Hong Kong Business High Flyers 2015

ANNUAL 2016 2015

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Hong Kong's Outstanding Enterprises 18 TOP INDUSTRIES REVIEWED slippery slope for hk's economy IT'S ALL DOWNHILL FOR LUXURY RETAILERS

HONG KONG BUSINESS ANNUAL 2016 1

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Contents Annual 2016

2016 OUTLOOK 6 8 10 12 14 16

Slippery slope for HK’s economy in 2016 Office in, retail out for HK property Competition heats up in the jobs market Strong 2016 for corporate legal sector Opportunities abound in accounting It’s all downhill for HK’s luxury retailers

MOST READ IN 2015 18

A month-by-month review of Hong Kong’s top stories in 2015

COMPANIES AND INDUSTRIES 24 Telecomm firms adapt to mobile data usage frenzy 26 Electronics exports boom on almost every major market 28 Electrical Appliances exports burn out 30 AV equipment market grows as exports stabilise 32 Enhancements never end for Hong Kong’s IT industry 34 Construction industry taps regional opportunities 36 Domestic exports of jewellery lose their shine 38 Hong Kong’s retailers hop on the e-shopping wagon 40 Textile industry unravels as exports to China dip 42 HK engineers thrive in a highly competitive market 44 Lighting industry flickers as total exports slip 46 Footwear industry on its toes as buyers turn pickier 48 HK doubles down on quality in auto exports 50 HK healthcare equipment industry flatlines 52 Processed F&B players roll out wellness options 54 Insurance industry adjusts to a matured market 56 All work and no play for Hong Kong’s toy makers 58 Leather goods seeing signs of wear and tear

6 44

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 2016 1

Contents Annual 2016

72

High-Flyers 2015 72 HSBC Life (International) Limited

76

78

76 Ageas Insurance Company (Asia) Limited 78 Altruist Financial Group Ltd 80 Canadian International School of Hong Kong 82 CITIC Pacific Limited 84 City University of Hong Kong 86 Elite Concepts 88 GODIVA Chocolatier 90 Hang Seng Insurance 92 Hong Kong Matchmakers 94 InterContinental Grand Stanford Hong Kong

84

96 Lan Kwai Fong Hotel @ Kau U Fong 98 MassMutual Asia Ltd. 100 Mercedes-Benz Hong Kong Ltd 102 Ovolo Group 104 OZO Wesley HK 106 Rhombus International Hotels Group 108 Sound Concepts Ltd. 110 The Cityview 112 Thomas Mayer & AssociĂŠs 114 Uni-Bio Science Group Ltd 116 Wharf T&T 118 Zchron Design

2 HONG KONG BUSINESS ANNUAL 2016

104

114

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ECONOMIC OUTLOOK

Slippery slope for HK’s economy in 2016 Hong Kong is unlikely to escape from its 2015 troubles and the worst is yet to come.

I

f you think 2015 was already a pretty bad year for Hong Kong, then brace yourself, for 2016 is about to turn sourer--especially for the country’s economic health. Its heavy dependence on China spells mishap as exports, retail sales, and mainland tourist arrivals will all spiral down for the next months, stalling growth momentum. To make things worse, Hong Kong’s property market is showing no signs of getting better next year as housing loans are still too few and the buying environment remains tense and cautious.

Inflation will creep up Hong Kong’s economy expanded by 2.3% year-on-year (y-o-y) in Q315, beating consensus estimates for a 2.0% expansion but slowing considerably from Q215’s 2.8% performance. Andrew Wood, head of Asia country risk research, BMI Research says that the 2.3% print confirms their expectations for the city-state’s economic 6 HONG KONG BUSINESS ANNUAL 2016

"The CPI will increase by 3.0% in 2016, the same as that in 2015.

Intuitively, the CPI in 2016 should be lower than that in 2015 because of deepening rental disinflation and deflation of selected items."

growth to cool in line with a stumbling mainland economy, and corrB&Rates their full-year real GDP growth forecast of 2.5% for 2015. “We see little cause for a significant pick-up in activity in 2016 amid tepid external conditions and the rising propensity for a domestic property price correction, and have therefore marginally downgraded our real GDP forecast to 2.3% for 2016, from 2.5% previously,” he adds.

He further notes that they project the CPI will increase by 3.0% in 2016, the same as that in 2015.

Intuitively, the CPI in 2016 should be lower than that in 2015 because of deepening rental disinflation and deflation of selected items (e.g., clothing and footwear). “However, arithmetically, the CPI in 2H15 (est. 2.3% vs. 3.7% in 1H15) was skewed downwards by the timing and amount of government measures, such as rates waivers and electricity subsidies. In any case, the underlying CPI, which excludes the

effects of government measures, is likely to continue disinflating in 2016,” Wood says.

An additional factor, he says, that will cloud the CPI outlook for 2016 is the government’s CPI weighting and basket adjustment, which is updated once every five years “to ensure that up-to-date expenditure patterns of households in different expenditure ranges can be accurately reflected in the compilation of the CPI”.

“The new basket weightings and the inclusion of new items of consumer goods and services will affect CPI values in 2016 and beyond,” he explains.

Christiaan Tuntono, analyst at Credit Suisse, further clarifies that Hong Kong’s trend growth has already been slowing down despite support from resilient Chinese growth and very easy monetary conditions. As these factors dissipate, Tuntono says they expect trend growth to moderate further.

“We are also concerned about

ECONOMIC OUTLOOK Hong Kong’s fiscal condition in the face of weaker trend growth ahead. We believe the Hong Kong economy is entering a structural downturn. We have revised down our 2016 GDP growth forecast to 2% from 2.2%, and set 2017’s growth at 2.2%. We believe Hong Kong’s potential growth rate, which was estimated at around 4% over the past 15 years, will shift down towards 2.2% over the medium term. The potential growth rate is likely to have significant implications for the labour market, property market and the fiscal position, in our view,” he says.

He adds that in the domestic sector, he thinks that the already troubled property market will face three growing headwinds: (1) rising HKD interest rates; (2) rising new home completions; and (3) the prospect of a weaker labour market. However, he thinks that the sector will remain cushioned by an excessive amount of liquidity in the banking system. “Home prices may only slide, but not crash, in the absence of a severe credit crunch,” he says.

Strong recovery is unlikely Tuntono also thinks that the structural downshift of Hong Kong’s potential growth rate will be led by a slowing Chinese economy, and rising US interest rates.

Stabilisation in China is crucial to a 2016 turnaround. For now, growth momentum is still weakening for exports, retail sales and mainland tourist arrivals.

Kelvin Kin Heng Lau, senior economist at StanChart, believes that China’s growth, while showing early signs of bottoming out, is set to stay soft; Hong Kong sentiment could take even longer to recover.

This, he says, together with fading growth momentum in the US – the lone bright spot for Hong Kong’s exports for much of 2015 – will limit room for an improvement in Hong Kong’s growth in 2016. “We lower our 2016 and 2017 GDP forecasts to 2.4% and 2.8% from 3.0% and 3.5%, respectively”, Lau says.

Wood from BMI Research also adds that with both trade and financial services set to remain muted in 2016, they have seen fit to

downgrade BMI’s 2016 real GDP growth forecast to 2.3%, versus 2.5% previously, and note that a strong recovery in the city-state’s economy is unlikely to materialise over the next two-to-three years as the Chinese economy continues to slow.

Hong Kong’s private investment is positively correlated with China’s economic performance. Lily Ming Lee Lo, analyst at DBS explains that China’s slowdown has been protracted (annual real GDP growth dipped below 8.0% since 2012), and economic growth is set to slow further to about 6.8% this year and 6.5% next year. As profits are being squeezed, Hong Kong enterprises’ business expansion and capital expenditures should slow.

Indeed, private investment growth contracted 6.1% in 3Q, compared to expanding 6.3% in 1H15 (10-year trend: 4.9%).

Net exports will also likely chip off some headline growth, Lo says.

“Nominal net exports have fallen by 17.1% YTD. Export growth to major markets was negative across-the-board. Exports growth rates to Japan and the EU have been consistently negative since 3Q14.

Growth rates averaged -5.1% and -3.6% respectively over the past three months (Aug-Oct). Exports to China fell 4.9% over the same period. While export growth rates to ASEAN and USA were positive up to July, they abruptly dived to -3.0% and -4.9% in August to October,” she adds.

Lo also said that they at DBS anticipate exports to the US would recover in 1Q16 on the back of a firmer economic recovery, while those to emerging markets in Asia would remain negative. “A deepening economic slowdown on the mainland, a tough external environment, and uncertainty in financial markets would likely drag down GDP growth to 2.4% in both 2015 and 2016,” she explains.

China’s membership of the WTO in 2001 helped turn the country into the ‘world’s factory’, and that has led the robust growth in Hong Kong’s trade and transportation (logistic) services. In 2003, the commencement of the Individual Visit Scheme helped bolster Hong Kong’s tourism sector, which led

Andrew Wood

Christiaan Tuntono

Kelvin Lau

Lily Lo

to strong growth in Hong Kong’s travel service exports.

“The implementation of the Closer Economic Partnership Arrangement (CEPA) in the same year also created new business opportunities for Hong Kong’s service providers in the mainland Chinese market. All these policy measures have helped make China Hong Kong’s largest services export market in recent years, surpassing the US,” he says.

Stellar spending keeps its spring Luckily for Hong Kong, household spending remains the bright spot for now. Household spending has repeatedly proven its resilience.

While y-o-/y spending growth has been slowing since Q2-2015, households contributed a decent 2.7ppt to Hong Kong’s 2.3% y-o-y headline GDP growth in Q3.

“In contrast, investment fell 6.5% y-o-y (versus +5.2% prior) amid China’s intensifying slowdown and currency depreciation worries. Net exports of goods were a positive contributor only because imports contracted faster than exports.

However, households can only do so much to keep the economy afloat, especially if worsening external headwinds in 2016 push unemployment significantly higher,” Lau says.

In expenditure terms, private consumption was again the chief outperformer in Q315, expanding at a solid 4.3% y-o-y clip. However, Wood says that this represented a sharp decline from Q215’s 6.1% y-o-y pace, and the slowdown was even more dramatic in sequential terms (the 0.1% q-o-q expansion represented the slowest sequential growth rate since Q313).

Hong Kong’s exports are reliant most on China

Source: CEIC, Credit Suisse

HONG KONG BUSINESS ANNUAL 2016 7

PROPERTY OUTLOOK

Office in, retail out for HK property

Two sectors stand out in Hong Kong’s underperforming property market, but for opposite reasons.

T

he tides will be turned for Hong Kong’s property developers next year, as they are forced to dangle juicier deals to lure mostly uninterested buyers to fill up a projected influx of new supply. This is the opposite of what transpired in 2015, when developers struggled to find the supply needed in order to satiate buyers scrambling to find neat property deals for themselves and their companies. Consequently, prices would be softer in Hong Kong’s property market, as developers become less aggressive in their asking prices.

Two sectors also stand out in Hong Kong’s distressed overall property market, but for completely opposite reasons.

Joanne Lee, senior manager of Hong Kong research & advisory from Colliers, says the office property sector will buck the industry’s headwinds in 2016, on the back of an endless stream of liquidity from a variety of 8 HONG KONG BUSINESS ANNUAL 2016

"Capital values of mass and luxury residential [are] to drop by 0-5% in 2016, while luxury rental may be able to buck the trend and rise by 0-5%."

sources. “Multinational companies, such as insurance firms, are widely assessing the feasibility of purchasing for owner-occupation as a long term strategic move that optimises liquidity, rental affordability and risk management,” Lee adds.

The retail property sector, on the other hand, is losing its lustre as it slowly loses its grip on its role as the gateway to China. Marcos Chan, head of research at CBRE Hong Kong, also adds that Hong Kong’s retail property sector is still adjusting to shifting retail trends.

“Tourism consumption demand will continue to decline, and the sales momentum of luxury goods will remain slow,” Chan says.

Residential The primary residential market will dominate sales in 2016, as the momentum continues to be languid on the secondary market.

According to Lee, a steep fall in prices following 2015’s all-time high

is improbable, as excessive liquidity in the global economy, optimum supply conditions and soaring construction costs will prevent a decline.

According to Joseph Tsang, managing director of JLL Hong Kong, developers will be less aggressive on asking prices and will continue to dangle sweeter deals and financing schemes to lure more buyers to fill up new projects which will be launched. Tsang also expects capital values of mass and luxury residential to drop by 0-5% in 2016, while he adds that luxury rental may be able to buck the trend and rise by 0-5%.

On the other hand, David Ji, director and head of research and consultancy, greater China at Knight Frank, adds that as the US Fed is poised to increase the interest rate, the residential market is bound to take a hit and see some weakening in both residential sentiment and demand. “Given the large supply coming on board in

PROPERTY OUTLOOK the New Territories, house prices in these areas will be under pressure.

However traditional markets are expected to hold out as overall we are looking at mass home prices to decrease 5-10% next year, while luxury residential prices could drop 0–5% next year,” Ji says.

Office Chinese investors will remain the cornerstone of Hong Kong’s office market as they continue to expand in Hong Kong. Ji adds that the Chinese firms, most notably financial institutions, are poised to capitalise on the increased collaboration of financial markets between Hong Kong and the mainland.

He also cited the proposed Shenzhen-Hong Kong Stock Connect as an example. As the extremely low vacancy rate mingles with sustained demand, Ji expects both Grade-A office rents and prices in the core districts to increase by 5% in 2016.

Lee, on the other hand, sees the office sector as the most resilient one among Hong Kong’s property types, thanks to an endless stream of liquidity. “ These include Sovereign Wealth Funds, REITs, insurance and banking firms, as well as accumulated high net worth clients from across the region,” Lee says. However, Lee foresees a 5% drop in office prices in 2016.

Meanwhile, the office market in Kowloon is a completely different ballgame, according to Colliers international. Diminishing demand has been plaguing the region in 2015, with tenants opting to renew for even shorter lease terms, typically one or two years. Patrick Mak, senior director of Kowloon Office Services, says the complexion of the office market in the region would shift in favour of tenants due to an increase in supply of both new and revitalised properties. “The resultant oversupply will lead to a rise in vacancy rates from 2.9% to 5-6%, driving more relocations,” says Mak. Industrial Industrial property developers have March 2016 marked on their calendars, and for a good reason--the end of the industrial

revitalisation scheme. Colliers says the halting of the industrial revitalisation scheme will contribute to a rise in potential industrial yields by up to 70 bps.

However, with a notable slowdown in export activities and retail sales at end-2015, Colliers predicts that rents will soften by 4% in 2016.

Chan agrees that the lifting of the revitalisation scheme would give industrial property developers some elbow room, especially new industries looking for space such as the self-storage sector and data centres. “A major project in Tsing Yi is expected to be completed in 2016, which will provide the market with 1.3 million sq. ft. of additional space,” Chan says.

Retail A one-two punch of declining tourism consumption demand and slowing luxury goods sales has left Hong Kong’s retail property sector down for the count, and the country will continue to suffer the bruises until 2016. Chan predicts retail rents in core locations to decrease by 15-20% in 2016 following a decline of 20% in 2015.

“We will see an increase in midmarket and mass market brands as they expand their footprint and take over surrendered spaces from high-end brands,” Chan says.

“Rents will continue to trend down, but in light of the lower base of comparison, the pace of decline will appear to decelerate.”

Lee concurs that Hong Kong’s luxury retail sales have plunged in the midst of China’s economic slowdown, spurring a 25% drop in 2015 in prime high-street retail rents. She says that the downward spiral would continue in 2016, caused by structural changes in mainland-consumer behaviour.

“Thinning crowds of shoppers force brands to look for cheaper alternatives. We predict rents of prime street shops will edge further down by 10% in 2016,” Lee says.

However, Lee sees some semblance of resilience in malls, which will be buttressed by the healthy spending of domestic Hong Kong shoppers. She adds that retail property prices will see the steepest decline among property types, anticipating a 24% drop in 2016.

“Prospective buyers are inclined to be more conservative in pricing due to the downside risks from the impending interest rate rise,” Lee says.

David Ji

Joanne Lee

Marcos Chan

Investment 2015 had been a year for declining transaction volume and values in Hong Kong due to predominantly negative market sentiment, according to Colliers. “The respective falls of 37% and 29% from 442 deals worth HKD91.1 billion in 2014 to 279 deals worth HKD64.4 billion in the first ten months of 2015 were the second biggest since 2008’s dramatic 44% drop,” Colliers said.

On the other hand, while the investment market has seen some improvements in 2015 due to increasing demand for commercial properties, JLL’s Tsang says the anticipated rise in interest rates will bottleneck an upside in capital values. Consequently, Tsang foresees capital values of Grade-A offices to grow by another 0-5% in 2016, while prices of high street shops are expected to slide further by 10-15%. Tsang also predicts that the capital value of warehouses will go up by 0-5%.

Vacancy Rate

Source: Colliers

Retail Sales Value

Source: Hong Kong SAR Government; Colliers

HONG KONG BUSINESS ANNUAL 2016 9

Hiring and Salary OUTLOOK

Competition heats up in the jobs market As businesses become more cautious in hiring, the bar for jobseekers is also being raised higher.

C

hina’s economic slowdown may have caused some Hong Kong businesses to be more cautious in growing their headcount in 2016, but analysts predict that Hong Kong’s strategic location will still fuel the competition for top talent in the market.

Andy Bentote, senior managing director, Hong Kong, Southern China and Taiwan at Michael Page and Page Personnel, notes that the slowing of the Chinese economy has impacted business growth prospects and hiring levels in certain sectors towards the tail end of 2015. “As we enter 2016, this could well lead to a renewed focus on higher salaries from employees, away from their current demands for increased work-life balance and leave allowance.”

In a more difficult economy, with fewer jobs around and tightened employer criteria for candidates, Bentote says job 10 HONG KONG BUSINESS ANNUAL 2016

"Multinational companies are accelerating their pace to acquire candidates who can understand different cultures and efficiently execute their strategies."

seekers will really have to step up and earn a new job, against fiercer competition. More so than ever, job seekers will need a compelling CV that sells their achievements as well as polished interview skills to win employers over.

“Due to uncertainties around China’s economic slowdown, companies are likely to remain cautious in growing their headcount during 2016. However, organisations will continue to have high demand for top talent in order to up-skill their teams,” reckons Matthew Bennett, managing director - Greater China at Robert Walters.

Hiring trends in 2016 Candidates with strong business acumen and communications skills as well as regional experience will be in greatest demand, according to Dean Stallard, regional director of Hays in Hong Kong. He notes that multinational companies will

prefer candidates who grasp three languages (Mandarin, Cantonese and English) to support their business growth in the city, which continues to serve as a bridge between Asia and the global market.

“Hong Kong’s dominant role as a regional commercial centre, its close relationship with the mainland economy, and the growing offshore yuan businesses have prompted MNCs to hire more talent with tri-lingual skills. Trilingual skills are in hot demand given Hong Kong’s unique position as a gateway to the mainland and Asian markets,” says Stallard.

“In order to boost their sales in the regional market, multinational companies are accelerating their pace to acquire candidates who can understand different cultures and efficiently execute their strategies,” he adds.

Furthermore, Hong Kong’s increased efforts to consolidate its

Hiring and Salary OUTLOOK status as an offshore yuan hub will give rise to new recruitment needs in financial institutions in 2016, according to Stallard. Business opportunities and increased hiring will arise following the International Monetary Fund’s decision to include renminbi into a basket of its reserve currencies.

“The internationalisation of yuan will continue to benefit Hong Kong because it is by far the most ideal marketplace for promoting yuan outside the mainland. In other trends for the year ahead, IT professionals will be in hot demand as the volume of business conducted via the Internet continues to rise quickly.

High-calibre professionals who can help fine-tune supply chains will also be avidly hunted as companies hope to enlist their help to reduce costs,” he adds.

In-demand jobs Robert Walters anticipates continued demand from the technology sector as a result of the growth in cloud technology, digital and big data. As these are relatively new areas, IT professionals with such skill sets and experience will be hard to find. “The city’s traditionally strong professional services sector will also continue to develop, creating a strong competition for talent, for example, compliance specialists and Mandarinspeaking investment professionals will see an ongoing need for their skills,” notes Bennett.

Michael Page’s Bentote adds that financial services is an interesting area as 2016 heads our way. Anti-money laundering (AML), general compliance, risk and know your customer (KYC)

Andy Bentote

Dean Stallard

Lee Quane

Matthew Bennett

Hong Kong - forecast vs actual salary increase

Source: ECA International

are still very much in demand in the market. On the flipside, he adds that the emergence of Fintech has seen the movement of Financial Services products onto more online technology, so the need for candidates in this area is high. There is a big question mark over whether the candidate flow can keep up with the pace of growth. Anyone with strong digital capabilities will be in demand as we enter 2016.

Within the broader technology sector, there is still demand for developers and architects at all levels. Cyber security is also an area where Hong Kong has a massive shortage of candidates, given that it is a relatively new function.

“Retail is another area going through change and some luxury retailers are considering store closures; a symptom of the slowdown in the economy perhaps, meaning fewer Chinese are buying luxury items at present. In contrast, fast fashion is doing well, with some of the bigger high street chains experiencing strong growth.

Therefore demand for qualified candidates is high,” says Bentote.

As companies seek to drive topline growth, sales managers with a proven track record will also be highly sought after, according to Robert Walters’ Bennett.

in 2016, but rises will be higher across in-demand areas, for example, compliance professionals specialising in areas such as antimoney laundering and control room could receive increases of up to 30% when switching jobs.

Meanwhile, Bentote reckons salary increases will realistically be linked with inflation at around 3% and there is every indication that a fair level of bonuses will get paid. The general view is that these are likely to be sensible rather than extravagant.

A recent survey reveals some bad news for hardworking employees: Hong Kongers will see some of the lowest “real” wage increases in Asia in 2016 despite 4.5% average raises in 2016. The latest Salary Trends survey by ECA International notes that after inflation is taken into account, real wage increases will amount to 1.5% on average in Hong Kong in 2016. This is the third lowest ‘real’ salary increase in the Asia region, only bettering Macau and Myanmar.

“In spite of the shadow of current economic uncertainty looming over key industries in Hong Kong, companies are predicting that salaries will rise by similar amounts this year and next year, in both nominal and real terms,” said Lee Quane, regional director – Asia, ECA International. “This reflects the Salary trends need for companies to maintain Bennett notes that salary relatively high rates of wage increments for candidates increases in order to continue to changing jobs will average 10-15% attract and retain talent.”

HONG KONG BUSINESS ANNUAL 2016 11

LEGAL OUTLOOK

Strong 2016 for corporate legal sector Hong Kong’s Belt and Road initiative is expected to provide fresh impetus.

D

espite much talk of the Chinese economy cooling down, 2015 has been a strong year for the corporate legal sector in Hong Kong. Phillip John, Norton Rose Fulbright head of North Asia, notes that they have seen a strong deal flow this year and that their Chinese clients are still very keen on pursuing investment opportunities in international markets. “We’ve continued to see these clients seeking to access funds through the debt and equity capital markets in Hong Kong. There may be some cooling but we don’t see a material decline in that trend in 2016,” he said.

According to John, Norton Rose Fulbright have had a number of prominent deals closed by its corporate team this year. The team have had a particularly high level of activity in equity capital markets work. The most significant transactions for its corporate M&A and securities team in 2015 12 HONG KONG BUSINESS ANNUAL 2016

"Chinese clients are still very keen on pursuing investment opportunities in international markets."

include the firm advising on the first rights issue under ShanghaiHong Kong Stock Connect. The firm also advised on the HK$29.9 billion Haitong Securities H shares subscription.

Deacons’ partner, Ronny Chow explains that the substantial and rapid growth of Hong Kong’s debt capital market in the past few years can be attributed to the wide range of product offerings, coupled with open access for issuers and investors, both domestic and international, and the increasing significance of offshore RMB bond issuances in Hong Kong.

“In recent years, with the easing of monetary policy in the United States, Europe and Japan, the market has witnessed an increasing number of companies which have entered the debt capital market, including PRC- based companies taking advantage of the lower funding costs relative to the onshore market.

Many companies which have

traditionally relied on loan financing have become more willing to tap the debt capital market as an alternative source of funding,” says Chow.

Chow adds that while the market has been dominated by US and Hong Kong dollar issues, increasingly bonds denominated in other currencies are being issued, including the Euro, Singapore dollar and RMB. The Hong Kong listed bond market has also grown substantially in recent years. Chow explains that one of the criteria for investment for some investors, such as institutional funds, is to invest in listed securities.

Therefore, the listing of debt securities in Hong Kong, he said, has helped to broaden the investor base for bond issuances and provided a viable financing option for many issuers.

According to the Hong Kong stock exchange, for the year ended 31 December 2014, there were 281 newly listed debt securities on the

LEGAL OUTLOOK

Phillip John

Jay Lee

Hong Kong stock exchange and the amount raised was approximately HK$961 billion. As at 31 December 2014, there were a total of 640 debt securities listed on the Hong Kong stock exchange.

According to Chow, the growth in listed debt securities is due to the simplified and streamlined application and approval procedures for listing of debt securities issued to professional investors. He adds that the Hong Kong stock exchange no longer prevets the contents of the listing documents, and formal approval by the Listing Committee is no longer required. “The simplified listing process has brought the Hong Kong stock exchange more in line with the requirements of other stock exchanges in the region and has provided an attractive listing venue for debt securities,” says Chow.

throughout Europe, Africa, the Middle East, and parts of Asia over the next ten years. New transport links and other infrastructure will be developed to connect China with Europe, southeast Asia and Africa.

The initiative thus provides a range of opportunities for companies looking to tap Chinese investment for developments within the B&R region, he says. John adds that while these projects will predominantly be developed by Chinese companies, there will be opportunities for nonChinese sponsors to invest alongside Chinese companies.

For the legal services sector, John believes that the opportunity is to advise Chinese companies on how to go about working in the various countries being targeted, and to advise companies in those jurisdictions on how to effectively partner with Chinese investors.

2016 outlook From a global perspective, John believes that the Hong Kong’s legal sector is at a time of some uncertainty. Anticipated rises in the US interest rates, very low oil prices and a slowing of the Chinese economy, he says, are a major drag. On a positive note, John sees the One Belt, One Road (B&R) initiative will provide fresh impetus to the development of the legal services sector once implemented.

He estimates that the B&R initiative will see an estimated USD2.5 trillion being invested in energy, transport, and infrastructure projects

Financial markets Aside from capital markets seen to flourish next year, the financial market is also expected to have steady growth that in return will help boost the legal sector.

Jay Lee, partner at Simmons & Simmons, believes that Hong Kong will continue to be important for their financial markets and disputes practice as financial institutions continue to face a wall of regulation and investigations.

According to Lee, there are significant changes to long established contractual principles, including the introduction of the

Contract (Rights of Third Parties) Ordinance in Hong Kong and potential implications for penalties and liquidated damages clauses from the English Supreme Court.

In addition, the new Competition Ordinance, Hong Kong’s first crosssector competition law, came into full force on 14 December 2015.

Meanwhile, in the process of implementing B&R, Lee expects that there will be many state companies and large financial institutions-driven outbound investments. Such infrastructure investment programmes under the B&R initiative, he says, will benefit the construction machinery companies, infrastructure construction companies, building materials producers as well as infrastructure operators in China in the initial stages of the B&R implementation.

“There will be legal needs in debt financings, mergers and acquisitions, foreign investments, joint venture/ consortiums, project finances, trade finances, construction contracts and Private Finance Initiative/Public Private Partnerships, among others,” he notes.

Lee also adds that one objective of the B&R initiative is to promote financial integration among relevant regions and countries. It is thus inevitable, he says, that more legal professions will be required to accomplish this objective.

Lastly, Lee says that given the many different and varied legal, political, economic, cultural and religious systems among the countries in the B&R umbrella, it is inevitable that multi-jurisdictional and complex legal issues will arise and cross-border disputes and conflicts will also arise.

Salaries per annum in the legal sector (HKD)

Source: Robert Walters Hong Kong

HONG KONG BUSINESS ANNUAL 2016 13

ACCOUNTING OUTLOOK

Opportunities abound in accounting A slew of regulatory changes have made the accounting profession less attractive.

Y

ear 2015 has seen a series of disruptive changes reshaping the whole ecosystem of HK’s accounting sector, creating new challenges and business opportunities. The application of technology into finance and the development of big data, for instance are changing the shape of traditional finance and accounting practice, while the regulatory environment is constantly evolving to cope with the transforming business landscape. According to Agnes Chan, HK & Macau managing partner of EY, there has been a lot of focus on the Organisation for Economic Co-operation and Development (OECD) action plan to combat base erosion and profit shifting (BEPS) and the HK Exchange’s proposed changes to environmental, social and governance (ESG) reporting requirements.

Year 2016 is seen to be filled 14 HONG KONG BUSINESS ANNUAL 2016

"It has been increasingly difficult to retain and recruit the right talent."

with vast array of opportunities but all signs seem to point to a challenging year. According to Chan, there have been growing volatilities in the commodity and capital markets, coupled with the economic slowdown of China and the looming interest rate rise in the US. Within the industry, she believes that we keen competition for business and talent will persist. “In fact, it has been increasingly difficult to retain and recruit the right talent.

We are not only competing with other accounting firms, but also competing with banks, governments and commercial sectors,” she said.

Business opportunities Chan believes that HK’s wellestablished capital market gives it advantages to capture these opportunities. “In 2016, businesses will continue to show strong aspirations in

transformation and accelerating growth. HK will benefit from China’s overseas investment and the upcoming Shenzhen – HK Stock Connect,” she said.

Chan expects more demand for non-audit services, such as advisory, with the changing regulatory environment and growing cross-border investment.

Moreover, she believes that there will be growing business opportunities in innovative and digital such as data analytics.

Furthermore, Chan adds that Chinese companies are increasingly globally focused and the supportive policies will continue to encourage overseas investment. In particular, Chan cites the China-initiated One Belt One Road initiative (B&R) and the Asian Infrastructure Investment Bank (AIIB) that will spur demand for statutory audit services, investment-related, tax and corporate advisory.

ACCOUNTING OUTLOOK Pammy Fung, director at Crowe Horwath (HK) CPA, expects demand for accounting professional services to continue to increase and the accounting environment will be relatively stable. According to Fung, the new regulations on listed companies about ESG Reporting, Risk Management and Internal Control, effective for the financial years or periods commencing on or after 1 January 2016, will boost the demand for accounting professional services, especially for valuation and internal control review services.

B&R B&R is expected to provide a golden opportunity for HK to become a major financing platform. According to media report, overseas investment from Chinese companies in the B&R regions is expected to reach US$200 billion within three years. Consequently, Chan believes that this will boost the demand for professional services, especially investmentrelated services such as risk assessment and international tax planning. As a result of this surging demand for professional services, Chan said that it will provide fresh impetus to the accounting sector as HK has long been the preferred services platform for many mainland companies. “With its free capital flow, largest offshore RMB pool, abundant information resources and world-class professional services, HK could develop into a major fund-raising and financing platform for the B&R strategy and achieve a leap in economic growth and sector development,” she explained.

Furthermore, Chan noted that the majority of the 60 countries along the belt and road are developing countries with great potential for HK to promote finance, trade, logistics, tourism and professional services.

Fung meanwhile said that B&R will create opportunities in the establishment of road networks, railways, harbours, oil pipelines and networks in electricity supply and optical transmission. This,

she said, will create an enormous demand in infrastructure, natural resources, machinery production, logistic management and associated supporting services. “New businesses will be established and demand for accounting professionals definitely will increase,’ said Fung.

Being one of the major financial centres in the world and with its excellent location, Fung believes that HK will provide significant supports including sources of finance and logistic support to corporations involved in the core and associated areas.

“HK’s skilled labourers and professionals, ranging from infrastructure workers, management experts, to experienced accountants and lawyers, are of high quality. The strategic “Silk Road Economic Belt and 21st Century Maritime Silk Road” will definitely speed up the demand and growth of high quality professionals in the financial and accounting sectors,” she said.

Challenges According to Crowe Horwath’s Fung, a major challenge for the accounting industry in 2016 will be the need for many accounting firms to maintain growth amidst shortage of manpower and increasingly external regulatory pressure at the same time. Fung explains that the shortage of manpower in particular, is due to the long working hours, tough overseas working environment and stress to meet tight deadlines in CPA firms which are causing experienced auditors leaving the CPA practices after being qualified. It also deters accounting graduates from joining the accountancy profession, she added. “The competition for recruiting accountants in the market is keen. There is a huge demand for professionals in the compliance field due to the need to meet the complicated regulatory requirements of listed companies,” said Fung.

