. Exporters also have good knowledge of international and national rules and regulations governing clothing exports, such as rules of origin, quota restrictions, tariff rates and documentation requirements. Cut, make and trim (CMT) arrangements are common, although many Hong Kong manufacturers have moved to higher value added activities such as design and brand development, quality control, logistics and material sourcing.

A few well-established local manufacturers have entered into the retailing business, either locally or in overseas markets. Many of them have retail networks with their own labels in major cities around the world including Beijing, London, New York, San Francisco, Shanghai, Singapore, Sydney, Taipei and Tokyo. Some well-known manufacturing retailers include Baleno, Bossini, Crocodile, Episode, Esprit, G-2000, Giordano, JEANSWEST, Moiselle and

clothing industry - company and industry Performance of Hong Kong’s Clothing Exports ^ (HK$ billion) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

by Market US EU Germany United Kingdom France Netherlands Italy Japan Chinese mainland Australia Canada

by Categories Woven wear For men or boys For women or girls Knitted wear For men or boys For women or girls Clothing accessories Of textile fabrics Of non-textile fabrics Other apparel articles

U-2. As a global sourcing hub in Asia, Hong Kong attracts a number of international trading houses and major retailers. Buyers sourcing from Hong Kong include American and European department stores (e.g. Macy's, JCPenney, Federated, Karstadt Quelle, C&A), discount stores (e.g.

Sears, Target and Carrefour), specialty chains (e.g. The Gap, The Limited) and mail order houses (e.g. Otto and Great Universal Stores).

Many international premium designer labels – such as Calvin Klein, Donna Karen, Ralph Lauren, Tommy Hilfiger and Yves Saint Laurent – source clothes in Hong Kong through their buying offices or other intermediaries.

Hong Kong's fashion designers have been gaining worldwide reputation for their professional

2013 Growth % -17 -3 -4 -3

Jan-Feb 2014 Value Growth % 0.2 +11 24.3 -7 21.9 -8 24.5 -7

2012 Share % Growth % 36.9 -3 29.6 -17 7.5 -18 7.2 -19 3.3 -14 2.7 -24 3.2 -18 7.4 -8 5.2 -2 2.8 -6 3.5 -9

2013 Share % Growth % 36.8 -3 27.8 -9 7.2 -8 6.8 -8 3.1 -7 2.5 -8 2.8 -16 8.0 +6 5.6 +6 2.9 * 3.4 -7

Jan-Feb 2014 Share % Growth % 33.3 -8 28.0 -12 7.2 -13 6.6 -13 3.2 -15 2.7 -10 2.6 -3 7.2 -7 6.8 +11 3.7 -3 3.3 -9

2012 Share % Growth % 33.6 8 12.5 -9 21.1 -8 15.5 -11 5.0 -11 10.5 -11 8.0 -5 2.3 -9 5.7 -3 42.9 -8

2013 Share % Growth % 33.3 -4 12.4 -4 20.9 -4 15.8 -1 5.1 -1 10.7 -1 7.7 -7 2.2 -7 5.5 -7 43.2 -2

Jan-Feb 2014 Share % Growth % 37.6 -9 14.7 -1 22.9 -14 16.5 +1 5.9 +6 10.7 -2 6.8 -7 2.0 * 4.8 -10 39.1 -7

Value 2.0 173.1 161.9 175.1

expertise, sensitivity to current trends and ability to blend commercialism with innovation. Medium to high-priced fashion clothing bearing Hong Kong designer labels is being sold/ has been sold in renowned department stores overseas such as Bloomingdale's, C&A, Harrod's, Isetan, Macy's, Marui, Mitsukoshi, Nieman Marcus and Seibu.

Industry Trends Online shopping is increasingly popular in Hong Kong’s major markets, including the Chinese mainland. According to China Internet Network Information Center (CNNIC), there were about 300 million online shoppers in China (49% of the overall internet population), boasting a turnover of Rmb$1,850 billion in 2013.

2012 Growth % -29 -8 -9 -8

Value 1.7 168.4 155.7 170.0

"The Ministry of Commerce forecasts that e-tailing transaction value will exceed Rmb3,000 billion in 2015."

With apparel (including footwear and headwear) accounting for the biggest share of the online spending, nearly 82% of the online shoppers bought clothes online last year.

The growing variety of online shopping sites such as Taobao, Paipai and EachNet, plus the mushrooming of social media marketing and mobile retailing, is expected to boost online shopping and sales further.

The Ministry of Commerce forecasts that e-tailing transaction value will exceed Rmb3,000 billion in 2015, constituting more than 10% of total retail sales. This trend has also encouraged the development of some online shopping technologies, such as virtual fitting, video shopping and mobile snapshot for clothing.

HONG KONG BUSINESS ANNUAL 2015 39

company and industry - textile industry

China remains HK’s top export market for textiles

The Chinese mainland accounts for 60% of Hong Kong's textile exports in January-February 2014.

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he textiles industry – comprising spinning, weaving, knitting and finishing of fabrics – had a total of 679 manufacturing establishments as of December 2013, employing 4,658 workers, or 4.5% of the local manufacturing workforce. The textiles industry is one of Hong Kong's major export earners, accounting for 2.3% of the total exports in 2013.

In recent years, with rising production costs and stringent environmental regulations, an increasing number of manufacturers have shifted their production of lower-end products to the Chinese mainland and Southeast Asian countries. Their manufacturing operations in Hong Kong are focused on sophisticated and high value-added items, including quality ring-spun, open-end yarn, fine gauge knitted fabrics as well as complicated dyed and printed fabrics.

To enhance competitiveness in the global market, some Hong Kong textiles companies have formed strategic partnership with indigenous Chinese companies. For instance, some of them

join force with mainland cotton suppliers in producing cotton textiles.

Hong Kong's textiles industry is a major supplier to the local clothing industry.

Producing textiles locally, Hong Kong textile manufacturers have an advantage in accommodating orders from local garment manufacturers in short notice.

Meanwhile, a significant portion of textile exports is destined for use in Hong Kong companies’ offshore production of garments, especially on the Chinese mainland.

Following 2% growth in 2013, Hong Kong’s textile exports decreased by 5% in the first two months of 2014. Re-exports, accounting for nearly 99% of total textiles exports, experienced a decline of 4%, while domestic exports fell by 18%. With more than 72% of the textile re-exports originating from the Chinese mainland, Hong Kong’s re-exports of textiles of China origin registered a decrease of 4% in January-February 2014.

Asia is the leading market for textiles exported from Hong Kong, accounting for more than 92% of Hong Kong’s textile

"Producing textiles locally, Hong Kong textile manufacturers have an advantage in accommodating orders from local garment manufacturers in short notice." exports in the first two months of 2014.

Of the top 10 export destinations, nine of them are in Asia. The Chinese mainland remains to be the city’s predominant export market, accounting for some 60% of Hong Kong's textile exports in JanuaryFebruary 2014.

Other major export markets of Hong Kong textiles include Vietnam, Cambodia, Bangladesh, Indonesia, Sri Lanka, the US, Thailand, India and the Philippines.

In particular, because of Vietnam’s cheap labour and WTO membership, many foreign investors, including those from Hong Kong, have set up garment factories there.

This gives rise to sustained demand for textile imports, making Vietnam the second largest market for Hong Kong’s textile exports, after the Chinese mainland.

Product-wise, Hong Kong's exports of textile yarns (down 5%), woven fabrics (down 9%), knitted or crocheted fabrics (down 4%), finishing accessories (down 5%) and floor coverings (down 14%) all registered declines in the first two months of 2014, while special yarns and fabrics showed 9% growth.

Sales Channels Hong Kong is both a leading production centre and a global hub for clothing sourcing. As such, Hong Kong's textiles industry is well positioned to serve both local and overseas clothing manufacturers and merchandisers.

While many Hong Kong textile manufacturers and traders supply their products to the clothing manufacturers in Asia, particularly on the mainland, international textile companies are also using Hong Kong as a gateway to promote their products to other Asian economies.

For instance, Brazil’s fast-growing fashion industry is attempting to leverage Hong Kong’s trade platform to promote their textiles and apparel on the Chinese mainland.

The industry is capable of producing either a wide range of quality products in bulk or specialised items within a short lead-time for varied applications.

Its competitive edge lies in the superb

40 HONG KONG BUSINESS ANNUAL 2015

textile industry - company and industry Performance of Hong Kong’s Exports of Textiles^ (HK$ Billion) Domestic Exports Re-exports of China -Origin Total Exports

by Markets China Vietnam Indonesia Bangladesh Cambodia Sri Lanka US Thailand India Philippines

by Categories Textile Yarns Woven Fabrics Knitted or Crocheted Fabrics Cotton Special Yarns and Fabrics Man -made Textile Materials Finishing accessories Textile Made-up Others Floor Coverings

2013 Growth % -14 +2 +2 +2

Jan-Feb 2014 Value Growth % 0.144 -18 10.380 -4 7.489 -4 10.523 -5

2012 Share % Growth % 65.4 -10 6.9 +2 4.7 +15 4.0 +8 4.1 -5 1.8 +3 1.7 -2 1.4 -12 1.0 -2 1.3 -11

2013 Share % Growth % 63.1 -2 8.2 +21 5.4 +17 4.5 +16 3.9 -3 2.1 +22 1.8 +4 1.3 -6 1.1 +12 1.2 -2

Jan-Feb 2014 Share % Growth % 59.6 -7 8.7 +3 5.6 +10 5.5 -3 3.9 -22 2.4 +9 1.8 -5 1.5 +9 1.2 -21 1.2 -8

2012 Share % Growth % 27.2 -6 29.1 -12 17.6 -9 8.5 -12 3.0 -25 23.3 -5 8.8 +9 8.0 -11 2.9 -9 0.6 +34

2013 Share % Growth % 28.1 +5 27.1 -5 16.7 -4 7.7 -8 2.7 -9 23.9 +4 9.4 +9 7.9 * 3.0 +4 0.5 -15

Jan-Feb 2014 Share % Growth % 29.2 -5 25.4 -9 15.3 -11 7.2 -7 2.8 +2 23.3 -4 10.0 -5 8.3 +9 3.3 * 0.4 -14

Value 1.441 80.358 57.650 81.798

2012 Growth % -9 -7 -6 -7

Value 1.247 81.854 58.999 83.101

Note: ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies. * Insignificant.

quality and swift response to fashion trends and market demand. The industry has also earned a worldwide reputation for unique quality, expertise, workmanship and flexibility.

Industry Trends In line with the global manufacturing landscape and fierce competition across the board, Hong Kong's textiles industry has been moving up the value chain to cater to the demand for upmarket textile products with original designs or brands.

Today, the operation of the textiles industry in Hong Kong is focused mainly, if not all, on higher value-added activities such as sales and marketing, quality control, designs and development, while offshore plants are specialised in

production operations. This, in turn, results in a high proportion of re-exports (almost 99%) in Hong Kong’s textiles exports portfolio.

With rising labour costs, RMB appreciation, volatile raw material prices and stricter environmental regulations on the Chinese mainland, many Hong Kong's textiles manufacturers have relocated their production facilities to other Southeast Asian countries, like Vietnam, Cambodia and Bangladesh.

A few companies have even set up offshore production in Latin America (e.g. Mexico) and Africa (e.g. Nigeria) to take advantage of preferential treatments allowed by regional trade agreements such as North American Free Trade Agreement (NAFTA) and the

"Today, the operation of the textiles industry in Hong Kong is focused mainly, if not all, on higher value-added activities such as sales and marketing, quality control, designs and development, while offshore plants are specialised in production operations."

EU’s GSP scheme.

To stay tuned to the advancements of manufacturing technology and product requirements, the textiles industry, as a capitalintensive business, has invested heavily to keep up with the latest technological trends.

Advanced production technologies are sourced mostly from vendors from Germany, Italy, Spain, Switzerland, Japan and South Korea.

Modern technologies like automatic web spreading, nano bio-functional materials finishing and Texparts® Zero Underwinding are no strangers to local manufacturers. As such, Hong Kong textiles manufacturers are able to offer a wider range of fibres, yarns and fabrics to clients.

HONG KONG BUSINESS ANNUAL 2015 41

company and industry - printing industry

Hong Kong home to many international publishers

Hong Kong's excellent telecommunication networks are great assets of the industry.

P

rinting is a supporting industry to publishing, advertising and various light consumer goods industries (toys, food, cosmetics etc).

Most of them are small and medium enterprises (SMEs) in Hong Kong.

Printers in Hong Kong produce a wide range of printing materials, including books, booklets, brochures and leaflets, and paper and paperboard labels, advertising materials, commercial catalogues, calendars, postcards and greeting cards. Some specialise in the production of higher value-added / high tech printing products, such as children's novelty books with popups and additional objects, cheque books, passports, bills and statements, securities and prospectuses etc. that require considerable skills, substantial capital investment and confidentiality.

Overseas customers are increasingly looking for faster turnaround and shorter delivery time in order to maximise return through smaller but more frequent orders. Hong Kong printers are known for quality, quick

42 HONG KONG BUSINESS ANNUAL 2015

delivery, competitive pricing and ability to cope with short-notice printing jobs. The quality is comparable to that of the US, Germany and Japan, the pioneers in printing technology. Hong Kong printers are also known for their inventiveness and willingness to find solutions to production problems.

Major printers are relocating the production to the Chinese mainland with purpose-built plants. Such development has changed the workflow and logistics and greatly improved the efficiency and output quality. The ability to meet high quality requirements has allowed Hong Kong to become a major printing and publication centre in the world, despite the increasing price competition from mainland printers. With the rising labour cost on the Mainland, printers go for more automation and mechanisation.

More complex automation can also reduce human errors while increasing efficiency, productivity and quality.

Hong Kong's excellent telecommunication networks are

"With proximity to the mainland market and a high degree of freedom of the press, Hong Kong has attracted international publishers to set up regional centres here." great assets of the industry. In effect, publishers in Hong Kong can quickly access information from various parts of the world, an advantage of vital importance to time-sensitive publications. With proximity to the mainland market and a high degree of freedom of the press, Hong Kong has attracted many international publishers/ news agencies (esp. media firms) to set up regional centres here. The Financial Times (Asia Edition), The Economist, The International Herald Tribune, etc, are all printed in Hong Kong and some are shipped into China for distribution.

Printing is an industry with constantly updating technology. The ability to catch up with new production techniques is thus crucial. Hong Kong printers are equipped with advanced models of lasersetters, electronic colour scanners, electronic page-composing systems, digital printers, automatic finishing systems and one to five-colour printing machines. Many Hong Kong companies are equipped with lamination machines, die-cutting, paper-cutting, shrinkwrapping, folding, hot-stamping and binding machines, etc. to keep the production process in-house to ensure a quality product. Many have also introduced computer-to-plate (CTP) systems, equipment for security printing, as well as latest machines to enhance digital printing capabilities.

To reduce operation costs, local printers (mostly larger sized) have shifted a major share of their operations to China. However, they maintain their Hong Kong offices to receive overseas orders. They are also increasingly making use of high tech to cut costs e.g. overseas buyers could place orders from abroad through broadband connections, given they are confident with Hong Kong printersâ&#x20AC;&#x2122; reputation and wanted to maintain their long standing business connections. The clumsy processes of specifying requirements, enquiries, checking the sample draft, amending information, confirming order etc. could all be finished online.

Also, production processes are being automated with computer systems.

Printers are increasingly making use of information technology to manage

printing industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Printed Matter ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

by Market US EU 28 United Kingdom Germany Chinese Mainland ASEAN Australia Japan

by Categories Miscellaneous Books, Brochures etc Paper & Paperboard Labels of All Kinds Children's Picture, Drawing or Colouring Books Printed or Illustrated Postcards, Printed Cards Transfers

production processes.

Sales Channels An estimated 60-70% of the export business is attributable to orders received directly from overseas countries.

Within this, about a quarter of them come from major international publishers in Hong Kong. Export orders are mainly handled by larger printers or dealers, who have established business relationships with overseas customers. In an effort to capture overseas business, large Hong Kong printing companies have established offices overseas.

Industry Trends Many trends in printing pertain to the advent of new technology or production techniques. Filmless printing, such as computer-to-plate (CTP), is becoming mature.

With CTP technology, images can be transmitted onto a zinc plate directly without the process of colour management and making colour separation films. This development can shorten the

2012 HK$Mn. Growth % 1,469 -11 16,339 -5 15,619 -5 17,808 -5

2013 HK$Mn. Growth % 1,394 -5 17,287 +6 16,088 +3 18,681 +5

Jan-Aug 2014 HK$Mn. Growth % 920 -1 12,034 +6 10,728 +1 12,954 +6

2012 Share % Growth % 26.9 -5 25.7 -12 10.8 -13 3.6 -14 12.8 +13 9.5 +2 4.9 -10 4.3 -4

2013 Share % Growth % 24.0 -6 23.2 -5 9.6 -7 3.3 -4 16.1 +32 10.7 +19 4.7 +1 5.1 +25

Jan-Aug 2014 Share % Growth % 23.4 +2 22.2 -2 10.2 +9 3.3 +9 19.0 +26 10.6 +10 4.6 +3 4.8 -1

2012 Share % Growth % 54.0 -6 23.2 +10 1.4 -32 7.0 -13 2.8 +2

2013 Share % Growth % 49.6 -4 24.2 +9 5.4 +305 7.5 +13 3.4 +28

Jan-Aug 2014 Share % Growth % 48.0 -1 22.0 -3 9.6 +117 7.4 +1 4.2 +60

prepress production time and produce more defined images.

Digital printing enables direct imaging - texts and graphics going directly from the computer to the printing machine without the use of plates. This shortens production time and cost, and improves speed and accuracy. It is easy to operate and suitable for printing small quantities with flexibility, short lead time and customisation (e.g. advertisements and personalised direct mailing, tickets).

Ultraviolet (UV) printing technology is a growing trend. Instead of having solvents in the ink that evaporate into the air and absorb into the paper, UV inks dry through a photomechanical process.

Through this method printers can work in a clean environment.

Some printers are also offering the â&#x20AC;&#x153;total solutionâ&#x20AC;?, including auxiliary services like design, data-processing, translation and editing

"With computer-to-plate technology, images can be transmitted onto a zinc plate directly without the process of colour management and making colour separation films. "

and electronic publishing etc. Some large printers have developed vertically, such as manufacturing or trading paper, or forming strategic partnerships with suppliers, in order to reduce the effects from paper price fluctuations and allow the company to have better control of material supplies.

In other cases, certain work processes, such as colour separation, which used to be subcontracted out, now tend to be internalised.

This is made possible by new equipment, which incorporates and automates more prepress or finishing functions. This would not only help printers achieve scale economies, but also have better control on quality and streamline production processes.

Social-economic developments have great bearings on the industry. As the home printer becomes common, the printing industry is striving for sophisticated printing like four colour printing with complex format.

HONG KONG BUSINESS ANNUAL 2015 43

company and industry - lighting industry

Hong Kong’s lighting industry dimmed a little in 2014 Exports decreased 9% overall as production facilities relocate to the mainland.

H

ong Kong exports a wide range of lighting products, which are usually meant for home improvement and domestic purposes. The largest export categories include batteryoperated portable lamps, such as torches, hand lanterns, hand-held incandescent lamps and LED lamps for outdoor, sports and/or diving uses.

Meanwhile, there are a number of companies engaging in the business of electric table, desk, bedside and floorstanding lamps. Other exports include wall and ceiling lighting, chandeliers and lighting fittings, as well as decorative items like Christmas tree lighting sets and lamp shades. The materials used for casings and shades include plastics, diecast metals, crystals, glasses, ceramics and polished brasses. Some companies also produce neon lights, illuminated signs and illuminated name-plates for advertising purposes and interior decoration.

Most Hong Kong lighting product manufacturers have relocated their production facilities to the Chinese mainland. Their offices in Hong Kong

are mainly responsible for product development, marketing and logistic support. They usually undertake product design, plastics injection moulding, vacuum coating, enamel plating and assembly production in-house.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc.

Hong Kong’s total exports of lighting products decreased 9% during JanuaryJuly 2014. While sales of electric lamps performed well, exports of discharge lamps and portable lamps were lacklustre.

The EU and the US are among the largest markets, together absorbing about half of Hong Kong’s lighting exports.

"Most Hong Kong lighting product manufacturers have relocated their production facilities to the Chinese mainland. Their offices in Hong Kong are mainly responsible for product development."

Although exports to the US surged, exports to the EU were sluggish during the first seven months of 2014.

Distribution Channels Hong Kong’s lighting manufacturers mostly produce for overseas importers and distributors, including reputable American and European brands. In view of intensified competition, ODM has outpaced OEM as their major business.

A few companies also promote lighting products with their own brand names or trademarks.

Hong Kong companies also sell directly to overseas buyers of hardware and general merchandise, including volume importers and regional distributors.

Some companies also deal with buying offices set up by overseas buyers in Hong Kong. Some large Hong Kong companies even sell directly to large-scale retailers like hypermarkets, supermarkets and chain stores, as well as buying groups/ co-operatives of smaller retailers in North America and Europe in order to reduce the levels of distribution and associated costs.

In recent years, overseas importers and distributors tend to make smallersized orders with higher frequency and shorter delivery lead times in order to minimise inventory. Some Hong Kong companies have therefore re-engineered their procurement and production management systems, in a bid to shorten their manufacturing cycle time and reduce costs in order to meet the market demand.

Major trade fairs such as the International Home and Housewares Show held in Chicago, the Cologne International Hardware Fair, and the Japan DIY Homecentre Show provide promotion opportunities for Hong Kong traders. The Hong Kong International Lighting Fair organised by the Hong Kong Trade Development Council (HKTDC) is another major event for companies to exhibit their products to overseas buyers.

CEPA Provisions In the main, the CEPA origin criteria for Hong Kong items include: (1) change in tariff heading; (2) performance of specific

44 HONG KONG BUSINESS ANNUAL 2015

lighting industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Lighting Products ^Â

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market EU (27) Germany France US Chinese Mainland Japan Canada Total Exports by Products

2012 HK$Mn. Growth % 61 +23 9,486 -3 8,399 -3 9,546 -3

2013 HK$Mn. Growth % 39 -36 10,997 +16 9,132 +9 11,036 +16

Jan-Jul 2014 HK$Mn. Growth % 21 -11 5,928 -9 5,473 +9 5,949 -9

2012 Share % Growth % 25 -5 8 -13 4 * 22 -3 20 +11 11 -31 3 *

2013 Share % Growth % 24 +12 6 -7 6 +62 22 +19 23 +32 9 -7 2 +4

Jan-Jul 2014 Share % Growth % 25 * 7 -5 6 -1 28 +32 14 -55 9 -6 2 +7

2012 Share % Growth %

2013 Share % Growth %

Jan-Jul 2014 Share % Growth %

Battery Operated Portable Lamps

20

+1

19

-8

16

+6

Electric Lamps & Lighting Fittings

20

+16

26

+23

24

+31

Discharge Lamps

14

-17

13

-7

26

+211

8

+5

8

-2

5

-7

10

+46

8

-15

6

-22

Electrical Lighting/signalling equipment for cycles/vehicles

Chandeliers & Wall Lighting

manufacturing process in Hong Kong; and (3) fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong. Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the value-added percentage.

With effect from 1 April 2012, costs of raw materials and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the value-added content originating in Hong Kong is greater than or equal to 15%.

Compliance with Overseas Requirements Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets. These include the

safety requirements of UL/ ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. Others include the CSA safety standards for exports to Canada, and the safety and quality requirements of the China Compulsory Certification (or CCC) system for products sold in the Chinese mainland.

Product Trends One of the significant developments in the lighting industry is the booming of DIY (do-it-yourself) market.

DIY products are increasingly popular, especially in North America and Western Europe.

Hence, a wide range of hardware items, including lighting products, are offered for DIY purposes. Meanwhile, decorative items are no longer limited to Christmas lighting sets. They also include a wide range of domestic lighting products, such as track lights, linear lights and spotlights of

"The Chinese mainland has also started to phase out the imports and sale of certain incandescent light bulbs since October 2012, with a plan to phase out most of such light bulbs by October 2016."

novelty designs.

Due to environmental concerns, lighting products of higher energy efficiency and longer lifetime are preferred.

Notably, Australia has banned the sale of most incandescent light bulbs that cannot meet the minimum energy efficiency requirements since 2010. The EU and the US have completely banned such sales since September 2012 and 2014 respectively. The Chinese mainland has also started to phase out the imports and sale of certain incandescent light bulbs since October 2012, with a plan to phase out most of such light bulbs by October 2016.

As a result, energy-efficient items like the integrated electronic compact fluorescent lamps are in demand.

Nevertheless, the industry is focusing on the development of LED lamps and lighting apparatus, which are more energy-efficient with an even longer lifetime than the compact fluorescent lamps.

HONG KONG BUSINESS ANNUAL 2015 45

company and industry - footwear industry

Hong Kong’s footwear industry wears out in 2014 Exports have dropped as much as 70%, in line with trends around the world.

T

he latest official statistics show that the footwear manufacturing industry had a total employment of 20 workers as of 2013. The majority of footwear manufacturers have set up offshore production facilities on the Chinese mainland to reduce operation costs and stay competitive, leaving only limited capacity in Hong Kong to meet small and quick orders.

Some manufacturers, after relocation of production facilities offshore, are classified instead as import-export establishments. At the end of 2013, there were altogether 1,300 import/export establishments hiring 5,580 workers.

Hong Kong produces a wide range of footwear suitable for indoor and outdoor activities. The industry is particularly strong at manufacturing women's shoes, including dressing shoes and casual shoes of real and synthetic leather such as boots and mules. Some companies specialise in men’s casual shoes, like boat shoes, moccasins, loafers and canvas shoes, while others in sports

shoes. Meanwhile, more companies are paying attention to children’s shoes, like funky boots with embroidery, shoes with cartoon characters, rubber boots and school shoes.

Hong Kong’s footwear exports dropped by another 10% in the first two months of 2014, after a similar drop over 2013. Re-exports, accounting for almost all footwear exports, fell on a par with total exports by 10% during January-February 2014, while domestic exports, given its low base, plunged by 70%.

Playing a leading role, the US, representing nearly 30% of the city’s total footwear exports in the first two months of 2014, saw a decline of 11%. Trailing the US were the EU, the Chinese mainland and Japan, accounting for 20%, 11% and 9% of the total, respectively. In January-February 2014, footwear exports to the EU fell by 13%, with Germany, Italy and the UK seeing respective slides of 12%, 36% and 4%, while sales to the Chinese

"In January-February 2014, footwear exports to the EU fell by 13%, with Germany, Italy and the UK seeing respective slides of 12%, 36% and 4%." mainland and Japan fell by 1% and 14%, respectively.

Sales Channels Many footwear companies in Hong Kong engage in OEM arrangements to produce for leading brands and retailers in North America, the EU and Japan.

With improving capabilities in product design and development, engineering, modelling, tooling and quality control, more and more Hong Kong footwear companies engage in ODM projects.

Many companies have their own R&D and QC specialists to strengthen the quality of their products.

Some Hong Kong footwear companies, such as Le Saunda, Mirabell, Staccato, and Joy and Peace, have also succeeded in building up their own brands with retail network in Hong Kong, Macau and the Chinese mainland. While some footwear exporters prefer selling to overseas importers and distributors, many of them are selling to mass merchandisers, such as Wal-Mart, Target, Costco and Kmart.

