MARKET ESSENTIALS - Hong Kong by Sven Boermeester

Hong Kong

SECOND EDITION

Market Essentials â&#x20AC;&#x153;Hong Kongâ&#x20AC;&#x2122;s trading dynamism and increasing economic integration with the Chinese Mainland, combined with the longestablished and deep-rooted UK-Hong Kong business relationship, make it the ideal partner for UK companies seeking new business opportunities in the fastest growing economic region of the world." Stephen Bradley British Consul-General to Hong Kong

Hong Kong

Government

INTRODUCTION

USEFUL CONTACTS

Introduction by the British Consul-General to Hong Kong I am grateful for this opportunity to address UK companies interested in entering the Hong Kong market or establishing partnerships with Hong Kong companies to win business on the Chinese Mainland. Hong Kong matters. It is the eleventh biggest trading entity in the world; it is one of the world's busiest container ports; it has the second largest stock market in Asia and it enjoyed economic growth of over 6% of GDP in 2006. The UK exported almost £3 billion worth of goods to Hong Kong in 2006 and earned a further £1.3 billion from services. Over 1000 UK businesses have a presence here. Stephen Bradley

Its open business environment is unparalleled in Asia. With its well established Rule of Law, protection of intellectual property, well regulated banking system, free flow of people, ideas and information and accountable government, Hong Kong is the preferred regional location for the world's leading companies. Hong Kong also matters to China. One third of China's trade passes through Hong Kong and Hong Kong is the biggest investor in every province of China. Over 70,000 Hong Kong companies employ some 11 million people in neighbouring Guangdong Province alone.

Hong Kong also plays a key role as China's international financial and service centre. Many Chinese companies come to Hong Kong to raise capital and to access international business services. There is an increasing number of cross-boundary activities, including transport links, tourism and environmental services. And under the Closer Economic Partnership Arrangement (CEPA), Hong Kong has preferential access to China's markets. This growth in Hong Kong economy, combined with the closer economic integration with China, offers opportunities for Western companies. With their own success, experience and cultural advantage, Hong Kong companies are at the forefront of these expanding business opportunities. UK Trade and Investment's role is to assist UK companies to develop their business in Hong Kong and China. My team at the Consulate-General, together with our partners, stand ready to assist.

UK Trade & Investment has identified a number of key sectors of opportunity in Hong Kong for British companies. These include: retail and consumer services, business and professional services, water and wastewater, food and drink, clothing and footwear, leisure and tourism, electronics and IT, software and computer services, railways, communications, environment, education and training, biotechnology, textiles, creative and media, healthcare, construction and giftware and jewellery. For further details of sector opportunities, visit www.uktradeinvest.gov.uk.

UK TRADE & INVESTMENT Kingsgate House 66-74 Victoria Street London SW1E 6SW Contact: Jean Gray Tel: 020 7215 8589 Fax: 020 7215 2482 Email: jean.gray@uktradeinvest.gov.uk Web: www.uktradeinvest.gov.uk

HONG KONG ECONOMIC AND TRADE OFFICE, LONDON HONG KONG SPECIAL ADMINISTRATIVE REGION GOVERNMENT 6 Grafton Street London W1S 4EQ Tel: 020 7499 9821 Fax: 020 7629 2199 Email: general@hketolondon.gov.hk Web: www.hketolondon.gov.hk

HONG KONG TOURISM BOARD 6 Grafton Street London W1S 4EQ Contact: Kevin Welch, European Regional Director Tel: 020 7533 7100 Fax: 020 7533 7119 Email: lonwwo@hktb.com Web: www.discoverhongkong.com

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

INVEST HONG KONG HONG KONG SPECIAL ADMINISTRATIVE REGION GOVERNMENT 6 Grafton Street London W1S 4EQ Contact: Adela Liew, Principal Investment Consultant Tel: 020 7499 9821 Fax: 020 7409 0647 Email: general@hketolondon.gov.hk Web: www.InvestHK.gov.hk

ASIA HOUSE 63 New Cavendish Street London W19 7LP Contact: Charlotte Pinder, Chief Executive Tel: 020 7307 5454 Fax: 020 7507 5459 Email: enquiries@asiahouse.co.uk Web: www.asiahouse.org

BRITISH CHAMBER OF COMMERCE IN HONG KONG Room 1201 Emperor Group Centre 288 Hennessy Road Wanchai Hong Kong Contact: Christopher Hammerbeck Tel: +852 2824 2211 Fax: +852 2824 1333 Email: cjah@britcham.com Web: www.britcham.com

HONG KONG TRADE DEVELOPMENT COUNCIL 16 Upper Grosvenor Street London W1K 7PL Contact: David Marsden Tel: 020 7616 9500 Email: london.office@tdc.org.hk Web: uk.tdctrade.com

Foreword by the Director-General of the Hong Kong Economic and Trade Office, London I welcome this initiative to inform British companies of the opportunities for business with Hong Kong. We share a long and mutually profitable trade and cultural relationship and enjoy close commercial ties. These have continued and grown over the past decade since Hong Kong became a Special Administrative Region of the People's Republic of China, operating with a high degree of autonomy under the “One Country, Two Systems” principle. Our economy has continuously changed for the better and the numbers have been overwhelmingly up since 1997. We have retained the top spot as the 'World's Freest Economy' according to the Heritage Foundation for the past 13 years. We are also a low tax economy as recognised by Forbes magazine, which this year ranked Hong Kong third from the bottom in its Tax Misery Index. Sarah Wu