Fung meanwhile believes that the new “Provisional regulations on CPA practices carrying out audit services relating to the

Agnes Chan

Derek Lai

Pammy Fung

listing of Mainland enterprises outside Mainland” lowers the flexibility when they arrange job timetables for their clients. “It adds a tremendous administrative workload for us in coordinating with PRC CPA firms and government authorities to fulfill the requirements,” she said.

Fung also points to the Companies Ordinance Section 408 as a reason for fewer people joining the accounting industry.

Through this rule, “offences relating to contents of auditor’s report” imposes criminal liability on auditors regarding their negligence.

Lastly, Fung cautions that the new Financial Reporting Council reform which may come into effect creates uncertainty in the accounting industry. This, she said, also stops people from joining.

Derek Lai, southern region managing partner at Deloitte, also agreed that demand for accounting professionals will be persistent, especially for advisory professionals. But, with increased regulatory requirements locally, he believes that HK accounting professionals will move into mainland China to work. “There will be change of requirements for accounting professionals.

There will be more demand for professionals involved in infrastructure. While the economy is slowing down, it will require a lot of manpower. The accounting industry is shifting from constitutional accounting professionals to more advanced - from traditional accounting, auditing, to more on advising people as they have to have valueadded services,” said Lai.

Salaries per annum in the accounting sector (HKD)

Source: Morgan McKinley Salary Survey 2015

HONG KONG BUSINESS ANNUAL 2016 15

RETAIL OUTLOOK

It’s all downhill for HK’s luxury retailers

Upscale brands will cease to dominate the market as big-ticket spending continues to languish.

I

t’s the end of an era for Hong Kong’s battered luxury retail market. Bleak news await upscale retailers in 2016, as experts warn that extremely weak luxury sales and flagging tourist demand will continue to plague the territory in months ahead.

Government statistics show that sales of luxury items dropped by a staggering 14.7% year-on-year in the third quarter of 2015, on the back of a steady decline in tourist spending. This resulted in the largest quarterly decline of prime retail rents in almost two decades, leaving landlords reeling while retailers scramble for ways to minimise their losses.

The usual suspects There are three key culprits behind Hong Kong’s falling luxury retail sales: the anti-corruption drive in China, mainland tourists’ changing consumption patterns, and the Hong Kong dollar’s 16 HONG KONG BUSINESS ANNUAL 2016

"Sales of luxury items dropped by a staggering 14.7% year-on-year in the third quarter of 2015, on the back of a steady decline in tourist spending."

strength against the yuan and other regional currencies.

“One of the major reasons for the luxury sales decline has been the anti-corruption policy in China, which has led to a change in mainland tourist consumption in Hong Kong,” says Joe Lin, executive director, Retail Services at CBRE. Lin highlights that in the past, mainland tourists would spend a high amount purchasing watches, handbags and jewellery in Hong Kong, mostly as gifts for others.

Now, China’s anti-corruption drive has deterred tourists from buying in bulk, and luxury purchases are now mainly for self-use and not gift-giving.

The effects of China’s austerity drive have been exacerbated by the Hong Kong dollar’s strength against most regional currencies, says David Ji, director, head of Research & Consultancy, Greater China at Knight Frank.

“In my mind, the Hong Kong dollar’s strength is the major contributor to the drop in tourist spending in Hong Kong this year,” Ji says. The Hong Kong dollar has gained considerably against the yuan and other currencies in the first nine months of 2015.

Because the HKD is pegged to the greenback, the currency is set to strengthen even further in 2016, particularly after the United States Federal Reserve’s decision to hike interest rates for the first time in almost a decade.

The devaluation of foreign currencies is driving a significant diversion of tourists to cheaper locations, Ji noted, particularly as prices of products in overseas locations have become cheaper than in Hong Kong. Mainland tourists are flocking to other locations such as Japan, Korea and even European countries to do their shopping, leaving Hong Kong’s luxury sales dropping in

RETAIL OUTLOOK the wake of their departure.

Experts warn that the trend of declining luxury retail sales is unlikely to reverse in the near future.

Joanne Lee, senior manager of Hong Kong research & advisory at Colliers, notes that China is not likely to ease its austerity drive in 2016, which will keep a lid on Hong Kong’s luxury retail sales.

“Apart from structural changes in mainland-consumer behaviour, weaker inbound tourism and slowing economy in Hong Kong are also to blame for the gloomy retail sector.

Stability in the labour market and consistently low unemployment, which backs the growth of local consumption, will help counter the negative external factors.

However Hong Kong, being a small economy, has always been reliant on external factors.

It is unable to boost the retail industry and economy by local consumption alone. Hong Kong’s economic growth is set to slow and retail sales are expected to post a single-digit decline next year,” Lee says.

The new normal Persistently low luxury sales have led to headline-grabbing shop closures by major brands.

In September, US-based leatherbag maker Coach, closed its flagship store on Queen’s Road Central, two years before its lease is due to expire in October 2017.

Such high-profile store closures have pushed landlords to cut aggressively cut rents.

This is the case with Emperor International Holdings, which has agreed to slash rents for five retail premises in Causeway Bay by up to 40%.

CBRE’s Lin notes that the retail market has reached a turning point—luxury brands will no longer dominate the market.

More mid-market retailers will snap up spaces vacated by luxury retailers in core locations, and this trend is set to continue in coming years.

“In the past few months we have observed a number of cases of mid-market retailers taking

up spaces made vacant by luxury retailers, such as multi-brand cosmetic retailers taking over shops previously occupied by luxury watch brands,” Lin says.

Meanwhile, Lee adds that the softening retail-leasing market is encouraging the gradual return of mass-market retailers and midrange brands to prime shopping districts. While this is negative for landlords, this is good news for local consumers.

“Some mass-market retail chains, for example high-street fashion and affordable-cosmetics brands, are taking advantage of the current market slowdown to move back in and take up new leases. As luxury brand retailers consolidate business, we will see a change in the landscape of shopping streets and that is good for the retail sector, by means of a healthier tenant mix with different kinds of tenants, not just watches and jewelry stores,” Lee says.

In order to cope with dropping sales, Ji notes that some prime retailers have chosen to relocate to shopping malls rather than keep their street-front shops. Ji expects luxury rents to continue dropping in 2016, with street-front shops expected to decline by 10-15% next year. In contrast prime shopping mall rents will stay resilient and are even forecasted to increase by 2-3%, as there is no new supply coming into the market while demand remains buoyant.

“Mall rents should hold steady because there is no new supply coming into the market, while some retailers are looking to consolidate their stores into shopping centres. This is why prime shopping mall rents are forecasted to increase by 2-3% in 2016. So here we can see a divergence between retail rents,” Ji says.

A silver lining Despite the sector’s troubled outlook, there are still pockets of hope to be found in Hong Kong’s retail scene. Strong domestic and tourist demand for mass-market products will keep sales buoyant in 2016.

“Mass-market retail sales

David Ji

Joanne Lee

Joe Lin

have been supported by local and tourist spending. Tourists are buying affordable items such as fast fashion, sportswear and cosmetics goods. Local consumption has remained strong due to a steady economy and low unemployment rate,” says Lin. “We expect the rental downcycle will continue for the next 2 years, but given a lower base of comparison, the pace of decline is expected to decelerate.

In terms of retail property transactions, the weak retail market sentiment will continue to curb sales of retail properties,” Lin adds.

Lee says that regardless of the depressing retail sector, shopping malls and stores that sell mass market goods are unlikely to be adversely affected by falling Chinese tourist arrivals and structural changes in consumption patterns.

“The local retail market remains supported by the healthy spending of domestic Hong Kong shoppers. Rents in malls, those of which are not heavily exposed to luxury brands will stay resilient,” Lee says.

The fact that retailers are will be able to adapt to changing consumption patterns provides hope for Hong Kong’s shifting retail market, says Ji. “This trend is not going to reverse any time soon. The Chinese anti-corruption drive will continue and the economy will remain subdued, which will continue to dampen luxury retail spending. Although the retail outlook will be subdued, there is still a glimmer of hope, as retailers will be able to adapt to this situation,” Ji says.

Valuie of HOng Kong Retail Sales (by type of outlet)

Source: Census and Statistics Department, KHSAR Government

HONG KONG BUSINESS ANNUAL 2016 17

TOP NEWS IN 2015

MOST READ

year. According to a research report from CBRE, these are in addition to the six residential sites to be tendered. The industrial site, in particular, will be the first to be sold in 14 years.

HR & EDUCATION

Almost half of HK employers wary of skill shortage effects on operations

Daily news: www.hongkongbusiness.hk ECONOMY

Hong Kong 10th priciest place for expats in Asia Pacific

RETAIL

Stingy tourists further dragged Hong Kong’s sluggish luxury sector

The prime street shop leasing market remained subdued over Q3/2014 amid sluggish retail sales, especially in the luxury segment. According to a research note from Savills, a number of international luxury retailers and retail groups have reported weaker sales growth over the third quarter of the year.

Hong Kong is the 10th most expensive location for expatriates in Asia Pacific and 28th globally while Seoul has overtaken Tokyo to take top spot in the region. According to a release from ECA International, these are among the findings of the company’s latest Cost of Living survey.

The SAR dropped just one spot in the Asia Pacific ranking over 12 months and has been overtaken by Singapore.

Increasing demand for Chinaspecialised professionals, the localisation of the workforce, continuous innovation and the impact of the ‘through train’ stock connect scheme are among the trends that will shape the recruitment landscape in Hong Kong in 2015.

18 HONG KONG BUSINESS ANNUAL 2016

Hong Kong overtakes Singapore as Asia’s premier wealth management hub

Singapore has been overtaken

by Hong Kong in Deloitte’s rankings of the world’s largest wealth management hubs. Hong Kong shot past Singapore to clinch fifth place in the list, after achieving a stellar 146% growth in terms of managed assets from 20082014.

Home prices slump by 0.5% for the first time

Take a chill pill: New property cooling measures are unlikely to be rolled out

Three is better than one: Hong Kong job hunters need to be trilingual come 2015

FINANCIAL SERVICES

Around 45 percent of employers in Hong Kong believe that the skills shortage has the potential to hamper the effective operation of their business or department.

According to Hays, the most difficult professionals to recruit are senior management candidates in sales, accountancy and finance, engineering, marketing, operations and HR.

RESIDENTIAL PROPERTY

RESIDENTIAL PROPERTY

HR & EDUCATION

In a report gauging the quality of hotel WiFi involving cities, countries, and world regions, Hong Kong has been ranked sixth in the nations the report covered. According to a release from Hotel WiFi Test, further, the United States is only in the 21st percentile for WiFi quality.

Compared to 12 months ago, when Hong Kong’s housing market was still reeling from the introduction of new presale rules and home prices had only risen an anaemic 2.3% in 2013, the current context is very different.

Hong Kong home prices dropped for the first time after gaining in three straight weeks. According to Barclays, the CCL home price index dropped 0.5% w/w to 134.03, but remained up 1.2% in 2015 so far. Among the four districts, Hong Kong Island and Kowloon declined by 2.3% and 0.3% w/w respectively, while New Territories West and East gained 1.6% and 0.5% w/w.

COMMERCIAL PROPERTY

More commercial sites up for sale before end-2014

The government announced the land sale programme for Q4 2014, with two commercial sites and one industrial site to be made available for sale before the end of this

INFORMATION TECHNOLOGY

Hong Kong hotels’ WiFi quality ranked 6th best in the world: report

RETAIL

December 2014 retail sales down 3.9% despite global jump in Chinese overseas spending

Hong Kong retail sales in December 2014 were at HK$47.8 bn, down 3.9% y/y by value. According to a research note from Barclays, this missed Bloomberg consensus estimate looking for +4.4% y/y growth.

December retail sales volume decreased by 1.3% y/y. The December trends were much weaker than November, which saw retail sales rebound to +4.2% growth. The report noted that these trends in Hong Kong also contrast sharply with Global Blue data which showed that Chinese overseas spending was +49% y/y. These trends support Barclays’ view that Chinese visitor spending continues to diverge to other travel destinations outside of HK.

TOP NEWS IN 2015

MOST READ

Daily news: www.hongkongbusiness.hk to expand the scheme to cover more Chinese cities.

ECONOMY

Asia’s ultra rich individuals wealthier by 7% vs America’s

RESIDENTIAL PROPERTY

Chinese home buyers in Hong Kong make up only 5.6% of overall sales volumes in 4Q14

Mainland Chinese buyers have long been regarded as an important source of marginal demand, and this has been the case not only for Hong Kong retail sales but for the local housing market as well.

According to Barclays, with the housing market’s momentum, expect Chinese buyers to jump back on the bandwagon.

Knight Frank, the independent global property consultancy, recently launched the ninth edition of The Wealth Report 2015. The report tracks the growing super-rich population in 108 cities across 97 countries.

currently) by end-June 2016.

Barclays estimates Hang Seng Bank and BOCHK’s capital adequacy ratio will fall by 35 and 22bps. However, it was also noted that both banks are still well capitalized after the adjustment.

RETAIL

Hong Kong 6th most popular retail market globally

International expansion remains high on the agenda for retailers in 2015, despite uncertain economic prospects and cost escalation, and Hong Kong follows China as one of the most targeted markets in Asia Pacific for global retailers considering expansion.

FINANCIAL SERVICES

Earnings of Hong Kong’s top 4 banks drop 19.57% to HK$128.07b in 2014

MARKETS & INVESTING

Hong Kong has largest number of billionaires in Asia: report

It has been noted that the total number of billionaires in the world now reaches 1,844, which is an 82% increase from ten years ago. Hong Kong, with 53 billionaires, tops the largest billionaire population in Asia.

New HK visitor policy feared to shoo more Mainland tourists away

Hong Kong’s Chief Executive Mr CY Leung recently stated that the Hong Kong government will discuss with Chinese authorities in March to tighten arrangements under the Individual Visit Scheme (IVS) for PRC tourists; and not

How Hong Kong banks will be affected by HKMA’s recent mortgage tightening measures

The HKMA recently announced another round of mortgage tightening measures, lowering LTV and DSR limits. According to a research note from Barclays, banks now have to apply a 15% risk weight on the entire mortgage book (vs 8%

RESIDENTIAL PROPERTY

Asia’s real estate inbound investment boom in 2015 on the horizon

While the flow of outbound capital from Asia will accelerate this year, it is inbound capital that will take a “quantum leap” in 2015. According to a release from Colliers International, this statement is based on its new white paper.

The office market Asia-wide is at a stage in the cycle where new supply will rise 152% to about 100 m sq. ft. presenting more opportunities. Hong Kong and Singapore remain the best target destinations.

Earnings at the top four Hong Kong banks dropped in 2014, as noninterest income shrank while asset write-downs ballooned, overshadowing an increase in interest income.

According to SNL Financial, banks reported a 19.57% decline in net income.

HOTELS & TOURISM

Transaction volume in Asia Pacific hotel investment down 18% to $7.5b

FINANCIAL SERVICES RETAIL

Year holidays. According to Morgan Stanley, further, looking beyond the near-term distortions, the data paints a picture of weak demand.

ECONOMY

Hong Kong’s domestic demand sluggish in March

It has been noted that growth indicators in the first two months of each year tend to be volatile, due to the shift in the timing of Lunar New

Asia Pacific’s hotel investment market recorded an impressive $9.2 billion worth of transactions back in 2013, led by the resurgence of Japan and big-ticket trophy deals in Singapore and Shanghai.

According to a report from JLL, however, 2014 witnessed a moderation in sales activity across the region falling by 18% to just above $7.5 billion with over 34,000 keys traded at an average rate of $221,000 per key.

HONG KONG BUSINESS ANNUAL 2016 19

TOP NEWS IN 2015

MOST READ

Daily news: www.hongkongbusiness.hk

MARKETS & INVESTING

Lower financing costs from 2014 rate cuts not low enough

Chinese industrial profits posted the first YoY growth this year, at 2.6% in April, versus a 2.7% decline from January to March. According to CCB International, lower financing costs resulting from rate cuts since November 2014 led to the rise in profits.

RETAIL

Tightened policy on Chinese tourists worsened market pessimism in 2015

RESIDENTIAL PROPERTY

Hong Kong finally tightened policy on Chinese tourists in response to mounting domestic concerns on capacity constraints. According to UBS, effective mid-April 2015, the multiple permits are replaced by the ‘once-a-week’ permit.

Private housing supply surges to record high of 78,000 at end-1Q15

The Transport and Housing Bureau recently released the Statistics on Private Housing Supply in Primary Market as at 31 March 2015. According to Barclays, private housing supply rose by 4,000 units q/q to a record high of 78,000.

COMMERCIAL PROPERTY

Rents in Hong Kong’s retail sector decline once more in Q1 2015

BUILDING & ENGINEERING

Hong Kong billed as Asian country with the highest natural disaster risk COMMERCIAL PROPERTY

Hong Kong CBD office market unexpectedly sizzles

Barclays’ 4th annual Barclays Asia Financials and Property Conference recently concluded, and one of the key messages that stood out to the group is that the Hong Kong CBD office market is really picking up steam and is likely to surprise on the upside.

According to Barclays, in its small group meeting with property consultant Savills, they noted that the market had been unexpectedly active.

As rents fell 0.8% q-o-q in Q1 2015, retail market sentiment remained sluggish this quarter, with retail sales falling by 2.0% year-over-year (y-o-y) in the first two months of 2015.

MEDIA & MARKETING

MARKETS & INVESTING

Hong Kong loans grew 3.6% m/m in March

HSBC’s Hong Kong PMI falls to 48.6 in April

The HKMA’s March monetary statistics showed strong growth in both loans and deposits, which were up 3.6% m/m and 2.5% m/m respectively. According to a research note from Barclays, excluding IPO-related loans, which straddled the end of March, loan growth in March would have been 0.8% m/m.

The report also noted that the RMB deposits balance fell 2.2% m/m to Rmb952bn.

20 HONG KONG BUSINESS ANNUAL 2016

Hong Kong’s private sector contracted at a faster pace in April according to the HSBC Hong Kong PMI, which fell to 48.6 from 49.6 in March.

According to a research note from HSBC Global Research, this was driven by falls in output and new orders. Further, new orders from Mainland China also deteriorated at a faster pace suggesting that the slowdown is likely to continue.

which 80% expect a pay rise after the change. JobsDB.com conducted an online salary survey in March 2015, which collected information from 2,369 local employees of 23 business sectors regarding their intention to switch job and the adjustment of salary and benefits.

Among the 23 sectors covered in the survey, the “Building & Construction” and “Design” enjoyed the biggest pay rise (7.5%), while “Education” and “Hospitality / F & B” sees the lowest salary increments, which are at 2.7% and 3.2% respectively.

According to a release from ARCADIS, Hong Kong (3rd place), Wuhan (4th), Tokyo (9th) and Manila (10th) all rank in the global top ten according to the recently released inaugural Sustainable Cities Index from ARCADIS, a global natural and built asset design and consultancy firm.

ECONOMY

Would a stronger Hong Kong dollar pull down growth?

HR & EDUCATION

6 out of 10 Hong Kong workers pocketed 4.7% wage hike

The latest jobsDB Job Seeker Salary Report 2015 reveals that 65% of the respondents received a pay rise of 4.7% on average. According to jobsDB.com, over 40% of the employees said they planned to switch jobs, of

In relation to the Hong Kong economy, this question has been asked: How much of a drag on growth is a stronger Hong Kong dollar? According to a research note from Hang Seng Bank, it believes the impact on the Hong Kong economy will be noticeable but not overwhelming. A 10% rise in the real Hong Kong dollar exchange rate will, on average, suppress service exports by about 4.4 percentage points, the report said. It will also take about 0.4 percentage points off Hong Kong GDP.

TOP NEWS IN 2015

MOST READ

Daily news: www.hongkongbusiness.hk COMMERCIAL PROPERTY

5,100 units possible from government site supply in 3Q15

RESIDENTIAL PROPERTY

Why analysts are putting their hopes of home sales rebound on Heya Crystal launch

According to Barclays, developers only sold 35 units last weekend, with the majority coming from inventory of Long Beach and Redhill Peninsula, which sold 12 and 10 units respectively.

During the week, Ultima also sold six units. The 350-unit Heya Crystal in Cheung Sha Wan released pricing for 200 units in two price lists.

RETAIL

Hong Kong is losing the retail game to “new TST” with mainlanders

According to a research note from HSBC Global Research, it thinks Hong Kong will lose out from the emergence of a “new TST” –Tokyo-Seoul-Taipei, as opposed to Tsim Sha Tsui, the popular shopping district in Kowloon.

The Development Bureau has announced the Land Sale Programme for the upcoming quarter. According to a research note from Barclays, in 3Q15, the government will supply sites that could build 5,100 units, which is roughly a quarter of its annual 19,000unit target.

in Asia Pacific. According to a release from Randstad, based on its recently released Q2 Workmonitor survey, Hong Kong employees find it the most difficult to switch off.

TELECOM & INTERNET

The virtuous cycle: The cloud drives innovation which drives the cloud

The reach of the cloud is unprecedented in technological innovation, save perhaps for Internet itself. Mobile users and the Internet of Things (IoT) rely upon the cloud for back-end functionality. Consumers use cloud-based services, often without even realizing it.

RETAIL

Hong Kong’s SMEs still haunted by pessimistic business outlook

TELECOM & INTERNET

Analysts expect solid 1H results from Hong Kong’s telco firms

According to a research note from Barclays, this is on account of a higher proportion of subscribers moving onto higher tariff plans that were instituted in Sep-14. While it is largely expected by the market in our view, Barclays sees further upward earnings revisions hinging on further tariff increases and higher discipline.

Eight in 10, or 77 per cent of, employees in Hong Kong feel pressured to respond to work related calls and e-mails while on holiday, the highest rate

HR & EDUCATION

Hong Kong employees urged to not feel guilty during vacation leaves

Taking a well-earned break from work in order to recharge your batteries improves your mental health and workplace productivity. According to a release from Hays, however, many professionals find it difficult to switch off or succumb to guilt by limiting their time away from the office. In a recent blog post, Alistair Cox, Hays’ CEO, says that spending time away from your place of work isn’t something to feel guilty about.

The Standard Chartered Hong Kong SME Index (SME Index), released jointly by Standard Chartered Bank and the Hong Kong Productivity Council, improves to 49.6 for Q32015. This indicates a modest improvement in sentiment among SMEs in HK in Q3.

COMMERCIAL PROPERTY

Tenants jump ship to revitalized buildings from typical Grade A offices

HR & EDUCATION

8 out of 10 Hong Kongers feel pressured to work on holidays

in other parts of the world.

According to Skyscanner, Hong Kongers plan their travels 66 days before departure.

LEISURE & ENTERTAINMENT

Hong Kong travellers found to plan trips 66 days ahead

The leading global travel search engine Skyscanner has revealed that Hong Kong travellers start planning their trips earlier than many people

Since the implementation of a series of revitalisation measures a few years back, the market has witnessed a boom in the supply of revitalised commercial buildings in the Kowloon office sector.

According to a research note

by Colliers International, the development of CBD2 which resulted in improved transportation network have encouraged the market to look into districts of such in different parts of Kowloon.

HONG KONG BUSINESS ANNUAL 2016 21

TOP NEWS IN 2015

MOST READ

Daily news: www.hongkongbusiness.hk

COMMERCIAL PROPERTY

ECONOMY

Why Asian economies are shrugging off weaker Chinese currency

The recent depreciation of the Chinese yuan could have a drag on Hong Kong banks’ profitability, growth and asset quality, says Fitch Ratings.

Rising offshore yuan (CNH) funding costs and a shortage in offshore yuan liquidity will

Early September average daily table revenues solid at HK$605m

22 HONG KONG BUSINESS ANNUAL 2016

HR & EDUCATION

83% of Hong Kong millenials mull over total career switch

LEISURE AND ENTERTAINMENT

According to WealthInsight, Hong Kong’s millionaires are opting to move their investments outside the old continent. Hong Kong HNWI allocations to Europe decreased sharply compared to other regions, going from 11.7% in 2010 to 7.2% in 2014. WealthInsight expects millionaires to further reduce their investment in Europe over the next few years.

It has been noted that in the industrial market of the real estate sector in Hong Kong, rents are supported by regional retailers. According to CBRE, this is as they face less impact from the sluggish retail sales in Hong Kong.

headache into a business opportunity to offer new agile services. Network operators and service providers are gearing up for the Internet of Things (IoT) – and the IoT mixes revenue opportunities with technology challenges.

Consumers are going crazy for IoT devices, from wearables like the Apple Watch and Fitbit health band, to Internetconnected thermostats, to connected vehicles.

CNY depreciation feared to drag Hong Kong banks’ profitability

The Rating and Valuation Department has released property statistics for July 2015 that show home prices up 0.8% and rents up 0.5%.

According to Barclays, this takes the housing and rent increases to 9.1% and 4.9%.

Hong Kong’s ultra rich starting to shy away from investing in Europe

Hong Kong’s industrial real estate market heavily dependent on regional retailers

FINANCIAL SERVICES

Analysts warn against disconnect between Hong Kong’s physical property, stock prices

ECONOMY

COMMERCIAL PROPERTY

Hong Kong’s Millennials are on the move, with four in five (83 per cent) already looking for a complete career switch despite only recently entering the workforce, according to the Randstad Q3 2015 Workmonitor released recently. According to Randstad, Hong Kong’s millennials are less interested in committing long-term to organisations compared to their more senior counterparts.

It has been noted that the average daily table revenues for the period 1-6 September in Macau gaming were strong at HK$605 mn. According to a research note from Barclays, this data was higher than August full-month that saw HK$550mn per day table revenue.

MARKETS & INVESTING

Asian business sentiment declines in 3Q15

RETAIL

Hong Kong no longer the goto place for cheaper luxury items: CLSA

Gone are the days when Hong Kong is the number one go-to place for cheaper luxury items.

Hong Kong is slowly losing attractiveness, and one of the reasons is non-competitive prices. Many tourists are finding it more rewarding to go to hubs in Europe or Japan.

Asian economies face several big challenges on the horizon, but a weaker Chinese currency isn’t even in the top three.

According to UBS, it’s been six weeks since China allowed the CNY to depreciate slightly and announced that going forward the daily fixing will consider the previous day’s closing spot price. All of this has lead UBS’ China economist, Tao Wang, to reiterate her view that the currency will most likely depreciate modestly over the next year.

INFORMATION TECHNOLOGY

How savvy carriers should respond to challenges posed

by IoT

The IoT is exploding – and its traffic is totally unlike anything that network operators have encountered.Here’s how savvy carriers can respond to this challenge – and use standards to turn the IoT from a management and security

Sentiment at Asia’s biggest firms tumbled in the third quarter at record pace due to growing worries about the economic slowdown in China and the risks it poses to the global outlook, a Thomson Reuters/INSEAD survey showed. According to the Thomson Reuters/INSEAD Asian Business Sentiment Survey, the Thomson Reuters/ INSEAD Asian Business Sentiment Index, representing the six-month outlook at 79 firms, was 60 in the September quarter from 71 in June.

TOP NEWS IN 2015

MOST READ

Daily news: www.hongkongbusiness.hk

ECONOMY

Hong Kong’s Q3 GDP confirms modest setback

It has been noted that intensifying headwinds from China took a clear toll on Hong Kong in Q3, but the damage was not as bad as the market had feared. According to a research note from Standard Chartered, Q3 GDP growth came in at a higher-thanexpected 2.3% y/y (consensus: 2.0%), down from 2.8% y/y in Q2. On a q/q seasonally adjusted basis, the economy expanded 0.9% in Q3.

by Cathay Pacific pilot Hank Cheng, with support from the B-KOO “Inspiration” team, the flight took off from Hong Kong International Airport early this morning. In 1911, the “Spirit of Sha Tin” lifted off from Hong Kong’s first privately owned airport in Sha Tin, marking the beginning of Hong Kong’s aviation industry. On 15 November 1997, a replica of this pioneering aircraft flew out of the HKIA.

MARKETS & INVESTING

Emerging Asia exports further ride its downward trajectory in 3Q15

Fitch Ratings says Emerging Asia’s exports weakened for the fourth straight quarter in 3Q15, underperforming other emerging regions in volume terms. According to a release from Fitch Ratings, emerging Asian currencies have weakened less, on average, than those of other major emerging regions on a real trade-weighted basis, partly explaining the divergence.

Global trade growth has been weak since 2009. Part of the explanation likely lies in the flattening of US trade deficit.

A report from CBRE reveals that whilst Asia Pacific is experiencing a slowdown in the luxury retail sector, some emerging trends are set to provide a new stimulus for demand in the coming years, and that this is particularly relevant in Hong Kong.

Hong Kong is the world’s 9th most expensive location for expatriates according to findings from the latest Cost of Living survey by ECA International. According to a release from ECA International, Hong Kong is up 17 places from last year’s 26th position globally.

Hong Kong’s pioneering homebuilt registered aircraft takes off

A special day in the history of Hong Kong aviation was marked recently with the successful inaugural flight of the first-ever homebuilt aircraft to fly under Hong Kong registration. According to a release from Cathay Pacific, led

Real estate activity in Asia next year will reflect a continuation of trends seen in 2015 – an abundance of capital flowing to core space, as well as a flight to safe havens in the region’s most developed and liquid markets.

Developers’ tempting mortgage offers attract 18% of buyers

Accountants expect higher salaries due to high demand

Hong Kong’s high demand but short supply of highly-skilled accountancy and finance talent has led to higher salary expectations from jobseekers, which cannot always be met by employers. According to Hays, this has created disconnect between employers and candidates.

Knight Frank recently launched the Global House Price Index for Q3 2015. The index, weighted by Purchasing Power Parity (PPP), increased by 2.7% in the year to September 2015.

RESIDENTIAL PROPERTY

HR & EDUCATION AVIATION

Hong Kong home prices recorded 16.7% annual price growth

2016 Asia real estate activity full of capital flowing to core space Hong Kong is 9th most expensive location globally for expats

Hong Kong luxury retailers mulling strategy overhaul

RESIDENTIAL PROPERTY

COMMERCIAL PROPERTY

ECONOMY

RETAIL

According to a research note from Knight Frank, it expects prime street shop rents to drop by 10-15% next year.

RETAIL

Prime street shop rents to drop as much as 15% in 2016

It has been noted that Hong Kong’s hallenging retail environment is likely to persist next year due to diminishing inbound tourist arrivals.

According to a research note from Barclays, major developers such as CKP, SHKP, HLD, NWD, Sino and Kerry now all offer their own first or second mortgages.

LTV increased to a range of 80-95% from 80-90% and the effective entry interest rate has decreased to 2.5-3% from 3.0%.

HONG KONG BUSINESS ANNUAL 2016 23

company and industry - telecommunications industry "Internationally, Hong Kong’s broadband penetration rate is among the highest in the world." satellite signals over the Asia Pacific region.

Telecomm firms adapt to mobile data usage frenzy Mobile data has been the buzz word for Hong Kong’s telecommunications industry, and firms are capitalising.

T

he Local Fixed Telecommunications Network Services (FTNS) market has been fully liberalised since 1 January 2003, with no pre-set limit on the number of licences issued, nor specific requirement on network rollout or investment. As at June 2015, there were 23 local fixed network operators in Hong Kong.

As at June 2015, there were 4 mobile network operators. In April 2015, the number of mobile service subscribers reached 16.7 million, representing one of the highest penetration rates in the world at about 232%. Among these subscribers, 12.2 million were 2G and 3/4G service customers.

There were 209 Internet Service Providers (ISPs) licensed to provide broadband services. As at April 2015, more than 2.28 million customers are now using broadband services with speed up to 1,000 Mbps (Megabits per second). In the residential market, 83% of the households are using broadband service. Internationally, Hong Kong's 24 HONG KONG BUSINESS ANNUAL 2016

broadband penetration rate is among the highest in the world.

International Direct Dialing (IDD) service to most countries and regions of the world is available. In 2014, the volume of outgoing and incoming traffic for telephone calls was 8,218 million minutes and 2,208 million minutes respectively. Cost of IDD calls has gone down significantly since January 1999, when fixed-line operators were allowed to offer non-exclusive international services.

As at May 2015, there were 43 licensees permitted to operate either external cable or non-cable based facilities for the provision of external communication services in Hong Kong, with more than 210 satellite earth station antennas in operation.

Hong Kong adopts an open sky policy in regulating the provision of satellite services.

Hong Kong provides dedicated relay services for multinational companies, international press agencies and TV channels to downlink or uplink their

Exports The main form of cross-border exports of telecommunications services is through incoming calls from another country, in the form of revenue collected for the service of completing the call.