A number of Hong Kong companies, some with Taiwanese stakes of interest, produce world famous brands, including Adidas, Asics, Tiger, Bass, Converse, Le Coq Sportif, New Balance, Nike, Reebok and Timberland. A few have been granted licences to produce and distribute foreign brands for the Chinese mainland or Hong Kong market.

Industry Trends China is not only the world’s largest shoe exporter and manufacturer, but the No.1 footwear consumer, surpassing the US since 2011. Presaging huge potential, the country’s annual per capita footwear consumption (among the urban population) is on the rise and is expected to have exceeded 2.5 pairs in 2012, bringing the total consumption of shoes on the Chinese mainland to reach 3.0 billion pairs.

Footwear manufacturers nowadays focus more on value-added service.

Quick response in sample making, prompt delivery and high quality are widely required. They are also tapping the global green trends by

46 HONG KONG BUSINESS ANNUAL 2015

footwear industry - company and industry Performance of Hong Kong’s Exports of Footwear ^ (HK$ billion) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

by Market US EU (27) Germany Italy Netherlands United Kingdom Chinese mainland Japan Australia Canada South Korea

by Categories Finfished footwear Rubber of Plastic Uppers Textile Uppers Leather Uppers Others Accessories and Parts

producing shoes made with recycled, eco-friendly and vegan materials. Popular footwear brands including Reebok, Melissa, Bobux, Terra Plana, Nike and Timberland have adopted environmentally-driven manufacturing processes and increased their assortment of “green” footwear items such as shoes made with natural latex rubber and recycled plastic. Nike has also launched a product line called 'Considered' where designers are encouraged to design shoes using less harmful adhesives and more recycled materials.

Meanwhile, most of these brands have developed ecofriendly packaging solutions by utilising eco-friendly, biodegradable and sustainable materials such as soy-based ink, recycled cork, nylon and foam.

For instance, Puma has replaced its original shoe box with a simple cardboard

2013 Growth % +47 -10 -11 -10

Jan-Feb 2014 Value Growth % * -70 5.368 -10 4.700 -11 5.368 -10

2012 Share % Growth % 35.4 -6 19.6 -19 3.9 -9 3.7 -12 3.0 -26 2.7 -5 9.6 +2 8.0 -9 3.0 -7 2.7 -14 1.9 +42

2013 Share % Growth % 33.0 -16 20.5 -5 4.0 -7 3.5 -14 3.5 +8 3.2 +4 9.9 -7 8.0 -9 3.0 -11 2.8 -7 2.7 +28

Jan-Feb 2014 Share % Growth % 29.4 -11 20.2 -13 4.1 -12 3.6 -36 3.4 +3 2.8 -4 10.5 -1 8.9 -14 3.5 -15 2.8 -23 3.7 +28

2012 Share % Growth % 93.5 -9 16.3 -9 10.6 -13 66.5 -8 0.2 -34 6.4 *

2013 Share % Growth % 92.8 -10 15.1 -17 10.9 -6 66.6 -9 0.2 -1 7.2 +1

Jan-Feb 2014 Share % Growth % 93.5 -11 14.7 -18 12.9 -5 65.7 -11 0.2 -16 6.5 +3

Value 0.003 40.191 36.123 40.194

sheet and a special bag made of non-woven polyester consisting of recycled PET. Furthermore, online shopping has been growing in popularity along with ascending internet usage.

Most of the renowned brands such as Nike, Crocs and Adidas have responded by setting up online stores where shoppers can choose from a wide variety of shoes in different sizes, colours and styles at different price points.

In China, a fast growing market with high potential, the total number of online shoppers on the Chinese mainland was about 300 million in 2013, boasting a turnover of RmB$1.85 trillion in 2013. It is expected that the e-commerce retail sales in China would reach RmB$3 trillion by 2015.

According to China Online Shopping Research Report 2012, the most popular items purchased online

2012 Growth % +53 -8 -10 -8

Value 0.004 36.362 32.307 36.366

"In China, a fast growing market with high potential, the total number of online shoppers on the Chinese mainland was about 300 million in 2013, boasting a turnover of RmB$1.85 trillion in 2013."

by consumers in China are clothing, footwear and headwear, with nearly 82% of the respondents having the experience of buying these products online.

Increasingly, ethical sourcing is a common practice among international footwear companies. In response to the social demand for protecting human rights in workplaces, many leading companies have introduced measures to monitor the working conditions in their own factories as well as the contracted factories overseas.

For example, most, if not all major footwear brands have established their code of conduct in relation to labour conditions for their contracted factories to abide.

To follow suit, Hong Kong companies such as Taizin have introduced their own code of conduct to ensure safe and healthy working conditions.

HONG KONG BUSINESS ANNUAL 2015 47

company and industry - auto parts and accessories industry

Hong Kong doubled growth in domestic auto exports Re-exports are the main business in Hong Kong’s exports of auto parts and accessories.

I

n-car entertainment items such as car radios with multimedia features are the largest export category in Hong Kong, a reflection of Hong Kong’s strong position as an exporter of a wide range of electronic products. Hong Kong also exports certain direct parts and accessories for motor vehicles and motorcycles, including pneumatic tyres, safety glass, rear-view mirrors, locks, car seats, car batteries, electrical lighting, alarms, navigational equipment, wiring sets, counters and meters, exhaust systems.

Although Hong Kong is not an automotive manufacturing centre, many Hong Kong companies have been engaged in the auto parts business for many years, and have achieved a certain standing within the industry. Apart from those engaging in trading and manufacturing for the aftermarket, a number of auto parts companies in the territory are suppliers to the leading automotive manufacturers in the US, Europe and Japan. A number are also recognised as tier-1 or tier-2 suppliers to automotive companies.

One salient feature of Hong Kong’s exports of auto parts and accessories is the dominance of re-exports, which account for the majority of total exports.

This indicates the importance of Hong Kong as a trading centre and entrepôt for auto parts, in particular, for the Chinese mainland market.

Sales Channels Most manufacturers produce on an OEM basis either directly for automotive makers or for tier-1 or tier-2 suppliers.

Some large manufacturers of accessories also produce under their own brand names and designs. These are then exported either through exporters, agents or directly to overseas importers who buy in bulk and distribute to car dealers, service stations and auto parts stores.

Those major aftermarket chain-store retailers of sufficient size may also import directly from manufacturers.

Participation in international trade fairs and exhibitions will not only help Hong Kong companies to stay abreast

"One salient feature of Hong Kong’s exports of auto parts and accessories is the dominance of re-exports." of the latest technologies and product trends, but will also enable them to meet with potential business partners and overseas manufacturers. The relevant major international trade fairs include the AAPEX-Automotive Aftermarket Products Expo in Las Vegas and the Automechanika in Frankfurt. From time-to-time, the HKTDC also organises business missions for Hong Kong manufacturers, targeting specific markets and looking to establish new business relations.

Industry Trends The automotive supply chains usually follow the just-in-time operation mode.

This means many of the major players in the global automotive industry have shifted production closer to their targeted markets to reduce logistics costs, while gaining better access to the targeted markets. This trend has encouraged auto parts suppliers to follow suit. As many Asian countries consider the development of the auto industry to be one of the major pillars of their economic growth, those auto parts suppliers with a presence in the region will gain a definite advantage. An increasing number of foreign automotive makers, for instance, have formed joint ventures on the Chinese mainland.

With growing pressure on cost and quality, the automotive industry has increasingly adopted advanced information technology in design and manufacturing. Computer-aided design has become a popular tool in many industries, and is becoming mature with regard to automotive geometric design.

Computer-aided manufacturing, which is largely related to numerical control machining, and rapid prototyping (or 3-D printing technology in today’s terminology) are also being adopted.

General Trade Measures Affecting the Exports of Auto Parts and Accessories Initiation of anti-dumping proceedings in certain countries/economies against goods originating from the Chinese mainland has been of concern to those Hong Kong companies with production facilities across the border. Brazil, for example, currently imposes anti-dumping duties against imports of certain kinds of tyres used for buses, lorries or cars, as well as motorcycle rubber tyres originating

48 HONG KONG BUSINESS ANNUAL 2015

auto parts and accessories industry - company and industry Export Performance of Hong Kongâ&#x20AC;&#x2122;s Auto Parts and Accessories Industry^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

By Market Chinese mainland USA EU (27) Germany Netherland Japan ASEAN

By Categories Radiobroadcast receivers for motor vehicles Parts and accessories pf motor cycles/cycles/invalid carriage Radio navigational aid apparatus Parts and accessories of motor vehicles Revolution counters, production counters, taximeters, mileometers, etc., speed indicators/ tachometers Parts for use with spark-ignition internal combustion piston engines, nesoi Parts for use in the compression ignition internal combination engines New pneumatic tyres of rubber Chassis fitted with engines, for motor vehicles

2012 HK$Mn. Growth % 16 59 15,890 6 12,164 10 15,907 6

2013 HK$Mn. Growth % 21 27 16,613 5 12,016 -1 16,633 5

Jan-Jun 2014 HK$Mn. Growth % 22 105 9,077 19 6,576 20 9,099 20

2012 Share % Growth % 23.3 -8 22.4 28 17.0 -1 4.5 -1 3.7 -5 11.2 25 6.6 4

2013 Share % Growth % 24.7 11 26.3 22 16.2 * 4.4 3 4.2 21 7.8 -27 7.5 19

Jan-Jun 2014 Share % Growth % 26.4 22 27.2 47 17.4 19 4.6 20 4.9 28 6.2 -1 7.6 13

2012 Share % Growth % 15.6 11

2013 Share % Growth % 10.2 -32

Jan-Jun 2014 Share % Growth % 9.4 3

12.4

10

11.2

-5

10.2

1

16.8

42

9.1

-3

15.7

-2

14.4

19

11.2

28

13.4

41

10.9

-1

14.2

37

17.4

55

8.4

-2

8.2

1

6.6

-11

3.6

-36

3.8

11

4.2

18

2.3 3.2

111 7

4.8 4.1

117 34

3.5 5.6

-15 92

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies. Trade figures for different product groups are based on HS classification system and maybe different from values under the SITC system.

from the mainland. The US, meanwhile, has imposed anti-dumping duties against imports of certain new pneumatic off-the-road tyres originating from the mainland.

Product Trends Consumers in developed economies have helped shape the industryâ&#x20AC;&#x2122;s development, as they are becoming more concerned about passenger safety, driving performance and environmentalfriendliness. The world including China and other developing countries - is becoming more concerned about urban pollution and is now paying greater attention to reducing air pollution and raising fuel efficiency. Due to growing concerns about high

prices for conventional energy, most automotive industry players are focussing on energy-saving and new energy vehicles as part of their future business development.

As to Chinese players, the Shenzhen BYD Group is seizing the opportunity to sell purely electric cars, which are becoming popular in the mainland market, while at the same time embarking on the development of hybrid sedans and purely electric passenger vehicles. All of these developments are expected to boost technological advancement in the areas of electronic and electrical control systems, and should prove a boon to the auto parts businesses related to electronic and electrical systems.

"As to Chinese players, the Shenzhen BYD Group is seizing the opportunity to sell purely electric cars, which are becoming popular in the mainland market, while at the same time embarking on the development of hybrid sedans and purely electric passenger vehicles."

At the same time, there is an increasing trend in the automotive sector towards using more electronic devices, including those relating to engine controls and safety systems. Navigation items, and in-car entertainment items are increasingly listed among the standard specifications of automotive vehicles.

Some electronics players are developing a range of in-car display devices with interactive features, a reflection of advances in mobile and Internet technology. As these devices are increasingly presented as built-in features in new cars, related auto parts manufacturers have responded by shifting their targets from end-users in the aftermarket to automotive makers.

HONG KONG BUSINESS ANNUAL 2015 49

company and industry - medical & healthcare industry

Chinese mainland putting pressure on HK companies

Local companies strive to improve their competitive edge through product and company re-positioning.

T

he medical and healthcare equipment industry has two distinct markets: the household consumer and professional or institutional (hospitals and clinics). Most medical and healthcare equipment companies in Hong Kong are engaged in OEM business, such as producing massagers and blood pressure monitors for household consumer use; and rubber moulding, plastics/resins for institutional use. With increased competitiveness in price and product development, the Chinese mainland is increasingly putting pressure on Hong Kong local companies, inducing them to strive for product and company re-positioning. Many Hong Kong-based companies also provide engineering design services in order to enhance their competitive edge.

To lower production costs, many Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, and most of them are engaged in the manufacturing of mechano-therapy appliances/massage apparatus. However,

50 HONG KONG BUSINESS ANNUAL 2015

quality control, marketing, research and development, design, as well as material and equipment procurement continue to be conducted in Hong Kong.

Products with better growth prospects for Hong Kong manufacturers include home-based equipment, hygiene sterilised supplies, equipment for lessinvasive procedures, orthopaedic tools and devices, devices and supplies for high health-risk diseases and injuries and telemedicine etc.

Between January-August 2014, Hong Kong’s total exports of medical and healthcare equipment increased by 6%.

Exports to the Chinese mainland, the largest market for Hong Kong’s medical and healthcare equipment dropped by 4% during this period. However, exports to the US and the EU increased by 23% and 14%, respectively.

Among different product categories, Hong Kong’s exports of miscellaneous electro-diagnostic apparatus (including apparatus for functional exploratory examination or for checking

"Between January-August 2014, Hong Kong’s total exports of medical and healthcare equipment increased by 6%." physiological parameters) increased by 12%. Meanwhile, exports of miscellaneous medical instruments and appliances that include sight-testing instruments and veterinary science appliances increased by 8%.

Outsourcing has been growing in popularity among overseas manufacturers of medical and healthcare equipment in recent years. Hong Kong companies are in good position to act as contract manufacturers or sourcing partners given their edge in quality assurance and intellectual property (IP) protection.

Though the cost of regulatory compliance is relatively higher in Hong Kong than the mainland, this helps to differentiate Hong Kong companies from other lowcost competitors. It also reinforces the role of Hong Kong companies as a partner providing high-quality products and services.

Sales Channels Medical equipment is mainly sold directly to hospitals and clinics, while healthcare equipment is mostly distributed to department stores, chain stores and supermarkets via local or overseas trading companies. Well-established suppliers, such as Osim and OTO, have set up their own specialty shops.

Many of Hong Kong’s medical and healthcare goods are exported under OEM arrangements with supplied product specifications and designs. Hong Kong manufacturers are highly regarded for their handling of customers’ intellectual property (IP) and sensitive technology. In recent years, Hong Kong manufacturers have become increasingly involved in product design and development, engineering, modelling, tooling and quality control. In order to differentiate themselves from low-end products, many Hong Kong manufacturers apply for different international certifications for their products.

Apart from producing for OEM customers, some Hong Kong manufacturers also have in-house R&D departments to develop models produced under their own brand names. For these original brand products, Hong Kong manufacturers would sell to overseas importers and distributors, who would also act as agents to provide an after-sales

medical & healthcare industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Medical and Healthcare Equipment^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

By Market Chinese mainland USA EU (28) Germany Netherland Japan ASEAN Japan ASEAN

By Categories Miscellaneous Medical Instrument and Appliances Miscllaneous Electro-diagnostic Apparatus

2012 HK$Mn. Growth % 31 111 11,201 3 4,666 7 11,233 3

2013 HK$Mn. Growth % 37 19 12,077 8 6,097 31 12,115 8

Jan-Aug 2014 HK$Mn. Growth % 12 -63 8,090 6 4,291 15 8,102 6

2012 Share % Growth % 56.7 5 12.7 -9 9.0 -2 3.5 -2 1.7 -2 4.3 -5 2.9 9 2.7 76 1.1 13

2013 Share % Growth % 47.2 -10 15.0 28 11.1 34 3.8 16 2.9 83 3.9 -4 3.5 30 3.4 38 2.0 104

Jan-Aug 2014 Share % Growth % 44.9 -4 16.7 23 11.4 14 3.4 -1 3.3 41 4.9 36 3.3 10 2.1 -34 1.9 2

2012 Share % Growth % 23.7 3 22.3 21

2013 Share % Growth % 20.9 -5 25.3 22

Jan-Aug 2014 Share % Growth % 21.7 8 24.9 12

Syringes/Needles etc for Medical/Surgical

12.3

1

16.8

47

20.3

33

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Source; Census and Statistics Department HKSARG

services. It is advised that manufacturers/distributors take out insurance or make other arrangements to minimise the risk of product liability claims.

To further explore overseas market opportunities, medical and healthcare equipment manufacturers and exporters are encouraged to join the trade fair missions and exhibitions organised by the Hong Kong Trade Development Council (HKTDC). HKTDC also organises from time to time study or matchmaking missions for Hong Kong manufacturers to visit specific markets for establishing new business connections.

Industry Trends Demographic trends have an important impact on the medical and healthcare equipment industry. According to the United Nations, the older population is, and will remain, predominately female.

Globally, women outlived men by 4.5 years on average in 2014. Life expectancy at birth

was 72.6 years for females compared to 68.1 years for males. As a result, women made up 54% of those aged 60 or above and 62% of those aged 80 or above. These trends have resulted in an increasing demand for medical and healthcare products designed for the ageing population.

The total global expenditure for health is now more than US$6.5 trillion a year, according to the World Health Organization, and health expenditure as a percentage of GDP has been increasing among all major economies, including the Chinese mainland. The increasing share of medical services or healthcare in household expenditures in some developing countries can be translated into more opportunities for Hong Kong exporters of medical and healthcare products.

Product Trends As a result of the aging population, treatments for cardiopulmonary disease, diabetes and neurological

"The total global expenditure for health is now more than US$6.5 trillion a year, according to the World Health Organization."

disorders will see rapid growth, such as orthopaedic devices and pharmaceuticals that can help aging baby boomers stay active.

In addition, increased consciousness in personal health and fitness in developed countries is boosting demand for home-based or self-care equipment such as commode chairs, pill alarm boxes, ionizers, positioning aids, shower chairs, walkers, canes, crutches and patient lifts.

This equipment facilitates the prevention, detection and management of illness.

Modern technology plays a major role in the medical and healthcare equipment industry. Innovations such as microminiature and remote surgery techniques, DNA-based diagnostics, tissue-engineered organs, and advanced information technologies provide solutions to some of the most persistent and debilitating healthcare problems, and create demand for medical equipment utilising these new technologies.

HONG KONG BUSINESS ANNUAL 2015 51

company and industry - processed food & beverages industry

Foreign investment fills Hong Kong’s F&B plate

Many local brands have expanded to the Chinese mainland and to other overseas markets.

T

he processed food and beverages industry in Hong Kong is characterised by its active trading activities. Major food importers/traders in Hong Kong include Dah Chong Hong, Four Seas Food Investment, EDO Trading Co, Kwan Hong Yuen Trading Co Ltd and Sun Shun Fuk. Food and beverages production in Hong Kong is a large-scale business, with most of the output going for local consumption. Key products here include instant noodles, macaroni, spaghetti, biscuits, pastries and cakes. Other related activities include the canning, preserving and processing of seafood (fish, shrimps, prawns and crustaceans); the manufacture of dairy products (fresh milk, yoghurt and ice-cream); seasonings and spirits. With the growing Western interests in Asian food and condiments, such as soya sauce, soya milk and oyster sauce, there has been an increase in demand for Hong Kong’s food exports. A number of Hong Kong brands, such as Lee Kum Kee and Vitasoy, have expanded their markets proactively

on both the Chinese mainland and in the overseas markets, resulting in high recognition levels.

The industry has also attracted substantial foreign investment. A notable foreign investor is Japan’s Nissin, which now produces instant noodles in its factory in Tai Po Industrial Estate and is the leading player in Hong Kong’s instant noodles market. In another move, in 2006, the Japanese multinational group Ajinomoto Co acquired Amoy, a Hong Kong-based frozen dim sum and sauces producer.

Large Hong Kong manufacturers have expanded their global networks and set up offices or factories in several major markets. For example, Lee Kum Kee has factories and regional offices in China, the US and Malaysia, and Vitasoy has factories on the mainland as well as in the US, Australia and Singapore.

Sales Channels Many Hong Kong food and beverages manufacturers deal directly with

"Vitasoy Group has spread far beyond Hong Kong and now sells its products in more than 30 markets throughout the world." overseas importers and supermarket chains. However, Hong Kong’s food and beverages trading companies have played a pivotal role in introducing Western foods to mainland consumers, and in assisting smaller producers based locally and on the Chinese mainland in selling abroad.

Many Hong Kong brands have successfully entered overseas markets.

Garden (biscuits, cakes and sweets), Doll (instant noodles), Vitasoy (soft drinks), Amoy, Lee Kum Lee (cooking sauces) and Lam Soon (edible oils) are the leading local brands. Many of these brands have appointed distributors and/or established overseas offices to promote overseas sales.

These Hong Kong brands have expanded vigorously into overseas markets and have received increased international recognition.

Some companies have also set up overseas factories to produce for, and to serve, their local markets. For example, Vitasoy Group has spread far beyond Hong Kong and now sells its products in more than 30 markets throughout the world. Besides Hong Kong, Shenzhen, Foshan and Shanghai, the Vitasoy Group also has production plants in the US, Australia and Singapore.

In order to establish connections and explore market opportunities, processed food and beverages manufacturers and traders can join trade fairs and missions organised by HKTDC, such as the Food Expo in Hong Kong, the Canton Fair in Guangzhou and the Style HK Show in various mainland cities. HKTDC also organises, on occasion, study or matchmaking missions for Hong Kong manufacturers to visit specific markets to help build new business relations.

Industry Trends Health and wellness offerings are increasingly adapted to meet the expectations of consumers of processed food and beverages. In particular, ageing populations and a rise in health consciousness are creating a receptive environment for products that aid the “maintenance” of health, such as cholesterol-lowering spreads and high calcium milk.

While health issues are creating new openings, convenience foods such as

52 HONG KONG BUSINESS ANNUAL 2015

processed food & beverages industry - company and industry Performance of Hong Kong's Exports of Processed Food and Beverages^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

By Market ASEAN Vietnam Chinese mainland Taiwan Macau US EU Canada Korea

By Categories Processed food

2012 HK$Mn. Growth % 2,939 5 38,698 -2 6,665 30 41,637 -1

2013 HK$Mn. Growth % 3,118 6 42,303 9 9,083 36 45,421 9

Jan-Jun 2014 HK$Mn. Growth % 2,719 13 32,272 10 6,267 -9 34,991 10

2012 Share % Growth % 36.7 4 33.5 2 30.7 -10 6.7 -19 14.2 5 3.1 9 1.6 18 1.2 -1 0.8 32

2013 Share % Growth % 44.2 31 40.2 31 22.3 -21 7.2 17 15.3 17 2.6 -8 1.8 26 1.0 -11 0.9 15

Jan-Jun 2014 Share % Growth % 39.9 5 36.5 6 24.9 19 7.6 5 17.3 20 2.7 4 1.5 -14 1.1 18 1.0 32

2012 Share % Growth %

2013 Share % Growth %

Jan-Jun 2014 Share % Growth %

83.9

-1

84.4

10

83.4

9

11.9

-30

11.1

2

12.1

19

Edible offal of swine, frozen

7.4

-13

5.4

-20

7.7

56

Other molluscs/aquatic invertebrates, frozen, dried or salted

1.7

12

2.3

42

3.5

76

Pistachios, fresh or dried

6.1

22

5.7

2

4.7

16

Edible offal of bovine animal, frozen

2.3

29

2.7

29

3.0

29

Beverages

16.1

-4

15.6

6

16.6

15

Spirits obtained by distilling grape wine/marc

6.4

10

6.5

9

5.3

-11

Wine of fresh grapes (excl. sparkling wine)

4.0

-9

3.3

-10

4.5

38

Poultry cuts and offal, (other than liver) frozen

microwaveable and packaged foods, also looking promising in growth terms. As people become more health conscious, organic food is becoming more popular.

Online grocery shopping is becoming increasingly popular in Asian countries. In Taiwan and Japan, many working women buy food, including fresh fruit and vegetables through the Internet. On the mainland, online grocery shopping is popular in big cities such as Beijing and Shanghai, but shoppers prefer to purchase packaged/ processed foods and snacks, rather than fresh food items, online.

GM Food Labelling The regulatory approaches on GM food labelling vary in different countries and regions, and can be broadly classified as voluntary or mandatory.

For the voluntary labelling approach, only GM food that is significantly different from its conventional counterpart, in terms of composition, nutritional value and allergenicity, needs to be labelled.

For the mandatory labelling approach, it can be further divided into “panlabelling” and “labelling for designated products only”.

The “pan-labelling” category requires labeling for any food

"The Codex Alimentarius Commission of the United Nations has not yet reached agreement on the common standards with respect to GM food labelling."

products that either contain GM materials exceeding a threshold level or have any significantly different characteristics as a result of genetic modification. The “labelling for designated products only” category requires that only the designated products, which are genetically modified, need to be labelled. The international community is working towards a consensual policy on GM food labelling. However, the Codex Alimentarius Commission of the United Nations has not yet reached agreement on the common standards with respect to GM food labelling.

HONG KONG BUSINESS ANNUAL 2015 53

company and industry - cosmetics and toiletries industry

More companies setting up offshore factories

Thailand, Indonesia, and the Philippines are the go-to countries for companies fleeing the high production costs in Hong Kong.

T

he cosmetics and toiletries manufacturing sector in Hong Kong is small, with most manufacturers concentrating on producing mid-priced toiletries and perfumes, particularly for the Chinese mainland, Southeast Asia and the US. These are usually produced under their own brands.

Most of the companies in the industry are traders acting as agents to sell to the Chinese mainland, the US, Macau, Japan, Southeast Asia and the EU. Several Hong Kong spa and beauty salons also act as agents for cosmetics and skincare products looking to sell into Asia.

A number of traders have good connections on the mainland, useful links for selling professional product lines to beauty salons on the mainland.

Hong Kong traders make good partners for foreign brands, given their market knowledge, skills, connections and integrity. They are also useful when it comes to handling the entry procedures for goods being imported, with these

54 HONG KONG BUSINESS ANNUAL 2015

tending to require the disclosure of confidential information, such as product formula.

Sales Channels Most of the companies in the industry are traders who act as agents for international cosmetics brands looking to sell to the Chinese mainland, Macau and Southeast Asian markets. Hong Kong has a number of experienced distributors, many of whom are well versed in regional markets and regulations. They are capable of acting as distributors for popular brands, targeting the general public and devising comprehensive marketing initiatives.

Most of Hong Kong’s cosmetics and toiletries manufacturers concentrate on producing mid-end toiletries and perfumes. Choi Fung Hong’s own cosmetics brands, such as Joseristine, and other skincare brands, such as Sève and JaneClare, for example, emphasise that their products are “made in Hong Kong” in compliance with international certifications requirements. In addition,

"Most of Hong Kong’s cosmetics and toiletries manufacturers concentrate on producing mid-end toiletries and perfumes."

Choi Fung Hong and other Hong Kong manufacturers, such as Cogi, have succeeded in building their own brands on the Chinese mainland market.