Increasingly the last decade has seen Hong Kong making significant advances as an international financial centre. Hong Kong now has the world's sixth largest stock market with a market capitalisation more than four times larger than in 1997. Through Central Government's “Go Global” policy, Hong Kong has also become the city of choice for mainland companies looking to raise capital. Hong Kong is also becoming a RMB offshore trading centre and a major asset and fund management centre in Asia. Our companies were the first in the world to move their manufacturing operations to the Pearl River Delta (PRD) when China opened its economy 25 years ago. Today, the PRD is a manufacturing and export powerhouse, the fastest-growing region of China,

which in turn is the fastest-growing large economy in the world. These new and unique advantages of Hong Kong have been captured in the Closer Economic Partnership Arrangement (CEPA) signed between the Mainland of China and Hong Kong. Trade is flourishing. Since 1997 our total trade in goods almost doubled to US$650 billion and trade in services has now reached US$100 billion. And far from being sidelined in the international scrum to get into China, we are increasingly finding a new role as a gateway to the mainland, for instance, nearly a quarter of the total trade between the UK and mainland China (US$8.8 billion) is routed through Hong Kong. In 2005, Hong Kong was the UK's 13th largest trading partner outside the EU, while last year the UK was our 8th largest trading partner in the world and 2nd largest trading partner among the 25 EU Member States. However, we are not complacent and want to reach out to more British companies. The Hong Kong Economic and Trade Office in London and our InvestHK consultants are here to help. You are most welcome to contact us.

Photos courtesy of: Dreamstime.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of InterTrade Media Limited. The views expressed in this publication are not necessarily those of the promoters involved. Whilst every effort has been made to ensure that the information in this publication is accurate, InterTrade Media Limited cannot accept any liability for loss or damage arising from facts, errors or omissions. Readers should undertake the usual commercial checks before entering into business arrangements. InterTrade Media Limited UK, Tel: + 44 161 613 5872, Fax: + 44 161 333 5353, E-mail: info@intertrademedia.com

Hong Kong

SECOND EDITION

Hong Kong

Government

INTRODUCTION

USEFUL CONTACTS

HONG KONG TOURISM BOARD 6 Grafton Street London W1S 4EQ Contact: Kevin Welch, European Regional Director Tel: 020 7533 7100 Fax: 020 7533 7119 Email: lonwwo@hktb.com Web: www.discoverhongkong.com

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

ASIA HOUSE 63 New Cavendish Street London W19 7LP Contact: Charlotte Pinder, Chief Executive Tel: 020 7307 5454 Fax: 020 7507 5459 Email: enquiries@asiahouse.co.uk Web: www.asiahouse.org

HONG KONG TRADE DEVELOPMENT COUNCIL 16 Upper Grosvenor Street London W1K 7PL Contact: David Marsden Tel: 020 7616 9500 Email: london.office@tdc.org.hk Web: uk.tdctrade.com

Photos courtesy of: Dreamstime.com

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INTRODUCTION

Welcome Message from the British Chamber of Commerce in Hong Kong The history of Hong Kong has shown that it can adapt to changing environments and challenges; it still does. Hong Kong’s economic rebound has continued into 2007 with solid growth across a broad spectrum of business. Politically, we have seen a smooth transition in Government with the re-election of the Chief Executive, Donald Tsang.

Brigadier Christopher Hammerbeck, Executive Director

Hong Kong remains a prominent international financial centre. It retains a very significant role in doing business with China and is still probably the major investor into China. Hong Kong is often viewed as being at the heart of the Pearl River Delta - an economic zone larger than Shanghai. However, I believe that Hong Kong is becoming more than this - it has become the business integrator for and with China.

stage - either as a listed enterprise or as a subsidiary of a major Chinese group. Hong Kong’s regulatory environment encourages corporate governance and transparency; it is these attributes that are being frequently sought. While China benefits from being in Hong Ko n g , businesses already here benefit as do those choosing to establish themselves in Hong Kong - a melting pot.

I see Hong Kong’s development continuing in other ways as a regional base for international companies establishing or growing their presence in Asia Pacific and not just for China. The advantages of Hong Kong are well known great communicatons, sound infrastructure, small government, level playing fields, appropriate regulation and, above all, rule of law. Hong Kong is a solid base from which to tackle Asia - not just for the larger multinational company but in particular for the smaller enterprise with more modest resources.

Hong Kong remains an important focus for trade with the United Kingdom. We believe that the UK Government will continue to attach increasing importance to Hong Kong; as I have explained Hong Kong is far more than the perception.

These benefits have not escaped the notice of China; Hong Kong is now seen increasingly as a place where Chinese businesses are establishing a presence and from where they are launching themselves onto the intrernational

The British Chamber of Commerce in Hong Kong is a strong Chamber with a robust membership (including members based outside Hong Kong); we actively represent members’ views to government (both Hong Kong and British Governments) and we are active in the wider community. The Chamber’s secretariat is well staffed with capable and energetic resources ready to support new members as well as helping members of longstanding. To sum up: Hong Kong - a great place to be and its ‘can do’ approach to doing business is quite unique.

Hong Ko n g ’s Chief Executive (the leader of the Government) is Donald Tsang. He was elected by the 800-strong election committee and appointed by the State Council of the People’s Government on 21st June 2005. Tsang replaced Tung Chee-hwa, who resigned from his post in March 2005, citing ill health. He had been Chief Executive since Hong Kong returned to Chinese sovereignty in 1997. Mr Tsang was elected to his current term in March 2007 and appointed in July 2007.