Other export incomes are derived from offering roaming services to overseas mobile phone users;selling satellite transponder capacities to other telecommunications operators, broadcasting and multinational corporations to meet their regional communications, broadcasting and international communications needs;consultancy services (e.g. technology transfer and training programmes) to overseas customers; andtelecommunications services provided to travellers to Hong Kong.

With the opening up of the telecommunications market in most countries, many Hong Kong operators have gained a foothold in the overseas markets, particularly in the mobile telephone sector. For example, Hutchison Telecom has 3G operations in different regions and countries (e.g. the UK, Denmark, Italy, Sweden, Ireland, Israel, Macau, Australia and Austria). Many other operators have invested in the development of telecommunications networks in Asia, including India, Indonesia, the Philippines, Sri Lanka, Taiwan and Vietnam.

The bulk of Hong Kong's international call traffic is now with the Chinese mainland. International private leased circuits are offered to several mainland gateway cities, while some operators provide roaming services to mobile phone and pager users when they are on the mainland.

Industry Development and Market Outlook As of end-June 2008, mandatory type II interconnection policy had been withdrawn. Type II interconnection is a regulatory tool widely deployed in the world, requiring the incumbent fixed network operator (“FNO”) to open up its copper-based customer access

telecommunications industry - company and industry Exports of Telecommunications Services (HK$ million) Exports - Telecommunications Services

2011 9,695

2012 10,840

2013 12,401

Sources: Report on Hong Kong Trade in Services Statistics for 2013, Census and Statistics Department

Industry Data December 2014 306 19,255

No. of establishments Employment Source: Quarterly Report of Employment & Vacancies Statistics, Census and Statistics Department

Business Receipts (HK$ billion) Public local phone/facsimile/telegraph/telegram services Public long distance phone services Mobile phone services Other telecommunication services Total

2011

2012

2013

4.9

4.8

5.0

6.6 18.8 24.0 54.3

9.3 22.8 26.4 63.3

6.7 27.9 26.8 66.4

Sources: Key Statistics on Business Performance and Operating Characterisitics of the Information and Communications, Financing and Insurance, Professional and Business Services Sectors, Census and Statistics Department

network (CAN) to new entrants so that the latter may provide competing service to customers in the start-up phase when their own self-built CANs are not as extensive as the incumbent’s. Now over 86% of local households have the choice of more than one FNO. The increasing use of data services such as instant messaging and mobile internet services among the younger generations helps stimulate the mobile data usage in Hong Kong.

As at March 2015, local mobile data usage recorded a remarkable surge to 17,472 Terabytes (i.e. 17,472,476 Gigabytes). This represents more than a double in the mobile data usage over 2012.

After 29 new digital terrestrial television (DTT) fill-in stations launched in 2011, the coverage of DTT services has been expanded to 96% in early 2012. As of December 2014, take-up rate of DTT is above 80% of total number of households in Hong Kong.WiFi access is increasingly widespread in Hong Kong. As at June 2015, there were more than

33,400 public WiFi hot spots in Hong Kong. Since the Hong Kong government launched the Government WiFi programme in 2007, there were free public WiFi services in 486 government premises as at May 2015.

Macro-trends in the industry Worldwide mobile data bandwidth usage continues to grow as the mobile phone increasingly integrates into users’ daily life. Services and functions that can be done through the mobile phone include payment, receiving news, exchanging files, music, and movies and trading.

Driven by the increased affordability of smart gadgets and more extensive network coverage, "going wireless" continues to gain momentum in the global consumer market. According to the GSM Association, mobile broadband connections (i.e. 3G and 4G technologies) is estimated to increase from 39% at the end of 2014, to account for 69% of the global connections by 2020.

With the deployment of

"As at March 2015, local mobile data usage recorded a remarkable surge to 17,472 Terabytes (i.e. 17,472,476 Gigabytes).

This represents more than a double in the mobile data usage over 2012."

the 4G technologies such as the Long Term Evolution (LTE) and other advanced technologies progressively by the three broadband wireless access services providers in the 2.5/2.6 GHz band, consumers can enjoy even higher speed of mobile data services up to 100 Mbps. In Hong Kong, CSL, Hutchison and Smartone launched 4G network services in 2012.

The expansion of 3G/4G networks drives up the demand for video telephony, sharing and messaging services over mobile networks. According to ABI Research, in 2011, there were fewer than 47 million consumers using such services, but the take up rate is expected to grow to 390 million in 2016.

ABI Research also forecast that the global mobile TV’s market revenue will exceed US$ 20 billion by 2015.

According to the MIIT, total fixed investment in the telecommunications sector reached RMB 361.4 billion as at end-2014, up 8.5%.

Total fixed investment in the telecommunications sector reached RMB 361.4 billion as at end-2014, up 8.5%.

HONG KONG BUSINESS ANNUAL 2016 25

company and industry - electronics industry "Hong Kong was the world’s largest exporter of telephones and mobile phones."

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.

Electronics exports to the US were robust, while exports to the EU continued to expand. But exports to Japan were uninspiring. Exports to ASEAN, which constituted mainly of parts and components, were spurred by the input demand for production in the region.

Electronics exports boom on almost every major market Exports to the Chinese mainland are growing steadily, signalling smooth sailing for electronics.

H

ong Kong’s electronics industry is the largest merchandise export earner of the territory, accounting for 61% of Hong Kong’s total exports in 2014. 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 sound recording apparatus, computer parts/accessories, and video recording apparatus; and the world’s third largest exporter of electric micro motors and electronic integrated circuits in value terms in 2013.

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 26 HONG KONG BUSINESS ANNUAL 2016

three quarters of Hong Kong’s electronics 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.

Hong Kong’s electronics exports rose by 4% during January-June 2015. Exports of semiconductors, telecommunications equipment/parts and AV equipment/parts grew by different degrees. But exports of IT equipment/parts were lacklustre.

Exports to the Chinese mainland, which accounted for over 60% of the total electronics exports, grew by 2% 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 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.

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

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

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 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

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

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).

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

"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."

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 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 .

HONG KONG BUSINESS ANNUAL 2016 27

company and industry - household electrical appliances industry “Hong Kong’s total exports of household electrical appliances decreased 12% in the first half of 2015.” management system, etc.

Hong Kong’s total exports of household electrical appliances decreased 12% in the first half of 2015.

Exports of major items like household lighting products, thermic domestic appliances, hair dressing/hand drying apparatus and food grinders/mixers 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 remained steady in the first half of 2015, sales to the EU and Japan declined in the period.

Electrical appliances exports burn out

Sales to the EU and Japan, two of its largest markets, have been lackluster.

H

ong Kong produces and exports a wide range of household electrical appliances, including kitchen appliances ranging from food grinders, mixers and juicers to thermic appliances like coffee makers, toasters, electric knives, electric kettles and ovens; home care appliances like electric fans, air conditioning machines, vacuum cleaners, floor polishers, space heaters and irons; personal care products like hair dressing and hand drying apparatus, shavers, hair clippers, massagers, face steamers and electric toothbrushes; and 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 2013.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 control, management, marketing and 28 HONG KONG BUSINESS ANNUAL 2016

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 14000 - a standard for environmental

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 opportunities for Hong Kong

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 Total Exports by Categories Household Lighting Products Thermic Domestic Appliances Hair Dressing/Hand Drying Apparatus Domestic vacuum cleaner

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

2014 HK$Mn. Growth % 34 -10 19,206 -5 18,274 -5 19,240 -5

Jan-Jun 2015 HK$Mn. Growth % 19 +3 8,546 -12 8,122 -13 8,565 -12

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

2014 Share % Growth % 25 +3 21 * 5 -2 4 -4 4 -9 20 -20 7 -6

Jan-Jun 2015 Share % Growth % 30 +3 20 -15 5 -9 3 -16 4 -31 17 -31 7 -4

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

2014 Share % Growth % 31 +2 13 +2 8 -21 7 -8

Jan-Jun 2015 Share % Growth % 32 -2 11 -8 6 -34 7 -8

* 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

companies to establish connections with potential buyers.

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. 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 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

“Along with the growing concern on environmental protection, provision of environmentally appealing electrical appliances which comply with is becoming a competitive edge of Hong Kong exporters.”

Electronic Equipment Pollution on Environment.

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

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

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.

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.

HONG KONG BUSINESS ANNUAL 2016 29

company and industry - audio visual equipment "Hong Kong companies emphasise quick response to ensure effective services to their customers." digital cameras performed well, although exports of audio/video recorders and players declined in the period.

The Chinese mainland was Hong Kong’s largest export market, constituting over half of the total AV equipment exports. During January-July 2015, exports to the mainland, of which the majority were parts and accessories for processing production, increased 7%.

While exports to the US surged, exports to the EU were sluggish.

AV equipment market grows as exports stabilise More manufacturers are relocating production facillities to the mainland to reduce costs.

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, 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 2013.

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 largescreen 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 2016

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 rose 2% during JanuaryJuly 2015. Exports of major items like parts and accessories and TV cameras/

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.

audio visual equipment - company and industry Performance of Hong Kong’s Exports of AV Equipment 2013

2014

Jan-Jul 2015

HK$Mn.

Growth %

HK$Mn.

Growth %

HK$Mn.

Growth %

559

-13

504

-10

288

-7

Re-exports

199,587

-10

178,295

-11

96,283

+2

of Chinese Mainland Origin

156,185

-13

136,320

-13

73,668

+1

Total Exports

200,146

-10

178,799

-11

96,570

+2

Domestic Exports

Total Exports by Major Markets

2013

Chinese Mainland EU

2014

Jan-Jul 2015

Share %

Growth %

Share %

Growth %

Share %

Growth %

57

-8

57

-11

58

+7

8

-16

9

-9

8

-1

Germany

3

-24

2

-12

2

-9

Netherlands

2

-17

2

*

2

+14

US

9

-9

10

+3

11

+14

Japan

7

-24

6

-21

5

-16

ASEAN

7

-11

6

-19

6

*

Total Exports by Categories

2013

2014

Jan-Jul 2015

Share %

Growth %

Share %

Growth %

Share %

Growth %

Parts and Accessories

61

-7

62

-9

62

+2

TV Cameras and Digital Cameras

11

-13

10

-20

11

+21

Headphones, Earphones & microphones

6

-3

7

-8

7

+7

Audio/Video Recorders and Players

4

-34

4

-23

3

-17

TV Receivers

5

-17

4

-21

4

-21

Radios

3

-30

3

-8

3

-17

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.

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. 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 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

"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."

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. The Chinese mainland has adopted similar environmental protection regulations.

HONG KONG BUSINESS ANNUAL 2016 31

company and industry - information technology equipment industry "Exports to the mainland, mainly parts and accessories, were lacklustre.

But exports to the US and the EU surged in the period.”

60% of the total exports. Exports to the mainland, mainly parts and accessories, were lacklustre. But exports to the US and the EU surged in the period.

Enhancements never end for Hong Kong’s IT industry IT firms have to constantly push themselves to the limits of innovation to sustain their businesses

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 2013.

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 2016

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 were sluggish during January-July 2015. Although exports of computer parts/accessories and office machines declined, exports of complete set computers rose in the period.

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

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 aftersales 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.

Compliance with Overseas Requirements Hong Kong companies are capable of meeting the technical requirements

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

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

2014 HK$Mn. Growth % 861 -50 414,933 +1 305,128 -1 415,794 +1

Jan-Jul 2015 HK$Mn. Growth % 258 -59 228,583 * 171,962 +4 228,841 *

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

2014 Share % Growth % 66 -2 7 +22 7 +19 2 +113 2 +8 8 +5 3 -4

Jan-Jul 2015 Share % Growth % 60 -11 8 +28 9 +34 3 +94 2 +16 9 +18 4 +10

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

2014 Share % Growth % 49 +1 33 +5 18 -6

Jan-Jul2015 Share % Growth % 48 -6 36 +16 17 -10

^ 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.

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 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 Pollution on Environment.

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

Product Trends On the back of technological advancement and falling prices amid keen competition, conventional IT products like desktop

"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."

and 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, Internet of Things (IoT) technology now allows a wide range of indoor and outdoor devices to be connected.

This is expected to spark tremendous opportunities for industries. Smart homes will be one of the major IoT application areas that would elicit huge demand for related IT systems, hardware and devices.

On the other hand, 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 2016 33

company and industry - building materials and hardware industry “The recent rise in public expenditure on infrastructure has been driven mainly by transportation projects." large companies, which tend to be main contractors. There are quite a number of big construction companies capable of handling projects requiring sophisticated technology and strong financial background and are expanding their business across the region.

Hong Kong contractors are experienced and highly skilled in building works. Because of the growing size and complexity of the projects, the current industry trend is to award large and complex building contracts as a single package to multi-disciplinary contractors. There is no formal restriction for entry to the contracting business in Hong Kong. Foreign and local contractors are treated alike, and they are allowed to tender local public sector projects.

Construction industry taps regional opportunities

Hong Kong’s construction savvy opens doors for neighbours racing towards urbanisation

C

onstruction activities can broadly be classified into three categories, namely buildings (residential, commercial, and industrial/ storage/service), structures and facilities (transport, other utilities and plant, environment, and sports and recreation), and non-site activities (decoration, maintenance and repair, etc.).

The overall gross value of construction work performed by main contractors in Hong Kong has been rising since 2009.

A strong YoY growth of 37.8% in the value of private sector sites and 23.9% in the value of public sector sites drove up the construction activity by 14.5% to HK$55.2 billion in the second quarter of 2015.

The recent rise in public expenditure on infrastructure has been driven mainly by transportation projects, including the Hong Kong-ZhuhaiMacau Bridge, Guangzhou-ShenzhenHong Kong Express Rail Link, the expansion of railway networks such as the West Island Line and the Shatin to 34 HONG KONG BUSINESS ANNUAL 2016

Central Link, as well as new highways such as Tuen Mun-Chek Lap Kok Link and Island Eastern Corridor Link.

These works include land formation, road construction and laying of water mains. As the infrastructure projects are being rolled out, the demand for construction services in Hong Kong, particularly demand from the public sector, will remain high.

Services Providers Hong Kong's construction industry is characterised by a small number of large local contractors, a high level of subcontracting, presence of a large number of overseas contractors, with a substantial proportion of companies being both developers and contractors.

Most of Hong Kong's construction companies are small in size and those with less than HK$10 million (US$1.3 million) in annual gross value of construction work account for as high as 96% of the construction industry. The majority of the small ones act as subcontractors to the

Exports Hong Kong's expertise in construction of quality high-rise residential and commercial buildings is internationally renowned and in great demand in overseas markets, especially in Asia.

The Middle East has arisen to be a market with growing potential for Hong Kong’s construction companies.

Government infrastructure plans as well as commercial projects provide good support to construction activities in the Gulf region.

For example, the Hong Kongbased construction company, Chun Wo Development, launched a luxury residential project ‘Reem Diamond Residence’ in Abu Dhabi, the United Arab Emirates (UAE) in 2014.

New momentum in public infrastructure To achieve the objective of promoting economic growth through infrastructural development, the Hong Kong government has been increasing its infrastructure investment over the past few years. Some of the mega infrastructure projects announced in the Policy Address in 2007 have had their details published and tenders released, thereby driving up local construction activities.

The Hong Kong government has also forged ahead with other works, such as Operation Building Bright and Revitalising Historic Building.

building materials and hardware industry - company and industry Major indicators of the building and civil engineering industries Establishments Employment Gross value of construction works performed (HK$ million)

2012 22,309 184,563

2013 22,312 185,733

YoY % * +0.7

236,927

278,75

+17.4

Source: Key Statistics on Business Performance and Operating Characteristics of the Building , Construction and Real Estate sectors *Insignificant

Mar-2015 (YoY %) 1,244 (-4.0) 502 (-2.0) 742 (-5.4) 91,878 (+16.9) 43,188 (+29.4) 48,690 (+7.8)

Number of Construction Sites Public Private Employment Public Private

Jun-2015 (YoY %) 1,310 (-0.3) 549 (+2.0) 761 (-1.9) 92,808 (+16.4) 41,922 (+15.3) 50,886 (+17.3)

Source: Quarterly Report of Employment and Vacancies at Construction Sites, Census and Statistics Department

Hong Kong exports of construction services Value (US$ million) Share of total service exports (%) YoY growth (%)

2010 144 0.2 +4.1

Source: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department

In addition, further development of the Hong Kong International Airport, including the construction of the third runway, has been approved.

In the 2015-16 Budget, the Hong Kong government projected public expenditure on capital works to reach HK$70 billion for the fiscal year ending March 2016. In recent years, public spending on infrastructure has been maintained at high levels. For instance, the government has invested in large-scale road and railway projects totalling over HK$90 billion since 2009.

Infrastructure projects and property developments in the region To accommodate the urbanisation process, many Asian countries are upgrading their basic infrastructure such as road networks, port facilities and housing. Commercial, retail and residential projects are springing up in many developing Asian countries, typically India, Indonesia, the Philippines, Thailand, Malaysia and Vietnam, where Hong Kong construction

companies are actively seeking opportunities.

For examples, Luks Group engages in cement production and property development in Vietnam, while Hongkong Land has participated in residential and office building projects in Indonesia, as well as luxury residential developments in the Philippines.

The Middle East is another market which has attracted many Hong Kong companies, with many projects won in many Middle East countries.

Hip Hing Construction has won contracts in Abu Dhabi’s carbon-free city Masdar, as well as in Dubai to build a 72-storey residential building through joint venture with a local contractor.

China's construction market Rapid urbanisation has driven up China’s infrastructure development.

To expand domestic consumption, China’s urbanisation plan 201420 aims to increase the proportion of urban population from 53.7% in 2013 to 60% by 2020. The higher rate of urbanisation

2011 142 0.2 -1.1

"In the 2015-16 Budget, the Hong Kong government projected public expenditure on capital works to reach HK$70 billion for the fiscal year ending March 2016."

2012 329 0.3 +130.8

2013 390 0.4 +18.7

will generate huge demand for public infrastructure, housing and transport networks.

In the 12th Five-YearPlan (FYP), the Chinese government announced ambitious plans to develop transport and energy infrastructure as part of the efforts to accelerate the country's industrial transformation and upgrading. The proposed projects include new railway lines, highways and airports (see table below).

China’s 13th Five-YearPlan, which is expected to be released in early 2016, will be closely watched for any policy intention to further increase infrastructure investment over the next few years. In the past years, local governments have been building a lot of new towns along the outskirts of China’s second- and third-tiers cities as part of their efforts to achieve the urbanisation target. However, a lack of supportive infrastructure and transport network has left most of these newly built apartments empty, creating an increasing number of “ghost towns”.

HONG KONG BUSINESS ANNUAL 2016 35

company and industry - jewellery industry "In the first half of 2015, total exports of imitation jewellery amounted to HK$4.3 billion, rose 4% from the previous year."

26%, while sales to the UAE surged by 53%.

On the other hand, Hong Kong’s exports of pearls, gem-stones and rough diamonds decreased 2% in the first half of 2015, after a 15% jump in 2014.

Hong Kong is the world's largest exporter of imitation jewellery in 2013, according to the latest available statistics. In the first half of 2015, total exports of imitation jewellery amounted to HK$4.3 billion, rose 4% from the previous year. Unlike fine jewellery, imitation jewellery is rarely domestic-made but re-exported from origins outside Hong Kong, notably the Chinese mainland, which accounts for 94% of all exports from Hong Kong in January-June 2015.

Domestic exports of jewellery lose their shine

Despite being able to bend towards the needs of consumers, HK’s jewellery industry still suffered dipping exports domestically.

H

ong Kong's jewellery industry can be broadly classified into two sectors: jewellery made of precious metal and imitation jewellery. In terms of value, 86.3% 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 36 HONG KONG BUSINESS ANNUAL 2016

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 have 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.

After expanding by 8% in 2014, Hong Kong’s exports of precious jewellery increased by 1% in the first half of 2015.

The US and the EU remained Hong Kong’s dominant markets for precious jewellery, accounting for nearly half of the total in January-June 2015, when exports to these markets rose by 20% and 7%, respectively.

Meanwhile, Hong Kong’s exports of precious jewellery to Switzerland and ASEAN experienced respective slides of 21% and

Sales Channels The jewellery industry of Hong Kong is 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, supported by the influx of tourists in recent years. According to Hong Kong Tourism Board’s survey, in 2014, overnight visitors spent HK$23.4 billion on jewellery, accounting for 17.1% of their total spending on shopping; as for those from the Chinese mainland, the share was higher at 18.5%. In addition, Hong Kong is the seventh largest economy in terms of retail value of luxury jewellery and timepieces in 2015, according to Euromonitor International.

Industry Trends Articles of jewellery are getting more fashion oriented. Innovative designs are important for moving up-market. In doing so, it is necessary for manufacturers to have more metallurgical knowledge. New technology

jewellery 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

Source: Hong Kong Trade Statistics, Census and Statistics Department

Precious Jewellery by Market US EU United Kingdom France Italy Switzerland UAE ASEAN Macau

Source: Hong Kong Trade Statistics, Census and Statistics Department

Precious Jewellery by Category Articles of Jewellery, of Precious Metal Articles of Pearls, Precious or Semi-Precious Stones Goldsmiths' & Silversmiths' Wares, Precious Metal

Source: Hong Kong Trade Statistics, Census and Statistics Department

Pearls, Gem-Stones and Rough Diamonds (SITC 667) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

*Insignificant Source: Hong Kong Trade Statistics, Census and Statistics Department

also allows the development of new or innovative designs.

Jewellery, which used to target the high-end market, is also following more closely with the fashion trend and targeting at the younger, middle income level market segment, some in the form of brand jewellery.

Recent technological development allows massive production of jewellery 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

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

2014 HK$Mn. Growth % 7,580 -10 53,896 +12 23,954 -2 61,476 +8

Jan-Jun 2015 HK$Mn. Growth % 3,445 -9 23,398 +3 10,190 -2 26,843 +1

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

2014 Share % Growth % 27.2 -1 16.3 -1 6.9 -4 4.4 -9 1.8 +15 12.1 +29 10.9 +155 7.2 +32 6.9 -29

Jan-Jun 2015 Share % Growth % 31.9 +20 17.5 +7 8.7 +24 3.7 -7 2.3 +14 11.0 -21 7.4 +53 7.0 -26 6.6 -14

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

2014 Share% Growth% 96.8 +8 3.1 +14 0.1 -37

Jan-Jun 2015 Share% Growth% 97.0 +1 2.8 +4 0.2 +50

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

2014 HK$Mn. Growth % 243 * 149,057 +15 7,842 +15 149,300 +15

Jan-Jun 2015 HK$Mn. Growth % 88 -49 72,108 -1 3,513 -3 72,195 -2

computer-aided design and manufacturing (CAD/CAM) systems, computer numerically controlled (CNC) machine tools and even 3D printers in their product design and manufacturing processes. New technologies also enable Hong Kong manufacturers to develop new materials for fashionable jewellery items other than fixing defects and to increase the accuracy of the designed output.

Product Trends In terms of materials, white metal will remain the mainstream, while there has been a renewed interest and demand for colour stone jewellery. Demand for yellow gold is on a rise again, albeit with a fashionable twist.

Titanium is gaining popularity for its light weight, strong nature and non-sensitivity to

"The number of younger consumers has increased over the past few years.

They are fashion-conscious and putting a great stress on the design element."

human body. It is also worthnoting that, in recent years, consumption of diamond jewellery has increased, particularly in emerging economies such as China and India where incomes are rising fast and consumers’ purchasing power is strong. Yet, lowerpriced items with more creative use of karat gold and alloys may also become more popular with less affluent customers.

The number of younger consumers has increased over the past few years. They are fashion-conscious and putting a great stress on the design element. In many cases, they are influenced by the trends in clothing fashion, mainly through magazines, TVs or movies. In Asia, for example, the biggest jewellery buyers are the rising numbers of women entering the workforce.

HONG KONG BUSINESS ANNUAL 2016 37

company and industry - clothing industry "Hong Kong’s total exports of clothing fell by 10% year-on-year in the first five months of 2015 after a decrease of 7% in 2014."

Hong Kong’s retailers hop on the e-shopping wagon

With clothing being the most purchased items online, e-tailing has never been more popular, even in the Chinese mainland.

T

he clothing industry is a major manufacturing sector of Hong Kong. It is the third largest manufacturing employer in Hong Kong, with 825 establishments hiring 6,266 workers as of May 2015. 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 38 HONG KONG BUSINESS ANNUAL 2016

offered are not easily matched elsewhere.

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 fell by 10% year-onyear in the first five months of 2015 after a decrease of 7% in 2014. In January-May 2015, Hong Kong’s domestic exports of clothing slumped by 31%, while reexports fell by 9%.

Among the chief export destinations, Hong Kong's clothing exports to the US decreased by 7% in the first five months of 2015, while those to the EU fell by 15%.

Clothing exports to major EU markets including the UK, Germany, France, Italy and the Netherlands fell by 11-18%.

Taken together, sales to the US and the EU accounted for more than 62% of Hong Kong's total clothing exports.

Meanwhile, sales to Japan dropped by 10%, whereas the Chinese mainland market showed an 8% slide in JanuaryMay 2015.

Product wise, Hong Kong’s exports of woven wear for both men/boys and women/girls fell by 10% year-on-year in the first five months of 2015. Exports of knitted wear subsided by 13%, whereas clothing accessories and other apparel articles slid by 9% and 8%, respectively.

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, I.T,

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

United Kingdom Germany France Italy Netherlands 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

JEANSWEST and Moiselle.

Industry Trends Online shopping is increasingly popular in Hong Kong’s major markets, including the Chinese mainland. Across the board, clothing is among the most purchased items online.

With the number of online shoppers soaring 60 million to 360 million in 2014, online clothing sales surged 42% to Rmb 6.2 billion or 22% of the total online shopping turnover in the Chinese mainland.

The growing variety of online shopping sites such as Taobao in China and ASOS Marketplace in the UK, plus the bloom of group shopping and mobile retailing, is expected to boost online shopping and sales further.

It is forecast that global e-tailing transactions can

2014 Growth % -16 -7 -7 -7

Jan-May 2015 Value Growth % 0.4 -31 50.4 9 45.4 -10 50.8 -10

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

2014 Share % Growth % 36.2 -8 28.0 -6 7.1 -3 7.0 -8 3.3 * 2.6 -11 2.6 -3 7.2 -16 6.0 * 3.0 -4 3.1 -13

Jan-May 2015 Share % Growth % 36.1 -7 26.0 -15 6.6 -15 6.3 -18 3.1 -11 2.6 -12 2.5 -12 6.8 -10 6.4 -8 3.6 -8 2.9 -11

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

2014 Share % Growth % 32.3 -9 12.4 -6 19.9 -11 15.8 -6 5.0 -7 10.8 -6 7.7 -6 2.3 -2 5.5 -7 44.1 -5

Jan-May 2015 Share % Growth % 36.3 -10 13.4 -10 22.9 -10 16.1 -13 5.3 -14 10.8 -12 7.3 -9 2.1 -10 5.2 -9 40.4 -8

Value 1.7 168.4 155.7 170.0

see a 15% growth and top US$ 970 billion in 2015. This trend has also encouraged the development of some online shopping technologies such as virtual fitting, video shopping and mobile snapshot for clothing.

Private or house labels, in essence, have become an increasingly effective marketing tool among garment retailers, especially when many consumers in developed markets still remain conservative in view of the sustained economic hardships.

In order to differentiate as well as upgrade the image of their products, major retailers have started to put a stronger emphasis on their own labels.

Renowned retailers such as H&M, Marks & Spencer, Orsay, Palmers, Pimkie, Springfield and Kookai have owned their private labels.

2013 Growth % -17 -3 -4 -3

Value 1.4 157.5 144.2 158.9

"With the number of online shoppers soaring 60 million to 360 million in 2014, online clothing sales surged 42% to Rmb 6.2 billion or 22% of the total online shopping turnover in the Chinese mainland."

As consumers desire to have private labels on everyday garments like jeans, accessories and T-shirts, the doors are also open to the supply of these clothing items to private label owners.

Product Trends Consumers gradually resume spending on fashion products, but still opt for items that offer comfort, function and valuefor-money – and nothing too radical. Longevity remains an important element, while items with recognisable brands and decent quality are still highly sought-after.

One of the major driving forces of clothing market appears to be the children in the coming years, particularly in the traditional markets. The global market for children’s wear is projected to reach US$174 billion by 2017.

HONG KONG BUSINESS ANNUAL 2016 39

company and industry - textile industry "Asia is the leading market for textiles exported from Hong Kong, accounting for 93% of Hong Kong’s textile exports in the first five months of 2015."

Textile industry unravels as exports to China dip

With 75% of textile re-exports originating from the Chinese mainland, a dip in numbers raises a red flag.

T

he textiles industry – comprising spinning, weaving, knitting and finishing of fabrics – had a total of 569 manufacturing establishments as of March 2015, employing 3,887 workers or 3.9% of the local manufacturing workforce. The textiles industry is one of Hong Kong's major export earners, accounting for 2.1% of the total exports in 2014.

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 40 HONG KONG BUSINESS ANNUAL 2016

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 a 9% fall in 2014, Hong Kong’s textile exports decreased by 6% in the first five months of 2015. Re-exports, accounting for almost 99% of total textiles exports, experienced a decline of 6%, while domestic exports plunged by 41%. With 75% of the textile re-exports originating from the Chinese mainland, Hong Kong’s re-exports of textiles of China origin registered a decrease of 3% in January-May 2015.

Asia is the leading market for textiles exported from Hong Kong, accounting for

93% of Hong Kong’s textile exports in the first five months of 2015. 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 57% of Hong Kong's textile exports in January-May 2015.

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.

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 fastgrowing 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 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

textile industry - company and industry Performance of Hong Kong’s Exports of Textiles (HK$ Billion)

2014 Growth % -32 -8 -7 -9

Jan-May 2015 Value Growth % 0.257 -41 30,415 -6 22,757 -3 30,672 -6

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

2014 Share % Growth % 59.9 -13 9.1 +2 5.8 -2 5.1 +2 3.7 -14 2.4 +2 1.8 -10 1.4 +2 1.2 -3 1.2 -12

Jan-May 2015 Share % Growth % 56.9 -15 11.0 +27 6.1 +4 5.5 +10 4.3 +9 2.6 +19 1.7 +2 1.5 -6 1.4 +16 1.2 +5

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

2014 Share % Growth % 26.8 -13 24.6 -6 25.6 -14 14.8 -19 7.9 -7 2.9 -3 10.2 -2 9.2 +7 3.1 -5 0.5 -9

Jan-May 2015 Share % Growth % 27.9 -13 25.2 +1 23.5 -13 13.6 -14 7.3 -112 2.6 -8 10.8 +6 8.9 -1 3.1 +2 0.4 -6

Value 1.247 81.854 58.999 83.101

Domestic Exports Re-exports of Chinese Mainland origin Total Exports

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

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

2013 Growth % -14 +2 +2 +2

Value 0.851 74,975 54,797 78,827

* Insignificant.

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.

To stay tuned to the advancements of manufacturing technology and product requirements, the textiles industry, as a capital-intensive 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.

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

Product Trends Among various kinds of fibres, cotton remains the most preferred material for consumers in the appeal market. With reference to Cotton Council International and Cotton Incorporated’s Global Lifestyle Monitor Survey 2014, “100% cotton” is the marketing term that is more likely to influence European consumers’ clothing purchase decisions.

While more than half of UK consumers say they are willing to pay more to keep cotton their clothing in face of increasing fiber substitution, more than three quarters of consumers in China, India and Japan agree that cotton and cotton blend are the fibres which are the materials best suited for fashion.

HONG KONG BUSINESS ANNUAL 2016 41

company and industry - engineering "A strong growth of 7.1% in the value of transport sector drove up the construction activities by 12.5% to HK$198.6 billion."

HK engineers thrive in a highly competitive market Extensive investments to the Chinese mainland breaks open opportunities for the industry.

E

ngineers involved in construction are multi-disciplinary, including civil, structural, building, electrical and mechanical. In 2014, the transport sector was only seconded by residential building as the enduser group of construction activities, followed by service building and commercial building projects.

The overall gross value of construction works performed by main contractors in Hong Kong has been rising since 2009. A strong growth of 7.1% in the value of transport sector drove up the construction activities by 12.5% to HK$198.6 billion in 2014. As the ten mega infrastructure projects are being rolled out in phases as scheduled, demand for engineering services in Hong Kong, particularly demand from the transport sector, will remain high.