A number of mid- and high-end foreign brands have established sales counters in local department stores and opened their own outlets in shopping malls, while the more professional products are sold through beauty salons. Specialty cosmetics chains are well developed in Hong Kong, with Sasa, Bonjour, Aster, Angel and Colourmix taking the lead.

These companies mainly sell international brands with deep discounts, as well as private label products. Health and personal care chains, such as Watsons and Mannings, have shifted their focus more towards cosmetics in recent years, selling mainly international brands. Meanwhile, many international brands have tapped into online sales in order to extend their reach in different markets.

Industry Trends Owing to high production costs in Hong Kong, many manufacturers have set up offshore production facilities on the mainland and in a number of Southeast Asian countries, notably Thailand, Indonesia and the Philippines.

The world cosmetics market, especially the upper-end segment, has long been dominated by a number of substantial global companies, including P&G, Unilever, Shiseido, L’Oreal and Estee Lauder. Their domination of the toptier of the market segment has made it difficult for new brands to enter.

OEM production in the sector, however, is not widespread. This is largely due to the strict official requirements on quality control and secrecy with regard to product formula. Most manufacturers directly export their finished products to their overseas distributors. Recently, several international suppliers have reached licensing agreements with supermodels and fashion brands with regards to developing fragrances and cosmetics products. An increasing number of famous fashion brands have also diversified into developing cosmetics products under their own labels, notably Anna Sui, Chanel and Christian Dior.

There is a rising trend among Hong Kong companies in this sector to look to

cosmetics and toiletries industry - company and industry Export Performance ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets Chinese mainland Macau US Japan ASEAN Australia EU (28) Taiwan Total Exports by Major Categories

2012 HK$Mn. Growth % 107 12 11,140 18 3,259 20 11,247 18

2013 HK$Mn. Growth % 119 10 11,700 5 3,430 5 11,819 5

Jan-Sep 2014 HK$Mn. Growth % 66 -27 8,956 6 2,774 10 9,022 5

2012 Share % Growth % 20.6 25 19.8 14 11.5 15 10.0 19 9.8 10 9.7 94 7.5 6 3.7 -29

2013 Share % Growth % 20.2 3 23.4 25 10.2 -7 8.3 -12 9.9 5 8.3 -10 8.2 15 4.0 12

Jan-Sep 2014 Share % Growth % 20.7 11 23.1 6 12.6 32 7.6 -9 10.1 6 6.3 -24 7.8 -2 4.1 3

2012 Share % Growth %

2013 Share % Growth %

Jan-Sep 2014 Share % Growth %

Beauty or make-up preparation for skincare

67.2

32

67.3

5

67.6

5

Perfumes & toilet waters

13.9

6

13.7

3

13.5

6

Preparations for use on the hair

6.0

9

6.4

12

6.6

7

Preparations for perfuming or deodorising rooms

3.7

61

4.5

28

3.7

-12

Perfumed bath salts & other bath preparations

3.3

-7

3.1

-1

2.9

-1

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong compnies.

explore the mainland market.

With the increased affluence and appearance awareness of Chinese consumers, the potential of the cosmetics and toiletries market on the mainland is huge, especially for branded mid- to highend cosmetics and toiletries products. The mainlandâ&#x20AC;&#x2122;s cosmetics market is also notably highly brand-oriented.

Product Trends Make-up tends to have a shorter life cycle than many other consumer goods. In advanced markets, the average product life of make-up items could be as short as one month. Colours and shades play an important role, and these elements are heavily influenced by fashion trends, tastes and seasonal moods.

These trends usually originate in large-scale trade fairs in

Europe, spread to the US, then Japan and Asia, through trendsetter magazines. Giant make-up companies have a huge influence on those magazines. It is important for manufacturers to offer a wide selection of colours and shades for each season.

The aging population is driving the recent surge in â&#x20AC;&#x153;cosmeceuticalâ&#x20AC;? products that combine cosmetics with vitamins, herbs, and sometimes pharmaceuticals, such as Vitamin-C lotions, tea tree oil-infused cleansers and collagen masks (collagen is formally used in the treatment of burn wounds).

Many medicinal beauty products focus on anti-aging skincare. Dermatology is incorporated into product development, and products catering for different skin types are available. Active

"Make-up tends to have a shorter life cycle than many other consumer goods.

In advanced markets, the average product life of make-up items could be as short as one month."

ingredients are being added to cosmetics and plant extracts and traditional Chinese herbs are also very common, especially among Chinese, Japanese and Korean-made cosmetics.

Organic and natural cosmetics made from mineral pigments and organic plant extracts, which provide natural sun filters, long lasting colour, and deliver a healthylooking radiant glow, are also gaining popularity. Unlike conventional make-up, none of these products contains artificial fragrances or petrochemicals, making them ideal for those with sensitive skin.

An increasing number of professional products with specific functions have emerged in recent years. This is in line with consumers becoming better educated in terms of product application.

HONG KONG BUSINESS ANNUAL 2015 55

company and industry - architecture industry

Demand for architectural services soars in Hong Kong

"Hong Kong’s architectural firms are renowned for their project management expertise."

A

Increasing local opportunities for architectural firms Since the ten major infrastructure projects were announced in 2007, the local demand for architectural services has shown signs of increase. In addition, with the government undertaking revitalisation of heritage sites, a lot of opportunities are being brought to Hong Kong architects and construction engineers. For example, for the conversion project of the Murray Building in Central, the government rezoned the site and annotated it as “Building with Architectural Merits Preserved for Hotel Use”. In November 2013, the tender was awarded to a Hong Kong-based real estate company to convert the building into a luxury hotel.

In the 2014-15 Budget, Hong Kong government reiterated its commitment to infrastructure investment, including the Hong Kong-Zhuhai-Macau Main Bridge, the Hong Kong section of the GuangzhouShenzhen-Hong Kong Express Rail Link and the expansion of road and railway networks. In addition, to increase the land supply for commercial and residential uses, the government is planning new development areas, including the Hong Kong-Zhuhai-Macau Bridge Hong Kong Boundary Crossing Facilities (HKBCF) and the airport's North Commercial District, as part of the plan to develop the Lantau Island with retail, tourism facilities and supporting infrastructure.

All thanks to the ten major infrastructure projects that were announced in 2007. rchitects perform a diversity of functions which can be broadly grouped under three categories, namely planning, design, and development.

At the outset, a design plan is required to set up the project, commonly referred to as a master plan or concept design. It is the initial creative part of the assignment.

Once a master plan or concept design has been devised, detailed design drawings are prepared for submission to the necessary government departments for approval. Construction drawings and specifications are then prepared for construction purposes. Knowledge of local rules and regulations is important in this stage.

This stage is primarily associated with the supervision of construction work. It is usually the longest and most involved part of the project. Hong Kong’s architectural firms are renowned for their project management expertise, giving assurance to effective control over quality, cost and project time.

All practitioners have to register with the Hong Kong Institute of Architects (HKIA). Currently, the HKIA has more than 3,100 registered members. Most of the architect firms in Hong Kong are locally owned. Attracted by the business opportunities in the region, a number of foreign architects have come to work in Hong Kong.

Exports of services Many overseas projects for Hong Kong architects are assigned by Hong Kongbased companies investing overseas, and the Chinese mainland is the largest export market for Hong Kong's architectural services. In recent years, the construction markets in Middle East and Southeast Asia have attracted Hong Kong architects as well. Some Hong Kong architectural firms, such as P&T and Aedas, have established offices in Vietnam, Singapore and the United Arab Emirates (UAE), while participating in both residential and commercial projects.

Hong Kong's exports of architectural,

engineering, scientific and other technical services increased by 5.8% to HK$3,946 million in 2012.

Urbanisation in China drives up demand for architectural services In the 2014-20 urbanisation plan announced in March 2014, the Chinese government aims to increase the urbanisation rate from 53.7% in 2013 to 60% by 2020, with approximately 100 million people expected to move from the rural areas into cities. To accommodate the rural-urban migration, massive infrastructure development will continue in the coming years. In addition, the continuous development of small- and medium-sized cities in China will strengthen the economic hinterland of larger cities. The broader urbanization will further spur demand for housing, hotels and office buildings in both larger 56 HONG KONG BUSINESS ANNUAL 2015

architecture industry - company and industry Industry Data Dec 2013 Architectural, surveying and engineering services related to real estate and construction

Establishments

Employment

2,202

26,947

Sources: Employment & Vacancies Statistics, Census and Statistics Department

Hong Kong's exports of architectural, engineering, scientific and other technical services Exports - Architectural, engineering, scientific and other technical services Share of total services exports (%) Change (% YoY)

2010

2011

2012

3,745

3,731

3,946

0.6 +4.2

0.5 -0.4

0.5 +5.8

Sources: Hong Kong Trade in Services Statistics (2012 Edition), Census and Statistics Department

cities and their satellite cities.

It is expected that such infrastructure expansion, which covers housing, rural infrastructure and transport infrastructure, will bring enormous opportunities to Hong Kong architectural firms.

Hong Kong architectural firms in the Mainland market Hong Kong architectural firms started entering the Chinese mainland market in the late 1970s. Hong Kong architects, who excel at projects requiring advanced technical requirements and complexity, have been involved in designing landmark buildings and multi-purpose complexes in major cities.

They have also drawn up the blueprints for upmarket residential developments as well as “green” buildings in smaller cities.

The common practice of Hong Kong architectural firms entering the mainland market is to cooperate with local design institutes. The mainland design institutes assist the Hong Kong partners in understanding and complying with the planning and building approval processes. On the other hand, Hong Kong architects provide input on advanced building design and technology.

Hong Kong architects also have expertise in contract management and preparing tender documentations in

accordance to international practices.

There were 385 Hong Kong, Macau, or Taiwanfunded construction service enterprises operating on the Chinese mainland as at the end of 2012 (with 129,700 employees), of which 90 were wholly owned. In addition, there were another 295 foreign-invested construction enterprises operating on the mainland (with 102,800 employees), and 91 of them were wholly-owned.

To provide architectural, engineering, urban planning and landscape architectural services on the mainland, Hong Kong companies are allowed to set up joint-venture or wholly owned operations.

In this regard, Hong Kong funded companies have to comply with the capital and other requirements (for details please see CEPA section below).

Green Building Boom Ongoing awareness of environmental protection leads to an increasing demand for green buildings in Hong Kong.

For example, the Buildings Energy Efficiency Ordinance enacted in 2010 specifies the energy efficiency design standards for four types of building services installations, and requires certain buildings to conduct energy audits. With the new legislation taking full effect since September 2012, there will be more business

"There were 385 Hong Kong, Macau, or Taiwanfunded construction service enterprises operating on the Chinese mainland as at the end of 2012 (with 129,700 employees), of which 90 were wholly owned."

opportunities for related professional services.

On the other hand, the Hong Kong Green Building Council launched Building Environmental Assessment Method Professional (BEAM Pro) programme in April 2010 to provide industry professionals trainings on green building. As at April 2014, more than 1,900 practitioners were accredited as BEAM Professional and about 600 of them were from the architecture sector.

Apart from Hong Kong, the Chinese mainland and other emerging countries are also going green. In January 2013, the Chinese government issued the Action Plan for Green Buildings, aiming to promote sustainable development in the country’s urbanisation process. The Plan’s main objectives include enforcing mandatory energy saving standard on new buildings in urban areas and constructing green buildings of one billion sqm by end2015, while 20% of the new buildings in urban areas will have to meet the green standard. Energy saving reconstruction of the existing buildings will also be carried out, which includes renovation of residential buildings of more than 400 million sqm and public buildings of 60 million sqm. In the UAE, the Masdar City in Abu Dhabi aims to be a carbon-free city, relying on renewable energy sources.

HONG KONG BUSINESS ANNUAL 2015 57

company and industry - sporting goods industry

HK remains a key player in sporting goods industry The majority of Hong Kong sporting goods are exported under OEM/ODM arrangements with overseas manufacturers.

H

ong Kong companies export a diverse range of sporting goods on a global basis. The major categories include sports equipment and accessories (68% of the total), sports apparel (26%) and sports footwear (7%).

Sports equipment and accessories cover a wide range of products, including sporting bags, life-jackets, water-skis, surf-boards, skate-boards, golf equipment, fishing and hunting requisites, and tennis and badminton racquets.

Hong Kong is one of the world’s leading suppliers of sporting goods.

Although they have largely relocated their production bases to the Chinese mainland, Hong Kong’s sports apparel manufacturers still receive strong support from a number of ancillary industries.

Sportswear production benefits greatly from the strong presence of the clothing industry in Hong Kong. Indeed, the production of sports gear is well served through a widely-available variety of quality threads, fabrics, zippers, labels and other components, all at reasonable

58 HONG KONG BUSINESS ANNUAL 2015

prices. This easy sourcing of materials and components adds a truly competitive edge to Hong Kong’s sports goods sector.

The majority of Hong Kong sporting goods are exported under OEM/ ODM arrangements with overseas manufacturers and brand owners, notably Reebok, Nike, Adidas, Umbro, Timberland and Quiksilver. Only a few Hong Kong manufacturers have looked to develop their own brands, a move backed up with R&D undertakings.

Notable examples, though, include Neil Pryde (windsurfing sails), Super-X (sportswear) and Nikko (camping gear and accessories). Several Hong Kong companies act as agents/distributors for foreign sportsgear/sportswear companies, often sponsoring local sports teams as part of their promotional activities.

Many Hong Kong sporting goods are exported under licensing and contract manufacturing arrangements with overseas manufacturers and brand owners, such as Nike, Puma, Umbro, Quiksilver and Wilson. Typically, buyers

"Several Hong Kong companies act as agents/distributors for foreign sportsgear/sportswear companies." provide the production specifications and product designs. Hong Kong manufacturers, though, are increasingly becoming adept at product design and development, engineering, modelling, tooling and quality control, allowing them to generate higher value along the supply chain.

Sales Channels A few large local manufacturers, as mentioned earlier, export products under their own brand names. “Nikko” knapsacks and “Neil Pryde” sails, for example, are well-known in overseas markets. It is common practice for these manufacturers to appoint overseas distributors in order to help promote sales.

A good distributor is a valuable source of market information and can be helpful in advising Hong Kong companies on appropriate pricing strategies. However, Hong Kong companies should ensure that any potential partner is well-established in the market, supported by warehousing and product-handling facilities, and possesses a good knowledge of the dynamics of the local market. On the mainland, sporting goods are channelled through shopping centres in first-tier cities and specialised retail stores in the secondand third-tier cities.

Other distribution methods include selling to discount stores, speciality stores and traders. For instance, large discount chain stores in the US, such as WalMart and Target, buy from Hong Kong exporters. The large speciality chain stores selling sporting goods in the US include Sports Authority, while the big players in Europe include Decathlon, Intersport and Go Sport.

The International Sportsmen Exposition (ISE) in the US and ISPO in Germany are the leading trade fairs for sporting goods.

As well as staging trade fairs, the HKTDC, also organises study or match-making missions for Hong Kong manufacturers, many of which are OEM firms, to visit specific markets in order to help building new business connections.

Retail consolidation is one of the biggest issues facing the sporting goods industry.

Retailers are transforming into super-sized stores with a “shoppertainment” format.

Manufacturers are dealing with fewer but more powerful retailers such as WalMart, or large specialty chains, such as Sport

sporting goods industry - company and industry Performance of Hong Kong’s Exports of Sporting Goods^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Markets Sports equipment and accessories Sports apparel Sports footwear Total Exports by Major Markets EU (28) United Kingdom Germany US Japan Chinese mainland ASEAN Australia

Chek and Foot Locker. These sporting goods retailers, in turn, put increasing pressure on manufacturers to offer better deals. They also shift the inventory risk on to the manufacturers.

Industry Trends Generic sporting goods tend not to be influenced by changes in the popularity of particular sports, though they are still highly vulnerable to changing fads and fashions.

Luxury brands have entered into the sporting goods business by introducing their own sneakers and sporting accessories. A “life cycle hypothesis” has been proposed to describe the boom and bust in the specialised sporting equipment market. As people grow older, they prefer fishing, golf and exercise equipment, as opposed to the more strenuous sports, such as football and tennis.

With capital intensive products being the exception, sporting goods are like other consumer goods, with R&D and marketing figuring highly in the value-added part of the process. These have seen many

2012 HK$Mn. Growth % 199 -19 39,367 -4 36,579 -5 39,566 -4

2013 HK$Mn. Growth % 192 -4 38,422 -2 35,328 -3 38,614 -2

Jan-Sep 2014 HK$Mn. Growth % 110 -20 26,268 -7 24,053 -8 25,378 -8

2012 Share % Growth % 70.3 2 23.6 -14 6.1 -24

2013 Share % Growth % 71.1 -1 23.6 -2 5.3 -15

Jan-Sep 2014 Share % Growth % 67.8 -11 25.7 -1 6.5 17

2012 Share % Growth % 27.5 -14 6.5 -5 5.7 -18 29.0 -1 12.4 14 9.1 -14 3.7 16 3.6 19

2013 Share % Growth % 26.9 -5 6.2 -7 5.9 * 27.1 -9 13.1 3 10.6 13 3.8 1 3.6 -2

Jan-Sep 2014 Share % Growth % 27.6 -7 5.8 -12 7.1 10 26.7 -9 12.8 -9 10.0 -12 3.8 -6 3.6 -5

businesses look to off-shore their physical production to the Chinese mainland, Vietnam, Indonesia and Thailand in order to lower their production costs. Hong Kong manufacturers have also largely off-shored their plants to low-cost countries. With international players focusing their R&D on the use of new materials and generating designs incorporating engineering, biomechanics and physiology, several Hong Kong manufacturers have also looked to refine their R&D capabilities.

With regard to marketing, endorsement agreements with sports stars and sponsorship and licencing agreements with sports events are important factors in making products/ brands a success. In line with this, sporting goods companies have often become the sponsor of sports stars, teams and tournaments.

Close connections with sports stars and coaches prove a resource that provides a competitive advantage.

Feedback on products from such individuals could help direct R&D activities.

"With capital intensive products being the exception, sporting goods are like other consumer goods, with R&D and marketing figuring highly in the value-added part of the process."

Product Trends Hong Kong’s sporting goods industry is expanding steadily as people more readily appreciate the health and leisure benefits of physical activity, while sportswear is also increasingly being embraced by the casual wear market. The best-selling sports outfits combine sports activities with leisurewear, as sports lovers want to look smart and fashionable while exercising, while people also wear athletic apparel and footwear for casual or leisure purposes.

Modern technology is now playing a distinct role in the industry, with designers seeking new fabrics and applications.

Examples here include sun-protecting and reflective fibres with synthetics blended into wool and cotton.

Manufacturers of sports balls and golf equipment have also upgraded the materials used in basketballs, volleyballs and footballs, shifting from rubber and PVC to high-end PU. The use of nanotechnology in sports apparel is also expected to become more widespread.

HONG KONG BUSINESS ANNUAL 2015 59

numbers | indicators Population by Age Group and Sex Mid-2013

End-2013

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

0-4

134.5

125.7

260.2

3.6

134.2

124.9

259.1

3.6

5-9

128

120.2

248.2

3.5

134

125.5

259.5

3.6

10 - 14

149.1

139.6

288.7

4

142.9

134.8

277.7

3.8

15 - 19

208

196.3

404.3

5.6

204.5

192.9

397.4

5.5

20 - 24

226.4

230.7

457.1

6.4

224.1

228.1

452.2

6.3

25 - 29

221.8

295.8

517.6

7.2

223.4

293.7

517.1

7.2

30 - 34

231.9

343.2

575.1

8

232.9

346.3

579.2

8

35 - 39

229.5

331

560.5

7.8

228.4

332

560.4

7.8

40 - 44

239.8

338.7

578.5

8.1

239.1

338.7

577.8

8

45 - 49

271

337.9

608.9

8.5

264.6

334.3

598.9

8.3

50 - 54

313.5

341.1

654.6

9.1

311.2

344.6

655.8

9.1

55 - 59

281.3

287.9

569.2

7.9

288.8

296.7

585.5

8.1

60 - 64

220

223.1

443.1

6.2

224.3

228.3

452.6

6.3

65 - 69

148.8

146.4

295.2

4.1

156.5

155.7

312.2

4.3

70 - 74

109.6

103.7

213.3

3

108.7

101.4

210.1

2.9

75 - 79

100.6

109.9

210.5

2.9

100.5

110.3

210.8

2.9

80 - 84

69.5

88.4

157.9

2.2

73.2

90.6

163.8

2.3

>= 85

47.4

97.2

144.6

2

50.2

101.5

151.7

2.1

3 330.7

3 856.8

7 187.5

100

3 341.5

3 880.3

7 221.8

100

Age group

All age groups

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

Mid-2014 Age group 0-4

Mid-2014

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

136.4

127.4

263.8

3.7

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

50 - 54

312

349.9

661.9

9.2

Age group

5-9

134.4

125.2

259.6

3.6

55 - 59

293.2

300.5

593.7

8.2

10 - 14

140.5

133.2

273.7

3.8

60 - 64

229

233.4

462.4

6.4

15 - 19

194.4

183.6

378

5.2

65 - 69

163

163

326

4.5

20 - 24

215.8

220

435.8

6

70 - 74

110.1

102.1

212.2

2.9

25 - 29

224.1

291.3

515.4

7.1

75 - 79

100.6

109.6

210.2

2.9

30 - 34

234.1

349.1

583.2

8.1

80 - 84

74.3

92.1

166.4

2.3

>= 85

52.3

104.3

156.6

2.2

3 342.7

3 892.1

7 234.8

100

35 - 39

228.2

334.2

562.4

7.8

40 - 44

240.7

341.1

581.8

8

45 - 49

259.6

332.1

591.7

8.2

Notes :

All age groups

# Provisional figures.

The Population Census conducted from June to August 2011 provided a benchmark for revising the population estimates compiled since the 2006 Population By-census. Population figures from end-2006 to mid-2011 have been revised accordingly.

Source :

Demographic Statistics Section, Census and Statistics Department (Enquiry telephone no. : 2716 8345 Enquiry e-mail : population@censtatd.gov.hk)

60 HONG KONG BUSINESS ANNUAL 2015

numbers | indicators Labour Force, Unemployment and Underemployment Labour Force Period

No. ('000)

Percentage change over the same period in preceding year (%)

Unemployed ('000)

Unemployment rate (seasonally adjusted) (%)

Unemployment rate (not seasonally adjusted) (%)

Underemployed ('000)

Underemployment rate (%)

2011

3 703.1

2

126.7

-

3.4

63.3

1.7

2012

3 785.2

2.2

124.5

-

3.3

57.6

1.5

2013

3 858.8

1.9

130.8

-

3.4

58.2

1.5

6/2013 - 8/2013

3 876.0

2.2

135.9

3.4

3.5

59.2

1.5

7/2013 - 9/2013

3 871.5

2.4

134.3

3.4

3.5

56.8

1.5

8/2013 - 10/2013

3 859.5

2

129.5

3.3

3.4

56.5

1.5

9/2013 - 11/2013

3 850.4

1.8

127.9

3.4

3.3

54.9

1.4

10/2013 - 12/2013

3 865.6

1.9

118.7

3.2

3.1

55.5

1.4

11/2013 - 1/2014

3 876.8

1.6

114

3.2

2.9

51.3

1.3

12/2013 - 2/2014

3 842.3

0.6

112.3

3.1

2.9

47

1.2

1/2014 - 3/2014

3 833.9

-0.1

119.1

3.1

3.1

48.4

1.3

2/2014 - 4/2014

3 841.2

0.1

122.3

3.1

3.2

53.9

1.4

3/2014 - 5/2014

3 861.5

0.2

122.4

3.1

3.2

60.5

1.6

4/2014 - 6/2014

3 872.3

0.2

127.6

3.2

3.3

58

1.5

5/2014 - 7/2014

3 904.4

0.9

133.3

3.3

3.4

57.9

1.5

6/2014 - 8/2014

3 926.4

1.3

136.4

3.3

3.5

54.6

1.4

7/2014 - 9/2014

3 918.6

1.2

132.9

3.3

3.4

57

1.5

8/2014 - 10/2014

3 907.8

1.3

129.2

3.3

3.3

57.2

1.5

Notes :

# Provisional figures - Not applicable.

Starting from 2001, annual figures are compiled based on data collected in the General Household Survey from January to December of the year concerned as well as the mid-year population estimates by District Council district compiled jointly by the Census and Statistics Department and an inter-departmental Working Group on Population Distribution Projections.

The labour force refers to the land-based non-institutional population aged 15 and over who satisfy the criteria for being classified as employed population or unemployed population.

The employed population comprises those persons aged 15 and over who have been at work for pay or profit during the 7 days before enumeration or have had formal job attachment.

The unemployed population comprises all unemployed persons. For a person aged 15 or over to be classified as unemployed, that person should : (a) not have had a job and should not have performed any work for pay or profit during the 7 days before enumeration; and (b) have been available for work during the 7 days before enumeration; and (c) have sought work during the 30 days before enumeration.

However, if a person aged 15 or over fulfils the conditions (a) and (b) above but has not sought work during the 30 days before enumeration because he/she believes that work is not available, he/she is still classified as unemployed, being regarded as a so-called "discouraged worker".

Notwithstanding the above, the following types of persons are also classified as unemployed: (a) persons without a job, have sought work but have not been available for work because of temporary sickness; and (b) persons without a job, have been available for work but have not sought work because they: (i) have made arrangements to take up a new job or to start business on a subsequent date; or (ii) were expecting to return to their original jobs.

Unemployment rate refers to the proportion of unemployed persons in the labour force. "Unemployment rate (seasonally adjusted)" refers to the unemployment rate adjusted for seasonal variations. Starting from May 2008, the seasonally adjusted unemployment rate is compiled by the X-12 ARIMA method to replace the previous X-11 ARIMA method. The seasonally adjusted unemployment rates since November 2006 - January 2007 have also been revised using the new method. Figures prior to November 2006 – January 2007 refer to the seasonally adjusted unemployment rates based on the X-11 ARIMA method. Seasonal adjustment is not applicable to annual average unemployment rates.

The underemployed population comprises those employed persons who have involuntarily worked less than 35 hours during the 7 days before enumeration and have sought additional work during the 30 days before enumeration, or have not sought additional work but have been available for additional work during the 7 days before enumeration. Following this definition, employed persons taking no-pay leave due to slack work during the 7 days before enumeration are also classified as underemployed if they worked less than 35 hours or were on leave even for the whole period during the 7-day period.

The underemployment rate refers to the proportion of underemployed persons in the labour force.