Welcome Remarks from the Hong Kong Trade Development Council For overseas firms looking to access opportunities in China, Hong Kong has the experience and institutional strengths to be an effective partner and risk manager. Its unrivalled advantages include the rule of law, strong anti-corruption legislation, free flow of information and robust IPR prote c t i o n . Hong Kong undertakes value-added aspects of production, distribution and trade, managing operations throughout the region. New areas of expertise include technology trading and transfer between overseas and mainland partners.

Lawrence Yipp, Regional Directo r, Western Europe

The Hong Kong Trade Development Council promotes Hong Kong’s two-way trade in goods and services with the world. Its Premier Connect service puts enquirers in touch with potential customers or suppliers from a database of over 100,000 Hong Kong companies. Online www.tdctrade.com carries exte n s i ve information about business developments in Hong Kong and the mainland. TDC trade fairs in Hong Kong offer a convenient and cost-effective way to access opportunities in China. Contact telephone: 020 7616 9500 or Email: London.office@tdc.org.hk

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INTRODUCTION

Welcome Message by the Chief Executive of Asia House in London Asia House is delighted to be contributing to this Market Essentials folder on Hong Kong.

Charlotte Pinder

Asia House is the premier pan-Asian organisation in the UK. Based in London, we are a non-profit, non-political organisation established in 1997 and are celebrating our 10th anniversary this year. Our focus is on fostering links with the Asian business, cultural and diplomatic communities, promoting in the UK a greater understanding of the rich and varied Asian cultures and economies. Our new headquarters building was opened in October 2005 and in our first year of operation we exe c u te d over 125 events for 30 Asian countries with audiences in excess of 35,000. Our definition of Asia stretches from Iran in the west to Japan in the east and from the central Asian republics in the north to Indonesia in the south. We act as a forum for the exchange of ideas and knowledge, providing a bridge for cultural and business links and promoting understanding of the increasing importance of Asian economies within the global system.

Our corporate programme offers our corporate members exclusive access to meetings with visiting Asian government and business leaders and experts on Asian affairs. Such meetings provide invaluable opportunities to learn at first hand about government policies and market conditions in Asia and to exchange views on mutual topics of interest. Asia House works in close association with the Hong Kong Economic and Trade Office, the Hong Kong Trade Development Council and UK Trade & Investment. We have recently been honoured by a visit from Madam Fu Ying, the Chinese Ambassador to the UK, where she met with senior UK business leaders over luncheon. This Market Essentials folder is an informative , accessible guide to the sectors, industries and commercial opportunities in this hugely important and exciting market.

The Hong Kong Stock Exchange is the fifth largest in the world, with a market capitalisation of about US$2.28 trillion as of August 2007. In 2006, the value of initial public offerings conducted in Hong Kong was second highest in the world after London.

Comment by the Deputy Chief Executive of International Financial Services, London International Financial Services, London (IFSL) is an organisation working at the heart of the UKbased financial services industry. Its primary task is the worldwide promotion of the services, expertise and skills provided by its members on the basis of their UK operations. Globalisation has resulted in increasing diversity and continuing evolution of financial markets. Keeping ahead of these developments is a major challenge. The focus of IFSL's promotional work is therefore continually reviewed and directed to those areas that provide the greatest business opportunities.

Patrick Lamb

IFSL plays a pivotal role in organising events both at home and abroad. Independent and cross-sectoral, but with close links to Government, IFSL can access and operate internationally at levels and with a collective authority that can be difficult for members to achieve individually. By harnessing the expertise of Government and firms in the financial services sector, IFSL can coordinate and focus the needs and resources of each. By opening direct channels to the most senior levels of Government in the UK and overseas, IFSL can help establish contact with key decision makers. In this way we have helped open markets and overcome regulatory and other barriers to trade, expanding markets to the mutual benefit of the industry and countries around the world.

Qualifications (ETQ), Carbon Trading and Islamic Finance. IFSL is closely involved with organising the Business Teams for the Lord Mayor's visits and we host meetings with official visitors and journalists from Hong Kong on a regular basis. Sir David Brewer is the Senior Consultant for Asia in IFSL and will be assisting in the preparations for Business-related visits throughout 2008.

This range of activity enables IFSL to demonstrate to government ministers, officials and those who work in the financial services industry from many countries around the world, the benefits they can derive from accessing the skills and expertise available in the UK, particularly in the area of PPP, Education, Training and

We are currently involved in a UK government-led initiative on financial services which is being undertaken in close partnership with UK Trade & Investment as well as the Corporation of the City of London. For any further information or assistance please email me at: p.lamb@ifsl.org.uk or give me a call on 020 7213 9121.

The UK is a leading international financial centre and IFSL's research and statistics team provide an informed and authoritative overview of the increasingly important role played by financial services and their value to the UK and the global economy. All IFSL reports are freely available on our website: www.ifsl.org.uk

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COUNTRY PROFILE

Introducing Hong Kong Until Hong Kong was ceded to the British in 1841 following the ‘Opium Wars’, Hong Kong island was a largely neglected corner of the Chinese empire, inhabited by farmers and fishermen. During the following century-and-a-half, the colony was transformed into a vibrant commercial centre. Initially based on its strengths in cost-effective manufacturing, by the latter part of the twentieth century Hong Kong’s dynamic economy was firmly based on services, finance and trade. In 1984, the British Government agreed to return the entire colony to China in 1997, when the lease on the New Territories north of Hong Kong island (leased to the UK in 1898) expired. Beijing duly took control of the region, officially renamed the Hong Kong Special Administrative Region (HKSAR), on 1st July 1997.