Services Providers Many engineers are members of the Hong Kong Institution of Engineers (HKIE), a local professional body for engineers. First established as the 42 HONG KONG BUSINESS ANNUAL 2016

Engineering Society of Hong Kong in 1947, the HKIE was incorporated by government ordinance in 1975 to set professional standards and to encourage professional development for local engineers. In 1992, the HKIE qualification was recognised for government services appointments.

The HKIE has become a key qualifying body for a wide range of engineering disciplines. It has over 30,000 members, of which more than 14,000 are corporate members.

Exports Most of the export business comes from Asia, particularly the Chinese mainland. The construction sector, particularly the professionals, benefits from Hong Kong's extensive investment activities in the region.

Most of Hong Kong's investments in the region are in manufacturing, property development, hotel construction and infrastructure projects. Major types of professional engineering services that are currently

being exported include consultative engineering services, engineering design services for construction projects and project management.

Direct exports of Hong Kong's non-construction related engineering services are limited as the industry is domestically-oriented and entry into many foreign countries is restricted.

However, such services are exported indirectly through the exports of manufactured goods, especially advanced equipment and products which embody high engineering services content.

A number of Hong Kong's engineering companies are exporting their services via working for multinational companies in Southeast Asia, North America and Western Europe, covering a wide range of industries including information technology, telecommunications, chemicals and fast moving consumer goods.

The largest market for Hong Kong's engineering service exports is the Chinese mainland. High-tech equipment and engineering services are in great demand on the mainland.

Japan, the US, Germany and other European countries have already made a strong presence on the Chinese mainland in areas such as electronics, electrical and mechanical, information systems, bio-chemical, industrial and telecommunications engineering.

Engineering companies from other places in Asia, such as Taiwan and South Korea, are trying to capture a larger share of the Chinese mainland market. Singapore, striving to become the region's technology centre, is also active in developing opportunities in the mainland market. Even in the face of a highly competitive market, local engineers benefit from Hong Kong's extensive investment activities on the Chinese mainland.

Industry Development and Market Outlook Hong Kong’s ten mega infrastructure projects, first announced in the 2007 Policy Address, are being rolled out in phases, thereby boosting the city’s construction market. In addition, the

engineering - company and industry No. Of Establishments Mar 2015 Architectural, surveying and engineering services related to construction and real estate activities Engineering, technical and consultancy services, not related to construction and real estate activities

Employment Mar 2015

2,246

27,392

555

2,137

Source: Quarterly Report of Employment and Vacancies Statistics, Census and Statistics Department

Number of Members as at Aug 2015

Corporate Membership of the HKIE Civil Division Structural Division Building Services Division Electrical Division Mechanical, Marine, Naval Architecture & Chemical Division Electronics Division

9,516 6,347 5,752 3,628 3,499 1,594

Source: Hong Kong Institution of Engineers

Exports of Services (HK$ million)

2011

2012

2013

Architectural, engineering, scientific and other technical services

3,731

3,946

3,815

Source: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department

Hong Kong government has also moved ahead with other projects, such as Operation Building Bright and Revitalising Historic Building. The unemployment rate in the construction sector, after easing to 5% in 2014, fell to 4.2% in Q2 of 2015, down sharply from the financial tsunami peak of 12.8%.

In the Budget 2015/16, the Hong Kong government projected the public expenditure on capital works to hit HK$70 billion for the fiscal year ending March 2016. In recent years, the government's infrastructure investment has been maintained at high levels, with several construction and transport projects being carried forward in parallel.

Progress is being made with the construction of CentralWan Chai Bypass and Island Eastern Corridor Link set for completion by 2017 and the northern connection sub-sea tunnel of Tuen Mun-Chek Lap Kok Link ready by 2018.

In addition to the newly

opened West Island Line, railway network projects of the South Island Line (East) and Kwun Tong Line Extension are both expected to finalise in 2016. With the second berth of the Kai Tak Cruise Terminal building came into operation in 2014, the terminal is now able to accommodate two mega cruise ships with a gross tonnage of up to 220,000 tonnes.

China's real estate development and construction market Reflecting the country’s economic growth and its fast pace of urbanisation, China’ property market has attracted a huge amount of investment, including overseas investment.

Hong Kong companies, such as NWS Holdings and Hang Lung Properties, are leading investors in the mainland’s infrastructure and housing market, given their knowledge of the mainland market and expertise in quality

"Hong Kong’s electrical and mechanical engineering service providers have also participated in many of the mainland’s mediumcost housing programmes, working closely with their mainland counterparts to lay the foundation for cooperation."

control, cost control, project management and financial capacity.

Hong Kong’s electrical and mechanical engineering service providers have also participated in many of the mainland’s mediumcost housing programmes, working closely with their mainland counterparts to lay the foundation for cooperation. Aside from this, the HKIE has signed co-operation agreements with six industry associations on the mainland, including the China Association for Science and Technology (CAST) and Beijing Association for Science and Technology (BAST).

Driven by local governments’ effort to reach urbanisation target and boost GDP growth, a lot of new towns have been developed along the outskirts of China’s second and third tier cities in the past decade. Yet, a lack of supportive infrastructure and transport network has left most of the newly built apartments empty.

HONG KONG BUSINESS ANNUAL 2016 43

company and industry - lighting industry "Hong Kong’s total exports of lighting products decreased 1% during January-July 2015. While sales of electric lamps performed well, exports of discharge lamps and portable lamps were lacklustre."

Although exports to the US surged, exports to the EU were lacklustre during January-July 2015.

Lighting industry flickers as total exports slip

The industry’s total exports have slipped by a solitary percent, with customers losing interest in discharge and portable lamps.

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 44 HONG KONG BUSINESS ANNUAL 2016

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 1% during JanuaryJuly 2015. 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.

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.

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

lighting industry - company and industry Performance of Hong Kong’s Exports of Lighting Products

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets EU (28) Germany France US Chinese Mainland Japan Canada Total Exports by Products

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

2014 HK$Mn. Growth % 34 -14 10,604 -4 9,787 +7 10,638 -4

Jan-Jul 2015 HK$Mn. Growth % 9 -11 5,891 -1 5,389 -2 5,910 -1

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

2014 Share % Growth % 25 -1 7 +2 6 -12 29 +25 15 -38 9 -5 3 +8

Jan-Jul 2015 Share % Growth % 22 -14 7 -1 4 -41 32 +12 16 +9 9 -5 2 -2

2013 Share % Growth %

2014 Share % Growth %

Jan-Jul 2015 Share % Growth %

Electric Lamps & Lighting Fittings

29

+29

Discharge Lamps

17

Battery Operated Portable Lamps

16

Electrical Lighting/signalling equipment for cycles/vehicles

Chandeliers & Wall Lighting

* Insignificant.

34

+13

33

+2

+50

8

-53

8

-9

-3

14

-15

13

-12

7

-3

6

-7

5

-13

7

-7

7

*

8

+2

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

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.

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.

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), under which lighting products are among the affected items.

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

"One of the significant developments in the lighting industry is the booming of DIY (do-ityourself) market. DIY products are increasingly popular, especially in North America and Western Europe. "

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 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.

HONG KONG BUSINESS ANNUAL 2016 45

company and industry - footwear industry "Hong Kong’s footwear exports dropped by another 8% in the first five months of 2015, after the same fall over 2014. "

Footwear industry on its toes as buyers turn pickier

Retailers are stepping up their strategies as consumer confidence becomes dimmer by the day.

T

he latest official statistics show that the footwear manufacturing industry had a total employment of 30 workers as of December 2014. 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 2014, there were altogether 1,220 import/export establishments hiring 6,330 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, 46 HONG KONG BUSINESS ANNUAL 2016

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 8% in the first five months of 2015, after the same fall over 2014. Re-exports, accounting for nearly all footwear exports, fell on a par with total exports during January-May 2015, while domestic exports, given its low base, fell by 15%.

Playing a leading role, the US, sharing 32% of the city’s total footwear exports in the first five months of 2015, saw a decline of 10%. Trailing the US were the EU, the Chinese mainland and Japan, accounting for 17%, 12% and 7% of the total exports, respectively. In January-May 2015, footwear exports to the EU fell by 23%, with Italy and the Netherlands seeing respective slides of 28% and 22%.

Meanwhile, sales to the Chinese mainland increased by 4%, and those to Japan slid by 20%.

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.

To establish business contacts with overseas buyers, Hong Kong manufacturers and traders have involved themselves actively in international trade shows led or sponsored by the Hong Kong Trade Development Council (HKTDC), including the ones in Budapest, Dongguan, Dusseldorf, Dubai, Guangzhou, Istanbul and Jakarta.

Industry Trends China is not only the world’s largest shoe exporter and manufacturer, but the biggest footwear consumer (surpassing the US since 2011). According to National Bureau of Statistics, exports of footwear reached Rmb 350 billion in 2014, while footwear sales in China are projected to reach Rmb 350-370 billion in 2015.

Footwear manufacturers nowadays

footwear industry - company and industry Performance of Hong Kong’s Exports of Footwear (HK$ billion) Domestic Exports Re-exports of China-origin Total Exports

* Insignificant.

by Market US EU (28) Germany United Kingdom Netherlands Italy Chinese mainland Japan Macau Australia South Korea

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

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 towards a sustainable economy by producing shoes made with recycled, ecofriendly and vegan materials (i.e., materials containing no animal-derived products or by-products). 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,

2014 Growth % -59 -8 -8 -8

Jan-May 2015 Value Growth % * -15 12.051 -8 10.368 -10 12.051 -8

2013 Share % Growth % 33.0 -16 20.5 -5 4.0 -7 3.2 +4 3.5 +8 3.5 -14 9.9 -7 8.0 -9 2.7 +28 3.0 -11 2.7 -31

2014 Share % Growth % 33.4 -6 20.2 -9 4.1 -6 3.1 -9 3.7 -2 3.2 -16 9.9 -8 6.6 -24 3.5 +17 2.9 -11 2.0 -29

Jan-May 2015 Share % Growth % 32.3 -10 16.7 -23 3.8 -13 3.0 -13 2.7 -22 2.5 -28 11.5 +4 6.8 -20 3.8 -2 3.6 +17 2.9 +28

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

2014 Share % Growth % 92.4 -8 13.9 -14 12.6 +6 65.7 -9 0.2 -5 7.6 -3

Jan-May 2015 Share % Growth % 91.4 -9 15.6 -6 14.2 +3 61.5 -12 0.2 -39 8.6 +1

Value 0.004 36.362 32.307 36.366

most of these brands have developed eco-friendly 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 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.

Nike even allows customers to customise their own shoes online.

Like clothing and clothing accessories, shoes are one of

2013 Growth % +47 -10 -11 -10

Value 0.002 33.638 29.729 33.640

"Like clothing and clothing accessories, shoes are one of the most-browsed product categories among online shoppers."

the most-browsed product categories among online shoppers.

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. Given the freshness of economic recovery, many shopping habits will likely prevail.

HONG KONG BUSINESS ANNUAL 2016 47

company and industry - auto parts and accessories industry "One salient feature of Hong Kong’s exports of auto parts and accessories is the dominance of re-exports." of auto parts and accessories, covering many different industrial sectors, ranging from electrical appliances and electronics to metal and plastic parts or mechanical components. Certain products may have been exported under different categories, such as electronic products, mechanical or plastic parts. But the relevant trade statistics do not have detailed breakdowns for particular items exclusively used in automotive vehicles.

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.

HK doubles down on quality in auto exports

The majority of Hong Kong’s auto parts companies have fortified their quality checks to comply with rigid requirements.

H

ong Kong exports a large variety of auto parts and accessories, with re-exports being the major business. A variety of automotive electronics and electrical items are among the largest export categories, 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 48 HONG KONG BUSINESS ANNUAL 2016

are also recognised as tier-1 or tier-2 suppliers to automotive companies.

Many Hong Kong auto parts companies have strengthened their quality assurance and environmental management systems, and have secured ISO 9000 certification (an internationally recognised standard for quality management systems) for their operation systems, as well as ISO 14000 (a global standard for environmental management systems).

To comply with the stringent quality requirements of the automotive industry, while meeting corporate social responsibility criteria, a number of Hong Kong companies have obtained further certifications for their operation systems, including ISO/TS 16949, the German VDA 6.1 and the Italian AVSQ. All of these are internationally recognised quality management standards specific to automotive industry. A number have also secured OHSAS 18001, an international standard for occupational health and safety management systems.

Hong Kong exports a great variety

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 pro¬duce 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 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, targetting 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 targetted markets to reduce logistics costs, while

auto parts and accessories industry - company and industry Export Performance of Hong Kong’s Auto Parts and Accessories Industry

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

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

By Categories Revolution counters, production counters, taximeters, mileometers, etc., speed indicators/ tachometers Radio navigational aid apparatus Parts and accessories of motor vehicles Parts and accessories of motor cycles Radiobroadcast receivers for motor vehicles Parts for use with spark-ignition internal combustion piston engines, nesoi Parts of electrical lighting or signalling equipment, etc.

Parts for use in the compression ignition internal combination engines

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

2014 HK$Mn. Growth % 77 +271 18,775 +13 13,459 +12 18,851 +13

Jan-Aug 2015 HK$Mn. Growth % 97 +152 12,730 +4 9,323 +6 12,827 +5

2013 Share % Growth % 24.7 +11 26.2 +22 16.2 * 4.4 +3 4.2 +21 7.8 -27 7.5 +19

2014 Share % Growth % 28.7 +32 26.5 +15 16.1 +12 4.1 +6 4.2 +13 5.3 -23 8.0 +21

Jan-Aug 2015 Share % Growth % 31.7 +23 25.8 +2 15.1 -7 4.0 -7 4.4 -1 4.9 -16 8.5 +17

2013 Share % Growth %

2014 Share % Growth %

Jan-Aug 2015 Share % Growth %

14.2

+37

18.6

+48

23.8

+45

15.7 11.2 11.2 10.2

-2 +28 -5 -32

14.5 13.1 9.9 8.5

+5 +33 * -5

12.0 14.1 7.7 6.7

-15 +12 -22 -26

8.2

+1

6.4

-12

6.1

-2

4.1

+34

6.0

+69

7.7

+40

3.8

+11

3.8

+13

3.6

-7

^ Since offshore trade has not been covered by standard 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 the HS classification system and may differ from values under the SITC system * Insignificant

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.

"With growing pressure on cost and quality, the automotive industry has increasingly adopted advanced information technology in design and manufacturing."

Brazil, for example, currently imposes anti-dumping duties against imports of certain kinds of tyres used for buses, lorries or motorcars, as well as motorcycle rubber tyres originating 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, and has initiated an investigation against certain mainland-origin passenger vehicle and light truck tires.

Product Trends Consumers in developed economies have helped shape the industry’s development, as they are becoming more concerned about safety and driving performance.

HONG KONG BUSINESS ANNUAL 2016 49

company and industry - medical & healthcare industry "Hong Kong manufacturers are highly regarded for their handling of customers’ intellectual property (IP) and sensitive technology." medical instruments and appliances that include sight-testing instruments and veterinary science appliances decreased by 8%.

HK healthcare equipment industry flatlines Manufacturers are turning to home-based equipment for better growth prospects.

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, quality control, marketing, research and 50 HONG KONG BUSINESS ANNUAL 2016

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 – September 2015, Hong Kong’s total exports of medical and healthcare equipment decreased slightly by 3%. Exports to the Chinese mainland, the largest market for Hong Kong’s medical and healthcare equipment dropped by 16%. However, exports to the US and the EU 6increased by 18% and 9%, respectively.

Among different product categories, Hong Kong’s exports of miscellaneous electro-diagnostic apparatus (including apparatus for functional exploratory examination or for checking physiological parameters) increased by 4%. Meanwhile, exports of miscellaneous

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.

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

medical & healthcare industry - company and industry Performance of Hong Kong’s Exports of Medical and Healthcare Equipment

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

By Market Chinese mainland US EU (28) Germany Netherland Japan ASEAN India Macau

By Categories Miscllaneous Electro-diagnostic Apparatus Miscellaneous Medical Instrument and Appliances Syringes/Needles etc for Medical/Surgical

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

2014 HK$Mn. Growth % 16 -57 12,256 +2 6,619 +9 12,272 +1

Jan-Sep 2015 HK$Mn. Growth % 9 -32 8,700 -3 5,093 +6 8,709 -3

2013 Share % Growth % 47.2 -10 15.0 28 11.1 34 3.8 16 2.9 83 3.9 -4 3.5 30 2.0 104 1.5 +8

2014 Share % Growth % 43.5 -7 17.1 +15 11.8 +8 3.7 -1 3.1 +10 4.8 +27 3.6 +5 1.9 -8 1.6 +7

Jan-Sep 2015 Share % Growth % 38.9 -16 20.5 +18 13.0 +9 3.6 +5 3.8 +10 4.8 -5 3.7 +8 2.7 +39 1.6 +5

2013 Share % Growth % 25.3 22 20.9 -5 16.8 47

2014 Share % Growth % 26.1 +4 21.4 +4 19.1 +16

Jan-Sep 2015 Share % Growth % 26.6 +4 20.8 -8 18.6 -10

^ 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

into more opportunities for Hong Kong exporters of medical and healthcare products.

Meanwhile, growth of public health expenditure in the more industrialised countries is slowing down which, however, creates opportunities for home medical equipment targeted at patients undergoing recuperation and therapy processes.

General Trade Measures Affecting Exports of Medical and Healthcare Equipment Equipment for medical purposes faces stringent regulations in overseas markets. In the US, the Food and Drug Administration (FDA) is responsible for ensuring that medical devices comply with the safety and effectiveness requirements stipulated in the Federal Food, Drug and Cosmetic Act. The US regulations cover various aspects of design, clinical evaluation, manufacturing, packaging, labelling and post-market surveillance of medical

devices. In the EU, medical devices are covered by three main directives. These set out the requirements for the performance and safety of medical devices and the procedures for checking product compliance. A product is required to have a CE mark to show full compliance with relevant directives. The CE mark enables the product to be marketed in any EU member country.

The Japanese government has revised the Pharmaceutical Affairs Law (PAL), and it had come into force in November 2014. Manufacturers, repairers and distributors are required to obtain a business licence for Marketing Authorisation Holders (MAH). If the manufacturing facilities are located outside of Japan, these foreign manufacturing facilities are required to obtain Foreign Manufacturer Accreditation instead of a Manufacturer Licence.

Product Trends As a result of the aging

"Increased consciousness in personal health and fitness in developed countries is boosting demand for home-based or self-care equipment."

population, treatments for cardiopulmonary disease, diabetes and neurological 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 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.

HONG KONG BUSINESS ANNUAL 2016 51

company and industry - processed food & beverages industry "Large Hong Kong manufacturers have expanded their global networks and set up offices or factories in several major markets."

Processed F&B players roll out wellness options 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 52 HONG KONG BUSINESS ANNUAL 2016

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. Also, 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 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.

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 microwaveable and packaged foods, also looking promising in growth terms.

As people become more health conscious, organic food is becoming more popular. Organic foods are foods produced using ‘natural’ farming methods, which do not involve the use of synthetic pesticides and chemical

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

2013 HK$Mn. Growth % 3,118 6 42,303 9 9,083 36 45,421 9

2014 HK$Mn. Growth % 3,545 +14 46,111 +9 8,464 -7 49,656 +9

Jan-May 2015 HK$Mn. Growth % 1,294 +5 19,545 +8 2,375 -36 20,839 +8

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

2014 Share % Growth % 42.0 +4 37.6 +2 24.5 +20 6.8 +4 16.8 +20 2.5 +3 1.4 -13 1.0 +18 1.2 +48

Jan-May 2015 Share % Growth % 47.3 +19 40.3 +8 25.1 +28 1.1 -85 17.1 +10 2.1 -17 1.3 -10 0.8 -21 1.2 +53

2013 Share % Growth %

2014 Share % Growth %

Jan-May 2015 Share % Growth %

84.4

10

83.9

9

83.4

8

11.1

2

12.5

24

13.0

10

Edible offal of swine, frozen

5.4

-20

7.8

57

5.2

-12

Other molluscs/aquatic invertebrates, frozen, dried or salted

2.3

42

3.3

57

2.8

-15

Pistachios, fresh or dried

5.7

2

5.6

8

4.6

-3

Edible offal of bovine animal, frozen

2.7

29

2.9

17

8.6

242

15.6

6

16.1

12

16.6

7

3.3

-10

4.7

55

7.2

64

3.1

102

4.2

45

5.3

47

Poultry cuts and offal, (other than liver) frozen

Beverages Wine of fresh grapes (excl. sparkling wine) Milk/Cream, condensed/sweetened, solid, fat content >1.5%

^ 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.

fertilisers. Organic farmers use management systems that promote and enhance biodiversity, biological cycles, and soil biological activity.

Organic foods are not processed using irradiation, industrial solvents or chemical food additives. Organic processes maintain a food’s organic status by segregating it from synthetic and other prohibited materials, carefully tracking ingredients, and maintaining detailed record keeping.

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.

Product Trends In developed economies like the US and the EU, there has been a shift in consumer taste in favour of healthy foods, partly as a result of the ageing population who seek easy-to-prepare, high quality nutritional foods to

"There has been a shift in consumer taste in favour of healthy foods, partly as a result of the ageing population who seek easy-to-prepare, high quality nutritional foods to compensate for their lowered taste sensitivity."

compensate for their lowered taste sensitivity.

Food manufacturers are introducing low cholesterol/ carbohydrate/added sugar foods. The quest for slimness has given rise to the development by Danone, Unilever and Kraft of “dietary foods” that contain added fibre to make the food more filling. This trend requires increased R&D capabilities and advanced production technology. Purchase of organic food is a major trend in developing countries.

According to the US Organic Trade Association, organic food sales in the US reached US$35.9 billion in 2014.

HONG KONG BUSINESS ANNUAL 2016 53

company and industry - Insurance Industry "Many insurers are venturing into planning and wealth management to meet consumer demands."

Company (Group) of China (PICC) was listed in Hong Kong in December 2012.

Insurance industry adjusts to a matured market

More insurers are turning towards retirement planning and wealth management to cater to customer demands.

A

ccording to the Office of the Commissioner of Insurance’s (OCI) provisional statistics for the first half of 2015, Hong Kong’s total gross premiums increased 13.6% YOY to HK$184.9 billion (US$23.7 billion), representing 16.2% of the city’s GDP in the first half of this year. General business grew 3% to HK$23.9billion (US$3.1billion).

During the same period, long-term in-force insurance business increased by 15.4% YOY to HK$ 161billion (US$20.64 billion), while new long-term insurance business expanded faster at 25.2% YOY to HK$68.7 billion (US$8.8 billion). Analysed by gross premiums, long-term insurance business represented about 87% of the market, while general business accounted for the remaining 13%.

Hong Kong had 158 authorised insurers as of 6 Jul 2015, about half of which were incorporated overseas.

Among the overseas-incorporated insurers, Bermuda, the US and the UK took the lead.

54 HONG KONG BUSINESS ANNUAL 2016

According to the Hong Kong’s Office of the Commissioner of Insurance (OCI) 2014 Annual Report, the top 10 insurers by overall gross premiums in 2013 were AXA General Insurance Hong Kong, Zurich Insurance Company Ltd, Bupa (Asia) Limited, Bank of China Group Insurance Company Limited, China Taiping Insurance (HK) Company Limited, AIG Insurance Hong Kong Limited, QBE-HKSI Limited, Asia Insurance Company Limited, CNOOC Insurance Limited, MSIG Insurance (Hong Kong) Limited.

The total amount of the gross premiums written by these insurers was HK$ 18.82 billion (US$ 2.41 billion) in 2013, accounting for 45.2% of the total market share.

Major mainland insurers which have been listed in Hong Kong include China Life Insurance (the world’s second largest insurance company in terms of market capitalisation as of 2015 April), Ping An Insurance of China, China Taiping Insurance and China Pacific Insurance. The People’s Insurance

Insurance agents and brokers Insurance agents and brokers serve as an intermediary between policyholders and the authorised insurers. While insurance agents are contracted with a certain insurance company, insurance brokers are not affiliated with any insurance company.

As at end-June 2015, there were 51,144 appointed insurance agents (including 2,487 insurance agencies and 48,657 individual agents) registered with the Insurance Agents Registration Board, and 684 authorised insurance brokers who are the members of the approved bodies of insurance brokers, namely The Hong Kong Confederation of Insurance Brokers and Professional Insurance Brokers Association.

Industry Development and Market Outlook Against the backdrop of a highly matured market, an ageing population and rising general affluence, many insurers are already venturing into retirement planning and wealth management to meet consumer demands.

The Insurance Companies (Amendment) Ordinance 2015 was enacted by the Legislative Council in July 2015, paving the way for establishing the Independent Insurance Authority, as well as a statutory licensing regime to replace the existing self-regulatory system for insurance intermediaries. This changeover will help regulate the insurance business, protecting potential and existing policy holders and promoting the development of the industry.

To better protect policyholders and strengthen market stability in the event of insurer insolvency, the Hong Kong government has been working with the insurance industry to establish a Policyholders’ Protection Fund to cover both Individual and SME policyholders.In line with the regional trend, multi-channel distribution for insurance products is growing in popularity. While insurance products are primarily distributed by insurance agents, bancassurance penetration (the

Insurance Industry - company and industry Insurance and services auxillary to insurance and pension funding March 2015 Employment

35,706

No. of Establishments

10,813

Source: Quarterly report of employment and vacancies statistics, census and statistics department

Insurance Market Total gross premiums (US$ billion) Long-term business General Business Insurance Penetration (premium income as % of GDP) Insurance density (per capita premium, US$)

First half of 2015 23.7 20.6 3.1 16.2 3274.2*

Source: Office of the commissioner of Insurance, Cennsus & Statistics Department + Based on Mid 2015 Population Figures and 2015 first 6 month total gross premiums

Service Providers umber of authorised insurers Total Long-term insurance General Insurance Composite

June 2016 158 44 95 19

Source: Office of the Commissioner of Insurance

distribution of insurance products by banks) has been growing rapidly.

Asia, in particular China, continues to be viewed by global insurers and reinsurers as the region of opportunities. In addition to the Chinese mainland's WTO liberalisation, Hong Kong's insurance sector and professionals can benefit from the CEPA agreement signed with the mainland.

China’s insurance market The Chinese mainland recorded a growth of 19.9% in premiums income to RMB 1.53 trillion (about US$25 billion) in the first seven months of 2015, with longterm insurance business and general insurance business growing by 24.2% and 11.67 % respectively.

In the first seven months of 2015, foreign-invested insurance companies on the mainland accounted for 5.6% of the life insurance market and 2% in property and casualty insurance market respectively. For foreign insurers, they have entered the Chinese market mainly through the formation of joint ventures with local

companies.

It is estimated that 40% of the total population will be aged 60 or above by 2050, accentuating the need for more extensive health insurance protection on the mainland.

In April 2014, China Insurance Regulatory Commission (CIRC) announced that domestic or foreign insurance companies will be allowed from June 2014 to acquire one more mainland insurance company in the same business segment, be it life insurance or property-and-casualty insurance, and any purchase of more than one-third of the equity stake of an insurer will be subject to regulatory approval.

Currently, insurance companies on the mainland are only allowed to own one insurance company in each segment. The maximum limit of capital participation by a Hong Kong insurance company in a Mainland insurance company is 24.9%.

The new arrangement is seen as conducive to industry consolidation, raising the operational efficiency of insurance companies on the

"It is estimated that 40% of the total population will be aged 60 or above by 2050, accentuating the need for more extensive health insurance protection on the mainland."

mainland.

Under the CEPA framework, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong (“Guangdong Agreement”) came into effect from March 2015. Measures related to the insurance sector include the following: • Encouraging Guangdong insurance companies to cede their business to Hong Kong insurance or reinsurance companies with RMB as the settlement currency.

• Encouraging Hong Kong insurance companies to expand their reinsurance business.

• Allowing Guangdong insurance companies that fulfil regulatory requirements to appoint Hong Kong insurance companies.

Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA) There were 16 approved applications for Hong Kong service supplier (HKSS) for the sector of insurance and insurance-related services as of 31 August 2015.

HONG KONG BUSINESS ANNUAL 2016 55

company and industry - toy industry "Video games have faced fierce competition from devices such as smart phones and tablets which also have game functions." exports of traditional toys and games dropped by 5% year-on-year, whereas exports of electronic and video games dropped 4% year-on-year, accounting for 33.5% in terms of shares. While video games have faced fierce competition from devices such as smart phones and tablets which also have game functions, the recent release of consoles such as PlayStation 4 and Xbox One that support 3D capabilities has stimulated new interest in video games.

All work and no play for Hong Kong’s toy makers

Hong Kong’s toy industry has taken a huge hit as exports have been on a downward slope.

H

ong Kong toy makers produce a wide range of items, including dolls, doll houses and other accessories, action figures, construction sets, toy guns, make-believe toys (toy versions of adult “objects”, e.g., kitchen implements, vacuum cleaners, etc.) and gimmicks such as beauty kits and doctor’s kits. Other major categories are electronic toys and games, radio/remote controlled toys, battery-operated toys and metal toys.

To reduce operation costs and stay competitive, most Hong Kong toy makers have set up production facilities offshore, mainly on the Chinese mainland. As such, many toy companies in Hong Kong have been reclassified as import-export establishments, contributing to the apparent decline in the number of toy makers locating in Hong Kong.

Meanwhile, the role of their offices in Hong Kong shifts towards quality control, management, marketing, finance and accounts, product design, and production management.

This skew towards higher value-added activities is sharpening the competitive 56 HONG KONG BUSINESS ANNUAL 2016

edge of Hong Kong toy makers, while expanding production capacity through relocation.

After dropping by 19% in 2013 and 18% in 2014, Hong Kong’s toys exports dropped further by 5% year-on-year in January-October 2015. Better performance was seen mainly in the Western markets. In January-October 2015, exports to the EU and the US registered year-on-year gains of 1% and 19%, respectively. However, Hong Kong’s exports to the Chinese mainland, Japan and ASEAN, which accounted for some 40% of the total, were lackluster during the period. Yet, Hong Kong’s export statistics may not fully record Hong Kong’s toys business as it mostly takes the form of offshore trade, with shipments bypassing Hong Kong.

Item-wise, traditional toys and games which had outperformed electronic and video games in recent years, saw its share in Hong Kong’s toys exports increased from 54% in 2013 to 66.5% in the first ten months of 2015.

In January-October 2015, Hong Kong’s

Industry Trends Retail consolidation in overseas markets has changed the business landscape for toy exporters. In the US, for example, mass merchants including Wal-Mart and Target are taking away increasing shares of the toy market from specialty chains and traditional retailers. Mass merchants are able to purchase large quantities, allowing them to bargain with suppliers regarding to prices and terms of trade in a better position. However, the importance of the online channel to toys is increasing. According to market research firm The NPD Group, the online channels have shown significant growth and could potentially contribute to more than one-fifth of toy revenues. Brick-andmortar chains have been shoring up their e-commerce operations.

The mass market depends on aggressive advertising campaigns or promotional tie-ins for success. Gradually, more toy manufacturers are entering into partnerships with companies from other industries, especially fast-food chains, in their promotion campaigns. Toy makers are also engaged in licensing deals with movie studios, making products featuring film characters, such as Spiderman, Batman and Disney’s characters.

Successful products can also come from phone apps/games, such as Angry Bird and Talking Tom. Even before the tide of toy recalls in overseas markets in 2007, safety standards, regulations and code of practices have long been major concerns among overseas buyers.

In this regard, the International Council of Toy Industries (ICTI), alongside active involvement of Hong Kong toy makers, has introduced the ICTI Code

toy industry - company and industry Performance of Hong Kong toy exports

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

HK$mn 318 63,593 53,543 63,911

2013 Growth % +10 -19 -22 -19

HK$mn 362 51,876 42,737 52,238

2014 January-October 2015 Growth% HK$mn Growth% +14 232 -18 -18 40,060 -5 -20 34,782 * -18 40,292 -5

Share % 22.6 8.5 4.0 2.0 28.1 19.9 15.8 2.5 1.1

2013 Growth % -25 -37 -8 -12 -21 -23 -9 +3 -14

Share % 22.2 4.9 4.6 2.4 26.4 18.1 15.4 4.5 2.1

2014 January-October 2015 Growth% Share % Growth% -20 24.0 +1 -53 6.5 +37 -4 5.3 +7 -4 2.7 +7 -23 22.5 -20 -26 21.8 +19 -21 12.4 -20 +48 4.7 -4 +51 2.3 +3

* insignificant

by market EU Germany UK Italy Chinese Mainland US Japan ASEAN Singapore Sources: Hong Kong Trade Development Council

of Business Practice and an associated auditing process known as the CARE Process, to manufacturers, distributors and retailers of toys and related merchandise in its member countries.