Source :

Social Analysis and Research Section (2), Census and Statistics Department (Enquiry telephone no. : 2887 5508 Enquiry e-mail : ghs@censtatd.gov.hk) HONG KONG BUSINESS ANNUAL 2015 61

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section B : Mining and quarrying Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

2

0

76

-8.4

***

***

Sep

2

0

77

6.9

***

***

Dec

2

0

78

6.8

***

***

Mar

2

0

78

5.4

***

***

Jun

2

0

82

7.9

***

***

Month

Industry Section C : Manufacturing Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

11 609

-2.2

103 350

-4

2 680

-9.8

Sep

11 586

-2

103 914

-2.7

2 700

14.1

Dec

11 541

-1.5

103 683

-1.5

2 387

-13.9

Mar

11 574

-0.7

103 498

-0.5

3 201

23.2

Jun

11 470

-1.2

102 222

-1.1

3 583

33.7

Month

Industry Sections D & E : Electricity and gas supply, and waste management Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

412

23.7

10 592

2.6

***

***

Sep

419

24

10 835

5.3

***

***

Dec

417

12.4

10 956

6.6

***

***

Mar

438

11.7

11 013

6.7

***

***

Jun

433

5.1

10 967

3.5

***

***

Month

Industry Section F : Construction sites (manual workers only) Establishments Year

Month Jun

2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

1 247

7.8

82 542

15.1

1 025

74.3

Sep

1 315

8.8

76 804

6.3

885

73.2

Dec

1 309

13

80 061

13.4

1 345

67.9

Mar

1 296

5.5

78 570

1

1 628

75.1

Jun

1 314

5.4

79 734

-3.4

1 535

49.8

62 HONG KONG BUSINESS ANNUAL 2015

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Part of Industry Section G : Import/export trade and wholesale Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

116 335

-0.7

554 372

-0.7

10 117

10.7

Sep

115 976

-0.3

551 628

-0.7

10 135

23.1

Dec

116 276

0.1

552 823

-0.3

8 544

10.9

Mar

116 322

-0.4

552 918

-0.9

9 208

-11.8

Jun

116 526

0.2

554 093

-0.1

8 152

-19.4

Month

Part of Industry Section G : Retail Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

65 046

1.6

264 805

2.1

8 124

17.8

Sep

64 929

1.5

264 751

1.9

9 186

2.6

Dec

65 387

2.3

267 703

2.9

8 307

9.9

Mar

65 804

1.3

269 997

2.8

9 681

2.9

Jun

65 936

1.4

271 904

2.7

8 805

8.4

Month

Industry Section H : Transportation, storage, postal and courier services Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

9 652

-0.1

169 346

1.6

4 101

20.3

Sep

9 673

0.6

170 988

2.5

3 642

2.8

Dec

9 701

1.4

171 620

2.6

3 630

20.4

Mar

9 750

0.9

171 721

2.1

4 183

15.7

Jun

9 799

1.5

174 547

3.1

4 037

-1.6

Month

Industry Section I : Accommodation and food services Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

17 201

1.6

276 207

1.4

12 970

5.7

Month Sep

17 073

1.8

275 895

0.8

14 362

11

Dec

17 068

0.6

277 794

1.3

14 959

26.1

Mar

17 454

1.5

281 230

2

17 595

13.2

Jun

17 796

3.5

283 154

2.5

15 799

21.8

HONG KONG BUSINESS ANNUAL 2015 63

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section J : Information and communications Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

11 807

6.6

101 073

5.4

3 054

28.3

Sep

12 035

7.4

102 577

5.2

3 015

40.2

Dec

12 224

7.5

103 248

6.2

1 995

-19.6

Mar

12 287

5.9

102 865

4.6

2 567

-4.2

Jun

12 414

5.1

103 517

2.4

2 653

-13.1

Month

Industry Section K : Financing and insurance Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

21 683

4

207 346

0.2

5 260

19.9

Sep

22 114

5.3

210 930

2.1

5 840

66.4

Dec

22 516

5.9

213 490

2.8

4 481

9

Mar

22 463

4.8

212 790

2.5

4 095

-19

Jun

22 303

2.9

213 994

3.2

5 004

-4.9

Month

Industry Section L : Real estate Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

15 071

5

126 415

1.7

3 523

23.1

Sep

15 100

3.9

126 041

0.3

3 833

0.7

Dec

15 198

3.6

126 523

0.5

3 497

19.3

Mar

15 117

1.3

126 951

ยง

3 962

5.5

Jun

15 050

-0.1

126 624

0.2

3 851

9.3

Month

Industry Sections M & N : Professional and business services Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

42 017

5.3

344 544

3.4

9 169

-2

Month Sep

42 578

5.8

348 265

3.7

8 778

3.2

Dec

43 836

8.1

353 817

4.9

8 931

2.5

Mar

43 867

6.1

353 546

3.5

9 767

12.3

Jun

43 631

3.8

353 366

2.6

9 356

2

64 HONG KONG BUSINESS ANNUAL 2015

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Sections P - S : Social and personal services Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

44 194

4.5

460 973

2.3

17 690

7.3

Sep

44 840

5.8

463 756

2.9

15 620

5.4

Dec

45 562

6.6

466 088

2.6

14 133

8.2

Mar

46 037

5.5

475 565

3.7

11 624

-32.9

Jun

46 682

5.6

479 987

4.1

16 604

-6.1

Month

All industry sections covered in the survey Establishments Year 2013

2014

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Jun

356 276

1.9

2 701 641

1.7

77 858

9.9

Sep

357 640

2.3

2 706 461

1.7

78 299

12.7

Dec

361 037

3

2 727 884

2.4

72 382

11.2

Mar

362 411

2.1

2 740 742

1.9

77 788

-3

Jun

363 356

2

2 754 191

1.9

79 724

2.4

Month

Notes : (1) Establishments in construction sites refer to number of sites, while persons engaged and vacancies refer to manual workers only. Please refer to "Limitations of the Survey" in Part V of the Quarterly Report of Employment and Vacancies at Construction Sites.

(2) Industrial coverage of retail trade is slightly incomplete in the present context. Main omissions are hawkers and retail pitches (other than market stalls).

(3) Industrial coverage of the transportation, storage, postal and courier services is rather incomplete in the present context. Main omissions are taxis, public light buses, and part of goods vehicles and inland freight water transport.

(4) Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation.

(5) Industrial coverage of the financing and insurance is slightly incomplete in the present context. Main omissions are monetary authorities and self-employed insurance agents with no business registration.

(6) Industrial coverage of professional and business services is slightly incomplete in the present context. Main omissions are renting and leasing of recreational and sports goods.

(7) Industrial coverage of social and personal services is rather incomplete in the present context. Main omissions are industry sections T & U ("Work activities within domestic households" & "Activities of extraterritorial organisations and bodies"); and religious organisations, authors and other independent artists, and some social and personal services.

(8) Starting from March 2009 round of the SEV, the survey coverage has been expanded to include more economic activities in some of the industries due to the change in industrial classification. The industries concerned are in Industry Section H Transportation, storage, postal and courier services, Industry Section N Administrative and support services and Industry Sections P - S Social and personal services.

(9) Figures relate only to those industries covered. Figures relating to the civil service are excluded.

(10) The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to March 2000 whereas the statistics prior to March 2000 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article entitled "Revision of the Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics.

*** Data are not released in order to safeguard confidentiality of information provided by individual establishments.

ยง Increase or decrease within 0.05%.

Source : Employment Statistics and Central Register of Establishments Section, Census and Statistics Department (Enquiry telephone no. : 2582 5076 Enquiry e-mail : employment@censtatd.gov.hk) HONG KONG BUSINESS ANNUAL 2015 65

numbers | indicators Nominal Wage Indices for employees up to supervisory level (excluding managerial and professional employees) by selected industry section (September 1992 = 100) Import/export, wholesale and retail trades

Manufacturing Year

2014

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Jun

181.6

+6.5

195.1

+3

169.4

+3.7

167.2

+7.2

Sep

182.3

+5.1

199.6

+3.4

173.1

+3.9

167.3

+5.5

Dec

180.9

+4.7

198.8

+1.9

173.2

+4.1

169.4

+3.7

Mar

185.2

+4.8

198.8

+0.9

174.1

+4.3

170.7

+5

Jun

189.7

+4.5

203.1

+4.1

177.6

+4.9

174.4

+4.3

Real estate leasing and maintenance management

Financial and insurance activities

Year 2013

2014

Month

Accommodation and food service activities ^

Index

Month

2013

Transportation

Index

Year-onyear % change

Index

Year-onyear % change

Professional and business services

Personal services

Index

Year-onyear % change

Index

Year-onyear % change

All selected industry sections

Index

Year-on-year % change

Jun

206.2

+5.1

211.1

+9.2

203.1

+5.8

241.9

+6.9

191.6

+5.2

Sep

208.4

+4

215.5

+9.4

206.6

+6.1

247.3

+5.4

194.6

+4.8

Dec

207.5

+2.8

219.2

+9.7

208.3

+8.1

253.8

+5.4

195.2

+4.1

Mar

209.5

+2.7

222.1

+9.7

212.1

+9.1

254.2

+7.8

196.7

+4.1

Jun

212

+2.8

222.1

+5.2

215.6

+6.2

261.1

+7.9

200.3

+4.5

Real Wage Indices for employees up to supervisory level (excluding managerial and professional employees) by selected industry section (September 1992 = 100) Manufacturing Year

2013

2014

Month

Import/export, wholesale and retail trades

Transportation

Accommodation and food service activities ^

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Jun

112.6

+1.8

121

-1.6

105.1

-0.8

103.7

+2.5

Sep

119.3

0

130.7

-1.6

113.3

-1.2

109.5

+0.4

Dec

110

+0.4

120.9

-2.3

105.3

-0.2

103

-0.5

Mar

111.3

+0.5

119.5

-3.2

104.6

0

102.6

+0.7

Jun

113.4

+0.6

121.4

+0.3

106.2

+1

104.3

+0.5

Notes : The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to March 2004 whereas the statistics prior to March 2004 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article "Revision of Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics.

^ Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation.

# Refers to all industries covered by the Wage Enquiry, including the electricity and gas supply industry, sewerage and waste management activities

industry and publishing activities industry, whose statistics are not separately shown.

'0.0' denotes increase or decrease of less than 0.05%.

As from 2011, the Real Wage Indices are derived by deflating the Nominal Wage Indices by the 2009/10-based CPI(A). To facilitate comparison, Real Wage Indices prior to 2011 have been re-complied using the 2009/10-based CPI(A).

Source : Wages & Labour Costs Statistics Section (1), Census and Statistics Department (Enquiry telephone no. : 2887 5550 Enquiry e-mail : wage@censtatd.gov.hk)

66 HONG KONG BUSINESS ANNUAL 2015

numbers | indicators Real Wage Indices for employees up to supervisory level (excluding managerial and professional employees) by selected industry section (September 1992 = 100) Financial and insurance activities

Year 2013

2014

Month

Index

Year-onyear % change

Real estate leasing and maintenance management

Professional and business services

Personal services

All selected industry sections

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-on-year % change

Jun

127.9

+0.5

131.0

+4.4

126.0

+1.1

150.1

+2.2

118.9

+0.6

Sep

136.4

-1.0

141.0

+4.1

135.2

+1.0

161.9

+0.3

127.4

-0.2

Dec

126.2

-1.4

133.2

+5.2

126.6

+3.6

154.3

+1.1

118.7

-0.2

Mar

125.9

-1.5

133.5

+5.2

127.5

+4.6

152.7

+3.4

118.2

-0.1

Jun

126.7

-0.9

132.7

+1.4

128.9

+2.3

156.1

+4.0

119.7

+0.7

Seasonally adjusted Consumer Price Indices Average monthly rate of change (%) during the latest 3 months Year

2013

2014

Month

Consumer Price Index (A)

Consumer Price Index (B)

Consumer Price Index (C)

Aug

-0.5

-1.9

0.0

+0.3

Sep

-0.4

-1.8

+0.1

+0.4

Oct

+0.4

+0.3

+0.4

+0.4

Nov

+1.2

+2.7

+0.7

+0.4

Dec

+1.1

+2.5

+0.6

+0.3

Jan

+0.3

+0.3

+0.3

+0.3

Feb

+0.3

+0.4

+0.3

+0.3

Mar

+0.3

+0.3

+0.3

+0.2

Apr

+0.3

+0.3

+0.2

+0.3

May

+0.2

+0.2

+0.2

+0.2

Jun

+0.2

+0.2

+0.2

+0.2

Jul

+0.4

+0.5

+0.4

+0.3

Aug

-0.4

-1.6

+0.1

+0.2

Sep

+0.5

+0.9

+0.5

+0.3

Oct

+0.7

+1.1

+0.6

+0.4

Notes : 0.0' Denotes increase or decrease of less than 0.05%.

The seasonally adjusted indices are subject to revision up to 3 years after original publication.

Four series of Consumer Price Indices (CPIs) are compiled to reflect the impact of consumer price changes on households in different expenditure ranges.

The CPI(A), CPI(B) and CPI(C) are compiled based on the expenditure patterns of households in the relatively low, medium and relatively high expenditure ranges. By aggregating the expenditure patterns of all households covered by the above three indices, a Composite CPI is also compiled to reflect the impact of consumer price changes on the household sector as a whole. The year-on-year rate of change in this index is generally taken to reflect overall consumer price inflation.

The CPI(A), CPI(B) and CPI(C) respectively cover some 50%, 30% and 10% of households in Hong Kong. The average monthly household expenditures (in HK$) of these groups during the base period (i.e. October 2009 - September 2010) were $4,500 - $18,499, $18,500 - $32,499 and $32,500 - $65,999 respectively. Taking into account the impact of price changes since the base period, the monthly household expenditure ranges of the CPI(A), CPI(B) and CPI(C) adjusted to the price level of 2013 are broadly equivalent to $5,200 - $21,400, $21,400 - $37,300 and $37,300 - $75,500 respectively, and that of the Composite CPI is broadly equivalent to $5,200 $75,500. The Composite CPI is compiled based on the expenditure patterns of all these households taken together.

With seasonal variations removed from the original series, the seasonally adjusted CPIs enable a more meaningful comparison of figures in consecutive months.

Since the month-to-month change of the seasonally adjusted series still tends to fluctuate due to other irregular factors, the trend of the CPIs may be more clearly discerned by looking at the average monthly rates of change in the seasonally adjusted indices during the latest 3 months.

Source : Consumer Price Index Section, Census and Statistics Department (Enquiry telephone no. : 2805 6403 Enquiry e-mail : cpi@censtatd.gov.hk) HONG KONG BUSINESS ANNUAL 2015 67

numbers | indicators Underemployment Rate by Industry

Construction

Import/export trade and wholesale

Retail, accommodation and food services

Transportation, storage, postal and courier services, information and communications

Financing, insurance, real estate, professional and business services

Public administration, social and personal services

Otherindustries

Allindustries

2011

1.3

7.6

0.4

1.7

2.2

0.7

1.2

1.1

1.7

2012

1

7.9

0.3

1.5

1.7

0.6

1

##

1.5

2013

0.9

7.8

0.3

1.3

1.7

0.6

1

##

1.5

6/2013 - 8/2013

1.1

7.9

0.3

1.3

1.7

0.5

1

##

1.5

7/2013 - 9/2013

0.8

8.1

0.2

1.3

1.6

0.5

0.9

##

1.5

8/2013 - 10/2013

##

8.1

0.1

1.3

1.7

0.5

0.8

##

1.5

9/2013 - 11/2013

##

7.5

0.2

1.2

1.9

0.5

0.8

##

1.4

10/2013 - 12/2013

0.8

7.3

0.3

1.2

1.9

0.4

1

##

1.4

11/2013 - 1/2014

0.9

6.5

0.3

1.2

1.6

0.4

1

##

1.3

12/2013 - 2/2014

0.8

5.5

0.4

1.2

1.5

0.3

1

##

1.2

1/2014 - 3/2014

0.7

6

0.3

1.3

1.4

0.5

0.9

##

1.3

2/2014 - 4/2014

0.7

6.8

0.3

1.3

1.7

0.7

0.9

##

1.4

3/2014 - 5/2014

0.8

7.7

0.2

1.4

1.9

0.7

1.1

##

1.6

4/2014 - 6/2014

0.5

7.2

0.3

1.3

1.8

0.6

1.1

##

1.5

5/2014 - 7/2014

0.5

6.9

0.3

1.3

1.7

0.7

1.1

##

1.5

6/2014 - 8/2014

0.4

6.7

0.4

1.2

1.5

0.6

1

2.4

1.4

7/2014 - 9/2014

0.7

6.7

0.3

1.4

1.7

0.7

0.9

##

1.5

8/2014 - 10/2014Â #

0.7

6.8

0.3

1.4

1.9

0.5

1

##

1.5

Period

Manufacturing

Industry

Notes : # Provisional figures

## Statistics are not released due to large sampling error.

Starting from 2001, annual figures are compiled based on data collected in the General Household Survey from January to December of the year concerned as well as the mid-year population estimates by District Council district compiled jointly by the Census and Statistics Department and an inter-departmental Working Group on Population Distribution Projections. The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to the quarter of January to March 2008. Statistics prior to 2008 have been compiled based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article "Revision of Hong Kong Standard Industrial Classification" published in November 2008 issue of the Hong Kong Monthly Digest of Statistics. Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation.

Source :

Social Analysis and Research Section (2), Census and Statistics Department (Enquiry telephone no. : 2887 5508 Enquiry e-mail : ghs@censtatd.gov.hk)

68 HONG KONG BUSINESS ANNUAL 2015

numbers | indicators

Average domestic householdsize

Owner-occupiers as a proportion of total number of domestic households (%)

Owner-occupiers in public sector housing as a proportion of total number of domestic householdsin public sector housing (%)

Owner-occupiers in private sector housing as a proportion of total number of domestic households in private sector housing (%)

2011

2 359.3

2.9

53.2

33.6

69.8

2012

2 389.0

2.9

52

33.2

68.2

2013

2 404.8

2.9

51.2

32.9

66.7

5/2013 - 7/2013

2 412.1

2.9

51.2

33.2

66.7

6/2013 - 8/2013

2 421.5

2.9

51.2

33

66.8

7/2013 - 9/2013

2 421.2

2.9

51.1

33

66.5

8/2013 - 10/2013

2 418.6

2.9

51.1

33.1

66.5

9/2013 - 11/2013

2 417.9

2.9

51

33.1

66.5

10/2013 - 12/2013

2 417.6

2.9

51.1

33.1

66.5

11/2013 - 1/2014

2 419.2

2.9

51.3

33.3

66.7

12/2013 - 2/2014

2 415.1

2.9

51.5

33.5

66.7

1/2014 - 3/2014

2 418.1

2.9

51.5

33.6

66.7

2/2014 - 4/2014

2 421.9

2.9

51.1

33.3

66.3

3/2014 - 5/2014

2 425.0

2.9

51

33.2

66.3

4/2014 - 6/2014

2 429.4

2.9

51.1

32.9

66.7

5/2014 - 7/2014

2 432.7

2.9

50.9

32.6

66.7

6/2014 - 8/2014

2 441.4

2.9

50.7

32.3

66.5

7/2014 - 9/2014

2 438.4

2.9

50.6

32.5

66.3

Period

Number ofdomestic households('000)

Statistics on Domestic Households

Notes : Starting from 2001, annual figures are compiled based on data collected in the General Household Survey from January to December of the year concerned as well as the mid-year population estimates by District Council district compiled jointly by the Census and Statistics Department and an interdepartmental Working Group on Population Distribution Projections.

Owner-occupiers refer to the domestic households which own the quarters they occupy.

Public sector housing includes public rental flats and interim housing flats provided by Housing Authority (HA); and public rental flats and Senior Citizen Residences Scheme flats provided by the Housing Society (HS); subsidized sale flats provided by HA under the Home Ownership Scheme (HOS), Private Sector Participation Scheme (PSPS), Tenants Purchase Scheme (TPS), Buy or Rent Option Scheme (BRO), Mortgage Subsidy Scheme (MSS) and Middle Income Housing Scheme (MIH); and flats provided by HS under the Flat-For-Sale Scheme (FFSS) and Sandwich Class Housing Scheme (SCHS); and Public Temporary housing. As from Q1 2002, subsidized sale flats that can be traded in open market are excluded.

Private sector housing includes private housing blocks, flats built under the Urban Improvement Scheme of the Hong Kong Housing Society, villas/bungalows/ modern village houses, simple stone structures, quarters in non-residential buildings and private temporary housing. As from Q1 2002, subsidized sale flats that can be traded in open market are also put under this category.

Source :

Social Analysis and Research Section (2), Census and Statistics Department (Enquiry telephone no. : 2887 5508 Enquiry e-mail : ghs@censtatd.gov.hk) HONG KONG BUSINESS ANNUAL 2015 69

High-Flyers 2015 Profiles of Hong Kong’s Outstanding Enterprises and Business Leaders

HSBC Life (International) Limited 72 | Ageas Insurance Company (Asia) Limited 76 | AIG Insurance Hong Kong Limited 78 Altruist Financial Group Limited 80 | Canadian International School of Hong Kong 82 | The Cityview 84 www.Crystallize. Me Ltd 86 | Fujitsu Hong Kong 88 | GODIVA Chocolatier 90 | Henley Business School 92 Hyperlink Holdings Limited 94 | InterContinental Grand Stanford 96 | Lan Kwai Fong Hotel @ Kau u Fong 98 MassMutual Asia Ltd. 100 | MENCE 102 | Mercedes-Benz Hong Kong Limited 104 | OZO Wesley Hong Kong 106 Rhombus International Hotels Group 108 | Sound Concepts Ltd 110 | Thomas Mayer & Associés 112 TransUnion Limited 114 | Wharf T & T 116 | Zchron Design 118

CONTRIBUTING WRITERS: Gloria Fung, Andrew Ng, Gary Tsang, Jeff Heselwood

ENTERPRISE AWARD

HSBC Life (International) Limited

HSBC Insurance: Safeguarding Customer Wealth Across Various Life Stages

W

hen Hong Kongers were recently prodded on what financial concerns kept them awake at night, their answers largely reflected their age group: Younger workers fuss about earning enough for mortgage payments and parental care expenses, mothers and fathers wonder how to save for their children’s tuition fees and older professionals worry about their retirement and medical expenses.

Some insurers attempt to soothe this breadth of worries with a generic call to save as early as possible, but HSBC insurance takes a step further by creating insurance solutions built to support Hong Konger's evolving financial needs as they progress through life.

72 HONG KONG BUSINESS ANNUAL 2015

HSBC Insurance uses robust strategic financial planning tools and risk profiling questionnaires to help understand customers various wealth needs in different life stages, such as protection for the family, education for their children, retirement, managing and growing wealth and legacy planning Changing needs and life goals “As people move through different life stages, their needs and life goals change,” says Candy Yuen, Chief Executive Officer of HSBC Insurance Hong Kong. Yuen explains that insurance is traditionally considered by many as a protection product, however, insurance actually helps accumulate wealth to meet customers’ different life goals and requirements.

Candy Yuen Chief Executive Officer HSBC Insurance Hong Kong HONG KONG BUSINESS ANNUAL 2015 73

HSBC Life (International) Limited

INSIGHT

"Insurance is traditionally considered by many as a protection product, however, insurance actually helps accumulate wealth to meet customers’ different life goals and requirements," says Candy Yuen, CEO, HSBC Insurance.

74 HONG KONG BUSINESS ANNUAL 2015

Yuen notes that HSBC Insurance produces ongoing literatu`re and events to help uncover needs and gaps in trends related to customers' different wealth needs. For example, need-based brochures and sales tools were first developed in 2013 and further enhanced in 2014 to facilitate sales to engage and discover customers’ wealth needs. Moreover, special customer engagement programmes were conducted in recent years.

"This includes special events related to wealth needs to improve the overall customer experience and trigger their awareness in some wealth needs, such as retirement and education planning seminars. Experts were invited to share their suggestions and viewpoints with our audience," adds Yuen.

Apart from doing these events, HSBC Insurance ensures that its intermediate sales partner will regularly review customers' investment portfolios in order to make sure their performance is on track. This ensures, for example, that their education or retirement fund will not fall short of their plans.

HSBC Insurance works under the knowledge that Hong Kongers review their life protection or savings plan during certain life events like marriage, having children and securing their first job. This led the company to offer insurance solutions that are fluid than rigid, and customers are given the flexibility of an insurance solution that tries to best match their shifting priorities and circumstances.

“People should take advantage of changes in their personal circumstances

to reflect on whether the protection they hold is still adequate for their needs,” says Yuen.“Insurance can provide more than protection benefits, through solutions that help people save for long term goals such as children’s education and retirement.”

Ahead of the pack HSBC Insurance strives to keep ahead of the industry with continuous research studies to understand market trends, gather customer insights and create better insurance solutions. Staff training is also a key focus to market leadership. HSBC Insurance uses a combination of instructor-led training and online training on needs-based financial planning so its staff could better understand the needs of customers and align the solutions to their goals no matter which life stage they are currently in.

Yuen reveals that the key training focus for all HSBC Insurance sales staff is on the socalled “Customer Financial Journey”which spans from education, family protection, to retirement and legacy planning.

She says sales through deep dive training and coaching on the five steps (‘Engage’, ‘Discover’, ‘Recommend’, ‘Act’ and ‘Service’), staff are equipped with professional techniques such as lead generation, questioning skills, awareness building, objection handling, framing, bridging and conducting review – all of which are employed to figure out the best insurance solution for a Hong Konger.

Sales staff are even mandated to go through an eLearning module on “Customer Driven Solutions” to develop skills to better understand the needs of our customers.

Outstanding Enterprise Award This page clockwise: Candy aims at ensuring all staff put customers' interest at the heart of all they do; Candy presenting a souvenir to a representative of an aided school that took part in SWITCH; Candy with staff who joined the SWITCH program Opposite page: Staff of HSBC Insurance participated in a 2014 CS Volunteer Program SWITCH - a series of activities to encourage local students to improve their English communication skills

FAST FACTS • Ranked No. 1 in Inforce Business (in terms of Non-single revenue premuims#) • Ranked No. 1 in Single Premiums New Business# • The highest NBI* YoY growth : 16.1% for HSBC Life (vs insurance market average growth at 9.7%) • Ranked No. 1 in MPF market share, managing over 30% MPF asset in the market**. # Source of premium data : YTD 3Q 2014 Provisional Statistics on Hong Kong Long Term Insurance Business issued by Office of the Commissioner of Insurance

To refresh their knowledge and maintain high professional quality, HSBC Insurance conducts regular operational and new product launch trainings. It has created a user-friendly learning and development platform for employees via HSBC Business School intranet, which is a single point access of training, to facilitate personal and career development and drive employee engagement.

"HSBC invests in employees as the expertise leads to our success. That’s why

the HSBC Business School is committed to providing this learning platform so that all employees can access a range of opportunities to help them develop their career and take their expertise from strength to strength," says Yuen.

“Our aim is to ensure all staff put customers' interest at the heart of all they do, treating clients fairly and understanding their needs so we can provide suitable solutions and build long term relationships,” concludes Yuen.

* NBI = Annualized Premiums# + 10% of Single Revenue Premiums# ** Source: 'Gadbury Group MPF Market Shares Report' as at Sep 2014, by Gadbury Group Limited

HONG KONG BUSINESS ANNUAL 2015 75

AGEAS INSURANCE COMPANY (ASIA) LIMITED

PHILOSOPHY

Driven by an ambition to achieve and excel by nurturing lasting relationships, Ageas Insurance Company (Asia) Limited is committed to becoming a leading financial services provider in Hong Kong.

Customers are at the centre of the Ageas universe

A

sharp focus on customers and innovation differentiates forwardlooking Ageas Insurance Company (Asia) Limited in the fiercelycompetitive Hong Kong market.

Ageas Insurance Company (Asia) Limited is a wholly-owned subsidiary of the Ageas Group, one of Europe’s top-20 insurance companies.