Under China’s policy of 'one country, two systems', Hong Kong enjoy s a high degree of auto n o my from the Mainland, with its own legal system, currency, customs and immigration authorities. Only national defence and foreign affairs are the responsibility of the central g overnment in Beijing. Its services-based economy is booming. It is a major corporate and banking centre, as well as a conduit for China's burgeoning exports. Its deepwater port is one of the world's busiest. It has the second largest stock market in Asia, is the eleventh largest trader in the world and the fourth largest source of foreign direct investment. Hong Kong is not only an attractive market in its own right - few regions are better placed to enable companies to tap into the enormous potential of the Chinese market.

Hong Ko n g ’s justice system is considered to be a model of fairness and consiste n c y. Inte r-jurisdictional legal proceedings are not uncommon, due to the positive perceptions among many Mainland Chinese of Hong Kong’s transparent judicial process.

Government and Politics The governing and legal systems of Hong Kong are set out in the Basic Law, the constitutional document of the HKSAR, which came into effect upon its establishment on July 1st, 1997. The Government is headed by a chief executive, chosen by an 800-strong electoral committee for a five-year term. The chief executive is advised on major policy decisions by an Executive Council, which comprises the Chief Secretary, Secretary for Finance and the Secretary for Justice and 15 non-official members (community, business, academia and party representatives), assist the Chief Executive in making major policy decisions and developing subsidiary legislation. Under the Basic Law, the ultimate aim is the election of the chief executive by universal suffrage. There is a two-tier system of representative government. An elected 60member Legislative Council enacts legislation, manages public expenditure and monitors the performance of the administration. It comprises 60 members, with 30 members returned by geographical constituencies through direct elections and 30 members returned by functional constituencies representing different sectors of the community (approximately 7% of the franchise). At a district level, 18 district councils advise on the implementation of policies in their respective areas. Hong Kong’s legal framework is based on the common law system of the UK, as opposed to the civil law system of China, with a judiciary which is independent of the government. It is responsible for the administration of justice and interprets the laws enacted by the legislature. Hong Kong Cultural Centre (Photographer: Roberto Vannucci)

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MARKET OPPORTUNITIES

Geography and Population Hong Kong lies to the east of the Pearl River Delta, on the opposite side of the estuary to Macau It shares a boundary with the Chinese province of Guangdong and is just south of the Tropic of Cancer and across the provincial border from the Chinese city of Shenzhen. The 425 square miles that comprise the HKSAR are made up of Hong Kong Island, including a number of adjacent islets, Kowloon and the New Territories, which consist of a section of the Mainland and 235 small islands. Between Hong Kong Island and Kowloon on the Mainland lies Victoria Harbour, Hong Kong’s principal natural asset.

Although Hong Kong Island itself is one of the most densely populated areas in the world, HKSAR as a whole has one of the world’s highest ratios of designated parkland. More than 70% of the total area is rural, including about 40% which is designated as protected country parks, with no development allowed. The population of Hong Kong is around seven million, of which 98% are Chinese. There are also around 500,000 foreign passport holders. The official languages are Chinese and English. All major signage is in English or is bilingual and most people speak English to a high standard, particularly in service industries. Cantonese is the most widely spoken Chinese dialect.

Hong Kong’s climate is subtropical. Spring and summer are hot and humid, with heavy rainfall from May to September. Autumn is sunny, with lower humidity, while colder spells are common in winter, when temperatures can sometimes fall below freezing. The typhoon season is from July to September.

Typhoons are relatively common in Hong Kong. When one is expected, radio and television stations broadcast typhoon bulletins with graded warnings of 1, 3 and 8 and sometimes 9 or 10, depending on its proximity and intensity. When the warning is grade 8 or above, businesses close.

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MARKET PROFILE

The Economy Hong Kong is the UK's 15th largest export market, worth approximately £4.3 billion in exports of goods and services in 2005. The UK in turn imported £6.7 billion worth of goods from Hong Kong. Import figures for services are unavailable. Surprising to many, given the manufacturing colossus just across the Chinese border, it is services - financial, insurance, legal and trade services, business support, logistics, travel and tourism – which dominate the Hong Kong economy. Very little manufacturing takes place within the territory’s borders. H ow e ver, over 70,000 Hong Kong manufacturers operate in the neighbouring Guangdong province, providing employment for over 11 million people. The research and development and buying for these companies is still conducted in Hong Kong. Recent years have seen a welcome return to form for the economy, hit by a slowdown between 2001 and 2002. By the end of 2005, the sluggish performance had been transformed into an economic growth rate of around 7.3%. The catalyst in the turnaround was the Closer Economic Partnership Arrangement (CEPA) with Beijing, a free trade pact signed in the summer of 2003, which removed many tariffs and liberalised i nvestment rules. It also authorised a significant relaxing of visa requirements on Mainland visitors to the territory. The resulting influx of

Mainland Chinese tourists provided a much needed boost to the economy. Further CEPA liberalisation measures were announced in June 2006. They cover ten services sectors: legal, construction, information technology, convention and exhibition, audiovisual, distribution, tourism, air transport, road transport and individually-owned stores. The measures, to be effective from 2007, are aimed at making it easier for Hong Kong businesses to operate on the Mainland, lowering the thresholds for them to set up business or provide services there. Hong Kong is a user-friendly and easy-to-access market for British companies: there are no barriers to market entry; English is widely spoken, particularly in business; English law is the foundation of the territory’s commercial contract law; and British or British-compatible standards are widely used in engineering and construction. A large and diverse network of British companies is already established in the market, representing a comprehensive and easily accessible network of support and services to new entrants. It is also an extremely easy place in which to get around and do business, occupying an area the size of Greater London.

According to the UNCTAD World Investment Report 2006, Hong Kong was the second largest recipient of inward FDI in Asia and the sixth in the world in 2005. Inflows to Hong Kong surged by 5.6% to US$35.9 billion.