Product Trends Licensing has been a key driver of toys sales globally, particularly for traditional toys.

While a certain proportion of licensed toys is associated with evergreen characters such as Hello Kitty and Mickey Mouse, blockbuster movies and TV cartoons remain the major source of properties.

Big players like Mattel and Lego often create “special edition” lines on the latest movies. Recently, a number of Hollywood-created properties including Frozen, Minions and Star Wars has created unprecedented success for the licensees. However, in general, the trade of licensed toys of movie characters is subject to a rather short boom-and-bust cycle. According to market research firm the NPD Group, sales of movie-related toys experience a quick growth in the three weeks prior to cinematic release, then a

slowdown in the six weeks after the movie has come out.

On the other hand, video games and social media are now constantly inventing new characters. Angry Birds and Minecraft are the prominent examples.

Parents increasingly emphasize on children’s development and realize the importance of learning through play. Manufacturers are seen to respond by designing toys that aim to enhance children’s intellectual, social, emotional, and/ or physical development.

Interlocking bricks like Lego, puzzles and construction sets that improve hand-eye coordination, patience, creativity and spatial skills continue to be highly soughtafter; board and card games that develop skills such as turn-taking and decisionmaking remain popular as well.

Emerging trends On the other hand, there is an emerging category called STEAM which refers to educational toys with a focus on Science, Technology, Engineering, Arts, and

"The worldwide mega-trend is to integrate electronics and new technology with toys. Many dolls and toy robots can now be remote-controlled by an Android or iOS device and updated with apps to create additional and new playing possibilities."

Mathematics. Examples include robots, science and experiment kits, and arts and crafts. A Hong Kong company called Fame Master, has developed 4D (3 dimensions with details) educational puzzles on animals and human organs.

The worldwide mega-trend is to integrate electronics and new technology with toys.

Many dolls and toy robots can now be remote-controlled by an Android or iOS device and updated with apps to create additional and new playing possibilities.

Recently, the tiny robot BB-8, a character in the Star Wars franchise, has gained a lot of attention. The companion app is packed with official Star Wars sound effects and other features like recording holographic messages. A Hong Kong company named WooWee is famous for making tech-based toys too. The company has recently launched Miposaur, an intelligent robot dinosaur which is equipped with the latest sensor technology enabling it to respond to the swipe of hand and play with a trackball.

HONG KONG BUSINESS ANNUAL 2016 57

company and industry - leather consumer goods "Hong Kong’s exports of leather consumer goods fell another 8% to HK$14.6 billion in 2015."

Leather goods seeing signs of wear and tear

After skidding by 8% last year, exports have once again slid by the same percentage, showing growing consumer disinterest.

T

he latest official statistics show that there was a workforce of 90 people in the leather consumer goods industry in December 2014. In face of rising operation costs in Hong Kong, the majority of local manufacturers have shifted a significant part of production to the Chinese mainland and Southeast Asia, leaving only limited capacity in Hong Kong to meet small and quick orders.

Some manufacturers have invested heavily in advanced automated machinery and operation systems to streamline the whole production process.

At the end of 2014, the number of establishments involved in the importexport trade of leather consumer goods was 2,540, while direct workforce employed by these establishments totalled 9,930.

In addition to competitive labour costs, a broad spectrum of raw materials, parts and fittings (like hides and buckles) are supplied by nearby sources on the Chinese mainland. Indeed, some Hong Kong, Taiwan and mainland manufacturers are vertically integrated, which further 58 HONG KONG BUSINESS ANNUAL 2016

enhances quality control and flexibility in production and creates synergy. For instance, Yue Yuen Industrial (Holdings) Limited, a Hong Kong listed company, teams up with upstream suppliers ranging from raw materials to shoes components.

Many Hong Kong companies are engaged in the trading of leather consumer goods. Some of them are appointed by foreign brands as their agents in the region, including the Chinese mainland. A number of Hong Kong's leather consumer goods companies, such as Izzue, Collect Point, Mirabell, Staccato and Belle, take strong initiatives in developing the mainland market.

Performance of Hong Kong’s Exports of Leather Consumer Goods After registering a decrease of 8% last year, Hong Kong’s exports of leather consumer goods fell another 8% to HK$14.6 billion in the first five months of 2015. Re-exports, accounting for almost all exports of leather consumer goods

from Hong Kong, also fell by 8%, while domestic exports were up 1%.

The US remains the leading export destination for Hong Kong's leather consumer goods, accounting for 30% of the total during January-May 2015, followed by the EU and the Chinese mainland, with respective shares of 16% and 14%.

In terms of performance, Hong Kong’s exports of leather consumer goods to the US declined by 10% in the first five months of 2015. As for the EU, sales also dropped by 15%, with major member states like the Netherlands and Germany seeing respective descents of 13% and 15%, while Italy posting a 9% increase.

On the other hand, sales to the Chinese mainland and Macau lost 4% and 15%, respectively, whereas an increase of 1% was recorded for South Korea.

Product wise, exports of leather footwear, representing 51% of Hong Kong’s total exports of leather consumer goods, fell by 12% during the first five months of 2015, while sales of handbags, trunks and suitcases and other clothing accessories slid by 2% and 18%, respectively.

Sales Channels The majority of leather goods manufacturers in Hong Kong are small and medium enterprises (SMEs) which predominantly produce on an OEM basis for leading brands in North America, Western Europe and Japan. An increasing number of manufacturers are involved in product design and development, engineering, modelling, tooling and quality control. However, many of them still prefer selling to overseas importers and distributors, who in turn market to wholesalers and retailers.

Rather than relying solely on OEM/ ODM contracts, a number of large leather consumer goods companies have developed their own wholesale and retail networks. Certain suppliers, such as Giordano, Goldlion, Crocodile Garments and Le Saunda, have already been selling their brand-named products in the Chinese mainland as well as other overseas markets.

Industry Trends In pursuit of lower production costs, higher profit margins, expanding capacity and product range extension,

leather consumer goods - company and industry Performance of Hong Kong’s Leather Consumer Goods^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports

by Markets US EU(28) Italy Netherland Germany Chinese Mainland Macau South Korea Japan Australia Taiwan

leather consumer goods manufacturers in Hong Kong have shifted a significant part of their production facilities to the Chinese mainland and Southeast Asian countries, especially Vietnam. As the leather industry is highly specialised and vertically integrated, relocation may also provide the advantage of being more accessible to the raw materials and facilitating retail and distribution.

In view of soaring production costs, manufacturers, in addition to relocation, have further invested in advanced automated machinery and operation systems to streamline the whole production process.

In the meantime, advanced processing techniques in leather manufacturing have contributed to the popularity of leather consumer goods.

Nowadays, leathers can be worked up to more complex designs with digital leather cutting systems, while some can be dyed into more fashionable colours. In addition to durability, softness, lightness and smoothness have made leather garments everpresent and attractive around the year. For instance, clothing

Value 0.005 44.887 32.652 44.891

2013 Growth % -28 -5 -8 -5

2013 Share % Growth % 30.8 -10 17.0 -8 3.9 -16 3.2 +13 3.5 -4 12.9 +3 7.2 +28 6.9 -20 6.0 -4 3.2 -2 2.6 +12

made of the ultra-thin leathers, of which thickness is 0.2mm0.3mm, has become a stylish choice for spring/summer fashion season.

Since leather processing usually involves production procedures and chemicals that can cause environmental pollution, the industry is considered one of the most polluting industries. To curb pollution, different regulations are imposed to improve the production processes and product designs for better environmental protection.

For instance, China's Ministry of Environmental Protection (MEF) has established a new discharge standard for water pollutants emitted from the leather and fur making industry.

Product Trends With many people becoming more willing to spend on stylish and luxurious leather items, leather vogue handbags, skirts, jackets are gaining popularity in the fashion world, and have been considered a wind vane reflecting the current trends of the season and forming the vogue mark in people’s wardrobe.

Looking ahead, leather wear

2014 Growth % +79 -8 -8 -8

Jan-May 2015 Value Growth % 0.003 +1 14.631 -8 10.303 -8 14.634 -8

2014 Share % Growth % 30.6 -8 18.2 -2 4.1 -4 4.0 +16 3.5 -7 12.9 -8 8.5 +9 5.0 -33 5.1 -21 3.2 -6 2.7 -2

Jan-May 2015 Share % Growth % 29.5 -1 15.6 -15 4.3 +9 3.2 -13 3.0 -15 14.2 -4 8.5 -15 5.7 +1 5.5 -10 3.8 +7 2.9 +3

Value 0.009 41.471 30.139 41.480

"With many people becoming more willing to spend on stylish and luxurious leather items, leather vogue handbags, skirts, jackets are gaining popularity in the fashion world."

is forming a trend alongside with a growing demand for automotive leather. As leather consumer goods are increasingly viewed as fashion accessories, the trend, from smart to clean chic, neo sports up to romanticism, is expected to remain popular in the market.

Nowadays, however, the primary market requirement for any leather good is performance. This means improving the unique leather properties such as water vapour absorption and permeability, robustness and ductility. For footwear, its elegance and durability for upholstery leather, while softness and elegance for garments and leather goods. In addition, the appeal of natural leather offers opportunity in face of mass production of items made from alternative materials such as synthetic leather, textiles and plastics.

On the other hand, ecofriendliness and sustainability are becoming increasingly important issues in leather consumer goods industry.

Some manufactures have taken initiatives in simplifying their production process, by adopting simplified tanning processes.

HONG KONG BUSINESS ANNUAL 2016 59

numbers | indicators Population by Age Group and Sex End-2014

Mid-2015 #

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

0-4

140.8

131.2

272.0

3.7

145.6

135.4

281.0

3.9

5-9

139.4

129.2

268.6

3.7

143.4

132.9

276.3

3.8

10 - 14

138.6

131.8

270.4

3.7

135.0

128.8

263.8

3.6

15 - 19

191.3

180.4

371.7

5.1

182.5

172.1

354.6

4.9

20 - 24

223.0

226.3

449.3

6.2

213.7

218.6

432.3

5.9

25 - 29

224.6

288.6

513.2

7.1

225.9

287.5

513.4

7.0

30 - 34

232.8

347.0

579.8

8.0

235.0

349.1

584.1

8.0

35 - 39

225.3

333.5

558.8

7.7

226.7

338.2

564.9

7.7

40 - 44

239.5

341.1

580.6

8.0

240.5

341.6

582.1

8.0

45 - 49

250.7

326.9

577.6

7.9

247.3

327.2

574.5

7.9

50 - 54

308.2

352.1

660.3

9.1

305.3

353.2

658.5

9.0

55 - 59

295.5

303.5

599.0

8.2

302.1

311.0

613.1

8.4

60 - 64

230.5

236.5

467.0

6.4

235.9

240.8

476.7

6.5

65 - 69

172.8

174.4

347.2

4.8

180.5

182.8

363.3

5.0

70 - 74

110.9

103.0

213.9

2.9

110.9

103.5

214.4

2.9

75 - 79

101.2

109.0

210.2

2.9

102.0

108.5

210.5

2.9

80 - 84

75.2

93.0

168.2

2.3

74.7

93.1

167.8

2.3

>= 85

52.9

105.8

158.7

2.2

57.0

110.3

167.3

2.3

3 353.2

3 913.3

7 266.5

100.0

3 364.0

3 934.6

7 298.6

100.0

Age group

All age groups Notes :

Male ('000)

Female ('000)

Both sexes ('000)

Both Sexes (% of total population)

# 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 (1), Census and Statistics Department (Enquiry telephone no. : 3903 6943 Enquiry e-mail : population@censtatd.gov.hk)

Real Salary Indices (A) for Middle-level Managerial and Professional Employees Analysed by Selected Industry Section (June 1995 = 100)

Manufacturing

Import/export, wholesale and retail trades

Transportation

All Selected Industry Sections

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

2011

102.7

-2.2

116.8

+0.7

108.3

-1.9

117.0

+0.5

2012

102.1

-0.6

118.1

+1.1

109.3

+0.9

117.7

+0.5

2013

100.7

-1.4

118.8

+0.5

108.5

-0.8

117.7

0.0

2014

101.1

+0.4

119.5

+0.6

110.3

+1.6

118.8

+0.9

2015

103.0

+1.9

122.3

+2.3

113.2

+2.7

122.0

+2.7

Year

60 HONG KONG BUSINESS ANNUAL 2016

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 (%)

9/2014 - 11/2014

3 896.5

1.2

127.9

3.3

3.3

62.0

1.6

10/2014 - 12/2014

3 904.4

1.0

122.6

3.3

3.1

62.7

1.6

11/2014 - 1/2015

3 922.2

1.4

120.5

3.3

3.1

62.2

1.6

12/2014 - 2/2015

3 929.3

2.5

121.8

3.3

3.1

57.3

1.5

1/2015 - 3/2015

3 928.4

2.7

127.3

3.3

3.2

53.5

1.4

2/2015 - 4/2015

3 919.8

2.4

127.5

3.2

3.3

49.4

1.3

3/2015 - 5/2015

3 907.7

1.6

127.7

3.2

3.3

52.9

1.4

4/2015 - 6/2015

3 921.5

1.6

129.9

3.2

3.3

55.6

1.4

5/2015 - 7/2015

3 931.9

1.2

134.1

3.3

3.4

56.4

1.4

6/2015 - 8/2015

3 946.0

1.0

137.4

3.3

3.5

55.1

1.4

7/2015 - 9/2015

3 932.1

0.7

135.8

3.3

3.5

53.4

1.4

0.6

132.3

3.3

3.4

53.6

1.4

8/2015 - 10/2015 #

Notes :

3 922.2

# 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 2016 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 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

2

0.0

81

5.2

***

***

Dec

2

0.0

80

2.6

***

***

Mar

2

0.0

78

0.0

***

***

Jun

2

0.0

76

-7.3

***

***

Month

Industry Section C : Manufacturing Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

11 219

-3.2

102 642

-1.2

2 879

6.6

Dec

11 056

-4.2

101 480

-2.1

2 503

4.9

Mar

10 947

-5.4

100 300

-3.1

2 989

-6.6

Jun

10 874

-5.2

99 601

-2.6

2 725

-23.9

Month

Industry Sections D & E : Electricity and gas supply, and waste management Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

418

-0.2

11 001

1.5

***

***

Dec

422

1.2

11 039

0.8

***

***

Mar

405

-7.5

10 874

-1.3

***

***

Jun

405

-6.5

10 795

-1.6

***

***

Month

Industry Section F : Construction sites (manual workers only) Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

1 342

2.1

86 534

12.7

1 532

73.1

Dec

1 261

-3.7

86 343

7.8

846

-37.1

Mar

1 244

-4.0

91 878

16.9

882

-45.8

Jun

1 310

-0.3

92 808

16.4

935

-39.1

Month

62 HONG KONG BUSINESS ANNUAL 2016

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 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

116 639

0.6

554 431

0.5

8 447

-16.7

Dec

117 919

1.4

556 185

0.6

8 042

-5.9

Mar

117 446

1.0

549 226

-0.7

8 999

-2.3

Jun

116 138

-0.3

545 719

-1.5

8 198

0.6

Month

Part of Industry Section G : Retail Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

65 788

1.3

269 813

1.9

9 239

0.6

Dec

65 921

0.8

271 553

1.4

8 711

4.9

Mar

65 899

0.1

271 530

0.6

8 553

-11.7

Jun

65 446

-0.7

269 868

-0.7

8 439

-4.2

Month

Industry Section H : Transportation, storage, postal and courier services Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

9 728

0.6

175 449

2.6

3 384

-7.1

Dec

9 757

0.6

176 638

2.9

3 115

-14.2

Mar

9 747

ยง

176 593

2.8

3 958

-5.4

Jun

9 776

-0.2

176 508

1.1

4 062

0.6

Month

Industry Section I : Accommodation and food services Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

17 680

3.6

282 950

2.6

15 546

8.2

Dec

17 874

4.7

285 554

2.8

15 297

2.3

Mar

17 778

1.9

283 678

0.9

15 469

-12.1

Jun

17 820

0.1

282 749

-0.1

15 150

-4.1

Month

HONG KONG BUSINESS ANNUAL 2016 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 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

12 423

3.2

104 787

2.2

2 358

-21.8

Dec

12 595

3.0

105 215

1.9

2 672

33.9

Mar

12 716

3.5

104 049

1.2

2 933

14.3

Jun

12 761

2.8

104 941

1.4

2 481

-6.5

Month

Industry Section K : Financing and insurance Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

22 173

0.3

214 671

1.8

4 876

-16.5

Dec

22 723

0.9

217 249

1.8

4 727

5.5

Mar

23 088

2.8

218 747

2.8

4 649

13.5

Jun

23 084

3.5

219 678

2.7

5 308

6.1

Month

Industry Section L : Real estate Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

14 954

-1.0

126 777

0.6

4 394

14.6

Dec

15 296

0.6

128 773

1.8

3 910

11.8

Mar

15 531

2.7

129 770

2.2

4 370

10.3

Jun

15 543

3.3

129 461

2.2

4 274

11.0

Month

Industry Sections M & N : Professional and business services Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

43 181

1.4

353 104

1.4

8 544

-2.7

Dec

44 484

1.5

358 128

1.2

9 167

2.6

Mar

45 478

3.7

362 872

2.6

9 344

-4.3

Jun

45 540

4.4

363 131

2.8

9 200

-1.7

Month

64 HONG KONG BUSINESS ANNUAL 2016

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 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

47 142

5.1

482 459

4.0

13 929

-10.8

Dec

47 791

4.9

490 967

5.3

14 278

1.0

Mar

48 055

4.4

494 101

3.9

15 616

34.3

Jun

48 584

4.1

495 195

3.2

17 285

4.1

Month

All industry sections covered in the survey Establishments Year 2014 2015

Persons engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

362 689

1.4

2 764 699

2.2

75 357

-3.8

Dec

367 101

1.7

2 789 204

2.2

73 533

1.6

Mar

368 336

1.6

2 793 696

1.9

78 069

0.4

Jun

367 283

1.1

2 790 530

1.3

78 379

-1.7

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 2016 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

2015

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Sep

190.7

+4.6

203.8

+2.1

181.8

+5.0

176.2

+5.3

Dec

191.1

+5.6

204.7

+3.0

181.7

+4.9

176.8

+4.4

Mar

193.3

+4.4

204.8

+3.0

182.6

+4.9

179.9

+5.4

Jun

196.6

+3.6

209.7

+3.3

185.8

+4.6

184.0

+5.5

Financial and insurance activities

Year 2014 2015

Month

Accommodation and food service activities ^

Index

Month

2014

Transportation

Year-onyear % change

Index

Real estate leasing and maintenance management Index

Year-onyear % change

Professional and business services

Index

Year-onyear % change

Personal services

Index

Year-onyear % change

All selected industry sections

Index

Year-on-year % change

Sep

215.1

+3.2

222.1

+3.1

218.7

+5.9

267.9

+8.3

202.3

+4.0

Dec

215.4

+3.8

223.6

+2.0

221.3

+6.2

271.9

+7.1

203.3

+4.2

Mar

216.7

+3.4

226.9

+2.2

222.6

+4.9

274.3

+7.9

204.8

+4.1

Jun

218.4

+3.0

230.7

+3.9

231.7

+7.4

277.6

+6.3

209.4

+4.6

Real Wage Indices for employees up to supervisory level (excluding managerial and professional employees) by selected industry section (September 1992 = 100) Manufacturing Year

2014 2015

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

Sep

111.2

-6.9

118.8

-9.1

105.9

-6.5

102.7

-6.2

Dec

108.7

-1.2

116.5

-3.7

103.4

-1.8

100.6

-2.3

Mar

109.0

-2.0

115.5

-3.3

103.0

-1.6

101.5

-1.1

Jun

112.5

-0.7

120.0

-1.1

106.3

+0.2

105.4

+1.1

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%.

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 2016

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 2014 2015

Month

Index

Year-onyear % change

Real estate leasing and maintenance management Index

Year-onyear % change

Professional and business services

Index

Year-onyear % change

Personal services

Index

Year-onyear % change

All selected industry sections

Index

Year-on-year % change

Sep

125.3

-8.1

129.4

-8.2

127.5

-5.7

156.1

-3.5

117.9

-7.4

Dec

122.5

-2.9

127.2

-4.6

125.9

-0.6

154.6

+0.2

115.7

-2.5

Mar

122.2

-2.9

128.0

-4.1

125.5

-1.5

154.7

+1.3

115.5

-2.3

Jun

125.0

-1.4

132.1

-0.5

132.6

+2.9

158.9

+1.8

119.9

+0.1

Seasonally adjusted Consumer Price Indices Average monthly rate of change (%) during the latest 3 months Year

2014

2015

Month

Consumer Price Index (A)

Consumer Price Index (B)

Consumer Price Index (C)

Nov

+1.6

+3.4

+0.9

+0.4

Dec

+0.5

+0.8

+0.5

+0.3

Jan

+0.1

+0.1

+0.1

0.0

Feb

+0.1

+0.2

+0.1

0.0

Mar

+0.2

+0.2

+0.2

+0.1

Apr

-0.2

-0.4

-0.2

0.0

May

-0.2

-0.5

-0.1

+0.1

Jun

-0.2

-0.5

-0.2

0.0

Jul

+0.2

+0.3

+0.2

+0.2

Aug

-0.7

-2.0

-0.1

+0.1

Sep

+0.2

+0.1

+0.2

+0.2

Oct

+0.6

+0.9

+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 2016 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

2012

1.0

7.9

0.3

1.5

1.7

0.6

1.0

##

1.5

2013

0.9

7.8

0.3

1.3

1.7

0.6

1.0

##

1.5

2014

0.7

7.0

0.3

1.4

1.7

0.6

1.0

##

1.5

6/2014 - 8/2014

0.5

6.7

0.4

1.3

1.6

0.6

1.0

2.2

1.4

7/2014 - 9/2014

0.8

6.6

0.3

1.4

1.7

0.7

1

##

1.5

8/2014 - 10/2014

0.8

6.7

0.3

1.4

1.9

0.5

1.0

##

1.5

9/2014 - 11/2014

1.3

7.4

0.1

1.7

1.9

0.5

1.1

##

1.6

10/2014 - 12/2014

0.9

7.8

0.1

1.8

1.9

0.4

1.1

##

1.6

11/2014 - 1/2015

0.9

8.3

0.2

1.7

1.6

0.4

1.0

##

1.6

12/2014 - 2/2015

0.5

7.2

0.2

1.4

1.5

0.5

1.1

##

1.5

1/2015 - 3/2015

0.9

6.7

0.3

1.2

1.3

0.5

1.0

##

1.4

2/2015 - 4/2015

1.0

5.5

0.3

1.1

1.3

0.5

1.1

##

1.3

3/2015 - 5/2015

0.7

6.4

0.4

1.3

1.4

0.5

0.9

##

1.4

4/2015 - 6/2015

0.8

6.8

0.5

1.3

1.3

0.5

0.9

4.0

1.4

5/2015 - 7/2015

0.6

7.1

0.6

1.4

1.6

0.5

0.7

3.5

1.4

6/2015 - 8/2015

0.8

7.0

0.4

1.3

1.5

0.5

0.8

3.1

1.4

7/2015 - 9/2015

0.7

6.6

0.3

1.5

1.6

0.5

0.8

##

1.4

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 2016

numbers | indicators

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 (%)

2 389.0

2.9

52.0

33.2

68.2

2013

2 404.8

2.9

51.2

32.9

66.7

2014

2 431.1

2.9

51.0

32.8

66.4

5/2014 - 7/2014

2 433.2

2.9

50.8

32.5

66.5

6/2014 - 8/2014

2 439.4

2.9

50.6

32.3

66.4

7/2014 - 9/2014

2 437.7

2.9

50.5

32.4

66.2

8/2014 - 10/2014

2 437.7

2.9

50.5

32.5

66.2

9/2014 - 11/2014

2 436.4

2.9

50.4

32.5

65.9

10/2014 - 12/2014

2 439.7

2.9

50.6

32.5

66.3

11/2014 - 1/2015

2 443.0

2.9

50.2

32.6

65.5

12/2014 - 2/2015

2 448.5

2.9

50.2

32.6

65.4

1/2015 - 3/2015

2 449.4

2.9

50.2

32.4

65.7

2/2015 - 4/2015

2 451.7

2.9

50.3

32.4

65.8

3/2015 - 5/2015

2 454.4

2.9

50.7

32.4

66.6

4/2015 - 6/2015

2 463.4

2.9

50.3

32.4

65.7

Owner-occupiers in private sector housing as a proportion of total number of domestic households in private sector housing (%)

Average domestic householdsize

2012

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 2016 69

High-Flyers 2016 Profiles of Hong Kong’s Outstanding Enterprises and Business Leaders

HSBC Life (International) Limited 72 | Ageas Insurance Company (Asia) Limited 76 | Altruist Financial Group Limited 78 | Canadian International School of Hong Kong 80 | CITIC Pacific Limited 82 | City University of Hong Kong 84 | Elite Concepts 86 | GODIVA Chocolatier 88 | Hang Seng Insurance 90 | Hong Kong Matchmakers 92 | Inter Continental Grand Stanford Hong Kong 94 | Lan Kwai Fong Hotel @ KAu U Fong 96 | Mass Mutual Asia Ltd. 98 | Mercedes-Benz Hong Kong 100 | Ovolo Group 102 | OZO Wesley HK 104 | Rhombus International Hotels Group 106 | Sound Concepts Ltd. 108 | The Cityview 110 | Thomas Mayer & Associés 112 | Uni-Bio Science Group Ltd. 114 | Wharf T&T 116 | Zchron Design 118

CONTRIBUTING WRITERS: Lisa Cam, Andrew Ng HONG KONG BUSINESS ANNUAL 2016 71

Candy Yuen Chief Executive Officer HSBC Insurance Hong Kong

72 HONG KONG BUSINESS ANNUAL 2016

HSBC Life (International) Limited

ENTERPRISE AWARD

Clients and staff come first for HSBC

H

SBC Insurance is the market leader in terms of market share in the MPF market, and is also among the top three life insurance players in regards to new business market share. HSBC is a global and universal bank serving customers worldwide with over 6,100 offices in 72 countries and territories.

Being a leader requires focus and a strategy that comes from the perspective of its customers. “We measure our success by how well we meet our clients’ needs.” As Chief Executive Officer of HSBC Insurance, Hong Kong, Candy Yuen expresses, “We strive to do the right thing for our customers and thanks to the support and commitment of our staff, HSBC continues to excel in Hong Kong.”

A customer-centric focus The company focuses on a customer-centric strategy and need-based model to drive their actions and decisions. HSBC Insurance has been investing

in studying customer behaviours, preferences and trends for a number of years. Since 2005, HSBC has been publishing an annual Future of Retirement report globally and a few years ago, another research program was developed as well, namely, The Value of Education Study. Using a combination of customer insight from surveys with clients and feedback gathered by frontline staff they are able to develop and enhance their propositions to meet customers’ needs.

As a result, the Goal Access Universal Life Plan and Income Goal Insurance Plan launched within the last 12 months have been very well-received as these were done with customers in the front of mind. In December 2015, HSBC also launched HSBC Retirement Monitor, which estimates the monthly expenditures needed for different types of retirement lifestyles and serves as a tool that can help Hong Kong people forecast their spending during retirement.

HONG KONG BUSINESS ANNUAL 2016 73

HSBC Life (International) Limited

As Yuen reiterates, “Our staff are united by a singular purpose to connect our customers to opportunities, enabling them to thrive and economies to prosper. In essence, we are helping people to fulfil their ambitions.”

HSBC Insurance looks for the right type of employees to join the organisation and help the company grow. Besides the basic necessary skill set, they look for those who share similar values to that of HSBC. The goal is for staff to feel empowered to contribute their very best and help to achieve the best outcomes for their customers and the company. To ensure that they achieve this goal, they’ve put great emphasis on values and committing to applying the highest standards everywhere they do business. For example, Yuen explains, “We have the highest standards in regards to fighting financial crime, compliance and ensuring we know our customers well. We emphasize on teamwork and collaboration a lot, we are supportive and truly embrace diversity in an inclusive environment.”

Pearl Delta River opportunities The Pearl River Delta (PRD) is an important strategic priority and as Hong Kong becomes more connected to Mainland China, HSBC Insurance, like the rest of the world, are looking to the region for opportunities. The region has a population of about 57 million and forms one of China’s most populated areas. Hong Kong clearly plays a very critical role, as it has the right infrastructure, work force and technology to support the growth aspiration in the PRD and to help better serve clients there. The per capita GDP in the PRD is now roughly twice the national average of China and

74 HONG KONG BUSINESS ANNUAL 2016

is forecast to double by 2030 to around US$36,000.

By comparison, Hong Kong’s per capita GDP at the moment is about US$38,000 and HSBC is uniquely positioned to capitalise on the growth opportunities and capture the emerging wealth of the region.

With such an intense client focus and positioned in the next global growth story, building a strong human capital balance sheet becomes increasingly important.

As Yuen clearly states, “People are definitely our most valuable asset. It’s our employees that make our strategy actually happen.”

HSBC requires their staff to always be at their best, based on the common values of being open, dependable and connected. The company has taken the initiative to launch a series of staff recognition programs.

The belief is that when they acknowledge positive behaviour it is more likely to be repeated and recognised by everyone, and inspire staff to work together for a common cause.

A part of the community HSBC also wants to be the best in the communities their staff work and live in. HSBC internally has a Wayfoong Volunteer Group, which has been running since 1993. This year the Bank has been ranked first in Climate Change Research by Thompson Reuters.

Insurance as part of the group has also played a part in community contribution as well. Their corporate sustainability volunteers have formed their own program called “SWITCH” and recently they also successfully rolled out a “Let Us Shine” and “Hello Central” campaign; programs to help secondary students to practise English along with HSBC’s NGO partners such as Hong

Outstanding Enterprise Award INSIGHT

FAST FACTS

“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.

•

•

The Future of Retirement Choices for later life Hong Kong Report

The Value of Education Learning for life Hong Kong Report

Ranked No. 1 in Mandatory Provident Fund in Hong Kong with 29.3% market share. (Source: Gadbury Report as of September 2015) Ranked No. 3 in life insurance with 15.8% market share and 22% YoY growth: (vs insurance market average growth at 20.7%) (Source: 3Q 2015 Provisional Statistics on Hong Kong Long Term Insurance Business issued by Office of the Commissioner of Insurance)

Opposite page (left): Celebrities in town showed their support to HSBC Retirement Monitor in the Launch Ceremony; Opposite page (right): Staff strives to demonstrate the spirit of “At our best” both at work and staff activities This page: The Future of Retirement report; The Value of Education Hong Kong report; (below) Candy Yuen together with HSBC volunteers participated in the SWITCH program for students

Kong Family Welfare and Conservatory Association Centre of Heritage. In short HSBC supports their staff to serve customers and the community. Not only do they provide avenues for their employees to engage with the community, but each and every employee can enjoy two days of voluntary leave a year, where in essence – the company sponsors them to do volunteer work during office hours.

Digital opportunities Investing in the future is a common theme, not only in HSBC’s community outreach but also in how they service their customers in the future. As Yuen is excited to explain, “We are looking forward to continuing to build a customer-centric, digitally enabled organisation in Hong Kong, to help our clients identify and fulfil their needs, to help them realise their most important goals and ambitions in life – what we call

internally the five core wealth needs – protection, education, retirement, wealth accumulation and legacy planning.”

HSBC is putting a lot of emphasis on embracing digital to make it easier and faster for clients to do business with them and to perform transactions with the device of their choice. For HSBC Insurance, they are also looking at how they can use the digital platform to enhance the customer experience, allowing them to conduct their business and manage the way they choose to interact with the bank.

As Yuen summarises, “We’re very honoured to receive the HK Business High Flyers Award for 2015 and would like to express my sincere thanks to our customers and employees for their support. Without them we won’t be able to achieve what we do. We are fully committed to continue to better serve our clients and enhance our customer experience.”

HONG KONG BUSINESS ANNUAL 2016 75

AGEAS INSURANCE COMPANY (ASIA) LIMITED

Product launches accelerate growth for Ageas

R

emaining faithful to its “Your Partner in Insurance” brand message, Ageas Insurance Company (Asia) Limited (“Ageas”) insists on meeting customer needs with only the highest-quality financial protection and wealth management offerings.