“We set the highest standards to ensure our customers’ needs are addressed with the utmost integrity,” Stuart Fraser, the CEO of the company said. “The company describes itself as Your Partner in Insurance – and we aim to enhance the customer experience every single step of the way as a trusted partner through life.”

Flair for innovation An impressive track record for innovation distances Ageas from its peers, especially in product development. The Elite Choice Insurance Plan, for example, enables customers to choose from four currencies – USD, HKD, AUD and RMB – and adjust their chosen mix every five years.

This harnesses the possibility of benefiting from potential currency appreciation.

Another example of innovation is the All-inOne Critical Illness Protector, a comprehensive plan that covers 49 major illnesses and 26 less severe illnesses, offering up to five claims. In addition, the company’s Global Advance Care enables customers to obtain a free second medical opinion. Ageas is one of very few insurance firms that accepts a second medical opinion.

76 HONG KONG BUSINESS ANNUAL 2015

The company responded swiftly to the cancellation of the daily conversion limit of RMB20,000 for Hong Kong residents by launching the new Dynasty RMB Diamond Plan.

Dynasty is an attractive, yet simple, endowment insurance plan. Policyholders are required to pay premiums for only two years and can easily accomplish a financial target at the end of the fifth policy year. As well as benefiting from the potential for Renminbi appreciation, customers are guaranteed an annual return of 3.5% at the end of the fifth policy year. This amounts to a guaranteed return of 116.8% on total paid premium at the end of the fifth policy year. The application procedure is hassle-free with no medical underwriting necessary.

"We design product packaging to suit the needs of customers at different lifetime stages,” Fraser said.

Creative marketing strategies Innovation in integrated marketing campaigns has seen Ageas utilising the latest mobile technologies, along with powerful social media networking, to engage with customers via interactive features.

Ageas was the first insurer to use QR codes supported by a mobile website and video call functionality – and the first insurer to employ Augmented Reality (AR) technology in the conversion of static images into interactive videos in advertising campaigns. The company also utilises the Zapper 3D app and Near Field

LIFE INSURANCE This page clockwise: We engage customers via interactive games and social media networking; Ageas was the first insurer in Hong Kong to employ QR code and AR technologies in advertising campaigns; Ageas Hong Kong is proud to be title sponsor of the “Touch Mi Sammi Cheng World Tour”; Giant neon signs reflect a prominent Ageas presence in Hong Kong

Opposite page: CEO Stuart Fraser highlights customer centricity and innovation as leading Ageas qualities

Communication (NFC) in advertising.

In addition, highly-successful Ageas advertising and financial literacy campaigns featured Hong Kong celebrities such as Dayo Wong, DoDo Cheng, Joey Yung and Sammi Cheng.

Fraser said “Ageas often acts as title sponsor for mega events such as golf tournaments, concerts and talk shows. This deepens our penetration of the high-net-worth target market, while promoting the importance of protection and financial planning.”

The company’s consultants routinely use iPhones and iPads loaded with Ageas apps to assist the sales process. These enable the use of retirement and education calculators in conjunction with the Ageas Financial Needs Analysis app.

Keen sense of social responsibility Ageas is well known for its keen sense of social responsibility.

“Ageas actively supports charity events that have included the Oxfam Trailwalker, Habitat for Humanity and Food Angel,” Fraser added.

“We believe commercial success is directly linked to sound corporate citizenship. This philosophy has therefore become a core element of our marketing strategies to develop long-term relationships with customers.”

Ageas has also won the Gold Award in the Web Accessibility Recognition Scheme organised by the Office of the Government Chief

Information Officer and the Equal Opportunities Commission. This seeks to encourage wider adoption of web designs that simplify access to online information and services for the elderly and those hampered by disabilities.

Our future prospects The future looks bright for Hong Kong’s insurance market, thanks to a plethora of opportunities in local markets and an aging population.

The Hong Kong Government estimates that those aged 65 and over will account for 30% of the population in 2041, from just 13% in 2011.

In fact, Fitch Ratings forecasts 14% growth in 2015 for Hong Kong's life insurance sector, based on numbers of people expected to take out insurance policies in Hong Kong and Mainland China to address health protection and retirement needs.

Fraser commented “Thorough health protection and retirement planning is becoming an absolute necessity for growing needs in the market.”

An Ageas aim is to enhance the customer experience at every touch point and be widely regarded as a trusted partner through life to increasing numbers of policyholders.

The CEO’s pet “Martini” philosophy dictates that customers must benefit from quality and services “anytime, any place, anywhere” – a phrase made famous by a celebrated global Martini advertisement.

FAST FACTS • Its financial status is confirmed by global ratings agencies (A-Excellent) by A. M. Best, A

by Fitch Ratings, and Baa1 by Moody’s).

• It has more than 2,700 professionally trained and highly skilled consultants. Seven percent of them are members of the elite Million Dollar Round Table.

• The company has been awarded the "Caring Company” logo every year since the programme began in 2002.

HONG KONG BUSINESS ANNUAL 2015 77

AIG insurance hong kong limited

PHILOSOPHY

AIG aims to be the most valued general insurance company in Hong Kong. Our mission is to help make the world a safer place.

aig focuses on innovation to meet customers' demands

O

ne of the largest international general insurers operating in Hong Kong today is AIG Insurance Hong Kong Limited, a subsidiary of American International Group, Inc. (AIG), the global insurance organization.

The company combines local knowledge, global experience and financial strength to offer a wide range of general insurance products aimed at meeting the needs of consumers and multinational organizations alike.

AIG has a mission – ‘AIG Makes the World a Safer Place’ AIG is increasing its efforts to improve driver education and road safety, while leveraging data-driven insights and years of claims experience to understand why road accidents happen. Having obtained intimate knowledge of road safety challenges present in the approximately 130 countries and jurisdictions where AIG operates means clients can benefit from AIG’s considerable expertise.

One of the key initiatives is AIG’s role as a founding partner of ‘Together for Safer Roads’, an innovative coalition that brings together global private-sector companies to focus on improving road safety and reducing deaths and injuries by road traffic collisions.

Beginning in 2014, AIG has been promoting road safety in China with a large, specially modified truck that traveled throughout Guangdong province, Shanghai and Shenzhen.

The tour offers participants educational and entertaining activities focused on improving road safety awareness. These activities include

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driving simulators that allow participants to evaluate an individual’s driving safety level, an impaired driving experience to educate participants on the dangers of drink-driving and a seat belt simulator that recreates the impact of a collision when driving at a rate of 10 kilometers an hour, and will allow consumers to realize the benefits of wearing a seat belt. To date, the tour has attracted tens of thousands of people, the press, government bodies, and various large corporations.

Innovation is key at AIG For a long time, AIG has been recognized for its focus on innovation. In Hong Kong, AIG has just launched a new endorsement on their Directors & Officers policy that will provide cover to both the organization and the claimant in the case of an investigation, a ground breaking first for Asia Pacific.

Another example of AIG’s innovation is the AIG Multinational Program Design Tool which guides users through the fundamental aspects of multi-national program design, and provides a customized and detailed report on where and why coverage from a locally licensed insurer needs to be considered. Tailored to meet users’ exposures, preferences, sensitivities, and needs, recommendations are formed by over 90 years of AIG experience, individual risk tolerance, and local market coverage information across over 200 countries and five major business lines.

Understanding risk and the environment Companies need an insurer that has experience

general insurance

This page: AIG’s senior executives showed support at the Mission Possible charity box during the Hong Kong Sevens; Employees gave back to the community at a volunteering activity with Crossroads, one of the nominated charitable organizations by Mission Possible; AIG is the Major Global Sponsor and Official Insurance Partner of the New Zealand Rugby's world class teams

of dealing with the types of challenges that businesses face going forward in an everchanging business environment. Multi-national companies in particular will increasingly work across borders, and will face new exposures as a result. Cyber and reputational risk are two fast-growing areas of increasing concern. To counter these risks, AIG brings to the Hong Kong market its wealth of knowledge from operating in insurance markets across the globe.

To combat the fast evolution of cyber risk, AIG’s CyberEdge solution provides an effective response to growing cyber-crime threats and data breaches. The company launched its first cyber product in Asia in 2012, clients began to enquire about property damage or people being injured or hurt as a result of a cyber-claim. The company’s response to this demand was to introduce CyberEdge PC, an excess, differencein-conditions policy providing customers with express cyber coverage for bodily injury, property damage and financial loss arising from a security failure. CyberEdge PC is the first offering of its kind in the Hong Kong market.

Further, to address the rapid growth in property and infrastructure development across the globe, AIG has expanded its property insurance capacity to up to US$1.5 billion for highly protected risks.

Making a difference in the communities The company is committed to giving back to the communities it serves through programs and partnerships that focus on safety, security and disaster relief. Globally AIG matched more than US$7 million in donations made by its employees to charitable organizations in 2013.

It donates more than US$15 million a year to charities around the world.

In Hong Kong, AIG has donated HK$500,000 to support Mission Possible, a charity established by the Peter Bennett Foundation, to address Hong Kong’s most pressing social issues. The donation was made as part of AIG’s Hong Kong Sevens corporate project which provides a meaningful association between the Hong Kong Sevens, charitable awareness and giving.

AIG has also introduced the ‘Volunteer Time Off’ program whereby employees may take two days off per year and join company-sponsored or personal volunteer activities during working hours.

Embracing Diversity For years, diversity and inclusion have been a focus at AIG. The company is an equal opportunities employer which hires physically disabled employees and is also committed to seeking out ethnic minority populations in its analyst programs. The company also supports the local community by sponsoring a scholarship program of the Chinese University of Hong Kong which rewards physically disabled and ethnic minority students for their academic excellence.

Rudi Spaan, President and CEO of AIG in Hong Kong says, “Diversity and inclusion are important because these are the hallmarks of a successful company nowadays. Being an equal opportunity employer, we appreciate the diversity and cultural competence of our employees, and are committed to building an inclusive, respectful and productive workplace.”

Opposite page: Rudi Spaan, President & CEO of AIG Insurance Hong Kong Limited

FAST FACTS • AIG Insurance Hong Kong Limited is a member of American Interna tional Group, Inc. (AIG) • The financial strength of AIG Insur ance Hong Kong Limited is confirmed by global rating agen cies: A+ (stable outlook) by S&P, A2 (stable outlook) by Moody’s and A by AM Best. The company has also been awarded a counterparty credit rating of cnAAA on S&P’s newly introduced Greater China Regional Scale. This is the highest rating available on that scale.

• AIG has a mission – ‘AIG Makes the World a Safer Place’

HONG KONG BUSINESS ANNUAL 2015 79

Altruist financial group limited

PHILOSOPHY

Altruist is committed to bringing clients with "WEALTH-HEALTH-WISDOM," a total well-being solution.

The Industry Pioneer that Sees Opportunities in Challenges

I

t has never been easy to survive in the ever-growing competitive financial planning industry while the authority calls for more control over the business practices. The more stringent compliance requirements not only safeguard clients’ interests, but also serve as a screening to eliminate the unqualified consultants in the industry. While most practitioners are to a certain degree turned off by the new requirements which make closing business more difficult, Altruist Financial Group Limited (Altruist) still stands tall facing the challenges. “To us, these are not challenges but opportunities,” says Albert Lam, President of Altruist.

The company upholds core values that are suggested by its name ‘Altruist’, which is a group of people working for other people’s happiness and welfare with the highest level of integrity and professionalism. Adhering to its values from the very first day of business, no wonder the company has built a pool of satisfied and loyal clients with over 90 percent persistency rate and shown no fear to the stricter regulations. Mr Lam explained, “We have a positive outlook for the industry as flowers would grow better after the weeds around being removed.”

Opportunities from the North According to statistics from the Office of the Commissioner of Insurance, mainland visitors have bought 64,000 new insurance policies worth over 10 billion Hong Kong dollars in the first half of 2014, making up 18.4 percent of

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the total sales. Mainlanders have now become an increasingly important source of business; however, Altruist sees something beyond simply making money from these opportunities.

“Despite the cultural differences between the mainland and Hong Kong, financial planning is of equal importance to both sides.

Most mainlanders choose to buy insurance policies and investment plans in Hong Kong for its well-established legal framework.

Some may be attracted by the products that have better features and higher returns compared with those available across the border. Whatever reasons bring them here, we need to promulgate a right attitude and concept that financial planning is for long-term protection and saving instead of the short-term and speculative ones on which most other practitioners focus," Mr Lam explained.

The company is dedicated to educating clients with this correct knowledge, coupled with the detailed fact-finding processes and selecting the most suitable products that fit their needs.

Aligning with over 50 business partners, the company offers a full range of financial products, including insurance, investment, asset management, CIES and MPF. From these products, their professional consultants can develop a unique ‘Wise Solution’ to its clients, helping them to tailor financial solutions based on their needs at different stages of life. What further sets Altruist apart from its competitors is that they are one of the few in the industry which is licensed with the Hong Kong Securities and Futures Commission to carry out Type 1,

FINANCIAL PLANNING

This page: Altruist Club organized an outing to Hong Kong Global Geopark; Altruist supported Rehab Power Day 2014; Altruist earned FamilyFriendly Employer Award 2013/2014 Opposite page: Mr. Albert Lam, President of Altruist Financial Group

4 and 9 regulated activities, which allows the company to help manage clients’ assets more thoroughly and effectively.

Total well-being solution Altruist does not only care about wealth management, it also takes initiatives to promote physical health to its clients and colleagues.

Regular health talks are held to update them with useful health tips. To further promote a healthy lifestyle internally and externally, ‘WeFit 4ever’ is launched this year while three‘WeFit’ambassadors have been nominated.

Since its establishment, a series of activities have been organized: e.g. hiking, running-man and lawn bowling, for clients, family members and friends to join as a way to reinforce the company brand to the younger generation while ngaging in healthy programs. Speaking of young talents, the company has actively participated in various job fairs and joined hands with the School of Professional Education and Executive Development (SPEED) of the Hong Kong Polytechnic University to launch a PolyU SPEED - Altruist Summer Placement Scholarship and a 10-week internship program. A group of students came to real work-stations to learn more about financial planning and gained valuable on-site experience. Mr Lam added, “Whether the students will eventually join the industry is not the key.It’s more important to educate the young generation about a proper financial planning concept and attitude.”

Professional associate partners Manpower growth is the top priority for Altruist as new blood is always the most important asset for a distribution company. In addition to recruitment of full-time consultants, the company

has developed a new program: Professional Associate Partners (PAP) for inviting part-time consultants who are interested in developing a second career to bridge the gap between the inflationary cost of living and their real income.

To assure that everyone in the strong cadre of consultants lives up to the highest level of integrity and professionalism, Altruist is dedicated to providing the same level of support and backup in terms of training, monitoring, coaching and administration support to both full-time and part-time consultants.

FAST FACTS • Recognized as Caring Company since 2003 • Total well-being solution (wealth, health, wisdom) • Obtain SFC 1, 4, 9 licenses • Over 90% persistency rate

Giving back to the community Altruism is the indispensable essence of the company’s value. Internally, Altruist has a good deal of family-friendly policies for its staff. Its efforts were recognized by earning the ‘Family-Friendly Employer Award’ in 2011 and 2013/2014. To the wider community, the company supports the needy, such as the hearing-impaired, the physically and mentally challenged and the poor in forms of sponsorship and voluntary work. It has been the seventh consecutive year for the company to sponsor and volunteer at the Otic Foundation Charity Concert to raise funds for the hearing-impaired community. Their full-range engagement in corporate social responsibilities has best reflected its endeavors in this aspect and earned them the ‘Caring Company’ logo since 2003. The company is well-known for its good reputation in the industry with their Altruistic spirit. If you wonder what has got them through the challenges in all these years, and what led them to where they are today, it must be their integrity, professionalism and altruism that guide them through every part of their business every day.

HONG KONG BUSINESS ANNUAL 2015 81

CANADIAN INTERNATIONAL SCHOOL OF HONG KONG

PHILOSOPHY

To develop responsible global citizens and leaders through academic excellence.

CDNIS remains committed to its excellent standards

K

nown in Hong Kong and across Asia for its outstanding educational achievements, excellent facilities and array of extra curricular activities, Canadian International School of Hong Kong nurtures and motivates students to realize their full potential. CDNIS has been recognized as a pioneering institution for over two decades as it continuously pushes boundaries, ensuring its students are prepared for a well-balanced life upon graduation.

Heading the team of world leading educators and administrators is new Head of School Dr. Gregg Maloberti. Well known in Hong Kong as the representative for Lawrenceville for 15 years, Dr. Maloberti joined CDNIS at the start of the current academic year after heading Ross School in New York. He is keen for CDNIS to remain committed to its high standards.

“Despite being at CDNIS for only a few months, I can already say that the school exceeds its reputation. I have had the privilege of working at some of America’s finest schools and can say without a doubt that CDNIS teachers are absolutely first rate and the level of positive parent involvement is phenomenal.”

Defining features of a school A strong sense of community and an excellent rapport between staff and students are defining features of the school today. The teachers are passionate about their subjects and strive to create an environment that inspires students and gives them the confidence and enthusiasm to achieve their potential in academics, sports, arts and more.

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“I believe at the very centre of the learning journey is the relationship between teacher and student. That relationship gives students the confidence to take risks, try new things and trust their instincts,” said Dr. Maloberti.

CDNIS is an International Baccalaureate World School and is one of just a handful of schools in Hong Kong that teaches all three curricula.

Since educators, and not government officials, developed the Primary Years, Middle Years and Diploma Programme, it is said that the IB curriculum offers a truly international education.

And while each of the IB’s programmes has its own rich curriculum, it is the IBDP that is the most well known.

CDNIS attributes much of its success to the experience and exposure of its teaching staff to IB Best Practices globally. Currently, 30 teachers are IB examiners, moderators, workshop leaders, and authorization team members. Not only do CDNIS teachers train other teachers, but they are also part of the process that authorizes a school in its quest to become an IB World School. This gives CDNIS direct access to experts within the IB organization and an unparalleled understanding of how the courses should be taught and examined.

Outstanding faculty, excellent students The school credits that relationship as one of the main reasons its students have achieved such outstanding results in their International Baccalaureate Diploma final exams. CDNIS has offered the IB Diploma programme since 2010 with a remarkable 99% pass rate and high

INTERNATIONAL SCHOOL

This page clockwise: Guidance counsellors accompany students to Canada, the US and UK as part of the school's University Outreach programme; The CDNIS Senior Administration team take part in the ALS Ice Bucket Challenge; Yundi Li held a masterclass for CDNIS students; Mr. Tim Kaiser, Upper School Principal; CDNIS has over 1,800 students from Pre Reception to Grade 12 Opposite page: Dr. Gregg Maloberti, Head of School

FAST FACTS • Excellent IB results • Academic Summer School programmes • Outstanding success rate for student’s first choice universities • Wide range of extra curricular activities • Dedicated university application programme

average points score, leading to a ranking in the top 10% of IB scores worldwide.

Top IB results and gaining admission to the most selective and competitive universities around the world is not the sole focus of the school however, as CDNIS students are outstanding, compassionate leaders of tomorrow who are inspired to make a difference in the world. The school is also focused on ensuring students are admitted into postsecondary institutions and programmes they are passionate about; both in Hong Kong and abroad.

Upper School Principal Mr. Tim Kaiser said, “The impressive range of university and college destinations CDNIS graduates attend reflects the diversity of our student body. But success at CDNIS is more than achieving top grades;

it’s about having the ability to be confident in whatever you’re doing.”

“From my experience, parents often choose a school based on outcomes such as test scores and university placement. I know our students’ results will satisfy even the most discerning parent,” Dr. Maloberti said. “Parents should choose CDNIS because they want their children to become active learners in a supportive and engaging community. There is a remarkable energy level and joy that flows in and out of our school everyday and I do not know any parent who would not want their child to be a part of that.”

Opportunities and possibilities are abundant at CDNIS as the school focuses on developing responsible global citizens and leaders for years to come.

HONG KONG BUSINESS ANNUAL 2015 83

THE CITYVIEW

PHILOSOPHY

The Cityview strives to attain higher standards through genuine personal service and attention to detail, including environmental issues. After our conversion into a fourstar hotel in 2008, we have attracted travellers from all over the world, keeping the ‘international’ flavour of our former brand while upgrading the facilities. The high percentage of repeat customers and the number of prestigious awards indicates that the hotel is meeting its objectives satisfactorily. We also treasure our staff, offering continuing training and job monitoring to ensure that staff is working with a profession attitude and to the best of their ability.

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The Cityview furthers its efforts to pursue green lodging

C

orporate responsibility is nothing new.

But to fully commit to a cause year after year is no small feat. For the fourth year in a row, The Cityview is taking home The Best Green City Hotel accolade. Looking at the hotel’s eco-evolution over the past few years, it’s easy to understand why few hotels in the city can compete in this arena.

The hotel’s general manager Alex Wu is been overlooking his green revolution from the start and he can attest to his team’s efforts. “Through various team building and customer activities, we are able to make reducing our carbon footprint a fun and fulfilling task.”

When it comes to cutting down on wastage, every little bit counts. And it is with this in mind that The Cityview’s team have come up with various initiatives to encourage guests to help out. “From encouraging our guests to reuse their towels and sheets to setting up a donation box for them to leave their unwanted clothes behind, we’re able to help not only the environment but those within the community.”

In this case, clothes left behind by guests are passed on to various charitable organisations, giving them a second life. Another charity the hotel works closely with is FoodLink. “We monitor very closely the amount of food we prepare each day for all of our restaurants to minimise wastage. In instances where untouched foods that are still well within the expiration date but are no longer suitable to be used at the hotel, we then pass them on to FoodLink to be distributed to those in need.”

Helping the community is a huge part of what

the hotel is about. This is why, since acquiring a compose machine, the hotel has been able to make fertilizers that are then shared with those tending to plots near the hotel.

“We have leased a plot near the hotel where we plant vegetables and herbs. We make sure we use the fertilisers and soil that we produce using our compose machine. And we have been able to produce enough to share with our neighbouring plots. This is another great way for us to reuse, reduce and recycle, as well as build a sense of community among our neighbours,” says Wu. While eco-friendliness is nothing new, embracing it to this extreme is uncommon, especially in the hospitality industry where wastage is the norm. This is why the hotel has invited students from schools in the district to visit and gain a better understanding of the impact of being green. “Many of these students know about ways we can help the environment.

But they might not have had first hand experience in terms of seeing how an operation works. We are delighted to be able to invite them to the hotel and to help them understand and maybe even embrace environmentalism in their own daily lives,” Wu explains.

The hotel’s efforts are not only recognized locally but have also caught the attention of international watchdog group Earthcheck, who’s given the hotel a silver grading for the second year in a row. “We are looking forward to maintaining our grading for another two years at which point we will be qualified for the Gold Certificate,” Wu shares.

GREEN CITY HOTEL

This page clockwise: Executive Room; Crystal Ballroom; Amazing; City Café Opposite page: Alex Wu, General Manager of The Cityview

FAST FACTS • September 2014, Achieved Silver Certified status from EarthCheck consecutively for the second year • June 2014,The Cityview joined “Say NO to Shark Fin” program of WWF to pledge not to sell shark fin soup or related dishes to guests.

• May 2014, The Cityview is honored to be the Bronze Award winner of Hotels & Recreational Clubs under Sectoral Awards of 2013 Hong Kong Awards for Environmental Excellence • April 2014, The Cityview earns a prestigious certificate from the Hong Kong Environmental Protection Association recognising our participation in the “Wood Recycling & Tree Conservation Scheme” • March 2014, The 9th China Hotel Starlight Awards name The Cityview as the Best Green Hotels of China • March 2014, The Cityview participated in the unique CarbonCare Label Programme and achieves “Level 1 Carbon Reduction” for the period of Apr 1, 2013 to Mar 31, 2014. Level 1 carbon reduction represents at least 5% and less than 20% reduction against the base year.

As the hotel experience another wave of renovation, Wu says it creates the perfect opportunity for him and his team to further submerge the hotel in the eco cause. “We are renovating our guestrooms and when we do

this we will be able to install things like lamps and water faucets that are more efficient. It is a very exciting time for us and we hope to continue enhancing our commitment towards environmental friendliness.”

HONG KONG BUSINESS ANNUAL 2015 85

www.Crystallize.Me Ltd

PHILOSOPHY

Crystallize.Me believes in creating a unique and memorable experience for each and every one of their customers. This has been the key to their success and is evident in both the quality of their products and the premium service provided by all their members of staff. By offering customers the very best in luxury crystal products, Crystallize.

Me has been a pioneer in showcasing the true artistic splendidness and originality of finely crafted crystal pieces in China and Hong Kong.

Crystallize.Me shines as the crystal expert in China and hk

I

n Hong Kong and China, there is no other name best known for bringing exquisite pieces but Crystallize.Me. For over 40 years now, Crystallize.Me has proven its ability not only to provide top-notch crystal products, but also to innovate and re-invent itself to cope with the evolving customers and market conditions.

Raymond Chui, managing director of Crystallize.Me, says the past few years have not been easy to do business, but they never ceased looking for ways to stand out in the market and to prove to their customers that they are the best place to go to when looking for high-end crystal products.

In 2009, Chui realized that after many years in the Chinese market, they needed to up their game and push their brand forward. He hired a brand consultancy firm and spent one year to come up with an idea that will further establish Crystallize.Me as a brand-to-beat. “In the market, people know about our products but they probably don’t know that they are all from the same company. So rather having different products with different names in separate stores, we consolidated everything into one place called Bao Gallery in 2010 where customers can find everything we offer: crystal lighting, furniture, gifts, and jewelries,” said Chui.

Changing for the better But while the Bao Gallery proved to be an excellent concept, there was no erasing the fact that the market has evolved and

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customers’ preferences and tastes have changed. This, on top of economic hurdles, pushed Chui and his team to innovate and think of creative ways to establish the Crystallize.Me brand further, considering that the last few years have not been easy especially for luxury products.

By 2011, crystal jewelry was taken out of the Bao Gallery and crystal art was brought in. “It was time to introduce a different segment of product into the market which I think the market was ready for – crystal art,” said Chui, adding that crystal art is an established market in Europe but relatively new in China because the Chinese are more into paintings, stone sculptures, wood carvings, and fabric.

By 2013, instead of having the same style for all Bao Galleries in Shanghai, Beijing and Hong Kong, they changed the concept to fit the local consumers in each of these markets. In Beijing, where consumers are looking for more luxurious items, Crystallize.

Me launched the Bao Gallery Boutique. “It’s very up-market, stylish and hip. It carries the top-end of our products in Beijing - the best crystal art, best crystal lighting, and best crystal crafts,” noted Chui.

In Shanghai, where people are more priceconscious and seek good deals, Bao Galleries adopted an “outlet style” so they set up a gallery in Qing Pu where the outlet stores are. Meanwhile, Chui noted that Hong Kong is a more mature market in terms of brand awareness and style. Customers are looking

Crystal Lighting / Gifts / Arts This page clockwise: Crystal art piece; Exquisite pieces in Bao Gallery, Hong Kong Opposite page: Bao Gallery in Beijing

FAST FACTS

for more bespoke items so they adopted a “soho” type of gallery. “It’s very chic and it’s in a more designer-friendly area.”