The Hong Kong - United Kingdom Business Partnership The Hong Kong - United Kingdom Business Partnership was launched in October 2004. It was the result of an initiative agreed earlier in the year between Patricia Hewitt, the then Secretary of State for Trade and Industry and Peter Woo, Chairman of the Hong Kong Trade Development Council. The Partnership interlinks the services of UK Trade & Investment and the Hong Kong Trade Development Council to promote trade, investment and business co-operation and understanding between Hong Kong and the UK. It focuses on priority sectors, particularly at the level of small-tomedium-sized enterprises (SMEs). The Partnership also plays a role in helping UK SMEs to engage with the wider Mainland China market through Hong Kong. In 2005 and 2006, the Partnership focused primarily on fostering links in the creative industries and ICT sectors. In 2007 this has been extended to the environment and architecture/urban regeneration sectors. Visit www.tcdtrade.com/hk-uk for further details.

View over Hong Kong (Photographer: Tom Hirtreiter)

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MARKET OPPORTUNITIES

Creative Industries The UK is recognised as a global centre of excellence in creative industries. Historic ties mean that Hong Kong companies naturally look to the UK for best practice and expertise. Coupled with well-established trading links, widespread use and understanding of English and a legal system that is based on the English model, it puts British companies in a strong position to benefit from opportunities in the creative industries sector. Supporting the creative industries is a key policy for the Hong Kong Government, not just in terms of the local market, but also with a view to capitalising on the considerable opportunities presented by the liberalisation of the Mainland China market. The Pearl River Delta (PRD) and Guangdong province just across the boundary from Hong Kong is one of the world’s main manufacturing hubs. Manufacturing companies recognise the strength of Hong Kong’s creative industries, particularly the fusion of East and West and increasingly look to Hong Kong designers to support their product design and development. Additionally, the Closer Economic Partnership Arrangement (CEPA) g i ves creative industry companies in Hong Kong even stronger opportunities in the Mainland market. Many larger creative industries companies, such as in advertising and publishing, are also taking advantage of the beneficial arrangements under CEPA and are setting up wholly-owned subsidiaries on the Mainland. Central Plaza (Photographer: Norman Chan)

Hong Kong has been Asia’s premier advertising centre since the 1980s. The market has traditionally been dominated by multinational agencies offering one-stop-shop services. However, market saturation by the large agencies has led to a growing trend for boutique agencies specialising in particular market segments, such as a direct mail, branding and digital media.

Information and Communications Technology (ICT) In common with most other developed markets, opportunities in ICT in Hong Kong largely derive from the increasing technological fusion of telecoms, broadcasting, the internet and multimedia. Hong Kong is at the cutting edge of this new environment and is widely regarded as the region’s leading telecoms, broadcasting and internet hub. Asia in general is the world leader in numbers of mobile phone users. China (including Hong Kong), Japan and Korea dominate and five out of the top 15 economies for broadband internet penetration are in Asia. Asia also leads in mobile internet penetration and, in terms of penetration rates, competition and liberalised regulatory regimes, Hong Kong is ranked first overall. The fixed-line telecoms market was fully liberalised in January 2003, well ahead of many other countries in the region. There are no pre-set limits on the number of licences. The speed of liberalisation has been helped by the Government's open regulatory regime, which is pro-liberalisation, procompetition and pro-consumer. Competition is fierce, though, with no foreign ownership restrictions. There are nine fixed line operators, six mobile operators and four 3G operators all competing for a relatively small market. Nor is there any sign that competition is diminishing. Hong Kong has an excellent telecoms infrastructure, boasting almost 100% broadband network coverage. Due to its unique geography and demography, with an exceptionally high density of residential and business accommodation, the Government recognises that the key challenge is to maximise the capacity of the existing infrastructure. In addition, Hong Kong consumers are sophisticated, demanding and often fashion-led. This is continuing to drive growth in the use of mobile services for non-voice communications, based on innovative content and applications. (Photographer: Jun Young Lee)

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MARKET OPPORTUNITIES

Education and Training Education accounts for approximately one fifth of the Hong Kong Government’s annual budget, the largest single share of any policy area. A key element of its policy is to promote lifelong learning to enable Hong Kong to meet the needs of a knowledge-based economy. Hong Kong Chinese have always placed a great emphasis on the importance of education as a means to self-improvement. They see the three key issues as cost, quality of education and the benefits of a UK qualification over and above any other native English speaking country.

In particular, the Government is devoting considerable resources to the teaching of English in schools, in the workplace and in the wider community in order to maintain Hong Kong’s status as a cosmopolitan world-class city. There are a number of programmes intended to help raise the standards of English language education, such as the native English-speaking teacher scheme, the workplace English campaign and the Continuing Education Fund.

The Government has initiated a number of reforms, many of which offer major opportunities for UK suppliers in areas such as: • English teaching • UK academic qualifications • Distance learning packages • UK professional qualifications • Educational books and hardware • Educational software packages • Study in UK educational institutions (both short and long term) • Joint ventures in Hong Kong, such as on-line education • Collaborations between academic institutions • Alumni relationships

Hong Kong is one of the most densely populated places in the world, with 6,380 people per square kilometre. 98% of the seven million inhabitants are Chinese. The population is increasing steadily as a result of immigration from Mainland China and the Government forecasts that there will be 8.2 million people living in Hong Kong by 2011.