Stuart Fraser, CEO of Ageas, said: “We set the highest standards to ensure the requirements of those we serve are addressed with the utmost integrity. At the same time, we seek to enhance the customer experience every step of the way, as a trusted partner through life.”

Passion fuels product development Products introduced over the last few months – HealthCare 100, Regent Insurance Plan and Regal Premier Saver – demonstrate a passion for continuous improvement that distances Ageas from competitors.

Like inclement weather, critical illness is never far away – but today’s sophistication in medical care means a higher treatment success rate can be enjoyed if an illness is detected and addressed early enough. That is the reasoning behind HealthCare 100 Critical Illness Protector, which comes complete with three severity levels of critical illness benefit to provide sufficient protection under various circumstances.

Full coverage against more than 100 critical illnesses keeps the

76 HONG KONG BUSINESS ANNUAL 2016

insured protected until 100 years old. Peace of mind granted by such worry-free lifelong protection is incalculable.

Further, by attaching the Multi-Care Premier Protector rider to the basic plan, the insured can make a maximum of five benefit claims against critical illnesses.

Meanwhile, the Regent Insurance Plan provides attractive long-term returns and whole life protection with the option of a 4-year or 12-year premium payment period, with no medical underwriting required. In addition, special discount of up to 6.5% of the entire premiums is offered to help customers achieve a bright future with ease.

Lastly, the Regal Premier Saver combines whole life protection with a means of accumulating wealth. A premium prepayment option as short as one or five years enables customers to achieve early payment at lower cost, thanks to interest earned by the prepayment sum. In addition to a guaranteed cash value, Regal provides a non-guaranteed annual dividend and terminal dividend to help boost customers’ wealth further.

Spreading the word via compelling campaigns In an effort to spread the HealthCare100 message, Ageas has invited Mr. Luk Ho Ming, a TVB celebrity, to star in Ageas’s TV commercial to highlight the fact that early treatment grants peace-of-mind comfort. His wholesome and effervescent

LIFE INSURANCE PHILOSOPHY

FAST FACTS

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.

•

•

Its financial status is confirmed by global rating agencies (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 have so far received the honour of the Million Dollar Round Table (MDRT).

This page: Ageas harnesses the latest technologies to promote the importance of financial planning while enhancing brand image; Engaging customers on an innovative platform; Quality products provide comprehensive protection and sound financial planning; A large-scale campaign highlights the fact that “early treatment grants peace of mind” Opposite page: Stuart Fraser, CEO, Ageas personality proved ideal for promoting the plan’s unique features.

In August, Ageas began one year’s title sponsorship of the J2 Channel weather report, aligning perfectly with the thematic message that “inclement weather can occur suddenly, as can critical illness.”

Varying storylines reinforce the promise that Ageas is a trustworthy partner that customers can rely on in everyday life. The campaign runs alongside print, online advertising and out-of-home displays including mega billboards and bus bodies.

Widespread coverage throughout MTR stations includes trackside lightboxes, along with digital panel zones and escalator crowns.

The “Ageas CI Calculator” mobile website was also introduced to promote HealthCare100, and enable agents and customers alike to assess their CI protection needs anytime, anywhere.

In addition, Ageas became title sponsor for the Metro Radio G.E.M. Girls’ Power Concert, prompting Fraser to comment: “This infuses yet more energy into the vibrancy of our brand image.”

He added: “We also introduced the interactive ‘We Love Music’ mobile phone game and gave out fabulous prizes to coincide

with the concert. Our hugely-successful roadshow truck raised awareness around our brand, while boosting our Facebook page’s population of fans.”

Demonstrating sound corporate citizenship Meeting every customer’s every insurance need is paramount, Ageas also channels that energy into giving back to the community via corporate social responsibility initiatives that have attracted Caring Company honours for 13 consecutive years.

What’s more, the company’s commitment to assisting those with disabilities and special needs has won the Gold Award from the Web Accessibility Recognition Scheme for two years running, while the Ageas “growing greener every day” approach has earned the Wastewise Label – Class of Excellence from the Hong Kong Award for Environmental Excellence (HKAEE).

Fraser said: “We firmly 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.”

HONG KONG BUSINESS ANNUAL 2016 77

Altruist financial group limited

Altruist Financial Group Puts People First

L

aunched in 2001, in its short span of establishment Altruist has won the Hong Kong Business High Flyer Award for 10 consecutive years. When asked what is the key to their success, Chief Operation Officer Glenn Turner simply answers, “The quality of our people.”

With around 100 Independent Financial Consultants providing one-stop services around Hong Kong, Altruist differentiates itself in the market by concentrating on the quality of consultants, whom they trust to take care of their clients. Over 50% of this loyal team of consultants have been with Altruist for over 15 years.

When you get a consultant, you find ways to keep the consultant. Similarly, Turner notes that when you get a client it’s about keeping the clients. To keep clients, you must have a high level of skill, empathy towards your clients, belief in the product and most important of all, good integrity and after-sales service. These are the qualities in a human being that Altruist looks for when considering an applicant consultant. “Of course in our industry, you need to feel pride serving your clients with a life-time commitment while believing in the products you use as solutions. The objective is to do everything you can to help a client and in turn, the client remains,” says Turner.

It’s no secret that after the industry-wide scandal of the Lehman Brother’s bonds, it has precipitated a ripple effect of

78 HONG KONG BUSINESS ANNUAL 2016

intense governance in the form of new rules and regulations from the Insurance Authority, SFC, MPFA and the like to safeguard the public against malpractice. This is a challenge in the immediate and foreseeable future for all institutions around Hong Kong and admittedly, those at Altruist are also feeling the burden, yet to a lesser extent.

Current challenges Turner divulges the challenges in the current terrain and says that there is an evolving rule of regulation that is supposed to help protect people from the 10 percent irresponsible industry practitioners. “We, at Altruist, don’t feel we’re any part of the bad eggs, yet we still have to obey the slew of new laws and guidelines that are coming through from the regulators. It’s quite a difficult thing to feel this kind of “punishment” when you’ve shown industry leadership in quality,” he adds.

Speaking of industry leadership, Altruist has adopted a very active role by participating in the industry trade organizations such as the LEGCO representation of IFPA, HK Executive Board member of LIMRA and past chairmanship of IFAA etc. “Leaders demand quality. Having been granted the founding membership of both IFPHK and IFAA, Altruist simply stands out in the market by its testimonial of good quality,” says Turner.

Having the 3 licenses with CIB, SFC and MPFA, it enables

FINANCIAL PLANNING PHILOSOPHY

FAST FACTS

Altruist is committed to bringing clients with “WEALTH-HEALTH-WISDOM, ” a total well-being solution.

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Recognized as Caring Company since 2003 Total well-being solution (wealth, health, wisdom) Obtain SFC 1, 4, 9 licenses Over 90% persistency rate

Opposite page: Mr. Glenn Turner, COO, Altruist This page (clockwise): Marketing Director Ms. Brandy Tsang received on President Mr. Albert Lam’s behalf the Honorary Life Member as presented by PolyU Foundation; Altruist sponsored Otic Charity Concert and colleagues also joined as voluntary helpers; Altruist joined iFast Metro Race, promoting the importance of health

Altruist to carry over 300 types of products and services provided by over 60 business partners. Keeping the client is the core principle which is working out for the business model at Altruist.

As Turner confidently declares “We have about fifty thousand clients and of those 80 percent have bought from us in at least four different ways, so the benefit of keeping the client is that they stay there and keep buying more products from you as time goes by. Another advantage is that if we’re under attack by another salesperson, that person has to dismantle the relationship in four different ways instead of a single one.”

“We start a relationship with a client by using the needs selling approach, then followed by tailor-made solutions coupled with personalized after-sales service. This simple yet effective formula has enabled us to serve the third generation of our client base.

We retain in excess of 95% of our clients within the first 24 months, a persistency which is unique in Hong Kong,” explains Turner. “Only by being able to retain our consultants shall we be able to keep the clients with us at the same time. We are committed to creating an environment where we work together as a team with mutual trust and respect amongst our company.”

With no doubt, all business partners are impressed with this exceptionally good quality of book of business.

Quality speaks of itself by simply showing to clients the co-branded master card with Dah Sing Bank. “The trust that a bank endorsed to us is as important as the trust that our clients endorsed to us by giving referrals to our consultants.” Today, Altruist brings to their clients a total well-being solution of “Wealth, Health and Wisdom”.

Altruistic spirit As its company name symbolizes – a group of people working for other people’s happiness and welfare, Altruist is dedicated to fulfilling its corporate social responsibility by giving back to the community by offering scholarships, donations and voluntary work etc. In recognition of the long-standing support for PolyU, President Mr. Albert Lam has been invited as the Honorary Life Member of PoyU Foundation.

The core values of “integrity” and “altruistic spirit”, which have been embedded in the heart of each altruist, will surely reinforce its high-flyer positioning in the next 15 years.

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CANADIAN INTERNATIONAL SCHOOL OF HONG KONG

Developing Global Leaders Through Excellent education

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he Canadian International School’s mission is to develop responsible global citizens and leaders through academic excellence. It is a driver that fits closely, both in practice and end goal, with the values of the International Baccalaureate Programme. Forward-looking attributes such as being principled, open-minded, risk-taking and caring, are learning outcomes for the 21st century. In addition to the Ontario Secondary School Diploma which all CDNIS graduates receive, CDNIS students also study the IBDP. As an IB World School, CDNIS is engaged at every level to offer an education that prepares young people for global citizenship in a rapidly changing world.

The International Baccalaureate (IB) programme is widely regarded as the international currency of education. Research shows that students who graduate from IB programmes are more likely than their peers to succeed in higher education. Advanced standing, course credits, scholarships and other admissionsrelated benefits are among the advantages for IB graduates at many universities worldwide.

Last year, 100% of grade 12 CDNIS students who registered for the Diploma programme were awarded the full IB Diploma, in addition to the Ontario Secondary School Diploma that all graduates earn. Ninety-three percent scored above the worldwide IB grade average, with almost a third scoring 40+ points, placing them in the top 5% globally. The class of 2015 was offered

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92 scholarships totalling over HK$15 million, with the largest scholarship offer being HK$1 million. Seventy-one percent of graduates reported being accepted to their first choice university, 59% of which were Top 100 Universities (QS Ranking 2015).

A complete IB education is one contributing factor that gives CDNIS students the edge as they approach matriculation. CDNIS is one of only five through-train IB schools in Hong Kong, and one of 150 worldwide. Many schools offer the IB Diploma Programme, but do not offer either or both the Primary Years Programme (PYP) or Middle Years Programme (MYP).

An outstanding faculty CDNIS has all three programmes, with IB certified teachers delivering interdisciplinary and inquiry-based learning at each level. This is a notable achievement, as the IB organization requires that only one teacher per grade or one teacher per subject be IB trained to confer IB certification on a school.

Eighty-seven percent of teachers at CDNIS are IB certified, with the remaining 13% scheduled for IB training. The school’s administration has set a goal for 100% of teachers at CDNIS trained in IB by the end of the 2015-2016 school year.

In addition to having the full complement of IB training, many teachers are certified as IB leaders. CDNIS boasts 19 teachers who are IB Examiners, one who is a Moderator, and seven who

INTERNATIONAL SCHOOL PHILOSOPHY

FAST FACTS

To develop responsible global citizens and leaders through academic excellence.

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CDNIS runs a dualdiploma programme with students graduating with the Ontario Secondary School Diploma (OSSD) and International Baccalaureate Diploma (IBDP) Student to faculty ratio in the Upper School is 11:1 Average Grade 12 class size is 18 students There are 82 Upper School faculty members with over 58% holding a Master’s degree or higher Four Guidance Counsellors are assigned to advise students in Grades 10 to 12

This page: CDNIS students are challenged both inside and outside the classroom.

They travel the globe gaining valuable insight and rewarding hands-on experience in a variety of settings. are Workshop Leaders. Workshop Leaders deliver programming to other teachers, training them both in the philosophy and delivery of a true IB education. IB leaders play a special role in IB World Schools, guiding the community to strive constantly for greater innovation and improvement.

A culture of professional development CDNIS is committed to supporting the development and potential of its faculty. To this end, CDNIS has consciously created a culture of professional development and support. Every year, all teachers have the option to attend one local and one overseas training opportunity.

This would not be possible without considerable expenditure, so a generous sum is set aside annually by the Board of Governors to pay for travel and training costs. In the 2014-2015 school year, CDNIS set aside HK$2.2 million from the annual budget for professional development.

Overseas professional development is of particular value to CDNIS teachers as it allows them to live the IB philosophy of internationalism and open-mindedness. Learning with educators from other cultures provides an incredible added value to overseas workshops and conferences, allowing teachers to return to CDNIS with greater understanding of their international

student body and the wider school community. By the end of the 2014-2015 school year, 94 CDNIS teachers had attended overseas PD opportunities, travelling as far as Europe, North America, and Australia to augment their teaching knowledge.

Many teachers also arrive at CDNIS with additional education under their belts. Thirty-eight percent have completed graduate degrees, bringing research experience and in-depth understanding of various aspects of education to the school.

If you ask any CDNIS teacher where the best professional development takes place, they will quickly say it is at the school itself. The support that exists at CDNIS for professional development is not just in policy and budget, but extends deeply into the culture of the school. Every workshop, conference, and visit from an expert is followed up with an in-depth sharing session among teaching teams.

The headlong commitment to an all-encompassing IB education and experience is one reason why CDNIS students stand prepared for post-secondary education. CDNIS graduates are prepared for much more than further study.

A CDNIS graduate is made ready for a journey with no marked end. CDNIS graduates never really leave behind the IB education, as they move forward shaped for lifelong learning and global citizenship.

HONG KONG BUSINESS ANNUAL 2016 81

CITIC Pacific limited

CITIC Pacific’s ‘KADOORIA’: Where Legacies Converge

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ITIC Pacific is not only making history, the corporation is converging its legacy with a Hong Kong lifestyle legacy in the announcement of ‘KADOORIA’, a property development that is a rare masterpiece that continues the art of fine living.

Hong Kong Business recently interviewed Ms. Cindy Kwan, Director of CITIC Pacific Property Agents Limited, after their 11 November 2015 project naming ceremony press conference.

CITIC Pacific is a wholly owned subsidiary of CITIC Ltd. (SEHK:267), China’s largest conglomerate with a legacy of successful growth and excellence in financial services, resources and energy, manufacturing, engineering contracting and real estate in China and overseas.

Last December 11, the company has been awarded at CAPITAL Magazine’s Outstanding Developer Awards 2015 in the Rare Low Density Luxury Apartment category.

What does the name ‘KADOORIA’ symbolize?

‘KADOORIA’ is a convergence of ‘Kadoorie’ and ‘Aria’. Kadoorie Hill has long been the secluded luxury residential area to those who have contributed to the historic growth of Hong Kong, leaders of companies such as CLP, GEC, Jardine Matheson, Gilman, Deacon’s, PanAm, BOAC, HAECO, and HK & Whampoa Dock Co. Since the 1980’s the area has also been home to some of Hong Kong’s leading industrialists, media celebrities and

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creatives. Much as an aria in classical opera marks the climax of a dramatic composition, KADOORIA marks the crescendo of an exclusive luxury lifestyle in the heart of Kowloon.

Wasn’t Kadoorie Hill a barren hillside in the 1930’s?

Yes, we have researched the history of development of Kadoorie Hill. It began in 1931 when Hong Kong Engineering& Construction Co., purchased the bare hillside.

Kadoorie Hill is named after the family that controlled the purchasing company. Saplings of eucalyptus, cinnamon trees, flame-of-the-forest, seeds of horse-tail, and other pines were subsequently planted on the slopes of the hills and on both sides of the roads running through the area creating what is today one of Hong Kong’s most unique living environments, featured with lush green and mature trees.

KADOORIA boasts a tranquil sanctuary-like location that can only be found in this urban oasis in the heart of Kowloon.

Can you tell us more about KADOORIA? Located at No. 111 to 133 Kadoorie Avenue, the project is an exclusive collection of 77 two to four bedroom apartments set in the tranquil surroundings of Kadoorie Hill.

Each unit is designed to offer the privacy in urban living with spacious interiors that traditionally characterizes the legacy

property developers PHILOSOPHY

FAST FACTS

We collaborate the effort of a team of top experts who seek to emulate the standard of Hong Kong’s most luxurious property landscape.

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Address: No. 111-133 Kadoorie Avenue Unit size: about 1,200 square feet to 3,200 square feet Total number of units: 77 Clubhouse facilities: indoor swimming pool, Jacuzzi, reading zone, fitness room, children’s playroom

This page: Peaceful ambience and rich greenery along Kadoorie Avenue and in the neighborhoods Opposite page: Cindy Kwan, Director of CITIC Pacific Property Agents Limited of Kadoorie Hill’s magnificent mansions and secluded natural environment.

Kadoorie Hill is one of the four cherished traditional luxury residential districts in Hong Kong, joining the Peak, Jardine’s Lookout and Shek O on Hong Kong Island. The development is scheduled for completion in the third quarter of 2016.

Does KADOORIA exemplify CITIC’s motto of “Strive for Quality and Excellence”?

Yes, it definitely does! Property development has been one of CITIC Pacific’s businesses since 1992 when it inherited a number of industrial and commercial properties with the acquisition of Dah Chong Hong Holdings.

Throughout the years, a diversified property portfolio has been developed with extensive interests in residential, commercial and industrial developments, including Festival Walk, Discovery Bay, CITIC Tower, CITIC Telecom Tower, The Paragon, and Hang King Garden to name only a few.

Our property team comprises experienced and accomplished professionals from a wide range of disciplines which include architecture, construction, engineering, surveying, property management and asset management.

With the end-users’ requirements in mind, the CITIC Pacific team has been an outstanding developer capable of managing

high quality developments of different scales. KADOORIA will be a rare gem at Kadoorie Hill.

Property development is a continuous process, what’s in CITIC Pacific’s pipeline?

Going forward, CITIC Pacific will follow the Group’s strategy and continue to take a prudent and strategic approach in developing its real estate business in Hong Kong. The Company acquired a residential site with scenic sea and mountain views in Ma On Shan through Government land tender in May 2015 and we expect completion of the development in 2019.

No details are available as yet, but we are placing great emphasis on minimising our environmental impacts and ensuring the well-being of the local communities.

Would you say that CITIC Pacific’s CSR platform is reflected in every facet of its projects?

Yes, definitely. Following the Group, our goals are to be leaders in the businesses in which we operate; to be leaders in corporate governance; and to make CITIC a place where employees want to work and to create value for our shareholders.

We aim to achieve these through innovation, reform and openness. At CITIC, we emphasise our values of integrity, creativity, cohesion, harmony, dedication and excellence.

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City University of Hong Kong

CityU MBA has the edge, and it is the SHARP!

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ityU, a fully accredited university founded in 1984, has grown and changed at a fast pace with the vision to becoming a leading global university, excelling in research and professional education. Much like the growth and change of Hong Kong since 1984, CityU’s MBA program constantly evolves producing future business leaders and entrepreneurs whose skills, experiences, and contacts are in high demand throughout Asia.

Why does a CityU MBA give its graduates the edge? “We are SHARP!” says Professor Kevin Chiang who is the MBA Director at CityU. Embracing the concepts of Experiential Learning and Diversity in light of today’s business needs for management competency that leads technological advancements in communications, supply chain logistics, data analysis and management, CityU’s MBA program offers candidates the freedom to tailor their skills from the General MBA curriculum through the flexibility to choose up to two areas of concentration from five functional business areas: Accounting, Finance, Information Management, Marketing and Supply Chain Management giving them the leading edge skill set that is so essential for success in today’s business arena.

According to Professor Chiang, CityU’s MBA program has a strategic commitment to SHARP, the creation of an exceptional learning and networking environment that consists of world class Software, state of the art Hardware, and well connected

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Alumni to boost Recruitment of global talents seeking promising opportunities for career advancement and Placement. It is this commitment and evolution that has landed CityU’s MBA full time programme as the 2nd in the Eduniversal Best Masters Ranking in Hong Kong!

Hong Kong is a world business hub attracting companies from all over the world and a fertile bed for creative entrepreneurs.

The challenges to manage in a diverse international corporate environment with multicultural considerations are skills that a CityU MBA holder will have been prepared totally for throughout the program. Eighty six percent of full time MBA candidates hail from outside of Hong Kong. CityU’s MBA program makes available to students many opportunities on campus, through learning exchanges with partner institutions, and interchanges with international companies to experience directly cross cultural interactions.

Learning by doing Experiential Learning places a strong focus on leadership skills acquisition and “learning by doing” to create more opportunities for students to gain practical experience through action learning with a global emphasis.

According to Professor Chiang, industry experienced faculty as well as prominent alumni guide and mentor students in their

MBA PHILOSOPHY

FAST FACTS

The CityU MBA programme is an elite and high profile programme offered by the College of Business at the City University of Hong Kong. CityU MBA is committed to providing students with practical, cutting-edge managerial practice with the leadership skills needed to succeed in the ever-changing business world.

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CityU is ranked 2nd in Asia as the Best Global Universities for Economics and Business by the ‘U.S. News’ in 2015.

The College of Business at CityU is ranked 2nd in Asia in the UT Dallas Rankings, based on our research contributions from 2010-2014.

CityU MBA full-time programme is ranked 2nd in Hong Kong and 18th in Far East Asia by Eduniversal (2014-2015), a global ranking and rating agency specialized in higher education.

This page: MBA students visited Google during the Residential trip in US; The Enterprise Diagnostic Residential Trip in Shanghai Opposite page: Professor Kevin Chiang, MBA Programme Director, City University of Hong Kong education and future career path.

Professor Chiang states that the preparation work for students who choose the MBA Enterprise Residential Diagnostic Trip begins before the trip is made. This is to ensure that students will have their plan of action ready to their arrival at their “client” site. The CityU MBA program has conducted this real life student consultancy experience in over 16 cities in China with over 43 companies in a broad spectrum of industries.

Alumni’s anecdotes Alumna Locinda Loi, Asia Pacific Manager for US-based Pentasource Inc., shares, “The most precious moment came during the Residential Trip, as we had to apply what we had learnt to tackle a real business issue in a real company. On my trip in 2006, we visited a well-known telecoms company in China.

We had the chance to study the company’s structure and discuss an enhancement plan with the company’s management during the ten day trip. I would say that if we had not been studying on this program, then we wouldn’t have had such in-depth communication and open discussion with top management.

Tackling their issues really enhanced our learning.”

Global Experiential Learning is conducted with the Haas School of Business at the University of California Berkeley allowing students to focus on Entrepreneurship and Business Plan Development as well as acquiring skills in Innovation Management for Global Business through interactions with companies based in San Francisco and Silicon Valley. Global Experiential Learning provides students with a unique learning experience, career inspiration, and an opportunity to build an international network.

Alumnus Kevin Lee who works at CLP Power Hong Kong states “One of the memorable moments in my CityU MBA life was the study trip to the Haas School of Business at UC Berkeley in the USA. The Innovation and Management program had broadened my vision in the business world. Not to mention that I also had opportunities to learn from business leaders from the EMBA and DBA programs during the trip. I really treasured all the enjoyable moments and time spent with my MBA classmates who have deeply engraved in my heart.”

And networking is what it’s all about. CityU MBA is a founding member of the International Business School Network, and a participant in TRIANGLE, the most innovative international

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Elite Concepts

A life well-traveled is a concept well-made

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ith a slew of dining experiences under its belt such as Quemo, He Jiang and the Michelin-starred Ye Shanghai, Elite Concepts needs no introduction. Founded in 1991, Elite Concepts brought high-quality independent restaurants to Hong Kong and grew into a dynamic venture which transforms visionary ideas into commercially viable reality. An alumnus of Cornell School of Hotel Administration, Elite Concepts’ founder Paul Hsu firmly believes in having a clear picture of the target market and look out for what they are craving for and expect. It’s important to wow them and exceed those expectations.

He states that “The attitude in approaching the matter is the major factor. Instead of merely presenting diners with food, what really matters is the dining experience.” And now, with establishments in Shanghai and Beijing, the company continues to set the trend of hospitality experiences in Asia.

After establishing Yè shanghai in Pacific Place, Elite Concepts migrated its dynamic vision to Star Street with Cinecittà and when the precinct transformed from a quiet urban environment to a night life and entertainment district, the group brought Yè shanghai back to its roots in China. The premises of the restaurant, one of the traditional “Shikumen” houses of the old city became the focus of a fresh, modern interpretation of Jiangsu, Zhejiang and Shanghai cuisine, in surroundings that mixed the charm of the old with a distinctive modern allure.

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When asked which of his eateries are most sought-after, Hsu is quick to answer “Without doubt it’s Ye shanghai at the moment.

It’s been more than 15 years since its opening and it’s still growing organically with a recent opening Taipei. The concept was unique and just hits the spot, and is still going strong.

However, strategic locations makes a big difference.”

The secret to success There is no doubt the success of the hospitality is steered by the direction and vision of Hsu. Inspired by his travels, he enjoys absorbing new experiences and analysing whether the ideas will work in his restaurants by consulting his team and respective establishments. But translating an idea into reality may not be as easy as it sounds, as the challenge lies in sourcing good ingredients and reliable suppliers. Hsu acknowledges the hurdles that come with innovation.

“The issue [of sourcing suppliers] is becoming more and more challenging. It happens to all the restaurant operators indeed.

What we are doing now is dealing directly with the producers for ingredients such as iberico, wine, tea, fresh water crab from Yangcheng Lake, etc. and I’m trying my best to bring the ingredients directly from the source to ensure the good quality. I still keep traveling a lot and exploring new suppliers to keep our concepts fresh and options open.”

Innovative F&B Concepts PHILOSOPHY

FAST FACTS

Elite Concepts believes that every hospitality concept must show an understanding of local tastes and maintain a strong connection with the people and their culture.

With both a firm footing in the soil and a limitless capacity for innovation, Elite Concepts will continue to set the course for hospitality trends in Asia.

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Elite Concepts was founded in 1991 to bring high-quality freestanding restaurants to Hong Kong. It has evolved into a dynamic enterprise which transforms visionary ideas into commercial successes.

Elite Concepts continues to forge new trends in Beijing with the 1949 series. The first 1949 complex — 1949 The Hidden City — opened in Beijing in 2008.

Ye Shanghai gained the 9th Michelin star in 2016 since Year 2010. It celebrates the opening of Ye Shanghai Taipei.

This page clockwise: 1949 The Hidden City; Duck de Chine interior; King prawn served in bang sauce; Eyebar outdoor; QUEMO paella portrait Opposite page: Paul Hsu, Founder, Elite Concepts Indeed hairy crab is an ingredient which has turned into an event culminated by the group each year and is dissipated into all facets of the hospitality group. When asked why so much rearie is paid to that one ingredient, Hsu explains. “Crab is one of the food ingredients both Hong Kong and Chinese people love a lot and they are very knowledgeable when it comes to the luxury ingredient.”

And when asked what’s next for the creative and visionary group, the executive would only say. “We have more to come as it’s a brave new world for the foodies.” Judging by their track record, we expect something new and novel in the coming year.

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GODIVA CHOCOLATIER

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a tea-themed Limited Edition Chocolate for 2016

he gourmet chocolatier is wooing customers with hearty New Year sweets with a hint of tea. Traditionally, chocolate is often associated with the virtues of love and intimacy— thus its popularity during occasions such as Valentine’s Day. But GODIVA Chocolatieris taking its flagship sweet to the next level with its 2016 Limited Edition Chinese New Year Collection, a series of distinct selections worth having for next year.

According to the New York-headquartered Belgian company, ushering in the Year of the Monkey in 2016 ought to be an experience shared with gourmet chocolate. “Every bite consists of GODIVA’s rich blessing for the New Year,” GODIVA says of its Chinese New Year Collection, which carries a rather unique theme—tea.

“This year, GODIVA’s Limited Edition Chinese New Year Collection is inspired by Chinese tea, drawing the beautiful aromas of teas into the midst of the chocolates. The richness of the chocolates to the fragrance of the teas is a match made in heaven with every bite,” the company notes.

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Each collection contains a rich selection of dark, milk, and white chocolate guaranteed to delight the most discriminating of palates, with each chocolate infused with the flavors of Jasmine Green, Pu Erh, and Chinese Oolong teas, respectively.

GODIVA’s Year of the Monkey Dark Chocolate contains a crisp Piémont hazelnut paste wrapped in 50% dark chocolate, while Year of the Monkey Milk Chocolate contains 64% Peruvian dark chocolate with Hawaiian Macadamian nuts and a creamy milk chocolate shell. The Year of the Monkey White Chocolate, meanwhile, combines 71% Ecuadorian chocolate, soy nuts, walnuts, and a smooth white chocolate layer.

Aside from the delightful assortment of chocolate that only GODIVA can deliver, each Chinese New Year Collection is elegantly presented in a classic red box, adorned with a gold illustration of an energetic monkey which symbolizes the upcoming year. “On this joyous occasion, GODIVA hopes this box will bring dreams, blessings and hope to family, friends and loved ones this year,” GODIVA says.

PREMIUM CHOCOLATIER PHILOSOPHY

FAST FACTS

For nearly 90 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 satisfction and delight.

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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.

Opposite page: GODIVA Chinese New Year Collection 2016 This page: Chinese New Year Chocolate Luxury Gift Box 36pcs.

Customers can choose from four Chinese New Year Collection Packages, beginning with the basic Chinese New Year Chocolate Gift Box, which comes in nine-piece, 18-piece, and 28-piece sets.

For more distinguished but equally impressive gifts, one may also opt for the Chinese New Year Carré Gift Box, Chinese New Year Liquor Chocolate Gift Box, or Chinese New Year Luxury Gift Box. The Chinese New Year Carré Gift Box, which comes in 15- and 28-piece sets and utilizes two flavors for its Carré chocolate: milk chocolate filled with crunchy puffed rice, and dark chocolate filled with caramelized hazelnut crisps. “The two very distinct flavors fulfills the celebration of this special occasion,” GODIVA notes.

The Chinese New Year Liquor Chocolate Gift Box, on the other hand, caters to customers who want a little kick in their chocolate, specifically the Cherié and Cherry Cordial flavors of this nine-piece set.“Every bite of these two dark chocolates fill the soup with the delicious aroma of cherries,” GODIVA claims.

The Chinese New Year Luxury Gift Box, as the name suggests, elevates GODIVA’s timeless chocolate to unparalleled indulgence in 19-, 28-, and 36-piece sets. “Each piece shines like a jewel, shines like a jewel, bespoke to your taste, all contained in a jewelry box,” GODIVA says.

Meanwhile, GODIVA’s Chinese New Year Hampers is another gift option. “GODIVA 2016 Chinese New Year hampers are an abundance of blessings in the form of chocolates. These specially packaged GODIVA New Year hampers are the best way to celebrate the beginning of beautiful melody, delivering delicious

blessings to your friends or family, celebrating the coming year,” GODIVA says.

The Chinese New Year Hamper comes in two variations: the Delight Gift Hamper, which contains an 18-piece Chinese New Year Gift Box, a 36-piece Carré Collection All Assorted Gift Box, a 36-piece Biscuits Box, and a five-piece Truffles Milk Chocolate Box; and the Decadence Gift Hamper, which contains two Chinese New Year Chocolate Gift Boxes (nine-piece and 28-piece), a 28-piece Chinese New Year Carré Gift Box, 16 pieces of Truffé chocolate, and a 50-piece Biscuits Box. Both come with Dark Chocolate with Almonds tablet, Dark Chocolate Pretzels and Milk Chocolate Cocoa.

A longstanding commitment GODIVA Chocolatier, established in 1926 in Brussels, Belgium, has since grown togain a foothold in over 100 countries with a broad distribution network of over 600 stores. “GODIVA offers a range of chocolate creations and is dedicated to innovation and excellence in the Belgian tradition. GODIVA is committed to developing, manufacturing and delivering food and beverage products that are safe, of the highest quality, and consistently exceeding consumer expectations,” the company notes.

From truffles, shell-molded chocolate, European-style biscuits, individually-wrapped chocolate, gourmet coffee, hot cocoa, and now its Chinese New Year Collection, GODIVA remains committed “to bringing the ultimate chocolate experience to the world.”

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Hang Seng Insurance

Wilson Tang Chief Executive Hang Seng Insurance Company Limited

Hang Seng Insurance seeks to maintain its leading position

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n this day and age of a volatile economic backdrop, planning for the future is more difficult than ever. Simply saving up for retirement is no longer enough, with investments becoming an integral part of the retirement planning process. The complexity of products and sheer number of available options can make choosing a suitable plan or policy seems overwhelming. Clients need a partner that they can rely on to help navigate them through these uncertain economic times.