Apart from redesigning their galleries, Chui said they are also improving their expertise on crystal. “When we talk about man-made crystal, people always talk about lead content. Around 4-5 years ago, EU already banned leaded crystals. Now everyone is trying to develop a lead-free crystal. Crystallize.Me is working with a group of optic scientists to develop our own ultra-brilliant, lead-free crystal glass and we already produce them in small quantities.

We are talking with some investors who can help us push this into a brilliant multi-dollar project," said Chui.

The key to success When asked about what kept Crystallize.

Me successful over the years despite all the challenges in the market, Chui was quick to recognize that all the achievements would not have been possible if not for his

dedicated team. “As the owner/manager of the company, I also have to make many decisions. Now I learn to delegate a lot more things to my team and try to explore their ideas. I have to stand back from the front line and have my team take over,” he added.

Chui said he became the back-end support and it was a very important move especially this year. “Whoever is in charge makes the final decisions. I offer advice and support but they make the final decision. It has proven to me that some of the good decisions that they made are right for that time.”

Apart from human resource strategies, Chui admitted that they also had to make a lot of adjustments in terms of their products and pricing, but they made sure that quality was not compromised.

“We had to be more sensitive to more real, high quality stuff. We had to work extremely hard not only to prove ourselves to our customers but also to our suppliers.

We had to find more unique things but still offer the best prices,” said Chui.

• 1969 - The company was founded in Hong Kong. It was just a Crystal Lighting company focusing on European products.

• 2000 - Branched out in mainland China as “Crystallize Me”, the one and only high-end luxury crystal lighting brand • 2009 - Combine lighting/ jewellery/gifts into the concept of Crystallize Me • 2010 - Applied the new concepts of our showroom into Bao Gallery • 2011 - On-going Bao Gallery Crystal Art Experience is associated with China’s top crystal artists from Tsinghua University, Central Academy of Fine Arts in HangZhou, and Shanghai University • 2012 - became the lighting design and build supplier for the first 7 stars Shangri-la Hotel in Shanghai • 2013 - successfully won the bid for lighting build and supply for Ritz Carlton (Portman) in Shanghai. As well as for the HSBC Premier VIP Lounge in their Head Quarter in Central, Hong Kong.

• 2014 - successfully won the bid for lighting build and supply for Shangri-la Nanjing.

HONG KONG BUSINESS ANNUAL 2015 87

FUJITSU hong kong

PHILOSOPHY

Shaping tomorrow with you.

FUJITSU PIONEERS HUMAN-CENTRIC INNOVATIONS

F

ujitsu is flying high, but they most certainly do not have their head in the clouds, it is more the case that their innovations are helping their clients find their cloud’s silver lining.

In a study by Gartner, it was revealed that the Internet of Things (IoT) will include more than 26 billion devices by 2020, which in turn produce large quantities of data that needs to be stored, processed and analyzed in real time.

The IoT has become the driving force behind the demand for Fujitsu’s cloud, data center and IT managed services. For Fujitsu and their clients, that’s a lot of silver.

Whilst Fujitsu leads the way with nearly 80 years worth of experience and now serves 100 countries, they continue to innovate and secure their position globally as an unrivalled supplier for ICT services the world over.

Named the fourth largest IT service provider in the world, with 100 data centres allowing them to provide services, operational models, processes, communication and governances across multiple countries and with a growing workforce of over 160,000 experts, it is little wonder that Fujitsu is now also the number 1 provider in Japan.

Whilst the digital world continues to expand, finding solutions enabled by Cloud, big data and mobile technologies has become the norm for enterprises large and small, therefore CIOs worldwide value service providers like Fujitsu for crucial roles in perfecting and tailoring onestop-shop ICT solutions.

Mr. Derek Yiu, General Manager, Solutions

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& Services Business, Fujitsu Hong Kong, says: “Our 50+ years of operation in Hong Kong gives us inside knowledge of the local market and the understanding of regional challenges by facilitating the establishment of regional data centre hubs from our world-class data centres in Hong Kong and South China. As a gateway to China and the rest of Asia, Hong Kong serves as an ideal location for MNCs and organisations to consolidate their infrastructure and data centres from one regional IT hub.”

Fujitsu is a forward thinking company with a belief which understands that their employees are their greatest asset. Apart from running scholarship programs for worldwide candidates, they also invest in executive, technical and product training with their very own Fujitsu University.

At Fujitsu, 'empowerment' is the word of the day. Fujitsu’s main focus is on ‘human-centric innovation’, or to put it into laymen’s terms, a system where one can create an application or workflow specific to the need of that organization or industry, giving the user the freedom to tailor their work flow in a way that not only saves time and money but that also ensures that their latest research, products or services can be easily adapted to their needs.

By offering iPaaS solutions (Integration Platform as a Service) such as RunMyProcess, Fujitsu continues to empower their customers by eliminating the need for companies to invest in considerable operating costs as well as platform and capacity limitations. Furthermore, Fujitsu’s energy-efficient technologies are made

Leading ICT Solutions

This page clockwise: FUJITSU Server PRIMERGY inheriting 60 years of experience in mission-critical server development ; Fujitsu’s iPaaS cloud solution such as RunMyProcess helps customers design workflow, build and deploy business critical applications Opposite page: Derek Yiu, General Manager, Solutions and Services Business, Fujitsu Hong Kong

FAST FACTS possible by their business-centric data center infrastructure, which enables the consolidation of information, data analysis and result compilation in a timely, efficient and costeffective manner to meet key business priorities.

Moreover, tailor made ICT solutions are available for Fujitsu’s managed services whether from data center services, network communications to technical maintenance.

Working from Global Delivery Centers in more than 41 languages with local presence in 70 countries, Fujitsu delivers ITIL compliant delivery processes from data centers with Uptime Institute standards and ISO27001 secure operations.

Essentially Fujitsu is working side by side with each customer on the journey of business success and shaping their future together.

For such companies as Core Pacific-Yamaichi, ThyssenKrupp Elevator, Watami and many others, Fujitsu drives business values for each customer in different industry verticals by providing tailor made one-stop-shop solutions.

Derek Yiu states that: “In the case of ThyssenKrupp Elevator, one of the world's largest manufacturers and operators of passenger transportation systems, migration of their SAP database and application environment to Fujitsu's private cloud and hosting services has enhanced their performance by 30-50%.

While in retail, Fujitsu’s dual screen POS system has become an effective marketing tool, specifically for the Pacific Coffee Company, enabling them to enhance the customer’s coffee drinking experience and therefore increasing their loyalty. The customised queuing kiosk

system provided to Watami has also helped improve satisfaction among waiting hungry customers. To further expand our footprints in the public sector, Fujitsu Hong Kong is bolstering our team’s skills and capabilities to ensure that we are proficient in government project lifecycle management.”

With their considerable commitment to the fostering and development of a Human Centric Intelligent Society, Fujitsu continues to innovate prevailing technologies that directly contribute to improving our standard of living.

Fujitsu takes pride in their aim to drive, produce and innovate research and as such with an annual R&D expenditure reaching more than US$2 billion, it is a commitment that they invest 5% of their revenue.

Derek Yiu shares a prediction cited in a study by Gartner that by 2017, 60% of Global 1000 organisations will execute on at least one revolutionary and currently unimaginable business transformation effort, for this reason, Fujitsu’s many clients enjoy their turn-key approach to adopt their flexible model, providing them with a unique access to a fullservice package without investing into more than one service vendor, as well as cost savings through easier scalability without compromise.

Fujitsu’s readiness to continually deliver innovative solutions and services for local and global businesses is evident from their determination to be the leading edge in ICT solutions and technology.

By offering such cost-effective customercentric solutions, Fujitsu: Empowers you to create your own solutions.

• Fujitsu is the leading IT services provider, with approximately 162,000 professionals, serving customers in more than 100 countries. As a leader in ICT solutions and services for nearly 80 years, the group pursues strong innovation initiatives to create new value for customers with annual R&D investment amounting to nearly 5% of total revenue.

• Operating in Hong Kong for over 50 years, Fujitsu delivers real business value for customers across various industries by combining global expertise with local experience and facilities.

The Hong Kong office also serves the Macau market, further extending the outreach of the company’s world- class services and solutions to the gaming and hospitality industries.

• In the past 12 months, Fujitsu has deepened penetration in key industry verticals, including retail, telecommunications and FSI, with industry-relevant solutions and services. Meanwhile, as one of the selected suppliers for the HKSAR government under the Standing Offer Agreements (SOA) on Total System Solutions for Server Systems and Quality Professional Services (QPS), Fujitsu also aims to strengthen the partnership with public sector organizations introducing an array of robust social innovations in the near future.

HONG KONG BUSINESS ANNUAL 2015 89

GODIVA CHOCOLATIER

PHILOSOPHY

For nearly 89 years, GODIVA has created the world’s most elegant, hand-crafted chocolate to please and delight customers, from royalty to workers, adults and children. Only the finest quality Belgian chocolate is used, along with high-quality ingredients for fillings and decorations. The company strives to be a business whose goal is customer satisfaction and delight.

Welcoming the Chinese New Year with Elegance

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his coming Chinese New Year represents the Year of the Goat, a revered icon representing the hope for future success.

Many believe that welcoming the Chinese New Year with festivity and elegance enables one to welcome with open arms the prosperity of the New Year. And there is no better way to welcome the hope that the Year of the Goat brings than to surprise your loved ones, colleagues, and friends with an elegant and luxurious, yet modest and well-meaning gift.

For the coming Chinese New Year, the global leader in premium chocolate, GODIVA Chocolatier, has launched its Limited Edition Fortunate Goat Series, fit for anyone who wishes to welcome the hopes of the New Year in a grand manner with their loved ones.

The Limited Edition Fortunate Goat collection In welcoming the upcoming Chinese New Year, the company has specially designed a collection of chocolates in the form of a Goat looking up to symbolise a welcoming look at the hope and prosperity that the Year of the Goat brings.

The chief design of the collection features the

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sketch of a warm goat with the signature Chinese Red tone complemented by and elegant gold lining, to symbolise the festiveness and sincerity of the Chinese New Year celebration.

This year’s limited edition collection comes with individual designs that fit any and all types of individuals for your unique loved ones. The first in the collection is the Chocolate Chèvre Blanc Chrysanthemum Ginger, a smooth white chocolate ganache specially blended with ginger and chrysanthemum for that authentic Chinese element of harmony.

The Chocolate Chèvre Lait Gui Flower Ginseng is also an esteemed part of the limited edition collection. It is a milk chocolate ganache infused with the soothing taste of Ginseng and the elegant fragrance of gui flower. The formulation is coated with milk chocolate, giving the treat a silky texture to complement the Chinese New Year’s warm festivities.

For the dark chocolate lovers, GODIVA Chocolatier features the Chocolate Chèvre Noir Jasmin Angelica Root. The treat is lavishly coated with mellow dark chocolate, and blended meticulously with angelica root and Jasmin, and 72% cocoa dark chocolate ganache. This member

PREMIUM CHOCOLATIER This page: Chinese New Year Chocolate Luxury Gift Box; CNY Decadence Hamper Opposite page: GODIVA 2015 Chinese New Year Gift Box and chocolates

FAST FACTS of the collection especially complements those who wish to welcome the Chinese New Year with a bold outlook. The final touch to GODIVA’s Limited Edition Fortunate Goat collection is its signature gift boxes featuring the collection’s chief design – a warm red goat broadly lined with gold. Together with the collection’s featured chocolates, the GODIVA Fortunate Goat collection makes for the perfect welcome to the Year of the Goat.

GODIVA’s Signature Gift Boxes GODIVA Chocolatier also features its signature products to further fit the needs of unique individuals who want to welcome the Chinese New Year in their own special style. GODIVA’s 2015 Chinese New Year Carré Gift Box features Bresillienne Milk Chocolate Carré and Peru 64% Dark Chocolate Carré treats. The Carré Gift Box also sports a packaging design that boasts a classic Chinese red and gold style representing prosperity.

GODIVA Chocolatier’s Chinese New Year Liquor Chocolate Gift Box, another of GODIVA’s premium products, features Cherry Cordial, Chérie liquors and Raisin Fine Champagne in rich dark chocolate varieties. The Chinese New Year Liquor Chocolate Gift Box is fit for those who want to welcome the year with a rich beginning filled with warmth and love.

For those who want to welcome the Chinese New Year with heartfelt generosity, GODIVA offers its Chinese New Year Chocolate Luxury Gift Boxes – a gift box that may feature a variety of products

that you wish, including the Fortunate Goat chocolates, the Carrés, and other of GODIVA’s rich assorted chocolates. The luxury gift box features the chocolate selection displayed like jewellery in 21 to 36-piece limited edition gift boxes. GODIVA’s Gold Collection features a luxurious golden gift box with a bright red ribbon, best for those who want to welcome the year with utmost elegance and grace.

Meanwhile, the Chinese New Year Hamper Collection is another of GODIVA Chocolatier’s ways to welcome the year in variety. The Hamper Collection features an assortment of GODIVA’s signature chocolates and popular items.

• With exquisite taste, premium quality, seasonal packaging, exclusive boutiques and innovative products, GODIVA Chocolatier is dedicated to over 89 years of excellence and innovation in the Belgian tradition.

• GODIVA Chocolatier produces many different chocolate pieces that fall into different categories and are often mixed and matched to create a wide range of collections for personal, sharing, holiday and special occasion use.

• Recognized around the world is the leader in premium chocolates, we bring the most ultimate chocolate experience and emotional appeal of gifting to chocolate lovers worldwide.

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Henley Business School

PHILOSOPHY

We believe that success is about much more than profit. At Henley we engage with business to change the world of business for good.

It is our conviction that we should use our expertise responsibly, sharing business practices and thinking that create value for societies as well as shareholders.

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Satisfying Asia’s demand for World Class Management

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arlier in his career, Paul Mais, was being considered for promotion but later discovered the candidate who had gotten that promotion was an MBA holder. Will not having an MBA directly impact one’s career in Asia? Paul thought. Resolving to improve his career prospects by obtaining an MBA, Paul carefully researched and then selected Henleythe world class Business School in Hong Kong.

Founded in 1945, the Henley Business School was the first business school established in the UK and is one of the oldest and most respected schools in Europe. Henley operates in 17 countries and is one of 59 schools to attain triple accreditation in the world. A distinction that is held only by the top 1% of all business schools worldwide. Being one of the earliest international MBA programs in Hong Kong, Henley is about to celebrate 30 years of developing over 500 of Asia’s outstanding business leaders. The Financial Times and the Economist both rank Henley as a top world ranked MBA program.

Although all quality MBA programs represent a substantial investment today, the Henley Business School’s MBA offers ongoing value right from enrollment. Neil Logan, Henley’s Director of Asia Pacific, believes that the dynamic interaction of its diverse student cohort and world renowned faculty guided

by Henley’s rigorous, challenging, and career oriented program is what truly makes Henley the world class business school. The Economist has recently rated the Henley Business School #1 in the world in opportunity to network and

#1 in breadth of alumni. Neil explains that the current student cohort attracted students from 9 different countries and that there are over 60 thousand alumni in virtually every industry in 157 countries around the world. This creates a vast and powerful resource for students to continue the shared learning experience that is an important and integral component of the Henley Business School program experience and to the executive going forward. Paul shares further that Henley alumni are active worldwide on social media platforms such as LinkedIn sharing opportunities, current information and experiences.

The Flexible Executive MBA program is designed to be challenging yet fit into a busy executive’s balance of work and family obligations combining online virtual assignments, peer study groups, and intensive face to face workshops. There are opportunities to broaden global experience base by attending workshops in Germany, Finland, Ireland, Malta, Denmark, South Africa and of course the U.K. The Henley program attracts international executives with prior experience illustrated by an average age of 37 years seeking to boost their careers to the next level; some who fly into Hong Kong attending weekend workshops from China, Malaysia, India, Denmark and the UK. Students are encouraged to share their real work experiences throughout the learning process combined and opportunities to learn from world renowned faculty whose experience includes hands-on corporate and entrepreneurial experience creating a dynamic

MBA

This page: The starter weekend workshop of the Henley Flexible Executive MBA will be held in the UK campus at Henley-on-Thames, one of the most beautiful riverfront spots by the River Thames.

Opposite page: Neil Logan, Director of Asia Pacific, Henley Business School and Paul Mais, Head of Business Process and Prioritization, HSBC

FAST FACTS • Henley was the UK’s 1st business school • Ranked 2nd in the UK for the Fulltime MBA (The Economist 2014)

and relevant learning environment. Paul’s experience with Henley’s dynamic and relevant environment empowered him to interact in his own organization to study how his own organization was functioning, to further learn and apply to make better decisions and to influence the right kind of change. The fact that during Paul’s course work he was promoted twice is an indication of the immediate impact of Henley’s Executive MBA program.

Many Henley alumni have enjoyed the same immediate success. The Financial Times highly recommends the Henley program for aims achieved and for salary increases among business schools worldwide. Paul, who graduated in 2008 and is currently Head of Business Process and Prioritization for HSBC, believes his Henley MBA made the significant contribution to his career success.

Neil, who is also a graduate of the Henley Executive MBA program, says that one of the greatest strengths and the most enduring aspect of the program is the personal development curriculum which develops the student not only as a leader but as a person; it is the most significant impact that remains with you years after you have finished your studies.

The value of the Henley Business School’s Executive MBA compounds after completion of the program through corporate connections, active alumni organization, and programs that allow corporations to become aware of the

value of Henley’s MBA holders.

Faculty is regularly flown into Hong Kong to carry out intensive weekend workshops and meet with local organizations to present recent studies and findings. Professor Moira Clark not only recently addressed the likes of HSBC, Hang Seng, A.S. Watsons, KPMG, the British Chamber as well as the Hong Kong Entrepreneurs Club on her recent findings, experience and view on what drives exceptional customer experiences, but also gathered insights important to the understanding of what happens in Asia.

Neil and Paul’s Henley experience is echoed by other distinguished alumni who have risen to positions of leadership in various industries.

Michael T.K. Cheung, Executive Director, Tse Sui Luen Jewellery; Lizette Smook, Founder and CEO Innovasians Ltd; Roger Ngo, HR Consultant to HSBC; Vivian Lau, Managing Director of Hong Kong Air Cargo Industry Services, Chris Read, Chief P&C Officer with AXA Insurance and Daniel Au, Vice President Deutsche Bank all have found that their Henley experience has made the difference in their careers.

Henley Business School has plans to extend the range of activities in Hong Kong and will introduce its DBA program for those seeking advanced qualifications, focused executive development programs, an MSc for Real Estate Finance, as well as the Henley MBA for Music and Creative Industries for the rapidly growing media and entertainment industry in Asia.

• 14 centres of Excellence and Research • We're 1 of just 59 business schools in the world to be ‘Triple Accredited’ • Ranked in the Financial Times global Top 35 business schools • One of the largest business school's in Europe 5000+ participants • With over 60,000 alumni across 150 countries • We have more DBA students than any other school in Europe

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Hyperlink Holdings Limited

PHILOSOPHY

Benevolence, Righteousness, Propriety, Wisdom and Fidelity are the five constant virtues of China. These virtues are significant, not only to cultivate moral values among the Chinese community, but also virtues Hyperlink Holdings Limited has been practicing since the company started its business. One Chinese word you will hear constantly in China is “guanxi”, as Chinese people use “Guanxi” (known as people relationship) for personal or business purposes. It’s somewhat different from the standard business conducts in Hong Kong. The five constant virtues are Hyperlink’s core values. “Conscience” is the way the company handles every client, every business.

We strive to win our clients’ hearts by putting them at ease. As a conscience enterprise, Hyperlink continues to assure all clients with reliable and trustworthy services.

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Hyperlink Opens The Gateway for Investments in Hong Kong

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s I sit on the star ferry and take in the harbour light show, I am mesmerised by this beauty of this city. Watching the multi-coloured lights flash overhead from Hong Kong island across the waters to Tsim Sha Tsui, it is little wonder that there are so many stories of people who came to Hong Kong for a few weeks but who then decide to stay for 20 years, as there is a real sense here, that anything is impossible and the famous 'can-do' attitude of the Hong Kong people has expats falling in love with this seeming mecca of reinvention.

As the world descends into yet more 'redtape' and restrictions and whilst the ability of one to realise one's dream grows ever more difficult, it seems that Hong Kong remains one of the last bastions of freedom, reminiscent of the days of the ‘American dream’, it feels as though Hong Kong has now taken up that mantle of being the land of opportunity.

In a city where time appears to fly faster than anywhere else on earth, where sky-scrapers seemingly appear from mere building sites in the blink of an eye, the expression 'a New York minute' is fast being challenged by Hong Kong, as a place where anything is possible in half the time. For this very reason, time is a commodity few feel they can afford to waste: Enter Hyperlink.

Hyperlink provides an essential service for those looking to make a successful transition as foreign investors to Hong Kong. As Hong Kong is framed as the ‘The Pearl of the Orient’ and ‘City of Life’ it remains one of the most

important Asian cities with continual economic growth, and Hyperlink has become it’s 'go-to' company for investors looking to relocate to Hong Kong.

Established 4 years ago in 2010, Hyperlink are a forward thinking company that have taken advantage of the rapid development of China's economy and the Hong Kong SAR Governments implementation of the 'Capital Investment Entrant Scheme', which was set in October 2003 to facilitate the entrance of eligible investors and their families into Hong Kong. Increasingly considered as one of the best in class service providers for migration and investments, Hyperlink provide a 'one-stop shop' of convenience for clients, and personally deals with every facet of the process of relocation providing assistance for those wishing to build a future in Hong Kong.

The evidence of Hong Kong's hospitality for the ambitious is in the number of entrepreneurs one stumbles across. Dinner parties are rife with stories of people successful in following their dreams and Hong Kong has allowed them to realise those dreams with greater ease than they faced in their own countries. Low taxation is one of many benefits making Hong Kong a uniquely 'business friendly' environment, and with it's low crime rates is also an attractive, safe option for those looking for a secure place to raise their families.

Whilst the rest of the western world appears to descend into a state of 'dog-eat-dog', Hong Kong’s upward trend continues and remains a place where many choose to establish

Eminent Immigration Consultant This page clockwise: Hyperlink's professional team; Hyperlink staff devotes full effort to their job; One of the property architectural plans Opposite page: Samson Cheung, Vice President, Hyperlink

FAST FACTS • 2010 – Hyperlink seized the opportunity to start up its business after foreseeing an upward moving trend of Hong Kong being one of the most favorable place for migration.

• Dec 2012 – The number of employees has grown from ten to more than fifty as the company continues to hire.

• Jan 2013 – Organized it’s First Immigration Intermediary Agencies Capital Forum Cum Hyperlink Consultant Suite Delegation in Hong Kong

themselves. Is it any wonder that Hong Kong remains such a magnet for investors? Whilst the world grows ever more curious about China’s economic successes, Hong Kong is the gateway by which the world enters.

Hyperlink Holdings Limited is the umbrella under which forward thinking professionals have proactively anticipated the needs of their clients. Amongst the many services they provide, they can best be described as a migration and investment consultancy, who advise and create a bespoke service assisting those wanting to migrate to Hong Kong.

The long established relationship between Hong Kong and the west, has resulted in it's position globally as a world recognised financial centre alongside Tokyo, London and New York.

With regulatory obstacles at a minimum for the time being, Hong Kong remains uniquely positioned as a leading communications hub that investors are able to take advantage of by trading in all the world markets with greater

ease and speed.

Hyperlinks mission is simple, it is to help those wanting to start a new life by relocating to, and investing in Hong Kong property, and to make that process as easy and stress free as possible. With dozens of immigration, investment and property experts knowledgeable in various procedures, from acquisition and sale of property for living or investment purposes, stocks and shares, whether setting up a company, or finding a place of residence, they will even arranging a plan for your children's schooling.

Hyperlinks offers to fully orientate their clients into the Hong Kong lifestyle of their choice, keeping all affairs integrated and organised in one place, so clients are left with little to worry about. The message? If you are considering your options as a foreign investor and Hong Kong appeals to you, Hyperlink is the solution to all your needs and will be there for you every step of the way.

• Oct 2013 – Sponsored a seminar on Overseas Investment in Chongqing • Dec 2013 – Sponsored a seminar on Overseas Investment in Shenyang • July 2014 – Sponsored a largescale Overseas Investment Project Forum in Fuzhou • July 2014 – Started a new landed property project and had a ground-breaking ceremony • Oct 2014 – Sponsored a sports charity activity and Yan Oi Tong was the beneficiary body

HONG KONG BUSINESS ANNUAL 2015 95

InterContinental Grand Stanford Hong Kong

PHILOSOPHY

At InterContinental Grand Stanford Hong Kong we have a distinctive culture where our colleagues live our core values and branded service behaviours, both of which help us build pride and commitment in our brand.

It is the people who work in our hotel who make a real difference by bringing the InterContinental brand to life. Creating a “Great Hotel Guests Love” which is something we strive for every day and value most.

It is our people who bring it to life and they will always be one of the most memorable parts of every stay and will be remembered in our guests’ hearts and mind.

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Experience ultimate indulgence in Hk's best luxury hotel

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ringing a sense of ease and comfort to the travel experience is what InterContinental Grand Stanford Hong Kong is all about. The definition of luxury changes depending on where you are; in a city like Hong Kong, luxury has become a part of everyday life, so much so that many of us have become difficult to impress.

From an extravagant meal at an exclusive chef's table to private viewing of precious jewels at your favourite jeweller, luxury is often defined not by how expensive something is, but rather, how much attention has been paid to ensure every detail is in place.

This is precisely the defining difference between an ordinary hotel and a luxury, five-star property. Providing the right atmosphere, with beautiful rooms and a stunning view is one thing, but being able to anticipate the needs and cater to the demands to guests is what bring a good experience from an extraordinary one at any hotel.

With over three decades of experience servicing luxury-seeking business and leisure travellers, InterContinental Grand Stanford Hong Kong knows a thing or two about delivering five star experiences. As the General Manager Alexander O. Wassermann explains, it involves an intricate mix of hardware and personal touches.

“We have been renovating our guest rooms in the past year to ensure the rooms

are kept in shape and add new features such as additional plugs and Bose Bluetooth sound station, which are crucial for the modern traveller these days who is always travelling with numerous electronic devices.”

Catering to the evolving needs of guests is one of the key areas of focus at the hotel.

With a repeat visit rate of up to 50 per cent at any given time, Wassermann says it is extremely important to ensure they feel welcome each and every time.

And how do Wassermann and his team achieve this? “It is important for the team to remember the needs and specific preferences of our guests. This shows we are caring and that we pay attention to what makes their stay extra special.”

For instance, Wassermann says they will remember details down to which side of the table a guest prefers to have their tea served. “This involves a lot of communication amongst our staff members, relaying information to each other to ensure the guest experience is flawless.”

While the hotel has no problem attracting returning guests, some of whom had their first stay at the hotel dating back to close to 30 years ago, it’s equally important to draw new guests. And at an establishment where luxury needs to be felt rather than to be seen, the hotel is beginning to rely on social media to get the message out.