Healthcare Hong Kong has a dual system for healthcare in which services are provided by both the public and private sectors. Healthcare is dominated by the Hospital Authority (HA), a nong overnmental organisation which has a 90% market share. The remaining 10% is provided by the private sector. With around 85% of HA’s spending on salaries, funding for healthcare is under constant pressure. A growing elderly population places its own strains on public healthcare and care for the elderly and long-term care have become priorities. The Government and the HA are actively seeking assistance to spread the financial burden. This may be through PPP/PFI and outsourcing initiatives both in service provision and product procurement; by streamlining hospitals into hub-like arrangements; and through strategic purchases of capital equipment and innovative medical technologies. The Government is also looking at new proposals on healthcare insurance as it introduces charges for those that can pay. There is a long history of association between the Hong Kong and UK health sectors. Many of Hong Kong's medical practitioners are UK trained. The UK is seen as a leader in addressing and overcoming the sector’s challenges. In addition, Hong Kong practitioners are increasingly looking to expand their businesses into the Mainland market, with potential joint venture opportunities for UK companies. Traditional Chinese medicine (Photographer: Teresa Azevedo)

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MARKET OPPORTUNITIES

Environment This Hong Kong Government has stated its ambition to make Hong Kong “a green model in Asia”. The environmental market has grown steadily as a result of increased government expenditure on infrastructure and growing environmental consciousness among the community at large. The Government recognises that the business sector and the community are key stakeholders as much as they are partners in the protection and improvement of Hong Kong’s environment. The environmental lobby is increasingly influential. Stricter legislation demands that major projects be accompanied by environmental impact and sustainability assessments. Furthermore, increased public participation in the planning process has paved the way for greater scrutiny of projects in the early design stages. There are a number of major environmental projects planned for the next few years. These include: integrated waste management facility; waste recovering and recycling; renewable energy; the harbour area treatment scheme. Hong Kong has traditionally been open to international contractors and suppliers. Competition is very strong. However, the market is quite technically driven and open to good, competitively priced technical products. View of Hong Kong Island from Victoria Harbour (Photographer: Hugo De Wolf )

British standards have been used in the Hong Kong building and construction industry for decades. British exporters therefore, have a competitive edge over manufacturers from other countries. British products are perceived to be reliable and robust and users will often give preference, providing the products are competitively priced.

Construction Hong Kong’s large annual housing output, the large amount of infrastructure works being developed and the ease of entrance to the market make building and construction a significant area of opportunity for British companies. The structure of the building and construction industry is very similar to that of the UK. The key decision makers are clients, architects and engineering consultants, who play a lead role in specifying building and construction materials. Purchasing is largely done by the main contractors and their subcontractors. The large presence of UK engineering consultants and c o n t r a c tors, coupled with the fact that British standards are used extensively, further enhances opportunities for UK goods and services. The market went through a difficult two years between 2003 and 2005, due largely to a fall off in public sector expenditure in the sector and a lack of infrastructure projects. However, confidence has been rising over the past twelve months. The property market is still booming and there are a number of significant new infrastructure projects in the final stages of planning. Furthermore, even during the market downturn, the Hong Kong Housing Authority continued its annual production target of 20,000 units, ensuring consistent building maintenance opportunities. The environment is a top priority for Hong Kong’s Government. Property developers, both public and private, routinely incorporate intelligent and green features in their developments. Suppliers of environmentallyfriendly materials, efficient energy systems and components and energyefficient building management systems are highly sought after. As regional suppliers in these niche areas are scarce, there are clear opportunities for UK exporters.

Residential Flats in Hong Kong (Photographer: Pieter Janssen)

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MARKET OPPORTUNITIES

Professional and Business Services The migration of Hong Kong's low-end manufacturing across the boundary into Mainland China has opened up considerable opportunities for professional and business services.

In legal services, Hong Kong is Asia's most liberal jurisdiction in terms of permitting foreign lawyers to practise. Many international law firms have Hong Kong offices to serve clients in the wider region, although Mainland China remains the most important market for legal services exports.

As the Chinese market continues its phenomenal growth, Hong Kong, which has long been Asia's services capital, is perfectly placed to capitalise on its potential.

Hong Kong is the world's twelfth largest banking centre and the third largest in Asia. Of the worldâ&#x20AC;&#x2122;s largest 100 banks, 76 are in Hong Kong and 55% of its banking business is denominated in foreign currencies. It is the world's eighth most active stock market in terms of market capitalisation and it plays a crucial role in funding China's State-owned Enterprises (SOEs) and private enterprises' reform, as well as the massive infrastructure development programme.

Hong Kong has a strong legal system and its commercial framework operates according to accepted international standards. All the main international accounting firms already have a presence here - in some cases, their regional headquarters. The sheer size and growth of both the local and the wider Chinese m a r ket also means that smaller, local firms find it increasingly challenging to compete.

Venture capital is another strength. Hong Kong is responsible for managing 27% of the total regional venture capital pool. It also has the second most developed insurance market in the region, after Japan, and is the leading marine insurance centre in Asia

In October 2006, Alliance Trust plc, the largest general investment trust company on the London Stock Exchange, announced it was launching a new Hong Kong-based asset management business, focused on the Asia-Pacific region. The Trust believes Asia-Pacific will be a key driver in future world growth.