Hang Seng Insurance Company Limited(“HSIC”), a local-based insurance company, has grown to be one of the leading providers of bancassurance in Hong Kong. HSIC is also able to leverage off of the extensive branch network of Hang Seng Bank Limited (“The Bank”) to offer a wide range of bancassurance products.

Through its branches and a large team of professionals, The Bank helps customers achieve their insurance needs and financial goals. The Bank has a team of well-trained relationship managers and insurance salespeople and they are always glad to help and provide services to customers.

Innovative products which meets customer ever-changing needs HSIC has been recognised in the market not only for its strong channels servicing offered to meet clients’ insurance needs, but also for its innovative and diverse products available.

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The company has evolved its product offerings to cater for different needs of customers such as medical insurance, wealth management, and legacy planning.

According to the population projection forecasted by the Census and Statistics Department of Hong Kong Special Administrative Region in September 2015, the population is expected to remain on an upward ageing trend. The proportion of the population aged 65 and senior is projected to rise markedly, from 15% in 2014 to 33% in 2064. This projection implies the growing need of customers to plan ahead on their retirement and a step forward and legacy planning which shows their caring of their next generation. Exquisite Universal Life Insurance Plan (“Exquisite”), the HSIC’s flagship universal life insurance plan, is designed to cater the need. Key features of the product include a range of options for the payment term and period of guaranteed and fixed interest rate, different choices of currency, option of changing eligible life insured and flexibility for multigenerational legacy planning. Another spark light of the product is its flexibility. The product can be customised by selecting a combination of the above key features, No-Lapse Guarantee benefit period and premium payment term that suit customers various needs such as estate liquidity, estate equalisation, family protection etc.

This product is not just applicable to personal customers, but

Leading Insurance Company PHILOSOPHY

FAST FACTS

Future is filled with uncertainty while we help our customers to eliminate it by providing a total solution with both wealth and health related products.

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Senior executives of Hang Seng Bank and Bupa take a group photo at the press conference for the launch of Hang Seng Bank and Bupa’s new range of health management solutions.

In 2014, to enrich the wealth management proposition, Hang Seng Bank signed an exclusive 10-year distribution agreement with international healthcare company Bupa, under which a range of bespoke medical insurance products and services will be offered to Hang Seng customers.

Ranked number 2 in RMB Insurance market in the Q1-Q3 2015 (Source from Office of the Commissioner of Insurance, Quarterly release of provisional statistics for Long Term Business JanuarySeptember 2015).

Hang Seng Bank’s Prestige and Preferred Banking Centre

also to corporate customers. The plan can help customers in arranging business continuation strategies, key person insurance and executive bonus plan.

Apart from Exquisite, HSIC also offers a wide range of medical protection plans, saving plans, retirement plans and education plan. As the market continues to evolve, HSIC also strives to keep up by launching new products that cater to every customer’s unique needs.

Future plans Over the next five years, HSIC seeks to maintain a leading position by offering the best fit health protection and wealth management solutions to the company’s wide spectrum of clients. “The company’s commitment will always be to help customers find the right solution for their goals, whether it is to protect their health & life, or grow their wealth over the long term,” says Wilson Tang, Chief Executive, Hang Seng Insurance Company Limited.

HSIC will continue to actively tap the wealth insurance needs driven by Hong Kong aging population (retirement planning); further build on juvenile products for education funding plus add-on protections (education planning); build on the strong

RMB wealth insurance proposition; and maintain a diversified bancassurance business with growing focus on Protection Plans.

HSIC’s product suite will continuously evolve to provide one stop wealth and health insurance service, covering all of the clients’ needs to a greater extent in their different stages of life. “Whether it is a protection-focused product, wealth accumulation-focused product, or one that covers both, HSIC will have the right solution available,” adds Wilson Tang. For high net worth clients, HSIC will continue to develop increasingly tailormade products to meet customers’ unique needs.

The company is also committed to find new ways to continuously improve the level of service and convenience offered to clients. With an online platform in the works, HSIC seeks to allow clients to access their accounts and transact wherever and whenever they would like. Further, the company is looking to integrate its service platforms, both face-to-face and digital, to deliver a seamless, user-friendly customer experience. No matter what your needs are,HSIC helps you plan today for a better tomorrow.

Hang Seng Insurance is authorised and regulated by the Commission of Insurance of the HKSAR. Hang Seng Bank Limited is an insurance agent authorised by Hang Seng Insurance.

HONG KONG BUSINESS ANNUAL 2016 91

Hong Kong Matchmakers

Addressing Social Problems Through Matchmaking

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e know Mei Ling as the person who has single handedly changed the public perception of the industry by putting some class into the business of matchmaking. Here she is once again, re-defining the purposes and boundaries of matchmaking as corporate social responsibilities.

In her opinion, one of the most serious social problems we have presently in Hong Kong is population ageing, which could entail profound implications to our socio-economic development and public finance. By 2016, our median age will be 44.4 years old. According to the World Health Organisation, under a “donothing” scenario, by 2050, 40% of HK’s population will be over 65 years old, making us the fifth oldest city in the world – which would quasi spell the end of “dynamic” Hong Kong.

She continues, “The dependency ratio between Hong Kong’s labour force and non labour force was 10.3 to 1 in 1981, and in 2021, just 5 years time, the ratio is expected to drop to the alarming level of 3.4 to 1. Not only will our workforce embark on a persistent decline, the continuous increase in Comprehensive Social Security Assistance (CSSA)and public medical expenditure will not be sustainable. “ A serious problem Why are we ageing so fast? “There are two main reasons: (a) Longer life expectancy - we are taking better care of ourselves,

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and are generally better informed about health care and wellness than our forefathers. In 1999, the life expectancy for men was 77.2, in 2013 it went up to 81. For women, it was 82.4 in 1999, and went up to 87 in 2013. (b) Sinking birth rates: On the other hand, Hong Kong’s birth rate continues to sink. In 1961, the average birth rate was 34.3 babies per 1000 women, in 2013, it went down to 8 babies per 1000 women ! “ said Mei Ling somewhat exasperated.

The government has already established the Institute of Active Ageing within the Poly University in 2010 to address these issues, but according to Mei Ling, as long as not enough people are getting married and reproducing sufficient children, there is very little the government can do to mitigate the problem.

Government initiatives and strategies In terms of social policies, governments the world over tend to adopt either or both of two strategies: Firstly, through immigration, to enlarge the labour force and hopefully to lower the median age. The German Reunification achieved the former but not the latter, their median age actually went up and not down. In France, the cost is even higher. The French government’s immigration policy decades ago inadvertently laid the foundation of other problems in that the immigrants’ birthrate continuously exceed that of the French people’s birthrate by leaps and bounds.

Professional Matchmaker PHILOSOPHY

FAST FACTS

There is no relationship without repeat dates, there are no repeat dates if the first date did not go well, and if the first date didn’t go well, you bear 50% of the responsibility. So do try very, very hard to make your first date, & subsequent dates wonderful.

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HK’s population is ageing fast. By 2050, 40% of HK’s population will be over 65 years old Our dependency ratio will drop to 3.4 to 1 in 2021 As our workforce continues to decline public expenditure is no longer sustainable In 2013, we only reproduced 8 babies per 1000 women as opposed to 34 babies 50 years ago HK’s gender imbalance exceeds half a million Of 55,000 marriages in HK, nearly 48% of grooms did not marry HK women For the future of HK, we need more HK men to marry more HK women & have more HK babies

This page: At the Mr. Asia Contest with the Finalists; At the Judges’ Panel Opposite page: Mei Ling, Managing Director, Hong Kong Matchmakers So much so that by 2030, 40% of the total French population will be Muslims.

Secondly, to encourage more babies to be born in the ageing country, which our government has already been doing. In 2014, our total birthrate was 78,700 babies. Of which 45,100 (57%) were from Hong Kong women, and the balance 33,600 babies (43%) were from mainlanders.

True, without the latter, the birthrate in Hong Kong would have looked even worse. However, such “artificial” increases also come with a host of other problems. With birth rates from “local” couples, the government can guesstimate by marriage registrations and according to historical trends, the approximate number of hospital beds, kindergarten, schools, and other social needs the society would require. Some kind of planning is possible.

However, with birth rates from “visiting” women and sudden bursts of sporadic deliveries, it is difficult to “plan”. This has brought along multiple social problems from hospital beds, schooling to housing, employment, etc. which neither the government nor the local community was prepared to deal with, leading to discord.

The best solution, according to Mei Ling, would be an increase of birth rate from Hong Kong women. To achieve this, we need to increase the number of marriages first and here is where matchmaking can be of assistance.

Alleviating the problem According to the Census and Statistics Department, the total population of Hong Kong stood at 7,298,600 in mid 2015. We have 3,934,600 women and 3,364,000 men. In other words, we have 570,600 women more than men. Exacerbating the serious problem of gender imbalance is the fact that 60% of the women are over 35 years old, and Hong Kong men prefer younger women.

Adding insult to injury, of the total 55,274 marriages registered in Hong Kong in 2013, only 52.2% was with Hong Kong women, 47.8% men chose to marry women from the mainland, Taiwan or elsewhere. In summation, with an already difficult environment, Hong Kong women also have to face tough competition.

Mei Ling understands the market, the business and is ready, able and willing to help alleviate Hong Kong’s social problem by championing the cause of Hong Kong women.

HONG KONG BUSINESS ANNUAL 2016 93

InterContinental Grand Stanford Hong Kong

Where excellence is the competitive edge

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eaching new heights of excellence and brand loyalty is the core goal and achievement a luxury hotel like InterContinental Grand Stanford Hong Kong strives for.

In such a competitive luxury hotel market it’s all about guest recognition coupled with unique personal touches that build brand loyalty. With a service philosophy of creating a ‘Great Hotel Guests Love’ the InterContinental Grand Stanford Hong Kong achieves this by exceeding guests’ expectations and providing unique experiences.

It’s the ‘At-your-side service’ behaviours that put InterContinental Grand Stanford Hong Kong ahead of the competition. Encompassing the three core elements of Stay in the Moment, Make it Memorable and Be Charming and encouraging colleagues to apply these service behaviours at every touch point, takes the guest experience above a standardized 5 star experience to a memorable one.

Customers remember every contact point in the hotel where service is encountered. It strikes all who enter the hotel that all employees come across as charming, approachable, knowledgeable and confident. There’s a profound respect but no distance between the guest and any member of staff and this philosophy is common across the entire organization.

As General Manager Mr. Alexander O. Wassermann explains, “It can be remembering a guest’s favourite drink in the bar or

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seat in the restaurant. Sometimes it’s very simple features such as providing different choices of pillows or catering to different dietary requirements. We accommodate a very diverse guest mix, and we adapt our services accordingly to meet the different cultural needs. Today’s guests are also more health conscious and have very specific dietary requirements. This requires us to pay attention to vegan and vegetarian requests and gluten intolerance. If someone requests gluten-free bread, we are prepared for that too and provide it fresh to the table.”

A passion for service And it’s driving towards excellence that has led to solid results. As the Host Partner Venue for the 22nd Annual World Travel Awards Asia & Australasia Gala Ceremony 2015, InterContinental Grand Stanford Hong Kong also achieved Hong Kong’s Leading Business Hotel for a second year in succession.

Wassermann attributes this to the passion for service provided by his teams “I think one of the key stories of success is that 30% of our colleagues working in key positions have been with the hotel for more than 20 years. We are one big family and know many of our guests more as returning friends and they have really become part of our family.

We have a lot of business owners from Europe and the US, and they started coming to the InterContinental Grand Stanford Hong

Luxury Hotel PHILOSOPHY

FAST FACTS

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.

Awards received in 2015: • Named as Hong Kong’s Leading Business Hotel 2015 at the World Travel Awards for a second year in a row • Awarded as the Top 10 Business Hotels of China at the China Hotel Starlight Awards 2015 • 2015 Certificate of Excellence awarded by TripAdvisor • Received the Hotel category - Gold Award at the Green Plus Recognition Award 2015 organized

by CLP Power Hong Kong Limited

This page: InterContinental Grand Stanford Hong Kong - magic hour; InterContinental Special View Room - King; Sun Court Pool Opposite page: Mr. Alexander O. Wassermann, General Manager, InterContinental Grand Stanford Hong Kong Kong 25 to 30 years ago and brought their children with them.

Now this child is an adult and has maybe taken over the company, but our people have grown up with them. So it’s not a transaction it’s a personal interaction. It’s a respectful friendship.”

The team at the InterContinental Grand Stanford Hong Kong also has another accomplishment – an altruistic one. The hotel has established three Green Engage teams, where each individual team focuses on either waste, water or electricity conservation.

Initiatives like that and encouraging the reduction of paper consumption are always at the forefront. Over the last year alone, the mere activity of paperless meetings has reduced paper consumption by over 750 reams.

The hotel even had a poster competition to save water open to all family members to spread the word throughout the community, and it’s by involving and empowering the employees, InterContinental Grand Stanford Hong Kong achieved gold recognition from CLP Power Hong Kong Limited for green

initiatives.

With so many hotel choices in a city like Hong Kong it can be hard to really differentiate one from the other but at the InterContinental Grand Stanford Hong Kong, the experience of the employees and the element of truly unique memorable service make it stand out from anywhere else in town.

As Wassermann comments “We want to create lasting memories for our guests time and time again so they never consider any other hotel when visiting Hong Kong”.

Not only that, the spreading of goodwill to the community by running the business responsibly with such activities as giving bread to the elderly, collecting clothes for the Salvation Army, planting trees and cleaning beaches reinforces the sincerity of this hotel to be more than just an ordinary luxury institution, it’s a caring one. It’s this daily striving for excellence in all aspects of the business that makes this hotel a cut above any of their luxury counterparts.

HONG KONG BUSINESS ANNUAL 2016 95

Lan Kwai Fong Hotel @ Kau u Fong

lan kwai fong @ Kau U Fong shows why Boutique is better

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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 boutique hotel with its attention to detail and passion for inspiring travelers.

It’s been almost ten years since Lan Kwai Fong Hotel @ Kau U Fong opened in Sheung Wan. The area was nothing like the gentrified face it holds today, where there is now award winning restaurants and edgy clothing stores were just some tired printing shops and ch chaan tengs. As general manager of the hotel Rebecca Kwan explains, “We’ve been doing a lot of education and exploring at the very beginning, not just about the area but also the boutique concept. Before people had no idea of the area and insisted on the star rating. After the years, boutique hotels mushroomed and widely accepted, even in the Asian and Chinese markets. With such an intense competition, we have to work even harder and be innovative in order to stay at the top. We are lucky to be in an area full of actions and wonders which is the first rule of boutique hotels - where their buzzy ambiance feels just right. The hotel is blended together with the neighbourhood and the whole area becomes a hidden gem mixed with old and new element, history and design.”

Also, the hotel always work as partner with different festivals and associations, bring together a handsome and happening

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crowd to the hotel – the second rule of boutique hotel. There are famous violinists, singers, designers, artists from the surrounding galleries, world famous chef from neighbourhood restaurants, well-known authors and popular anchors. Therefore the guests can feel the cultural atmosphere everywhere.

A market leader When it comes to what makes them a market leader, Kwan insists it’s her staff that differentiates them from their competition.

“I think we have a professional team who has worked quite a long time with us. More than half of my management team has worked for ten years and 50 percent of the general staff have worked with us for five years. I really appreciate all of their effort and the low turnover rate is definitely the synergy for our success.”

Kwan further notes, “The great teamwork together and the positive norm help to speed up the process and find the best solution balancing both the interest of guests and hotel, based on our corporate core values of integrity, innovation, inspiration and initiative. Together with staff loyalty, continuous support from regular customers also contributes to the mystique of boutique hotel. Our repeat guests make up to around 20% of customers daily. We have some guests even stayed with us for over a hundred times. If you’re a guest in the hotel and you see familiar

Boutique Hotel PHILOSOPHY

FAST FACTS

“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.

About Dorsett Hospitality International • Headquartered in Hong Kong, Dorsett Hospitality International has three brands under its umbrella.

The upscale and midscale Dorsett Hotels & Resorts and d.Collection comprising a range of charismatic boutique hotels; and the value-led Silka Hotels. The group currently owns and manages 27 hotels in China, Hong Kong, Singapore, Malaysia and the United Kingdom; including six more openings within the next two years in Malaysia, China, Hong Kong and United Kingdom. For more information on Dorsett Hospitality International, visit: www.dorsett.com

This page (clockwise): Breeze Lounge with outdoor terrace; Deluxe City View Room; Hotel Lobby; Bathroom

faces with big smiles every time, recognize you, remember your preferences, that’ll make your day. It’s as simple as that.”

Another reason behind the secret of success is probably because Lan Kwai Fong Hotel @ Kau U Fong always tries to enhance the guests experience by letting them to try the best in town during their stay. Kwan will go out to explore the area, experience new restaurants and shops and then share the hottest picks with the guests. It’s not only about suggesting activities for guests, but also to show them an authentic side of Hong Kong and let them experience Hong Kong like a local. The hotel will keep guests update of what’s going on and offering them free tickets to the hottest show e.g. Art Basel, Asia Contemporary Art Show, Art Central, BODW, wine & dine, golf tournaments etc.

Moreover, guests can enjoy privileges in restaurants or designer shops when showing the hotel keycard in the neighbourhood.

Therefore guests have their unique experiences every time they stayed in the hotel.

Kwan hopes this will not only attract travelers to the hotel,

Opposite page: Rebecca Kwan, General Manager, Lan Kwai Fong Hotel @ Kau u Fong but also given them a reason to return the next time they find themselves in Hong Kong.

A stay at ease and comfort The oriental design boutique hotel not only providing an exclusive experience for their guests but also aim for a stay at ease and comfort. The hotel is equipped with free WIFI, a handy mobile in every room so guests have a local number and can make free IDD calls to seven counties around the world with free data. Complimentary freshly brewed coffee and tea with snacks is available at BreeZe Lounge throughout the day while free wine is available during happy hour. The outdoor terrace BreeZe Lounge is a perfect area for unwind and relax after spending a day at the busy buzzy city.

Dorsett Hospitality International currently have nine hotels in Hong Kong area are planning another one in the Tsuen Wan area.

With 27 hotels worldwide including locations in the UK, Singapore, Malaysia, China, be sure there are more to come.

HONG KONG BUSINESS ANNUAL 2016 97

MassMutual Asia Ltd.

massmutual asia develops its distinct branding

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n order to differentiate itself from the highly competitive market environment, MassMutual Asia has developed a unique market positioning and a distinct branding strategy that places great emphasis on creativity, flexibility and innovation. Ms Jeanne Sau, Chief Marketing Officer of MassMutual Asia, said, “Since 1851, MassMutual has been living the vision of ‘MassMutual – where dreams are made’. Our mission is to help customers realize their life goals and dreams through professional financial planning services.”

Over the past 20 years, MassMutual Asia has been dedicated to delivering flexible and innovative solutions in retirement, protection and investment products and services. Thanks to this commitment, MassMutual Asia has grown steadily with double-digit average annual growth in new individual business to become one of the top ten life insurance companies in Hong Kong.

has critical illness coverage. Market penetration of this type of product is low because most people may feel that, if they stay healthy, the premiums are paid for nothing, and constitute an “expense” item with no returns. The problem is, however, that once diagnosed with a critical illness, people will find it difficult to obtain medical and life insurance.

MassMutual Asia identified this unfulfilled business opportunity and developed PrimeHealth Extra Saver (PHE) as an innovative solution by bundling critical-illness protection, wealth accumulation and life protection into a single policy that fully answers customers’ needs for health, wealth and life protections, and with coverage lasting up to age 100. PHE offers “Extension of Life Protection”, a market-unique feature with guaranteed acceptance that enables any insured being diagnosed with a covered critical illness to take out a permanent life insurance plan without the need to provide satisfactory proof of insurability.

Capturing market niche The overstretched public health services in Hong Kong inevitably result in long queues for medical treatment. As a result some people will turn to private health services for immediate and quality medical treatment, but the cost of private treatment is very expensive. According to the Census and Statistics Department, only some 6% of the population in Hong Kong

Retirement challenges Life expectancy of Hong Kong people is now much longer than the global average. It is expected that, by 2064, their life expectancy at birth will increase to 92.5 for women and 87 for men. At the same time, with a decreasing birth rate and an increasing elderly dependency ratio, Hong Kong people are now facing much greater challenges in financing an unexpectedly long

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Innovative Insurance Company PHILOSOPHY

FAST FACTS

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 in protection, retirement and investment. In addition, MassMutual Asia strives to uphold its commitment to serving the community and enthusiastically supports charity events.

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Established in 1851, MassMutual has 165 years of experience in risk- and wealth-management services Ranked in the renowned FORTUNE as one of the “Five Largest US Life Insurance Companies” Enjoys exceptionally high financial ratings from A.M. Best Company (A++), Fitch Ratings (AA+) and Standard & Poor’s (AA+)

This page: MassMutual Asia invited the people of Hong Kong to share the joy of its 20th anniversary at sky100; The MassMutual Asia team enthusiastically supported the Community Chest New Territories Walk for Millions.

Opposite page: Jeanne Sau, Chief Marketing Officer, MassMutual Asia retirement.

Currently there are two types of annuity plan in the market: one that provides the insured with lifetime annuity income, without any pre-set period; and one that usually provides the insured with pre-set installment payments for up to a 10- or 20-year period, based on the accumulated value of the policy. As the latter does not provide a lifelong income guarantee, it may not be able to adequately cover the risk of prolonged life expectancy.

Target Lifetime Annuity Saver (TLA) was designed to help customers hedge the financial impact of longevity risk. What makes this product unique is that TLA is the only annuity plan on the market offering a guaranteed lifetime annuity payout, which effectively counteracts the financial risk incurred due to an unexpectedly long lifespan.

To fully cater for the retirement needs of customers, TLA offers the widest range of annuities in the market, with seven options.

For example, with the “lifetime increasing-income annuity” option, annuity income will increase by 5% every two years to counteract inflation. With the “lifetime fixed-income annuity with joint annuitant” option, even after the insured passes away, his/ her spouse will continue to receive the annuity for the rest of his/ her life.

A social enterprise Apart from being a provider of innovative financial planning

solutions, MassMutual Asia is also a socially responsible corporate citizen. Awarded the Caring Company Logo issued by the Hong Kong Council of Social Service, for ten consecutive years, as well as the Prime Award for CSR in 2008, MassMutual Asia strives to uphold its commitment to serving the community and enthusiastically supports charity events.

For example, in Q1 2015, over 800 MassMutual Asia consultants and staff participated in the Community Chest New Territories Walk for Millions. As a result of their concerted efforts, over HK$200,000 was donated to the Hong Kong Community Chest to benefit its “Family and Child Welfare Services”, with MassMutual Asia being one of top five fund-raisers in the charity walk.

MassMutual Asia’s innovative spirit also applies to corporate social responsibility. The MassMutual Jr. Space Camp Program pioneered in 1999 was inspired by MassMutual’s drive to innovate. This is the first-ever program providing simulated astronaut training to children from Hong Kong. Through innovative and unique training experiences, the program stimulates children’s interest in space exploration and advanced technology and encourages children to make their dreams come true by living the “It is Possible!” spirit.

“We always go the extra mile to exceed our customers’ expectations. Our Customer’s Dream is the most powerful motivator that enables us to move our development forward and pursue service excellence,” said Sau.

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Mercedes-Benz Hong Kong Ltd

Legacy and heritage leads the race

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s the inventor of automobile, Mercedes-Benz has a long heritage. Every Mercedes-Benz model is equipped with the most advanced technology while also offering a strong lineup of products in Hong Kong and Macau ranging from compact cars, to luxury saloons and sports cars to people carriers, and even big trucks. This illustrates their capability to satisfy any customer need.

An example of the brand’s success in Asia would be the A-Class’ popularity in the compact car segment. When the brand launched the redesigned A-Class in 2012, they opened up a new chapter in the compact segment with emotive design, high quality interior, powerful and efficient engines, and a best-in-class drag coefficient. It also underlined a new safety standard in the compact segment and customers in Hong Kong have accepted the A-Class as a compact car with young and dynamic image since then.

In 2015, Mercedes-Benz has successfully created a new brand communication platform, the Mercedes me Store in Hong Kong.

Mercedes me is the personalised access to the world of MercedesBenz. It bundles innovative and customer-focused services, products and lifestyle offerings from Mercedes-Benz and its cooperation partners that go beyond the ‘car’ as a product. It is also a new sub-brand that is brought to life by the Mercedes me Stores such as the one in Hong Kong which features interactive

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brand and product experiences in a relaxed atmosphere. Hong Kong is also one of the first locations with a Mercedes me Store around the world. Since Hong Kong is a bustling urban metropolis and a leader of trends in much of Asia, it’s a natural location for a Mercedes me Store.

A sophisticated market We spoke to Andreas Binder, President and Chief Executive Officer of Mercedes-Benz Hong Kong Limited, and he agrees. “Hong Kong customers are very sophisticated. They demand high quality products and services and they can express their needs very well.

We work hard to introduce the latest models with advanced technologies in a short period of time after the world premieres and with equipment levels suitable for Hong Kong.”

This year has been a triumphant year for the luxury brand. With the launch of new models such as the new Mercedes-Maybach S-Class, GLE and GLC, they have a very good momentum in the luxury vehicle segment in both Hong Kong and Macau. At the same time, the E-Class and C-Class remain very popular, and the S-Class is the undisputed segment leader, too. In addition, as the successor of the M-Class, the new GLE combines superior ride quality and the versatility and robustness typical for SUVs - it has all the ingredients to continue the success story. With the launch of the GLE Coupé, Mercedes-Benz is entering a new segment

Automobile FAST FACTS •

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Mercedes-Benz has perhaps the longest history of automotive manufacturing, yet it is one of the most forward thinking. In 2013, the brand put an autonomous drive research vehicle with the ability to merge into flowing traffic to the test from Mannheim to Pforzheim in Germany, covering over 100 kilometres through 24 towns and villages.

Mercedes-Benz won the drivers’ and the constructors’ championships in Formula One 2015. The technology from motor racing helps in the core business of vehicle production.

This page: Mercedes-Benz driving event in Central Harbourfront with the unveiling of GLC; Mercedes Me Store at Entertainment Building, Central; Mercedes Me Store dining area; Mercedes Me Store Grand Opening in September 2015 Opposite page: Mr Andreas Binder & Mercedes-Maybach S-Class Pullman of the market which the brand didn’t access before. With the best of both worlds, a sports coupé and a SUV, the GLE Coupé is very well-accepted by the markets. There are customers who are looking for a sports coupé with off-road capability in the market and the GLE Coupé is their best choice.

From compact vehicles to coupés with SUV capabilities, it’s the wide range of products available that Mercedes-Benz uses to its advantage. As Binder points out “We have different competitors in different segments. However, we do have a wide model range which many other brands don’t have and I think that’s one of our advantages. Furthermore, with the more than 60 year of experience we have in Hong Kong, we can cater our services and products to market needs.”

Mercedes-Benz is operating in the premium car market and being the leader of that segment the brand is facing strong competition from many manufacturers. It is challenging to keep as competitive advantage in the business, but the brand will remain as leader with its wide product portfolio, innovations and high quality customer service.

HONG KONG BUSINESS ANNUAL 2016 101

Ovolo Group

Get exactly what you want at the ovolo hotels

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ince 2002, the Ovolo Hotel Group has established itself as one of the leading independent operators of hotels and serviced apartments in Hong Kong. The company has been known to be innovative when it comes to the overall design and services it offers to customers. Ovolo is a Hong Kong-based, family-owned and privately operated business but is now expanding its reach to an international audience. The company now owns and operates eight hotels and two serviced apartments, spread across Hong Kong, Melbourne and Sydney.

The inspiration for innovation is usually something unique, bold or at least seen from a new perspective. But that’s what makes Ovolo Hotel Group so different. This year, the company is awarded in the “Innovative Designer Hotels” category at the Hong Kong Business High Flyers Awards, and it is an accolade that is very well-deserved.

Innovative projects One of its innovative developments is the Ovolo Southside, Hong Kong’s first New York-style warehouse-turned-hotel. Located within a former industrial building, the hotel is an interactive design stage showcasing contemporary art against a backdrop of industrial-inspired interior design.

Alongside regularly changing displays of experimental art and high-impact LED wall art, Ovolo has enlisted talented artists from

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around the world to contribute to this revolutionary art hub. The ultimate destination for a choice cut from the creative industries, the 162-room hotel is located in Wong Chuk Hang, once a centre for heavy industry and now a revitalised artists’ quarter, home to studios, galleries, bars and boutiques.

Ovolo is keeping its attention firmly on the pulse of the city and this keeps them abreast of the next big trend. The group bought the building of the Ovolo Southside over six years ago. At that time, nobody was talking about Wong Chuk Hang in any other context outside of Ocean Park and warehouses. But then, a lot of art galleries began to open or move there and people started converting the warehouse space into lofts and private kitchens, and by then Ovolo had in store a bit of nostalgic innovation – exactly what the community of Hong Kong needed.

Another exciting endeavour is the Mojo Nomad Project – a live-in co-working space program – which targets young entrepreneurs, startups and freelancers. The management at Ovolo discovered that young professionals work in a very different way. They don’t want to be beholden to any contracts because they might work in New York and Sydney or another city.

It’s a community and an active work place. So far, it’s been quite well-received in Hong Kong and Australia. But the firm has evergreater ambitious plans, and they’re already looking for more destinations to go, step-by-step.

Innovative Designer Hotels PHILOSOPHY

FAST FACTS

We are a dynamic, young hospitality company that does things a little differently with individually designed lifestyle properties that are feature-rich, guest-focused and full of character in authentic, lively urban locales.

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Founded in Hong Kong in 2002 • Founder & CEO: Mr Girish Jhunjhnuwala • Currently operates 10 properties: Hong Kong: 8 hotels, 1 serviced apartment Australia: 3 hotels, 1 serviced apartment • We connect with over 300,000 fans on Facebook • Ovolo means Egg in Italian Ovolo Hotels Company Awards • Best Hotel Management Company – World Luxury Hotel Awards 2015 • Top 10 Hotels in Australia & NZ (Ovolo 1888 Darling Harbour) – Conde Nast Traveler 2015 • Australasia’s Best City Boutique Hotel (Ovolo 1888 Darling Harbour) – Boutique Hotel Awards 2015

This page: The Lo Lounge on level L; The view of Wong Chuk Hang, with Ocean Park in the background; The view from the Corner Room Opposite page: Dirk Dalichau, Chief Operating Officer, and Heddy Li, Executive Director, Ovolo Group Creativity at Ovolo didn’t stem from a new approach, rather, it’s an age-old mantra of which the hospitality industry stemmed from – good old customer service.

Good customer service As Chief Operating Officer Dirk Dalichau commented, “I think the key is we always start with looking from the customers’ perspective. We don’t look at how we serve them at first, but we look at what is important for our customers, how they experience the hotel, and what other elements are really important during their stay and travel. And then we look at how we can serve them in a creative, fun and innovative way. These are the different components and different elements of our hotel.”

Individuality isn’t restricted to the decor, the philosophy of maintaining personality to create what people want extends to the staff of Ovolo as well. “We don’t mind tattoos, earrings, piercings, and coloured hair,” Dalichau explains.

“We allow [our staff] to be themselves, to have their own kind of individuality. We don’t try to restrict them. We want personalities. We want them to make jokes. We want them to be themselves because what is does is it creates a completely

different atmosphere, because people feel very comfortable staying with us.”

Continued expansion Judging by the popularity of the Ovolo hotels, this formula is working out very well. So much so that the group has recently opened two new establishments, Ovolo 1888 Darling Harbour and Ovolo Woolloomooloo, both in Sydney, Australia. Art is always an expression of individuality, so it’s no surprise that art is a major part of the Ovolo branding.

The Ovolo Woolloomooloo premises are vibrant and stacked with art. Though there were a lot of restrictions during reconstruction of the heritage building, many consultants made it work. The art is spectacular and has transformed a sleepy place into a vibrant and colourful environment. Apart from working with artists and designers, the group worked with the Australian government which has an initiative that commissions and archives the artworks of artists and the group has seized the opportunity to showcase the art in both establishments and is something Dalichau describes as something that “must be experienced by anyone who’s in the Sydney.”