“We want to share with travellers who are researching different hotel photos of the property. We are also happy to see a

Luxury Hotel

This page clockwise: InterContinental Special View Suite; Hotel Exterior; Mistral; Club InterContinental Lounge Opposite page: Alexander O. Wassermann, General Manager, InterContinental Grand Stanford Hong Kong

FAST FACTS Awards received in 2014:

stronger online presence which allows us to engage directly with guests.”

But once the guests decided to make InterContinental Grand Stanford Hong Kong their home for the holidays, the impeccable service begins even before they step in the hotel. “We anticipate the needs of our guests before their arrival. If we know they’ll be arriving late at night, we ensure

their rooms are ready to go so they can rest immediately."

The luxury of ease, comfort and familiarity is perhaps what’s most valuable in a city where opulence is found in abundance. And at InterContinental Grand Stanford Hong Kong, the luxury of being home when you’re away from home is what brings guests back time after time.

• Named as Hong Kong's Leading Business Hotel 2014 at the World Travel Awards • Awarded as the Luxury Hotel - Best Scenic Environment in China at the World Luxury Hotel Awards 2014 • 2014 Certificate of Excellence awarded by TripAdvisor • The Advancement Award 2014, Gold Medal, awarded by Ctrip • Received the Guest Review Award at the HolidayCheck Award 2014 organized by HolidayCheck.com • Received the Hotel Category - Silver Award at the Green Plus Recognition Award 2014 organized by CLP Power Hong Kong Limited • The Human Resources Department was recognized at the Employees Retraining Board (ERB) Manpower Developer Award Scheme - Manpower Developer Award organized

by The Employees Retraining Board • Mistral was awarded the 2014 Certificate of Excellence by TripAdvisor • Mistral was given the 2014 Wine Spectator Award - Award of Excellence by the Wine Spectator Magazine

HONG KONG BUSINESS ANNUAL 2015 97

Lan Kwai Fong Hotel @ Kau u Fong

PHILOSOPHY

“Don’t believe what you see.

When you believe it, you’ll see it. This has always been my philosophy,” General Manager Rebecca Kwan said.

The market competition is so intense these years and the technology is always keep changing. Hotels cannot only focus on what they did in the past, but need to know what the competitors are doing. Therefore it is always important to explore, to experience, to think out of the box and stay flexible and creative all the time.

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Boutique Retreat: how to Stand out as a great design hotel

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s one of Hong Kong’s first boutique hotels, Lan Kwai Fong Hotel @ Kau U Fong is not only leading the industry, but constantly reinventing itself, setting new standards for what it means to be a great design hotel with its attention to detail and passion for inspiring travellers.

Rebecca Kwan, General Manager of the hotel continues to lend her expertise in the hospitality industry to running the successful property, all the while injecting new ideas to the hotel.

Located in Kau U Fong, a unique strip on the crossroad of Central and the history-rich Sheung Wan area, the hotel has plenty to offer in terms of convenience and culture.

What used to be a street lined with old printing shops now has a collection of eateries and shops packed with personality. Kwan attributes much of the neighbourhood’s revival to the arrival of the hotel nearly a decade ago.

“We are one of the first boutique hotels in Hong Kong,” Kwan says. “In the past, the area is very old and traditional. There has since been rapid development in this area. Although this area was traditionally considered a part of Sheung Wan, more people now see it as Central.”

Much like this vibrant part of town, the hotel offers a delicate mix of cultures.

This is even more evident with the recent renovation of the property. “In the past, our lobby was entirely in white. Now we’ve

added some art pieces and a mix of oriental and contemporary details.” This change evidently gives the property a stronger identity and a distinct personality.

While being first to the scene undoubtedly gave the hotel an advantage, a certain pressure comes with being a pioneer. “We are always trying to think of new ways for our guests to enjoy their experience at the hotel,” says Kwan.

And going above and beyond is not only a slogan at Lan Kwai Fong Hotel @ Kau U Fong. Kwan offers one example of how the team dedicates themselves to completing guest experience. “Our guests love to take home souvenirs from a famous cookie bakery near our neighbourhood. But the line up to buy the cookies can be very long.

Anticipating our guests’ needs, our staff will go purchase the cookies in advance so our guests don't have to wait in line.”

Allowing the guests to fully experience Hong Kong is another important mission the hotel takes seriously. It’s not only about suggesting activities for guests, but also to show them an authentic side of Hong Kong.

“We are very familiar with our neighbourhood and we are always on the look out for new, unique shops. And if we feel the shop’s products or foods are good, we might partner up with the shops to offer special promotions for our guests.”

Kwan hopes this will not only attract travellers to the hotel, but also given them a reason to return the next time they find

Boutique Hotel

This page clockwise: Harbour View Suite with balcony; Deluxe Harbour View Room; BreeZe; Hotel Lobby Opposite page: Rebecca Kwan, General Manager, Lan Kwai Fong Hotel @ Kau u Fong

FAST FACTS

themselves in Hong Kong.

“Being a boutique hotel, we are very flexible when it comes to serving our guests.

But being a part of a hotel group also gives us the resources and expertise to stay competitive in the market."

It is this ability to cater to guests’ needs that Kwan believes, is the reason behind the

•

Dorsett Hospitality International (HKEx Stock Code 2266), is a spin-off from Far East Consortium Limited.

With three brands under its umbrella - the upscale and midscale Dorsett Hotels & Resorts and d.Collection comprising a range of charismatic boutique hotels including Lan Kwai Fong Hotel @ Kau U Fong; and the valueled Silka Hotels.

•

The group currently owns over 30 hotels in China, Hong Kong, Singapore, London and Malaysia; including eight more scheduled to open within the next two years in China, Hong Kong, United Kingdom and Malaysia.

hotel’s continuous success. Everything from offering guests a smart phone use during their exploration of the city to coupons to sample local foods like red bean ice, it’s all about bringing them that added bit of personal touch. “There is nothing standard about our hotel, we offer a level of mystique that exceeds their expectation.

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MassMutual Asia Ltd.

PHILOSOPHY

MassMutual has a solid track record of over 163 years of experience in riskand wealth-management services. Today, MassMutual Financial Group has a worldwide operations network of more than 1,800 offices located throughout the United States, South America, Europe and Asia.

As the group’s flagship company in the Asia region, MassMutual Asia has its headquarters in Hong Kong, and operates a branch office in Macau. Living the vision of “MassMutual – where dreams are made”, MassMutual Asia has developed one of the most innovative product and service platforms in the Hong Kong insurance industry, offering a suite of award-winning financial planning solutions.

MassMutual’s mission is to help customers realize their long-term goals and dreams.

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MassMutual Asia leads the way in insurance innovation

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esides being a well-known financial hub, Hong Kong is also where the world’s top insurance companies set up shop as a gateway to the rest of Asia.

Due to stiff competition, insurance companies are challenged to make themselves stand out from the rest of the pack and offer financialplanning solutions that customers would be sure to pick.

MassMutual Asia stepped up to this challenge when it became the first financial-services organization in Hong Kong to make a major investment in a vanguard platform dedicated to its three main financial services: risk management, wealth management, and wealth preservation and distribution.

Jeanne Sau, Chief Marketing Officer at MassMutual Asia, said, “As a customercentric company, we place great emphasis on innovation and developing flexible solutions in protection, investment, and retirement products and services, to deliver value-added benefits to our customers.”

The “Dream” Established in 1851 in Springfield Massachusetts, MassMutual was founded by George W. Rice, who embarked on the insurance business in his early twenties and quickly built a reputation as a vigorous and astute entrepreneur.

His dream was to help people plan for the future through insurance so that they and their families could lead a more secure life and realize their dreams.

As an institution with a solid track record of over 163 years, MassMutual has a heritage of history and tradition. At the same time, MassMutual emphasizes a proactive outlook involving creativity, flexibility and innovation.

Today, the MassMutual Financial Group is one of the world’s largest and most diversified global financial-services organizations.

Innovation Makes the Difference Living the group’s vision of “MassMutual – where dreams are made”, MassMutual Asia remains focused on helping customers realize their long-term goals and dreams. It has launched a number of firsts in the market, such as the revolutionary concept of universal life insurance and the guaranteed lifetime annuity plan.

MassMutual Asia answers customers’ needs with its portfolio of a wide spectrum of over 80 flexible and innovative risk- and wealthmanagement solutions, including three marketleading flagship products: “FLEXI-ULife Prime Saver” challenges traditional life insurance by offering flexibilities to accommodate the policyowner's ever-changing needs; “Target Lifetime Annuity Saver” is one of the very few plans on the market providing guaranteed lifetime annuity income, which effectively hedges the financial impact of longevity risk; and the “Portfolio Investment Plan,” an innovative investment platform based on the Nobel-winning Modern Portfolio Theory, which enables investors to minimize risks by building a balanced global portfolio.

Innovative Insurance Company

This page: MassMutual Jr. Space Camp Program promotes the “It is Possible!” spirit; The corporate vision "MassMutual - where dreams are made"; MassMutual’s range of innovative mobile applications; Opposite page: Jeanne Sau, Chief Marketing Officer, MassMutual Asia

FAST FACTS

Elevating Customer Experience with Advanced Technology As the world becomes increasingly digital, MassMutual Asia proactively leverages the latest in technology to deliver added value to customers. “Customers have high expectations of our service quality and efficiency, and this drives us constantly to pursue service excellence.

Today mobile information services have integrated into our everyday life, and this trend has inspired us to deploy advanced technology to raise the level of our services," said Sau. "We always go the extra mile to enhance customer experience to help them manage their financial planning with ease. We have specially developed a suite of applications for customers and consultants. To consultants, the applications help them generate more new business opportunities by enhancing the effectiveness and efficiency of the sales process," she added.

She notes that to customers, iFinance is designed to help them identify their financial planning needs with six interactive financial calculators, and iWealth serves as a platform to provide access to investment data and information, enabling them to manage their investment portfolio at any time anywhere.

An Innovative Approach to Social Responsibility Upholding its commitment to serving the community, MassMutual Asia enthusiastically supports charity events. This is well evidenced by the fact that MassMutual Asia has received a number of awards, including the “Caring Company Logo” issued by The Hong Kong Council of Social Service since 2005.

MassMutual Asia not only applies its innovative spirit to product design, but also corporate social responsibility. Pioneered in 1999, the MassMutual Jr. Space Camp Program is the first-ever program providing simulated astronaut training to children from Hong Kong and Macau. Each year, over 2,000 children apply for the program. Through innovative and unique training experiences, the MassMutual Jr. Space Camp Program inspires children to live the “It is Possible!”spirit and encourages children to make their dreams come true through selfconfidence, inquisitiveness, and perseverance.

“Continuous product and service innovation is one of the most important strategies for our company, because we firmly believe that MassMutual is where dreams are made," said Sau.

• Since its establishment MassMutual Asia has consistently achieved double-digit average annual growth in new individual business • Besides the life insurance business, MassMutual Asia also operates several subsidiaries in Hong Kong, including MassMutual Trustees Ltd., which focuses on MPF, and MassMutual Insurance Consultants Ltd., which handles general insurance • Has over 2,500 consultants delivering professional one-stop risk- and wealth-management consulting services • Launched the very first universal life insurance plan available in Hong Kong and Macau in 1995 • The first insurance company on the market to provide guaranteed lifetime annuity income to act as a safety net during the customer’s retirement • The first company to launch criticalillness protection plans that offer the market-unique Life Extension Benefit, allowing insured persons who have been diagnosed with a critical illness to take out a permanent life insurance policy without any proof of insurability.

• Published Hong Kong's first investment book in Chinese on the subject of "Modern Portfolio Theory”, the groundbreaking investment theory developed by Nobel economics laureate Harry Markowitz. Since its launch, the book has become a No.1 bestseller • Pioneered the MassMutual Jr. Space Camp Program in 1999.

In recognition of its innovative and unique marketing strategies, the program has been awarded a coveted “HKMA/TVB Awards for Marketing Excellence – Citation for Innovation”

HONG KONG BUSINESS ANNUAL 2015 101

MENCE

PHILOSOPHY

MENCE’s objective is to excel in everything, and expects its team to provide positive energy to their customers.

The team also needs to acquire excellent health, appearance and politeness.

Integrity and honesty are utterly important. MENCE does not approve hard selling, as male customers usually believe in reference data and evidence to evaluate the effect of the slimming treatment, hard selling would only put them off. Therefore, we insist on quality product and service, only word of mouth can last in long run.

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A healthy Body Brought

by MENCE

T

aking home the award for Best Men’s AntiAging and Weight Management, MENCE is about much more than helping clients achieve their desired body shape. Instead, it’s about getting to the root of the cause and building a great, healthy body from the inside out.

With over 30 years of expertise in the beauty industry, Mence Tsoi, Managing Director of MENCE is a pioneer in the field of male body and skin care treatments. For two decades MENCE has been providing health-conscious men in Hong Kong, China and Southeast Asia with a holistic solution to their weight problems.

“Our philosophy is first and foremost to provide our clients with effective treatment plans that will make them not only look good, but also to feel enjoyable, happy and healthy,” says Tsoi.

Through its results-driven treatments that begin with a charting of a client’s body condition, Tsoi says men who are too busy for exercise or maintaining a balanced diet can now too be the proud owner of a fit body.

“A lot of our clients are successful men with busy careers and they might not have the time to exercise or rest. We encourage them to take care of themselves, and that is a part of being a well-rounded man, to have the health and stamina to take care of your family and loved ones.”

Each visit begins with a body analysis that tracks the client’s fat percentage, water retention ratio, muscle density, body age, abdominal fat and BMI. Treatments are designed

to tailor to condition of the client’s health and desire. MENCE’s clients can benefit from the wholehearted dedication of the professional therapists who help to keep track of their progress throughout the programme to ensure all clients can see significant improvement each time with individual initiative. Success rate can be as high as 98%!

Treatments available target everything from weight loss to hair growth; many of them are patented and developed by Tsoi and her team of specialists. “We work with them on research and development to come up with new ways to combat skincare and body concerns. Many of these patented treatments are performed at our centres or at hospitals.”

Tsoi and her team work together with clients to come up with a treatment plan that suits their hectic schedule and body condition.

Through the right diet and use of body sculpting machines as well as non-invasive liposuction, Tsoi says achieving that coveted sixpack can be easy as this type of passive exercise can burn fat and increase muscle density six times faster than rigorous exercise.

While 30 minutes of active exercise consumes only 200 kcal, two hours of comfortable treatment at MENCE can burn up to 4,900kcal or 0.6 kg of fat! The surprisingly affordable treatments are safe, comfortable and natural.

“With our help, we can facilitate a growth in muscle mass. This doesn’t need to be done with exercise. In fact, we can achieve this when even with our clients are just resting.”

Technology is constantly advancing the way

Weight and Age Management This page clockwise: Howick Lau, spokesperson; Yannick, MENCE's client; MENCE's centre reception Opposite page: Mence Tsoi, Managing Director of MENCE

FAST FACTS

skincare and body treatments are performed.

While it is crucial to keep up with these advances, Tsoi’s greatest inspiration and motivation for developing new treatments is her clients.

“Many of the treatments we have, such as the Self Growth Factors Crystallization treatment for hair growth and skin rejuvenation, are grown out of our client’s evolving needs. Double-chin and eye-bags removal treatments are also available to make the clients look 10 years younger,” Tsoi explains.

With locations in Hong Kong and franchise in China and Southeast Asia, the MENCE

philosophy is spreading far and wide across the region. But what’s most important for Tsoi is to ensure all her clients leave each treatment feeling happy and healthy.

“We want all our clients to look great, but it doesn’t have to come at the price of exercise.

We’ve proven that you can look your best while feeling relaxed, comfortable, safe and pampered.”

If you want to look younger, sleep better and become healthier, simply email to info@ mencegroup.com or call us at 3106 3368 for free consultation. www.mence.com.hk/en/

• 2003: MENCE has become the first skincare and body slimming centre for men being awarded ISO 9001-2000.

• 2005: MENCE has successfully secured the unique technology, Novel Weight Loss System, with a global patent (application no.

06101868.1) and obtained the BVQI certificate.

• 2006:MENCE has been interviewed by TIME Magazine and is regarded as the leading male beauty centre which offers high-end slimming programs.

• 2006: MENCE is selected as one of the 50 most outstanding enterprises, 2005 by HK Business, and has awarded the “High Quality Brand” by the Next Magazine.

• 2008: Prime Awards For Eco Business by Prime & Business Environment Council • 2008-2009: Prime Award for CSR Caring Company Award

by Prime & Hong Kong Institute of Directors • 2011: Best Employer of the year by HKSAR Government; Family Friendly Employers by Family Council • 2009-2014: MENCE was invited by hospitals in Hong Kong to set up branches for providing services to doctors and patients

HONG KONG BUSINESS ANNUAL 2015 103

Mercedes-Benz Hong Kong Limited

PHILOSOPHY

Mercedes-Benz is a brand under the company founded

by Gottlieb Daimler and Carl Benz, who made history with the invention of what would later be commonly regarded as the first automobile in 1886. As a brand MercedesBenz was first used in 1926.

The company prides itself for being innovative, having passionate employees and being characterised by diversity, integrity and responsibility. It produces a range of innovations involving personal mobility in passenger cars, local and long-distance public transport, and the transporting of goods in commercial vehicles.

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Mercedes-Benz stands out as the epitome of luxury automobile

L

ike the fact that over 1.56M customers took delivery of a Mercedes-Benz car around the globe in 2013, many car hunters in Hong Kong seem to find the lure of Mercedes-Benz irresistible. The Stuttgart-based manufacturer shipped 6,095 units of passenger cars to customers in the SARs of Hong Kong and Macau in the same year, representing an increase of 16.8 percent compared to the year before. The year 2013 was a record sales year for the brand, noted President and CEO of Mercedes-Benz Hong Kong Andreas Binder.

The executive recently spoke to Hong Kong Business. This past year is widely estimated by those close to the company to be another record-breaking year as far as sales volume is concerned.

The brand has regularly been among the top luxury car brands on the local sales chart. It is in fact among the most popular brands in the territory, although it’s not operating in the same markets as some more mainstream brands.

With more customers comes the pressure on logistics and other customer services. A pleasant challenge many business owners would no doubt embrace, but nevertheless a range of reinforcement procedures has apparently kept Binder and his team occupied.

According to Binder, the company is monitoring a few areas where it can improve its services to customers. “We’re making significant investment to make sure that in future there will be enough facilities for customers.”

Neither will customers have to wait too long

for a new car, Binder assures. First customers of the new Mercedes-AMG GT in Hong Kong, for example, will get delivery of the right-hand drive two-seater performance car priced at HK$2M up in the second quarter of the year (2015), just “weeks after the first customers in Germany do with their left-hand drive version.”

Hong Kong is an important market for brands in Asia, Binder points out, as tens of millions of visitors come to the territory each year. Having worked for Mercedes-Benz in the territories of Indo-China, Singapore, Vietnam and Central Europe, from finding himself awed in a new culture to building a production and marketing infrastructure in a new market for the brand, Binder has under his belt ample experience in the region.

“Asian people seem to have very positive associations with the three-pointed star. They admire and understand the heritage of the brand, which has [almost] 130 years of history,” said the executive.

In order to reinforce the brand’s position in local markets, Binder thinks it’s important to continue to invest in the brand and stay one step ahead of the competition. The recent launch of the new Mercedes-Benz CLS allows the public a glimpse of the brand’s new communication direction.

Mercedes-Benz Hong Kong organised the new CLS launch and automotive design exhibition at the PMQ Square in Central last November.

In addition to showcasing the advanced technologies employed in the sleek coupe (a 5-door ‘shooting brake’ wagon-like version is to

Automobile This page clockwise: S-Class Launch at Four Seasons Macao; The new CLS Launch and automotive exhibition at PMQ Opposite page: GLA Launch at Asia World-Expo

FAST FACTS

complement the range), the organiser arranged an exhibition featuring a roster of MercedesBenz concept cars that dates back to as early as 1901, as well as different stages of the C-Class and S-Class models.

The exhibition was open to the public for two days following private viewings reserved for the media. Compared to what the public is used to as far as car launches are concerned, such as displaying a few units in a prime shopping mall and getting shifts of sales persons ready to take in orders, the exhibition represented a different theme and a different idea to showcase the brand. “There is a big fight among all the luxury brands for high-end clients. Doing the same thing as others is not going to work,” emphasised Binder. “We know there is a huge number of followers of the brand, they love our vintage cars and our design philosophy.

The exhibition at the launch ceremony was a platform [on which] people could talk more about our brand.”

Despite being a well-known and revered automotive brand, Mercedes-Benz has busied itself attracting a new and younger generation of customers. Mercedes-Benz knows that the new models have to be able to connect with the younger generation. “That’s why we have a new generation of compact cars going in a new direction,” Binder referred to the models

introduced over the recent months such as the CLA- and GLA-Class.

“We’ve put everything into the new generation of compact cars, which come with the same safety standards and technology as in other more upscale models. They also sport very young and dynamic designs,” he added.

Mercedes-Benz is synonymous with premium class automobiles, but in reality it has also long supported the younger generations who are not its target group of customers just yet. An example is that the brand has been recognising up-and-coming designers in various countries, while it has also put in place programmes around the world for a sustainable environment and community.

“Brand building is not only being a sponsor of high profile events,” added Binder. “We like to do something to the local environment and the local society.” In Hong Kong, for example, the brand is working closely with the Hong Kong Golf Association. Not only does the partnership promote key competition events such as the HKGA Mercedes-Benz Classics, it is also involved in a range of initiatives for juniors such as Golf for Schools and Festival of Sport.

Proof that Mercedes-Benz not only makes “damn good cars,” it also knows the importance of investing in the future, whether technology or generation.

• Mercedes-Benz has perhaps the longest history of automotive manufacturing, yet it is also one of the most forward thinking automotive brands. In 2013, the brand put a self-drive research vehicle with the ability to merge into flowing traffic to the test from annheim to Pforzheim in Germany, covering over 100 kilometres through 24 towns and villages.

• The group aims to raise the proportion of women in management positions to 20 percent by 2020. Women have already made inroads into the company’s top decision making circle, with Dr Christine Hohmann-Dennhardt sitting in the 8-member Board of Management of Daimler AG. • Mercedes-Benz has sponsored fashion events in major world metropolises ever since it began with the title sponsoring of Mercedes-Benz Australian Fashion Week in Sydney and Melbourne in 1996, followed by the New York edition in 2001.

A significant Mercedes-Benz presence at exclusive fashion platforms has been found in cities including Milan, Miami, Beijing, Istanbul, Buenos Aires and Johannesburg, to name a few.

HONG KONG BUSINESS ANNUAL 2015 105

OZO Wesley Hong Kong

PHILOSOPHY

The OZO philosophy is all about delivering restful nights, energising mornings, and the tools to offer onthe-go guests a quality experience without all the fuss. Practical yet stylish accommodation exceeds mid-market expectations offering value and comfort for travellers looking for insider experiences, combined with good connectivity and a great sleep.

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Ozo Wesley: Combining convenience and comfort

A

great holiday can be few and far between for those who lead a hectic work life.

Being able to spare a few days between your busy workweeks to travel and experience a new city, or simply to stay home and recharge, is a rare treat.

Be it a vacation or a stay-cation, it is becoming increasing popular for people to carve out a short few days out of their hectic schedule to recharge, refuel and rejuvenate. And there’s really no better way to do so than explore a city, be it a new one or the one you live in.

When trying to make the most of a short visit, it is crucial to pick a hotel that is the amalgamation of convenience and comfort.

To be close to popular attractions and offer a relaxing atmosphere for resting will bring ease to a trip.

Noted as one of the city’s newest lifestyle hotel, OZO Wesley Hong Kong seeks to do just this- providing guests with an enjoyable experience both inside the hotel and around the city.

Taking home the award for Best Lifestlye Hotel, OZO Wesley’s General Manager Mael Vastine believes hotel’s unique approach to customer service is a key part of its winning formula.

Catering to the modern traveller requires flexibly on the part of the team, something that can be much more easily done at an intimate hotel such as the OZO Wesley. With the ease of online booking systems, there are an increasing number of people making spontaneous travel plans. It is important for the hotel to be able to

offer guests a stress-free holiday. “ Catering to the modern traveler to us means helping our guests make the most out of their trip,” says Vastine. “Whether they visit for 24 hours or 4 days, our Vocal Local team members are always on hand to provide appropriate insider tips of where to go in Hong Kong. Vocal Local team members have their own special interests such as hiking, opera, dining, skateboarding, visiting local markets, and they love to share.”

Unsurprisingly, OZO Wesley’s hands-on customer service approach is taken notice of. “ In 2014, Fodor’s named us one of the Top 10 New Hotels in Hong Kong. We’re extremely proud and this is well deserved as OZO Wesley is unique and features an interesting approach for the busy and adventurous explorer.”

And while the hotel is adamant about providing guests with the necessary information to explore the city, it also values providing an unforgettable time when guests are staying in.

“Every evening we provide the Dose Off hot drink downstairs, our own herbal concoctions are designed to help ease you into a deep slumber. In the morning you will find the Daily Wow at our Boost Breakfast, again, refreshing concoctions of our own that help you start the day.”

Having everything ready and waiting when arriving at the hotel is an important part of the guest experience at OZO Wesley, especially when the guest may only be staying for a few short days. “We want to keep everything simple for our guest. The OZO fast track

Modern & Lifestyle Hotel

This page clockwise: Talk (Meeting Room); Boost breakfast; The Spot; OZO suite Opposite page: Mael Vastine, General Manager, OZO Wesley Hong Kong

FAST FACTS • Streamlined, tablet check-in ensures a fast, smooth arrival.

• Information lecterns providing destination information and advice • Free Wifi coverage throughout the hotel • 251 Guest Rooms – a haven for quality sleep What is nearby: • Both Admiralty and Wanchai MTR stations.

• 5 minutes walk from Pacific Place, a leading retail and commercial complex.

• The Hong Kong Convention and Exhibition Centre • The city’s prominent landmarks and the fast developing ‘Star Street’ food and entertainment precinct.

experience means you don’t waste your time with unnecessary administrative procedures and paper work – when you arrive you sign on the touchscreen embedded in the Desk and you’re away to your room. You will find more than ample, free connectivity everywhere. You can sign into our Wi-Fi on multiple devices in the room and public spaces, no hassle, no charges,”

says Vastine.

As to how the hotel can improve going forward, Vastine had this to say. “At OZO Wesley we aim to be the first choice for customers with a desire for a quality, keenly-priced, selectservice experience, with that in mind our plan will be to deliver even greater services to our guest,” he adds.

HONG KONG BUSINESS ANNUAL 2015 107

Rhombus International Hotels Group

PHILOSOPHY

To be one of the premier hospitality services providers, operating properties in major international cities and key destinations within Asia and Europe. The Rhombus portfolio consists of quality products which exceed the expectations and needs of its three key stakeholders: Owners/Investors, Guests and Employees. Rhombus cares and is committed to continuously delivering excellence combined with versatile services and products to its Owners/ Investors and Guests while providing vast opportunities to its Employees.

UTILIsING THE STAFF'S STRENGTH is the key to rhombus' success

W

ith its nurturing approach to management, Rhombus International Hotels Group once again takes home the accolade for Best Hospitality & Hotel Management. Smoothly running a hotel takes much more than great management; having a leader who recognises the importance of teamwork is the key to success. With properties around the world, the Rhombus Group’s chain of hotels is a well-oiled machine that delivers everything from a great place to stay during your vacation to impeccable service.