Water The Hong Kong Government has made improved water and wastewater management one of its priorities. It plans to spend HK$20 billion (ÂŁ1.5 billion) over the next ten to fifteen years on sewage treatment and improvement schemes and water mains rehabilitation. One of the main projects is the Harbour Area Treatment Scheme (HATS), aimed at enhancing the water quality and environment of the harbour area. Stage one of the project is complete. Stage two, split into two phases, began at the end of 2005 and is scheduled to be completed by 2014. Apart from the HATS, there are plans to upgrade several existing treatment works and a renewal programme of existing water treatment works. The Government has also commenced a HK$10 billion asset renewal programme on the water mains system, to be completed within 10 to 15 years. There is healthy demand for water supply management expertise, including areas such as sustainable development, conservation, supply and distribution, service delivery, pricing, desalination technologies and effluent re-use. In addition, a joint working group has been established with the Government of Guangdong province to promote regional cooperation, including cooperation on the World Bank-supported Pearl Rive r remediation project. Victoria Harbour (Photographer: Linda & Colin McKie)

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MARKET OPPORTUNITIES

Leisure and Tourism As a major tourist destination, Hong Kong has many hotels, restaurants and attractions, presenting opportunities across a wide range of recreation and leisure services. All major international hotel chains are present, along with the flagship properties of many local and regional hotel groups. Hong Kong also has over 10,000 restaurants and numerous tourist attractions. Shopping is one of the most popular pastimes here and some shopping districts are open late into the night, seven days a week. One leisure sector in particular which has been thriving in recent years is the sports goods industry, not least due to Hong Kongâ&#x20AC;&#x2122;s proximity to Mainland China, one of Asia's premier sporting nations. Hong Kong companies export a diverse range of sports goods, including sports equipment and accessories, sports clothing and footwear. Many of these goods are made for international brand names under licence, although some large local manufacturers do export products under their own brands. A huge boost to the local tourism market is the new Walt Disney theme park and destination resort of Lantau Island. Two years in construction, the park opened in September 2005. Hong Kong Disneyland is expected to bring huge benefits to the economy, not least of which are the HK$148 billion in net economic benefits over 40 years and the 3.4 million tourists it is expected to attract in the first year, rising to 7.3 million after 15 years.

Peninsula Hotel (Photographer: Norman Chan)

Hong Kong is the most popular city destination in Asia. The tourism industry employs more than 366,000 people, directly and indirectly, or around 11% of the total workforce. Over 50% of visitors are from Mainland China. Only 5% of visitors come from the UK..

Retail and Consumer Services Hong Kong's 20 million tourist arrivals each year and its location as the main gateway into (and out of) the Chinese Mainland, together with its close ties with the rest of South East Asia, make it an attractive and potentially rewarding centre for retail and consumer services. There is a wide range of business opportunities, from retailing and franchise operations to legal and financial services. Mainland China is poised to present further opportunities that companies with a presence in Hong Kong are well located to benefit from. Retailing is Hong Kong's second largest industry in terms of turnover and employee numbers, after the import and export trade. It is also the second largest in South East Asia, behind Japan, and the fifteenth largest in the world. Hong Kong's 55,000-plus retail outlets cover a range of different formats - department stores, warehouse-style hy p e r m a r kets, supermarkets, convenience stores, speciality shops, traditional independent shops and home shopping operations (including mail order). A rapidly growing sector is franchising. There are at least 110 franchise operations in Hong Kong, with around 2,000 outlets. The majority are local companies, but international players such as McDonalds, Body Shop and Benetton have a significant presence. The number of shopping centres has also increased markedly over the past five-to-ten years to service the growing populations of Hong Kong's new satellite towns.

(Photographer: Christine Gonsalves)

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MARKET OPPORTUNITIES

Food and Drink Hong Kong is a key international market for the UKâ&#x20AC;&#x2122;s food and drink sector. It has very little agricultural production of its own and relies on imports for most of its food and drink requirements.

Hong Kong is an international city. A high proportion of its population is well travelled and keen to experience new cuisine. Although Chinese cuisine is dominant, a wide variety of food from all over the world is available in both restaurants and supermarkets.

Inhabitants enjoy a high GDP per capita (approximately US$25,000 or ÂŁ13,000 - ahead of most European countries, Australia and Canada) and a high disposable income. Eating and drinking are considered to be important social activities and also play a key role in business, which has resulted in a highly developed retail and catering industry.

Traditionally, the majority of fresh seafood, meats and vegetables was bought from markets. However, supermarkets have made significant steps in increasing their market share, by offering fresh produce in cleaner more comfortable shopping environments.

Between January to October 2005, Hong Kong imported HK$45.9bn worth of food and live animals, an increase of 2% on 2004. The UK is currently the 19th largest exporter of food and live animals to Hong Kong, with a HK$588 million (1.3%) share of the total, up 1% from 2004. The main product categories of imports include meat and meat products, seafood, fruit and nuts, fruit juices and confectionery. Major products supplied from the UK include dairy and smoked products.

Frozen or chilled prepared meals are not popular among locals, who prefer fresh foods to cook from scratch. There is, however, a market for such convenience foods among the sizeable expat community. The market for organic produce is still very new. Further education is required to inform consumers of the benefits â&#x20AC;&#x201C; and justify the generally higher prices.

For alcoholic drinks, major product categories include wine, beer, whisky and spirits. Non-alcoholic drinks such as mineral water and soft drinks are also imported in significant quantities.

In 2006, Hong Kong International Airport was named the world's best for the fourth consecutive year by leading travel trade publisher TTG Asia. In September 2006, it announced plans for a second business hangar at the airport at a cost of HK$100 million. Scheduled to open in 2007, it will be large enough to accommodate large business aircraft, such as the Boeing 737-800 and Airbus Corporate Jet.