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OZO Wesley Hk

ozo wesley is Slumbering to success

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here’s no denying that the world is getting smaller. The global community is more tight knit than ever and any city in the world is as accessible to anyone with a credit and a connection to Zuji. With the information highway stronger than it’s ever been, business and leisure travelers are demanding a different experience for where they stay.

Gone are the days where people stay in a foreign location long enough to crave a ‘home away from home’ experience, but rather, demand has shifted to just the bare minimum of high quality stay, without having to pay for extra costs such as in-house spas, shoe polishing service or multiple restaurants.

Smart. Simple. Savvy.

OZO is a hotel brand created around a core concept of a great night’s sleep, a great breakfast and great connectivity. Since its opening in 2013 by Onyx Hospitality Group, it’s been adhering to the ‘Smart. Simple. Savvy’ mantra to offer their guests more control, quality and the services and amenities they really want, helping them to maximise their time in town. You won’t find another hotel more dedicated to a night’s rest of their guests.

All of the 251 rooms offer superb bedding and intuitive design to give guests just what they need for the perfect night’s sleep.

Starting with black out curtains and sound proofing, high quality beds with super soft linen and hard and soft pillow options,

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complimentary doze-off drink available at lobby during the evenings and even a Sleep/Dream button on the TV remote to launch a counting sheep screen saver with restful sounds.

Not only that, there are also information lecterns providing useful destination information and tips, plus introductions to the hotel’s Vocal Locals – team members who may share similar interests.

Value and comfort The ambience at an OZO hotel is truly different, as chief operating officer Duncan Webb elaborates. “Our vibrant public spaces create a buzz in the lobby, a warm, welcoming area that fuses functionality with a unique style reflecting the local colour of the location, refreshing scents and uplifting soundtracks.”

Webb is particularly proud of the OZO guest experience which begins at the Spot, where technology eliminates unnecessary admin procedures and paperwork, allowing for a fast-track paperless check-in. Guests simply present their passport, sign an electronic tablet, swipe their credit card, pick up a key, and get on with their stay; at the end of the stay, they drop off their key, sign their bill, and depart.

“As a newly-created and fast growing hotel brand, OZO offers value and comfort for guests seeking insider experiences. Our winning formula is our ability to provide practical and stylish

Select Service Corporate Hotel PHILOSOPHY

FAST FACTS

The OZO philosophy is all about delivering restful nights, energising mornings, and the tools to offer on-the-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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Streamlined, tablet checkin 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.

Opposite page: Mael Vastine, General Manager, OZO Wesley Hong Kong This page: Ozo Wesley Hong Kong exterior; Sleep room; Tone accommodation which far exceed mid-market expectations,” adds Webb.

Technology – no doubt – is also an important service provided by the select service hotel for guests with business requirements.

Apart from free high-speed wifi connectivity throughout the establishment, there is a flexible workspace with height adjustable desks, multimedia panel with built in connectors and a wall mounted ergonomic IPTV system. As Webb simply puts, “[A stay at OZO] is a five star sleep experience in a four star room and three star prices”.

Onyx Hospitality Group’s strategy with OZO Wesley is no doubt well received as since its opening in in Hong Kong in 2013 as the first OZO worldwide, OZO hotels are currently available in other locations such as Koh Samui, in Thailand, and Colombo and Kandy in Sri Lanka. There are several OZO hotels under development and scheduled to open soon in locations such as Hoi An in Vietnam, Penang and Johor Bahru in Malaysia, and the southern Chinese city of Xiamen.

HONG KONG BUSINESS ANNUAL 2016 105

Rhombus International Hotels Group

rhombus reveals the three elements of its success

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ith 29 years of history and originating from Canada, Rhombus has operated all over Asia, UK and North America. Beyond the standard hotel practice of providing service as well as cleanliness, Rhombus aims to give their guests a memorable experience. Not just a memorable experience upon check-in, but starting from once you book the hotel. As a guest of a Rhombus-managed hotel, you’d feel taken care of from precheck in to check in, throughout your stay and all the way to after your check out, so you come back as more of a family member rather than just a first time guest.

The management group doesn’t shy away from a challenge.

As Managing Director Wayne Mak elaborates: “We don’t limit ourselves to one niche. We take on a wide range of different projects and maximize return on investment for the owners.”

A winning business strategy Rhombus has a track record of taking on different star hotels on different scales as part of their business strategy and they target different market segments. That translates to only an advantage for a management company, to have experience where investors approach Rhombus, knowing they aren’t limited to certain projects. But in an industry full of intense competition, Mak attributes this to their adaptability.

“We stay ahead by knowing our competitors first, and I think

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our team does a very good job of that, and setting the bar beyond the competition. Also, we find that we have to adapt to change, and not to remain stagnant. We can’t be still, because the hotel industry is a dynamic market, it’s always changing. So I think our team and our organization embraces change well, while being able to maintain the brand consistency that we have across all of our Rhombus properties. We always think of new strategies, innovative ideas, and that relates back to why we’re successful as a management firm.”

The power of the team In fact Mak insists it’s his team that makes the difference. “The team is definitely the reason behind the success of this company - the staff is the heart and soul. We call the staff our Rhombus family members, and they are united towards fulfilling the corporate mission, philosophy and goals.”

“Primarily, our success comprises of three elements: the first is, for the owners, we try to maximize the return on investment.

For the guests, we try to provide the best and highest quality products and services in order to exceed their expectations. And third, we want our employees to have career development as well as opportunities for their career path in the future. In addition, we also want to give back to the community through our corporate social responsibility programs. And we believe this formula has

Leading Hotel Management Company for Worldwide Investors PHILOSOPHY

FAST FACTS

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.

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Founded in Canada, Rhombus International Hotels Group has more than 29 years experience in North America, 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 turn-key packages for various development projects.

This page: Swimming pool of Rhombus Park Aura Chengdu Hotel; Dining with stunning panoramic views over Victoria Harbour at AVA Restaurant Slash Bar of Hotel Panorama by Rhombus; Hotel LKF by Rhombus’ guestrooms, ranging from 500 - 950 sqft. of spacious luxury; Premium Room of Hotel Pennington by Rhombus, the modern retreat of sophistication and contemporary comfort Opposite page: Wayne Mak, Managing Director, Rhombus International Hotels Group generated the success we’ve enjoyed over the past 29 years.”

Rhombus-managed hotels are also extremely civic-minded and socially responsible. Throughout the organization they use energy-saving LED light bulbs to replace old fluorescent bulbs, as well as working with Foodlink to donate leftover food to be delivered to people in need. On top of that they sanitize and recycle soap products that are shipped off to areas where they don’t have proper knowledge about hand washing and hygiene.

With staff, guests, investors and social responsibility in mind, Rhombus has all bases covered to achieving their goals in continued success.

HONG KONG BUSINESS ANNUAL 2016 107

SOUND CONCEPTS ltd.

sound concepts keeping its ear to the ground for new trends

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n this day and age of disposable speakers and generic components, sound quality has taken a backseat to trendiness and novelty. However, serious listeners know that life is too short to listen to bad audio and that sound should always come first, with no exceptions. Even the best recordings will sound mediocre if played through a low quality rig, so you need a system that’s up for the task. For audiophiles with uncompromising sonic standards, Sound Concepts Hong Kong is the source for all of your audio solutions.

Founded by industry veteran Ms. Sherry Chung in 1990, the company has built a proven track record over the last 25 years, and is one of the fastest-growing integrated AV solutions distributors in Hong Kong. The company services the bespoke high-fidelity needs of a wide variety of both residential and institutional clients, with names such as the Shanghai Symphony Hall and the Shanghai Glass Museum. Sound Concepts Ltd. carries some of the finest brands in the industry, such as ATC, Axium and Parasound, along with providing installation and after sales services to customers in Hong Kong and China.

Constantly keeping its ear to the ground for new industry trends, Sound Concepts continuously pounds the pavement in search of the latest innovations whether analogue or digital. Given the growing trend in online music purchases and streaming, Sound Concepts has begun to offer digitally-

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compatible HiFi systems, allowing high-quality playback from your laptop, desktop, tablet, or smartphone.

Innovative products New products include the Musaic MP5 &MP10 Wireless music players, which seamlessly integrates into any digital ecosystem that may be installed in your home and can play almost any file type including 24-bit Studio Master Files. With the ability to connect to your home WiFi network, the system can also directly play music from 15,000 different internet radio stations and leading streaming services such as Spotify and iTunes Music.

In addition to being a music player, the device can serve as a control hub for other home systems such as smart lighting platforms and internet of things (IOT) applications. The Playback Designs MPS-5 Signature Limited Edition is also another new product that combines digital features with uncompromising audio standards. This CD/SACD transport also boasts Digital-toAnalogue Converter capabilities (DAC) capabilities, allowing for playback from a number of digital sources. The unit allows for super-high resolution files from PC, MAC or USB input, with up to 24/384kHz PCM and 6.1MHz DSD. Sound Concepts has also begun to offer the Bricasti M1 Digital to Analogue Converter Preamp to complement their other digitally compatible offerings. The unit supports the highest

professional AV CONSULTANCY PHILOSOPHY

FAST FACTS

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.

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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.

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.

This page: ATC SCM40A; Bricasti M1; PLAYBACK DESIGS MPS-5LE Signature Opposite page: Musaic MP5 & MP10 quality playback, capable of sample rates of up to 352.8kHz& 24bits, along with DSD, DSD64 and DSD128. With a dual mono design, the preamp features Bricasti’s proprietary filter technology allowing for unparalleled flexibility in tailoring the sound to the rest of your audio system or room.

Future plans Over the next three years, Sound Concepts is looking to leverage on its deep understanding of the hi-fi audio market to aggressively growth its business by expanding its professional client base, and carrying the latest, most innovative products for its customers. The company has already begun to service institutional clients such as concert halls and nightclubs, partnering with professional-grade component manufacturers such as the British provider Acoustric Transducer Company (ATC).

As the consumer expectations for sound quality continue to move up, establishments will also have to follow suit, which is likely to continue driving demand in this segment.

In retail, digital has been the major trend, with E-commerce being one of the main drivers of increasing retail sales. According

to founder Sherry Chung, she sees new trends such as online music purchasing as the way forward as the channel continues to gain traction as consumers’ preferred method of buying. Early on, Sound Concepts recognized this trend and partnered with brands whose products complement this new channel such as Musaic, NetStreams and ReQuest, in order to allow the company’s customers to enjoy their music in audiophile quality from whatever device they may have it on.

Additionally, customers can look forward to a new online sales website from Sound Concepts, with the company looking to go omni-channel. In addition to products that integrate well into the internet of things, new offerings have also become greener, keeping the environmental footprint in mind more than ever. New multi-room systems consume less power given their IP-based built-in digital power amps and low voltage power sources, which are much more efficient than old analogue systems.

Sound Concepts continues to focus on increased compatibility with new trends and upgradability, ensuring longer usable lives for products they offer given that obsolescence happens faster than ever given the rate at which technology evolves today.

HONG KONG BUSINESS ANNUAL 2016 109

The Cityview

Blending hospitality with sustainability and service

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ocated along Waterloo Road at the heart of Kowloon’s commercial district is The Cityview. The hotel has 422 guest rooms, ranging from standard accommodation options to suite facilities, and three food and beverage outlets. The Cityview likewise has two meeting and conference facilities that can cater to 400 guests at any one time, plus a fitness center, sauna and indoor swimming pool.

Premier rooms and suites Recently, the hotel launched its “Premier” rooms and suites. Each room has an area measuring about 21 square metres, while each suite measures about 45 square metres. Both the rooms and suites are spacious with large windows, and the occupants have a choice of a king or twin-sized beds with deluxe pillow styles.

The rooms and suites are especially designed for business executives, as each unit is equipped with a Smart TV (42 inches for the room and 55 inches for the suite) with internet access and AV connectivity for laptops, a multi-functional work desk, and an alarm clock with mp3 player docking station. Only the suites have a Nespresso coffee machine with choices of coffee capsules.

Part of the Premier package is the “Amazing Wholesome Buffet Breakfast” which is served at the Amazing, a food and beverage outlet that specializes on Thai cuisine. The meal consists of highfibre and low-calorie dishes like fresh fruits, organic fruit juice,

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cereal, cheese and yogurt.

Sustainability The Cityview is an eco-conscious hotel which continues to advocate environmental protection among its personnel and guests. One of these projects is the recycling of materials such as old furniture, computer and associate equipment, toner and ink cartridges. Another initiative is the placing of recycling bins in the guest rooms.

By 2016, the lobby would have a new look. Improved with eco-friendly materials, it would present a layout design enhanced with natural lighting.

The Cityview has also issued its first sustainability report for 2012 to 2014 last August, so far being the first and only independent hotel which has produced a sustainability report based on the Global Reporting Initiative G4.

Vegetarian and seafood options have been included in the Amazing’s a la carte menu. Food waste reminder tent cards, on the other hand, are displayed at the City Café. The Cityview has likewise collaborated with groups involved in this same campaign, having participated in the “Order Less, Waste Less, More Blessing” Light Banquets organized by Friends of the Earth. Other involvements include participation in the 2015 WWF Sustainable Seafood Week, and the signing of the Waste

Green Business Hotel PHILOSOPHY

FAST FACTS

The Cityview strives to attain higher standards through genuine personal service and attention to detail, including environmental issues. Through its green advocacy, The Cityview hopes to provide its customers peerless experiences while overcoming sustainability challenges in the process.

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August 2015, achieved Silver Certified status from EarthCheck consecutively for the fourth 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

This page clockwise: Premier Twin room; CSR activity; Amazing wholesome breakfast; Amazing restaurant at The Cityview Opposite page: Alex Wu, general manager, The Cityview Check Charter administered by the Hong Kong government’s Environmental Protection Department.

It is due to these endeavors that for four years now, the hotel has earned the EarthCheck Silver Certification which is the world’s most scientifically rigorous sustainability management programme for the tourism industry.

“As we move closer toward achieving our stated goals, we remain fully committed to addressing a host of new sustainability challenges with energy, water, waste and community involvement emerging as key areas of our focus,” says Alex Wu, The Cityview’s General Manager. “For this reason, we set annual targets in these areas to ensure that we are achieving our long-term objectives.”

CSR and personnel development program Apart from its green advocacy, The Cityview has been taking an active role in corporate social responsibility (CSR). It encourages its employees to take part in noble activities like raising funds and donating them to charitable institutions, and sponsoring meals for the underprivileged. In the past, some volunteer workers participated in a soap recycling activity (“Soapathon”) and

distributed the finished products to disadvantaged communities.

Recently, too, a group visited the Children’s Home.

In addition to their professional development and training, the hotel staff enjoys organized recreational events like annual picnics, sports competitions and staff birthday parties. These help enhance the employees’ holistic being, as they learn to strike a balance between work and leisure.

Benefits and upgrades The Cityview is also slated to launch its hotel loyalty program in the first quarter of 2016, where they will offer basic discounts upon outlet patronage or hotel stay. Credits can also be accumulated by members, which they can redeem through either F&B or various room benefits.

Looking forward, another business opportunity on the corporate and MICE segment is on the horizon for The Cityview as a result of its Premier renovation, hotel lobby upgrade and its upcoming loyalty program. The new facilities are designed to attract business travelers from multi-national companies.

For more on The Cityview, visit www.thecityview.com.hk.

HONG KONG BUSINESS ANNUAL 2016 111

Thomas Mayer & Associés

20 years of guiding clients through complex legal systems

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HOMAS, MAYER & ASSOCIES (TMA) is a French law firm established in Hong Kong in 1995. TMA specializes in the economic migration of companies from Europe to SouthEast Asia, particularly China, and from South-East Asia to Europe, particularly France. TMA provides its clients with the possibility to carry out their investment projects owing to technical solutions based on its in-depth knowledge of the economic and legal environments of these regions, together with its more than 20 years of experience in the commercial and legal practices of the relevant countries.

20th anniversary Starting from scratch, TMA has become in 20 years a key player in the closing of deals between France and Hong Kong. With the largest number of French lawyers in a single office in Asia, TMA advises its clients in all areas of international business law.

We are proud to advise all sorts of clients from middle sized companies to larger groups of the CAC 40 or the main board of the HK Stock Exchange.

Originally TMA was set up in Hong Kong to serve the needs of French companies seeking to invest in mainland China through Hong Kong. This is our expertise. We see ourselves as a two way bridge between France and China and Hong Kong, but also between the world of civil law (France) and the world of common

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law (Hong Kong). They are the two main systems of law and this is our edge: being able to guide our clients through these worlds and into the Chinese legal and economic systems.

TMA will continue to advise and assist foreign investments in South East Asia in general and in China in particular via Hong Kong and vice versa. Hong Kong is the ideal platform to connect China (and South East Asia) to the rest of the world. This is what we do. And this needs to be done from Hong Kong.

As TMA has built over the past 20 years an extensive network of various professionals in all fields of business law in every province and in the main cities of China, we are operational almost everywhere with no delay.

Making deals in France on behalf of our Chinese clients As Chinese investments in France (and in French-speaking Africa) will increase in the coming years, our expectation is to be the reference in the making of deals on behalf of our Chinese clients.

This year we advised Tech Pro Technologies, listed on the main board in HK, in their purchase of the Football Club of SochauxMontbéliard from PSA. This deal is one of the most remarked transactions of the year between China/HK and France. Acquiring and restructuring companies is our core expertise and we are certain to play a key role in this area in facilitating and making such deals, this is TMA’s challenge for the next five years.

LAW FIRM PHILOSOPHY

FAST FACTS

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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The practice was established in Hong Kong 20 years ago and employs 35 staff Paris office is a subsidiary as TMA Hong Kong is the main office 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.

This page: The office, the meeting rooms, and the entrance of TMA Hong Kong Opposite page: Eric-Jean Thomas, Senior Partner, and Eric Mayer (Managing Partner) Deal of the Year 2015 TMA advised the Hong Kong listed company Tech Pro Technology which is principally engaged in the manufacturing and sales of LED lighting products and LED lighting parts under the international brand Ledus.

The acquisition of FC Sochaux will strengthen Tech Pro Technology group’s hold on the LED market in Europe, and particularly in France, as well as affirm Ledus’ expansion through both the media and FC Sochaux related products.

Tech Pro Technology and Ledus Club Limited were advised in France by Thomas, Mayer & Associés (Eric-Jean Thomas, Senior partner and Emma Bensoussan-Crémieux, Managing partner).

Automobiles Peugeot was advised by LatournerieWolfrom Avocats (Caroline Basdevant-Soulié, partner, Claire-Marie Toupé, associate).

HONG KONG BUSINESS ANNUAL 2016 113

Uni-Bio Science Group Ltd

Uni-Bio Science

聯 康 生 物 科 技 集 團 有 限 公 司 Group Ltd.

Innovation is the Backbone of China’s Biopharma

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ingsley Leung, Executive Director of Uni-Bio Science Group, is aware that with a growing aging populationcombined with a more affluent urban middle class due to the modernization of China will place an increasing burden on China’s health care systems. “Uni-Bio Science Group’s long term strategy is to address these unmet and growing needs by pushing the boundaries of drug innovation through smart and cost effective models.” The building blocks for this strategy began over 12 years ago with the establishment of a product development program that started with R&D and has progressed through to successful outcomes in phase 3 clinical trials for efficacy and safety.

Uni-Bio Science Group is now ready to bust the blocks. Mr. Leung feels that two, soon to be launched, products have the potential to be blockbuster biopharmaceuticals in the China market. So much so that the Group is moving at a fast pace to develop the infrastructure needed to achieve sustained market growth. This year’s interim results were 18.3% as compared to 8.6% industry wide.

China’s pharmaceutical industry has been dominated by generic chemical drugs with products that lacked, in pharma speak, clinical differentiation. Biopharmaceutical drugs developed, manufactured, or made available by Uni-Bio Science in China will offer tremendous therapeutic advantages to patients.

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Scheduled to launch shortly, Uni-PTH are and Uni-E4 targeting the management of osteoporosisand diabetesrespectively.

According to Mr. Leung, China has an estimated 100 million diabetics as compared to 25 million in the US, yet China’s market value for diabetic management drugs is less than one fourth that of the US (US=$18B vs China=$4B). The upside potential in China for biopharmaceuticalmanagement of diabetes is tremendous. A product similar to Uni-E4 has recorded global sales in excess of US$400 million.

Improving the quality of life Drugs used traditionally in the management of osteoporosis focused on prevention of bone loss through controlling the breakdown of existing bone. However, if the existing bone structure is already of a weak nature the bone mass will stabilize but existing bone structure does not improve in strength.

Uni-PTH’s innovative approach addresses this through action that upregulates factors that increase new bone growth and improving the strength of a patient’s bone structure.

Uni-PTH can improve the quality of life for China’s aging population and decrease the burden to China’s health care system for managing patient with osteoporosis. How big a market is this? Persistence Market Research in a recent publication estimates that the global market for osteoporosis

Innovative Healthcare Solutions PHILOSOPHY

FAST FACTS

The Uni-Bio Science Group is a Chinese biopharmaceutical company focused on addressing highly unmet medical needs in diseases such as diabetes, ophthalmology and dermatology through the development of novel therapies.

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Listed on HKSE since 2001 250+ employees and 110+ contract sales agents Market cap as of 18 Aug 2015 is HKD 1.17 billion Innovation-focused with strong market access position Potential blockbuster products are Uni-PTH & Uni-E4 launch High quality manufacturing facilities imported from abroad (>HKD120M invested)

This page: UniBio HK Office Staff; UniBio Marketed Products Opposite page: UniBio Executive Director Mr. Kingsley Leung drugs to reach US$14.78 billion by the year 2022. Uni-E4 has proven in trials to effectively manage blood sugar levels in patients with diabetes while offering two other advantages.

The biopharmaceutical can also enable a patient to lose weight thereby improving their diabetic condition and overall health while preventing the occurrence of hypoglycemia.

Uni-E4’s action occurs only at high blood sugar level states and is inactive at normal or lower levels. There is no overshoot.

Insulin on the other had has shown to cause weight gain, hypoglycemia and could lead to hypoglycemic coma under certain conditions. Mr. Leung states, “To be a blockbuster drug in China, sales would have to reach or exceed the RMB 1 billion level.”

And to pave the way for that achievement Uni-Bio Science expects to quadruple its sales force in the coming two years prior to market entry. Uni-Bio Science has attracted a full management team with Big Pharma experience to insure the success of these two potential blockbusters as well as future products.

Leung adds that education is critical to a successful launch.

Physicians by nature are very conservative and concerned for patient safety. The challenge is to educate these physicians on the clinical differentiation of Uni-E4 and Uni-PTH. Uni-Bio Science’s Medical Affairs team is headed by a former long service Pfizer staff overseeing physician and sales education and is supported by Uni-Bio Science’s commitment to success through

an infrastructure platform that allows video conferencing and intranet access to communications and supporting clinical information. Uni-Bio Science is already active in the medical community attending seminars and conferences and its products are being evaluated at 15 clinical study centers by key opinion leaders in China.

Commitment to innovation Uni-Bio Science is committed to innovation with products in the pipeline for kidney failure, anemia, and long action formulations of osteoporosis and diabetes management drugs. The company hopes to become a biopharma market leader by adding products that will position it as the leader in therapies to manage diabetes and all complications of diabetes.

Uni-Bio Science’s manufacturing mirrors European Standards for GMP a fact that will attract small and mid-cap companies outside China who desire an established infrastructure platform for entry into China to partner up thereby adding to Uni-Bio’s portfolio in the China market, Samil Pharm of Korea has recently signed a distribution agreement for a select range of their products. Leung believes that Uni-Bio Science’s commitment to innovation and development will lead to product licensing agreements for world-wide distribution much like the recent €4 billion agreement by Insight Pharmaceuticals.

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Wharf T&T

20 Years Of ICT Accomplishments Upholding Business Excellence

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uilding castles in the clouds was traditionally thought of as folly, but for two decades Wharf T&T has been taking business enterprises of all sizes to new altitudes and now is the leading provider of ICT and business cloud services in Hong Kong.

Celebrating 20 years of continuing success in 2015, Wharf T&T is proud that the company has become the entrusted partner of all listed financial institutes in Hang Seng Index Finance Constituents, 90% of the Top 10 Global investment Banks, licensed banks incorporated in Hong Kong, financial institutes of the Global Top 100, as well as 90% of the HKSAR Government departments through focusing on all major business spheres including but not limited to business continuity and security, communication, marketing and operations.

In 2014, Wharf T&T announced another record breaking year with the highest revenue and operating profit ever continuing a legacy of excellence in services provided combined with the commitment to servicing a broader market. The continuously extended high-speed broadband network already covers 5,000 commercial buildings providing over 90% of Hong Kong business customers the ability to tap the power of communications and cloud to accelerate new business opportunities with technology that can help customers drive business growth.

With the best-of-breed ‘Fibre-to-the-Desk’ (FTTD) network

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infrastructure well in place, Wharf T&T is able to offer a variety of subscription-based cloud solutions for every business need with unrivaled scalability to provide solutions for users from SME’s with basic PC/laptop with operating systems support to the advanced network support of large multinational entities.

Innovative services such as FibreCloud builds a cost-effective infrastructure and resource layer that help enterprises drive capacity utilization higher than ever when combined with cuttingedge cloud technologies from the world’s leading technology giants made available through Wharf T&T’s full suite of cloud-asa-service (CaaS) solutions for businesses. FibreCloud redefines business-grade public cloud computing standards with premium services serving a wide spectrum of metropolitan-based business at an unprecedented value-for-money offering that has brought tremendous value to local enterprises, SMEs in particular.

An effective support team Wharf T&T will never leave clients in the clouds as its team of ICT support engineers are capable of full support services from design, planning, installation and maintenance of converged networks, voice, broadband, data storage, international connectivity, disaster recovery, business continuity planning, online marketing solutions, and business applications to cloud services. Wharf T&T acts well as enterprises’ ICT support team.

Fixed Network and Broadband - Telecommunications PHILOSOPHY

FAST FACTS

Wharf T&T, a leading ICT service provider in Hong Kong with unique strictly business focus and extensive Fibre-To-The-Desk (FTTD) network infrastructure, strives to provide business customers with leading-edge ICT solutions fulfilling their diverse business needs. A rich ICT service portfolio ranging from fibrebased high-speed business broadband, sophisticated local and international data networking, advanced IP-based voice telephony, best-of-breed public cloud services, and complex mission-critical systems integration solutions aims at enabling businesses of its customers. Quality is warranted in the complete ICT life cycle by its proven competence to design, build and operate. Wharf T&T is not only committed to engaging in sound and lasting ICT partnerships with our customers but also endeavouring best-practice standards and performances, as well as contributing to the development of corporate social responsibility in Hong Kong while doing businesses.

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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 telecom network infrastructure.

2015 marks the 20th anniversary of Wharf T&T. After years of pursuit of excellence and innovation, Wharf T&T has firmly established itself as a leading ICT services provider.

This page: Enterprise Cloud Applications; Vincent Ma, President of Wharf T&T Opposite page: Corporate advertising campaign starring Kay Tse to mark the company’s 20th anniversary Mr. Ma says “Over fifty thousand customers rely on Wharf T&T and not just for ICT, the impact of cloud is for businesses to harness its capabilities to drive productivity and efficiency and that requires a change in the way IT is managed and deployed.”

Cloud Assurance features the highest level of reliability encompassing internet access, off-site backup, business system protections and data recovery to guarantee ongoing business operation despite unexpected disasters.

Cloud Communicator keeps clients highly mobile workforce in contact with clients and each other at all times via face-to-face video calls on the go, unified voice and communication with fixed-mobile convergence as well as a mobile app.

Cloud Accelerator provides clients one-stop marketing tools to strengthen promotional efforts that include Cloud Signage (digital signage) and Cloud WiFi solutions that are ideal for retail chain or service outlet networks allowing them to strengthen promotional efforts, drive traffic, and monitor multiple outlets for service enhancements.

Proactively handling challenges According to Mr. Ma, Hong Kong is internationally recognized as a leading digital economy, consistently achieving top ranking in digital readiness and internet access capabilities with one of the most sophisticated telecommunications infrastructure in

the world. Wharf T&T is proactive about handling the critical challenge today and into the future which is the continuing development and retention of “Shrewdly blended IT talents” proficient in both technology and business.

The Leadership Development Program launched circa 2010 has successfully nurtured over 100 blended passionate ICT talents who will contribute and help move the Company forward.

Opportunities are created via Wharf T&T’s Dual Career Ladder Program enabling career paths for staff of different profiles to progress further.

Wharf T&T is not only committed to building a faster and more efficient business environment in Hong Kong, but it’s also recognized for being committed to improving the Hong Kong environment and society for all Hong Kong people through the actions of its Corporate Social Responsibility Program as evidenced by recognition from the Gold Label-WWF’s Lowcarbon Office Operation Program, Hong Kong Awards for Environmental Excellence in ‘Media and Communication Sector, and CarbonSmart Partner Commendation Scheme-CarbonSmart Low-Carbon Commitment Partner.

Wharf T&T also supports Project WeCan contributing to the development of young people from all walks of life as well as hosting events for fund raising or direct contribution for social service, environmental protection and the needy.

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zchron design

Punctuality and reliability wins the race

L

aunched in 1994, Zchron Interior Design has over 20 years of history in Hong Kong. Though in some industries that might be comparatively young, in the interior design world in Hong Kong, it’s more than two lifetimes. Hong Kong is a city where there is no shortage of demand for new homes that are most certainly remodeled after every move. Many result in disputes and end up in arbitration court.

Embroiled in legal trouble and often operating on a tight margin, many interior design companies don’t last more than two years. Not only has Zchron stood the test of time, this is its tenth consecutive year winning the Hong Kong Business High Flyers Award.

An affluent society “The most significant factor I can reflect from the last 10 years is that Hong Kong is a very affluent society,” explains Managing Director Nison Chan. “Housing is expensive, but on the flip side, there aren’t a lot of interior decorators dedicated to high-end homes. You have big names in a lot of other industries, such as HSBC for banking or Park n Shop for supermarkets, but a design house? There isn’t one that comes to people’s minds.”

Chan further states: “That’s because a lot of independent designers end up closing down after two years and in particular when it comes to contracts for opulent homes. A lot of the times

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there are disputes and many wind up in court. This happens quite a lot.”

Design and build The company’s mission statement is simple: ‘design and build’ and it’s what Chan lives by. He shares what he thinks is the secret to the success of Zchron: “We’ve been around for 20 years and honored with winning this award for 10 years. We pride ourselves in honesty and professionalism. We don’t change our prices once a client signs a contract. Actually we insist the quote remains the same and most importantly we finish the job on time. I feel that’s why we’ve been able to last as long as we have and our popularity has been steadily rising.”

Chan also acknowledges that providing such thorough service could not be achieved by his direction alone, and only possible by hiring the right staff.

“We require someone who has a professional attitude and focus. There is no formal training available for the project management side of design, so we provide on-the-job training and teach the most important values such as the importance of punctuality. At Zchron we actually have more than 100 types of checklists for a whole project, so this will help them complete tasks.”

Of course, for a design house, aesthetics and flair is the key

interior designer PHILOSOPHY

FAST FACTS

Our ‘design and build’ concept aims to provide one-stop 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.

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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

This page: Modern classic living room; Elegant living room; Modern classic dining room; Relaxing garden design; Luxury dinning room Opposite page: Nison Chan, Managing Director, Zchron Design

factor and with so many beautiful homes and premium office spaces at their disposal, the ideas for design must be fresh. Chan proudly facilitates a creative environment in his company. “We encourage our designers to get exposure to the latest design fair and exhibitions as possible and we are happy to sponsor these

trips for them.”

The demands for punctuality and not letting a project runaway on costs are definitely traits that are easily said than done.

Zchron’s insistence on these qualities could well pave the way for at least another 20 years in the industry.

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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 2015

72 HSBC Life (International) Limited

98 MassMutual Asia Ltd.

76 Ageas Insurance Company (Asia) Limited

100 Mercedes-Benz Hong Kong Ltd

78 Altruist Financial Group Ltd

102 Ovolo Group

80 Canadian International School of Hong Kong

104 OZO Wesley HK

82 CITIC Pacific Limited

106 Rhombus International Hotels Group

84 City University of Hong Kong

108 Sound Concepts Ltd.

86 Elite Concepts

110 The Cityview

88 GODIVA Chocolatier

112 Thomas Mayer & Associés

90 Hang Seng Insurance

114 Uni-Bio Science Group Ltd

92 Hong Kong Matchmakers

116 Wharf T&T

94 InterContinental Grand Stanford Hong Kong

118 Zchron Design

96 Lan Kwai Fong Hotel @ Kau U Fong

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