Taking home the Leading Hospitality & Hotel Management category for the fourth year in a row, the group’s Founder and President Calvin Mak says it’s not so much about managing the staff but rather, utilising their strengths to better the overall operation of the property.

“We believe that every department should have a leader. You don’t need to be a manager to be a leader. You can be a waiter in one of the restaurants and be a leader, if you choose to take initiative and put in the extra work,” he says.

Nurturing individuals And it is these individuals, he believes, who allow every department to operate smoothly.

“We recognise the importance of nurturing these individuals who show potential. It is great to be able to nurture our staff.”

Mak says one of the keys to success is to ensure you have a staff who is dedicated to their job and to the company. “Whenever

108 HONG KONG BUSINESS ANNUAL 2015

possible, we like to promote from within the organisation because it is important to take care of our staff. But mostly, we like to work with people who we know well and can rely on.

Even if they are only an 80 per cent fit for the position, I believe we can easily give them the proper training and help them excel.”

To be able to create a sense of belonging and offering the possibility of lateral movement within the organisation, Mak says, is a great motivator for staff members to stay the company.

“In the hospitality industry, it is very valuable to have a staff that’s been working with us for a long time because they are familiar with the hotel and our guests. A low turnover rate allows us to ensure a consistent level of service.”

Staff training Mak says it is also important to offer staff training opportunities outside of the property they’re stationed at. This brings the staff a more international scope on the overall needs of travellers and is great way for them to bring what they learn at other locations back to their own jobs.

“We regularly have training programs where our staff visit other properties, in China and overseas. This way, they can better anticipate and understand our customers needs and take away positive lessons from how other properties are run.” As for how he hopes to continue creating a friendly and nurturing atmosphere for his staff, Mak has this to say. “Every year, we try

Leading Hospitality & Hotel Management This page clockwise: Lobby at Hotel Pennington by Rhombus offering an open terrace; Hotel Bonaparte by Rhombus’ cosy Rhombus Lounge offering light breakfast and WiFi internet access; Hotel LKF

by Rhombus’ spacious guestrooms ranged from 500 - 950 sqft.; Chairthemed artpiece at the hotel lobby of Rhombus Fantasia Chengdu Hotel; Breathtaking Victoria Harbour views at the Sky Garden of Hotel Panorama by Rhombus Opposite page: Calvin Mak, Founder & President, Rhombus International Hotels Group

FAST FACTS •

Founded in North America, Rhombus International Hotels Group has more than 28 years experience in Canada, Europe and Asia.

•

Regardless of the size or scope of a project, Rhombus makes a commitment to service excellence, while maximizing profits and asset values.

•

Rhombus offers consolidated, realistic and practical turnkey packages for various development projects.

to put together some team building activities. It gives us the opportunity to have fun and learn about each other on a personal level, but also to understand the work different departments are doing."

This way, when needed, members of their staff from different teams can help each other out. "It is another great way for the team to work together to better anticipate and cater to the needs of our guests,” concludes Mak. HONG KONG BUSINESS ANNUAL 2015 109

SOUND CONCEPTS ltd

PHILOSOPHY

Our two main goals are to keep up with all the technical changes in the world of high-quality audio systems and to provide our customers with the best system designs for home and commercial property entertainment systems. We believe in our products, which are the finest loudspeakers, amplifiers, home theatre systems, cables, and tuning devices, IP-based network systems, smart control and automation systems, CD, Blu-ray players and D/A converters available on the market today. We work very hard to solve the challenges of each, unique installation and guarantee our systems for one year after

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How Sound Concepts Remains a Leading Force in the AV Industry

D

espite the competitive nature of the audio-video industry in Hong Kong and even in mainland China, Sound Concepts continues to be successful, remaining on top of the competition ahead of its rivals and new upstarts in the industry.

Our goal has always been to provide quality audio and home theatre products with reasonable prices in Hong Kong and China and partnered with topnotch after-sales service to our valued customers, said Sherry Chung who established the company in January 1990 in Hong Kong and who has been working in the audio industry since 1978.

Over the past decade, there have been rapid changes in the AV industry, including the sale of many historic brands to huge corporations. As a result, many of these historic brands suffered under the hands of their new owners who were not as knowledgeable and deeply passionate about them. “These new owners thought they could sell badly designed or unreliable products under historic famous brand names for a lot of money,” Chung said.

The company used to distribute some of these historic brands, but because of these changes, it had to let them go. “We’ve always wanted to provide the best value to our customers by providing quality and reliable products within the right price range to our customers,” added Chung. Sound Concepts then concentrated in growing operations with the remaining manufacturers who are really dedicated to producing best-quality and best-value products such as ATC, Atlantic Technology, Bricasti &

Parasound, among others. Sound Concepts has been noted in the industry for its exceptional array of innovative and award-winning audio and home theatre products from world-class manufacturers, which are constantly working with the company to provide fully integrated systems.

The company is one of the fastest growing distributors of integrated AV solutions for commercial, residential, and marine applications in Hong Kong. The company, which only started with four employees but now employs 15 people, has been sought out for its customized home entertainment solutions and systems for residential houses, hotel suites, recording studios, as well as commercial properties.

Expanding the business The decision to diversify its markets is proved to be a successful one for the Sound Concepts.

“Instead of focusing ourselves in the consumers market, we have expanded our business in the pro market,” said Chung.

The company partnered with Acoustic Transducer Company (ATC), a topnotch British manufacturer, to provide quality loudspeaker systems and solutions to commercial establishments. All systems and components have been designed and built in England to achieve performance levels that are far superior in the industry’s current standards. The company’s decision to partner with ATC has been proven to be a good choice, because ATC has been known to specialize in customized sound reinforcement systems for concert hall

professional AV CONSULTANCY This page clockwise: Atlantic Technology DA44 Dolby Atmos Enabled Speakers; ATC new speakers with ATC Tweeters - Model SCM 100SE, SCM-40 & SCM-11 Opposite page: Bricasti M28 Monoblock Amplifier

FAST FACTS • Sound Concepts Limited was established in January 1990 in Hong Kong, by Ms Sherry Chung, who has been working in the audio industry since 1978.

as well as nightclub environments, such as the Walt Disney Concert Hall in Los Angeles, Wigmore Hall in London, The Royal Opera House in London, Sydney Opera House, New World Symphony Hall in Miami, Bing Concert Hall in Stanford, United Kingdom, among others.

Because of its company’s pristine record, the ATC loudspeaker system was selected to be installed at the recently built Shanghai Symphony Hall, a concert hall with 1,200 seating and chamber hall with 400 seating just last June.

The company has also been recognized for being in the forefront of the digital convergence trend, providing and installing products ranging from entertainment systems to home automation, security, lighting, and computer networks. “We found that the clients have always been looking for us to provide them with excellent total solutions to meet with their needs and budget, are user-friendly and reliable, as well as to be able to blend into their interior design,” Chung said.

Latest products Among the company’s latest product offerings include: ATC’s new Entry Series (Hi Fi Passive)

speakers that have been honored by prestigious audio magazines with awards and well-received by the audiophiles all over the world; the Atlantic Technology revolutionary 44-DA Dolby Atmos Enabled Speaker that has been known to provide unprecedented degree of realism to movie soundtracks; Bricasti’s M1 Dual Mono D/A converter and the M28 Monoblock Amplifier; and the award-winning Axium audio and control system.

To keep abreast with the latest trends and products in digital information technology and consumer electric products, Sound Concepts is always part of international trade shows and oversees trainings by manufacturers to learn about new products and technologies as well as gain insights about developments in the industry.

From its humble roots in 1990, the company has certainly come a long way. Chung is really proud of their company, which has been known by customers for its professional installation as well as excellent after-sales service.

She noted that Sound Concepts values honesty to its valued customers. “We want to have happy customers. It has always been our goal,” Chung added.

• Our goal is to import into Hong Kong and China premium quality audio and home theatre products with first class high end performance but reasonable prices, and to provide an excellent after-sales-service to all our valued customers.

HONG KONG BUSINESS ANNUAL 2015 111

Thomas Mayer & Associés

PHILOSOPHY

The firm’s philosophy goes beyond just giving legal advice.Our approach is to focus on making a valuable contribution to the progress of our client’s business in a complicated international environment.

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STRUCTURING INVESTMENTS BETWEEN EUROPE AND ASIA

T

homas, Mayer &Associés (“TMA”)will celebrate its 20th anniversary in 2015.

Established in Hong Kong in 1995 as a French law firm,TMA has steadily developed its presence in the territory and is today recognized as a major actor in the structuring of business relationships of French and continental European entrepreneurs looking to explore the Asian market. Conversely TMA assists Asian clients in their European ventures.

TMA’s expertise in using Hong Kong as a platform for structuring international investments enables its clients to benefit comfortably fromthe legal security Hong Kong offers in the region.

As the vast majority of foreign investments in mainland China are structured in Hong Kong, Eric Mayer, partner at TMA explains, there’s simply no need for a project manager to go to China in order to structure an investment.

Hong Kong will always be the stepping stone into the Chinese market. Mayer explains that Hong Kong will unlikely be replaced by China as a top international business hub because of the rule of law and flexibility of the business environment if offers.

“Many of our clients wish to establish in China. But legal aspects of setting up a business such as holdings agreements and the actual signing of deals are always done in Hong Kong because clients understand the legal security and advantages that the city has to offer”, explains Mayer. In China, the firm has advised clients in Guangzhou, Dongguan, Shenzhen, Shanghai, Ningbo, Hangzhou, Suzhou, Beijing,

Tianjin, Harbin, Wuhan, Chengdu, and many other second-tier cities. “Being well connected to firms and professionals in mainland China is necessary in order to understand and control the important and complex legal documents needed in an investment project in China, and we will rely on local professionals to ensure that what needs to be done locally is done smoothly,” he says.

In the Europe towards Asia investment flow, most clients of TMA are French or Spanish speaking. TMA is in fact one of the few, if not the only firm in Asia with a team of twelve French lawyers. “French firms in China will only have one or two French lawyer heading a Chinese team. But our advantage is that we have a very good understanding of the French culture and that enables us to gain the complete trust of our clients.”

And the European clients that are trusting Thomas, Mayer & Associés for legal advices operate in sectors such as retail, real estate, events, medical, pharmaceutical, stones and other construction material, telecom, energy, industrial, including plastic engineering, manufacturing crowns for dentists, humidors, musical instruments, jewelry, and food and beverage, textiles, accessories, and even lingerie, just to name a few.

TMA client’s are also Chinese entrepreneurs seeking a foothold in France, through acquisitions or joint-ventures, also seek counsel from TMA. Regulations and rules in Europe are many and complying with many laws is tough. Eric-Jean Thomas says Chinese clients

LAW FIRM

This page clockwise: TMA's office in Hong Kong; Eric-Jean Thomas and Eric Mayer at the "Think Asia, Think Hong Kong" event held in Paris on 28 October 2014; Eric Mayer Opposite page: Eric-Jean Thomas (Senior Partner) and Eric Mayer (Managing Partner)

FAST FACTS • The practice was established in Hong Kong 20 years ago and employs 35 staff • Paris office, a subsidiary, opened in September 2010 • Practice areas: International business law, mergers and acquisitions, joint ventures, company and commercial law, international tax law, international arbitration, private international law, and immigration law, are its practice areas.

are attracted by French brands, just as much as the French business people are eager to go into China. “They look for relatively unknown brands that have gone into decline, but have a glorious past,’’ he says.

There are other entrepreneurs from China who are eager to develop their own brands and desire the added value of French design that will in itself be a selling point for their products among the mainland’s consumers who are attracted to all things French. Chinese business

people who prefer French design have the capital and the manufacturing capability but not the style, Eric-Jean Thomas points out.

Mayer attributes part of the firm’s success to its capacity to provide practical assistance to its clients beyond the legal and tax fields. The firm’s experience in handling all the practical matters arising while setting up a business in a different legal environment facilitates greatly the successful implementation of its client’s business plans.

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Transunion limited

PHILOSOPHY

At TransUnion, we value integrity, people, customers, and innovation. We act with honesty, trust and respect in all of our interactions and in everything we do. Our commitment to security and accuracy moves businesses forward. We recognize that each of us is essential to our success. We earn trust and build lasting relationships by delivering what we promise. We aspire to deliver tomorrow’s solutions today.

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The only CONSUMER credit reference agency in Hong Kong

H

eadquartered in Chicago, TransUnion is one of the global leaders in risk management solutions. TransUnion gives businesses and consumers the power to achieve their financial goals and helps build stronger economies worldwide.

The company has been operating in Hong Kong since 1982 and began managing the city’s consumer credit reporting system in 2003. As the only credit reference agency in Hong Kong, TransUnion currently maintains records on 4.95 million consumers in Hong Kong.

The company serves over 100 members in Hong Kong who are mainly banks and financial institutions. TransUnion compiles credit reports based on data received from its members as well as public sources of information. Consumers can order a copy of their personal credit report either online, by mail or directly from TransUnion’s office. Members of TransUnion are also entitled to access and review their customers’ credit reports before approving new loan applications or extending credit, in accordance with the Personal Data (Privacy) Ordinance and the Code of Practice on Consumer Credit Data issued by the Office of the Privacy Commissioner for Personal Data, Hong Kong.

Apart from credit reporting, TransUnion also provides a range of value-added services to banks, including an integrated suite of analytic and decisioning solutions that help banks manage risk more effectively and make objective decisions throughout the customer credit lifecycle.

The net assets incurred by Hong Kong’s

business community and residents plummeted in the aftermath of the 2002 Asian financial crisis. In 2002, the credit card delinquency ratio was at a record rate of 1.56 percent and over 25,000 personal bankruptcy orders were issued by the courts, meaning that there were more than 2,000 cases each month compared to fewer than 900 cases per month in 1998.

It was against this backdrop that the first fully-fledged, regulated credit reference agency, a role played by TransUnion, was set up in Hong Kong. Prior to this, credit providers had primarily shared negative credit data such as non-payment of a debt, court judgments, bankruptcies, arrears and late payments, which was used as reference for credit decisions.

Increasing demand for credit reporting services There has been a rapid growth of TransUnion’s credit reporting services in recent years. Several trends are driving the growth. The most important one is the increasing sophistication of Hong Kong’s banking sector. As banking services become more diversified and competitive, banks need more credit bureau information to help them perform risk assessment and make better decisions.

Changing regulatory requirements is another factor. In recent years regulations have become more stringent so it will be prudent for banks to use credit bureau services more often especially for portfolio management and customer acquisition.

The rapid increase in banks’ unsecure lending

Consumer Credit Reporting Company & Innovative Financial Service

This page: Mr Tsong (front row: third from the right) pictures with new hires at an orientation workshop; Mr Tsong (middle) pictures with guests at a customer workshop

Opposite page: Lawrence Tsong, President, Asia Pacific, TransUnion

FAST FACTS • Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 33 countries on five continents.

• In Asia, the company has a presence in China, India, Singapore, Malaysia, Thailand and the Philippines.

• TransUnion established Hong Kong’s first consumer credit data bureau in 2003 and currently maintains records on 4.95 million consumers • TransUnion’s services in Hong Kong include:

services is also responsible for the growing demand for credit reporting. More consumers order their credit reports when they apply for bank loans. With the rising trends of identity theft and fraud, more consumers are applying for TransUnion’s credit reporting and credit monitoring services to monitor unauthorized changes in personal data.

In fact Hong Kong people are feeling increasingly vulnerable to identity thieves, with 68% saying in an online survey commissioned

by TransUnion, they were ‘worried’ or ‘very worried’ about becoming victims.

Analytic and decisioning solutions help banks make better and faster decisions TransUnion provides an integrated suite of data, analytic and decisioning solutions to help banks manage risk more effectively, streamline business processes, and identify and manage fraud more efficiently. The solutions, developed

and implemented based on data intelligence, help banks make objective decisions that drive their business.

One of the solutions in the suite is Identity Manager, which allows banks to verify and authenticate their customers quickly, conveniently and accurately.

Recently a major local bank partnered with TransUnion to develop Hong Kong’s first electronic identity authentication solution that allows instant loan approval. The service is powered by TransUnion’s Identity Manager solution.

Customers are able to apply for loans online or via a mobile phone app. They then answer randomly-generated personalized questions where the answers would only be known to the customer himself/herself. The authentication can be done in a matter of minutes and at the convenience of the consumer without needing to queuing up at a branch.

o For banks and financial institutions – credit reporting services and a comprehensive suite of data, analytics and decisioning solutions o For consumers - credit reporting and credit monitoring services

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Wharf T&T

PHILOSOPHY

Wharf T&T strictly focuses on enabling customers' businesses using best-ofbreed technologies via topclass service. Backed by the state-of-the-art "Fibre-tothe-Desk" (FTTD) ultra-high speed broadband network, Wharf T&T possesses strong system integration capabilities and offers a full suite of subscription-based public cloud solutions to cope with the evolving business demand of ICT adoption.

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ICT Expert Celebrates Cloud and Business Excellence

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harf T&T undergoes a successful transformation and leads the way in embracing latest technology and providing quality information and communications technology (ICT) solutions to businesses. In an era where technology is rapidly advancing, cloud is the next big wave and Wharf T&T has an ace up its sleeve to pull ahead.

Cloud is the future Cloud is integral to corporate strategy and it is a transformative technology that makes business expansion and systems more efficient and flexible than ever before. Having witnessed the tremendous potential and power of the cloud, Wharf T&T has made a foray into cloud and stepped up investment in cloud development since 2010.

Given that cloud has a profound impact on businesses across different sectors at a strategic and operational level, Wharf T&T harnesses its cloud capabilities to deliver FibreCloud service (FibreCloud), a real cloud solution for large enterprises as well as SMEs, in tandem with three world-renowned technology firms VMware, Cisco and EMC this year.

“As the leading ICT service provider in Hong Kong with the best-of-breed ‘Fibre-to-theDesk’ (FTTD) network infrastructure well in place, we are well-positioned to propel the cloud development in Hong Kong to the next level. Combining the best-in-class network and compute infrastructure, virtualization and storage technologies, FibreCloud is set to

redefine business-grade public cloud computing standard and revolutionise the business landscape,” said Vincent Ma, President of Wharf T&T. FibreCloud is an ICT breakthrough which prevails over all other forms of cloud services offered by local ICT providers and top technology giants worldwide. Unlike other hosted or web-based cloud service counterparts, FibreCloud has its core infrastructure located at Wharf T&T’s ISO certified tier 3+ data centre in Chai Wan with dedicated facilities, cuttingedge backup and restoration technologies.

Accompanied by multi-dimensional security measures including 2-factor authentication customer management portal encrypted with SSL certificates, dedicated firewalls and customer VPN segregation, FibreCloud guarantees all cloud equipment and customer data are well-managed and commits to a 99.99% service level agreement.

Cloud services go hand in hand with highspeed internet connection and yet many cloud service providers fail to deliver a cloud-ready network architecture which has hampered cloud adoption. Riding on Wharf T&T’s full fibre optic network, FibreCloud connects with Wharf T&T’s stable and reliable FTTD network and provides seamless layer 2 and layer 3 end-to-end cloud connectivity solution, so that customers can access to cloud resources and applications anywhere, anytime.

Wharf T&T focuses 100% on Hong Kong’s business needs and offers strong local support with well-trained certified staff providing

Fixed Network and Broadband - Telecommunications This page: FibreCloud; Community service; Excellent HR Information System Provider Award in HR Excellence Awards

practical cloud advice from consultancy, migration, managed services to usage planning.

Together with the 24x7 technical support service, customers can directly reach Cantonesespeaking customer service personnel anytime for troubleshooting and professional assistance without delay.

While FibreCloud is a pay-as-you-go service, businesses only have to pay for what they actually use requiring no large upfront capital investment. Its auto scaling feature also enables users to scale up and down their cloud requirement according to changing business needs.

"Cloud is the next key enabler of ICT evolution and we plan to develop and bring more best-of-breed cloud solutions to market with substantial investment. The launch of FibreCloud is a major step in driving local cloud footprint and facilitating innovation, and we are confident that FibreCloud will enable both Wharf T&T and Hong Kong businesses to embark on a rewarding cloud journey,” Ma said.

CSR comes under spotlight Being recognised as the Caring Company for 6 years, Wharf T&T invests largely in community wellbeing. Through collaborating with numerous NGOs of different nature as well as the active involvement in Project WeCan programme, Wharf T&T works relentlessly for the benefits of society and has successfully built

a strong reputation as a socially-conscious, ethical and sustainable ICT service provider.

Through Project WeCan programme, Wharf T&T establishes a deeper bonding with CCC Kei Heep Secondary School and helps equip students with essential skills for life and work.

Going green has long taken root in the business sector and Wharf T&T is no exception.

Wharf T&T attained the Gold Label of WWF’s Low-carbon Office Operation Programme (LOOP) for 5 consecutive years and made serious efforts to cultivate a green working lifestyle and paperless office towards environmental sustainability.

Business reaches record high Wharf T&T keeps breaking new grounds and continues to shine with a record performance and a more pronounced business outlook.

Following the all-time-high revenue and operating profit in 2013, Wharf T&T recorded encouraging results for the first half of 2014. Total turnover rose by 3% to HK$947 million and operating profit grew 15% to HK$165 million. EBITDA increased 6% with margin improving to 39%. Having secured 9 industry awards this year, Wharf T&T is on the winning streak to greater success. Apart from being selected as an outstanding player in network and business broadband by numerous publications, Wharf T&T’s IT subsidiary, COL Limited, races to the top and is the first HR Information System Provider Award winner at the HR Excellence Awards.

2015 marks the 20th anniversary of Wharf T&T. Just as the strength of a plant is in its roots, Wharf T&T has a solid business foundation to grow further and catapult ahead of the competition.

Opposite page: Vincent Ma, President of Wharf T&T

FAST FACTS • Wharf T&T is the first and only

comprehensive ICT service provider in Hong Kong focusing on the business sector.

• Licensed in 1995, Wharf T&T is

a core member of the Wharf Group with over HK$6 billion invested in its own telecommunications network infrastructure in Hong Kong.

• Wharf T&T’s ultra-high speed ‘Fibre- to-the-Desk’ network covers 5,000 commercial buildings, serving 90% of local business customers.

•

Wharf T&T is the entrusted partner of listed financial institutes in Hang Seng Index Finance Constituents, local universities, Global Investment Banks, licensed banks incorporated in Hong Kong and financial institutes, as well as the HKSAR Government departments providing them missioncritical ICT services.

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Zchron Design

PHILOSOPHY

Our ‘design and build’ concept aims to provide onestop shopping for interior building work, from the design brief to completion and handover for a set price, delivered at a set time, based on professional standards.

We cater to the residential, retail and corporate markets.

By being designer, project manager and main contractor, we are able to manage each project effectively and efficiently by coordinating with all the suppliers and subcontractors.

Zchron Design reveals the three keys to its success

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ith a passion for perfection, Zchron Designs is all about bringing a beautiful vision of the perfect home or commercial space to life.

It is traditionally accepted that the work of an interior designer is to, as its title suggests, offer beautiful designs for homes and commercial spaces. While this remains true for most interior design firms in Hong Kong, one firm dares to be different, stepping not only outside of the box, but also beyond the realm of its role to ensure the each project it designs is completed to the satisfaction of its customers.

For the seventh year, Zchron Design is awarded the accolade in interior design.

Anyone who has had a chance to understand the model of operation at the firm will find this unsurprising. For years, the firm has been working relentlessly to change the cultural practice and behaviours of the industry, from drafting a design right down to how contractors execute the renderings.

Raising the standard Founder of Zchron, Nison Chan, is the driving force behind what is described an initiative to lead ‘self-regulation’ within the industry. As Project Manager at Zchron Jan Wong, shares Chan’s vision and his hopes of lifting the standards of the industry.

“There are three keys to running a successful interior design firm,” says Wong. “It’s about balancing the design aspect and the business aspect. But also important is to work closely

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with contractors to ensure our projects are built the way we envisioned.”

In order to do this, Chan and the Zchron team offer incentives for contractors who are able to deliver top-notch craftsmanship. “A lot of times,” Wong explains, “it is very difficult for designers and contractors to understand each other’s needs. We are willing to pay them more if it means they are willing to put in the effort and time to build our projects to perfection."

Design in build services It is because of this difficulty in finding the right contractor to execute a project that many designers choose not to get involved in the build process. “We are one of the only firms in Hong Kong that provides both design and build service. Many designers are not keen on doing this because controlling a contractor and his team is a very challenging task. But we are not afraid to take on this added responsibility because we feel this will allow us to fully control the quality and to ensure the design’s final form is as perfect as our clients imagined,” says Wong.

Going forward, the firm will continue its focus on luxury properties and commercial projects. However, there is plan for expansions, specifically in China. To do so, Zchron will be publishing a book of its top designs, which, in 2015 will be sold in Hong Kong and China.

“This will allow us to reach a wider audience, letting more luxury home owners know what we are capable of doing in terms of both design

Interior Designer This page clockwise: Contemporary stair design; Modern classic master bedroom design; Elegant living room; Minimal master bathroom design; Ralaxing garden design Opposite page: Jan Wong, Project Manager, Zchron Design

FAST FACTS • 1994 -- Nison Chan starts Krishom Design Group to cater to clients in both the commercial and residential markets, providing design and project management to completion • 1994-2011 – Conceived and improved the ‘design and build’ concept for commercial clients, such as Hang Seng Bank, Sincere Deparment Store, Wellcome Supermarket and SaSa Cosmetics Company and others • 2006 – Started Zchron Design to cater strictly to the residential market

and build,” says Wong.

As for where the firm anticipates to be positioned in the future? Wong has this to say.

“In five years, we hope to be the number one build and design firm in Hong Kong. We believe we are one of the view interior design companies with the potential to reach this level of success in the region.”

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Index STATISTICAL TABLES AND CHARTS

Following an alphabetical listing of the statistical tables and the pages where they appear

Population by Age Group and Sex

60

Labour Force, Unemployment and Underemployment

61

Number of Establishments, Persons Engaged and Vacancies

62

Nominal Wage Indices for employees up to supervisory level

66

Real Wage Indices for employees up to supervisory level

67

Seasonally adjusted Consumer Price Indices

67

Underemployment Rate by Industry

68

Statistics on Domestic Households

69

HONG KONG’S HIGH FLYERS Outstanding Enterprises 2014

72 HSBC Life (International) Limited

98 Lan Kwai Fong Hotel @ Kau u Fong

76 Ageas Insurance Company (Asia) Limited

100 MassMutual Asia Ltd.

78 AIG Insurance Hong Kong Limited

102 MENCE

80 Altruist Financial Group Limited

104 Mercedes-Benz Hong Kong Limited

82 Canadian International School of Hong Kong

106 OZO Wesley Hong Kong

84 The Cityview

108 Rhombus International Hotels Group

86 www.Crystallize. Me Ltd

110 Sound Concepts Ltd

88 Fujitsu Hong Kong

112 Thomas Mayer & Associés

90 GODIVA Chocolatier

114 TransUnion Limited

92 Henley Business School

116 Wharf T & T

94 Hyperlink Holdings Limited

118 Zchron Design

96 InterContinental Grand Stanford

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