Clothing Footwear and Fashion Although Hong Kong has a good domestic supply of highquality fashion garments and brands, imported garments are very popular. Many international brands have operations here, especially from Italy, France, Germany and the USA. They are here not just for the local market, but also to tap into the rest of South East Asia. Many of these foreign companies run their own outlets, while others work through agents. Local fashion retailers adopt international trends as part of their collections and department stores and general retailers will pick up currently popular labels that perform well overseas. The UK is known well for its traditional, classic brands. Retailers present in Hong Kong include Alfred Dunhill, Burberry, Gieves and H aw kes, Daks and Marks and Spencer, which has the largest presence among UK retailers. Department stores and retailers also carry a number of UK designers, ranging from street fashion to high fashion. Teenagers and young people have high spending power and are very brand conscious, which means that distributors and retailers are always looking for contemporary, high-value concepts.

Embroidered Chinese Shoes

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Specialist Publisher of Business Information Guides Covering Key British Export Markets For Further information please contact: Chris Burke, Managing Director InterTrade Media Limited, Ashbourne House 334 Wellington Road North, Stockport, Cheshire, SK4 5DA, England, UK Tel: + 44 (0) 161 282 4520 Fax: + 44 (0) 161 282 4522 Email: chris.burke@intertrademedia.com

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VISITING

Travel Essentials Visitors must be in possession of a valid passport to enter Hong Kong. It should have at least six months remaining validity. Although Hong Kong is now part of the People's Republic of China, its Special Administrative Region status means it has its own immigration controls. While all visitors to Mainland China should obtain a visa before travelling, visitors to Hong Kong can stay up to six months without a visa. But any British citizen wishing to take up employment must obtain an appropriate visa before arrival. Visa holders are usually permitted to stay in Hong Kong for one year initially. Appropriate visa extensions are generally allowed for two to three years. Upon completion of seven years' residence, visa holders can apply for unconditional stay. Visitors wishing to enter Mainland China from Hong Kong need to apply for a Chinese visa. This can be done in Hong Kong or before departure from the UK. Those entering Hong Kong via Mainland China and leaving again via the Mainland will need a double or multiple entry visa for China. Note: Visa requirements can change at short notice. It is always advisable to check with the relevant authorities before leaving the UK.

(Photographer: Christine Gonsalves)

Hong Kong was the largest source of outward foreign direct investment (FDI) among Asian economies in 2004 and the seventh largest in the world. It was the largest investor in the Chinese Mainland and was among the leading investors in Indonesia, Taiwan, Thailand, Vietnam and the Philippines.

Business Etiquette Business cards play an important part in Hong Kong life, in social as well as business environments. Cards should be offered and received with both hands. It is not usually necessary for cards to have a Chinese translation, unless travelling to other parts of China. Business attire for men tends to be conventional dark suits, although during the summer lightweight suits are often worn, but still in dark colours. Modes of address: In Hong Kong, the family name comes first. Thus, Chung Min Wong would be addressed in English as Mr Chung. In written form, some Chinese have adopted a European style, e.g. Mr MW Chung. Western first names are common, but the full name in Chinese is often retained.

(Photographer: Marcelmooij)

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KEY FACTS

Official name: Hong Kong Special Administrative Region (HKSAR).

Climate: Tropical monsoon. Cool and humid in winter, hot and rainy from spring throughout the summer, warm and sunny in the autumn.

Area: 425 square miles (1,103 square kilometres). Internet suffix: .hk Capital city: Hong Kong. Time zone: GMT +8 hours. Head of state: Hu Jintao (President of the People’s Republic of China).

GDP (2006): US$188.7 billion.

Head of Government: Chief Executive, Donald Tsang.

GDP growth (2006 est): 6.9%.

Population: 6,980,412 (July 2007 est).

GDP per capita (2006): US$26,824 (at current market prices).

Population density: 6,380 people per km – one of the highest in the world.

GDP composition by sector: Agriculture – 0.1%, industry – 11.4%, services – 88.5%.

Ethnic groups: 95% of the population is of Chinese descent.

Major trade partners: China (Mainland), USA, EU (Germany, UK, Italy), Japan, Taiwan, Singapore, Republic of Korea.

Language: Chinese and English are the official languages. English is often used in commerce, banking and international trade. Cantonese, a southern Chinese dialect, is the mother tongue of most of the population. Mandarin (or Putonghua) the official dialect of Mainland China - is widely understood and is becoming more popular. Telephone dialling code from UK: 00 852. Currency: Hong Kong Dollar. Exchange rate: £1 = HK$15.7 (October 2007). The Hong Kong Dollar is pegged to the US Dollar at the rate of HK$7.81 to US$1.

Major goods exports: Garments, electronic products, chemical products, jewellery, textiles and printed matter. Major goods imports: Electrical machinery and appliances, telecommunications and sound recording and reproducing equipment, office machines and automated data processing machines, garments. A large share is re-exported. Major services exports: Merchanting and other trade-related services, transportation services, travel services, financial and insurance services.

Weights and measures: While imperial and local Chinese weights and measures are sometimes used, the Government uses and encourages the use of the metric system.

Big Buddha, Lantau Island (Photographer: Luisa Fernanda)

Government

INTRODUCTION

USEFUL CONTACTS

HONG KONG TOURISM BOARD 6 Grafton Street London W1S 4EQ Contact: Kevin Welch, European Regional Director Tel: 020 7533 7100 Fax: 020 7533 7119 Email: lonwwo@hktb.com Web: www.discoverhongkong.com

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

ASIA HOUSE 63 New Cavendish Street London W19 7LP Contact: Charlotte Pinder, Chief Executive Tel: 020 7307 5454 Fax: 020 7507 5459 Email: enquiries@asiahouse.co.uk Web: www.asiahouse.org

HONG KONG TRADE DEVELOPMENT COUNCIL 16 Upper Grosvenor Street London W1K 7PL Contact: David Marsden Tel: 020 7616 9500 Email: london.office@tdc.org.hk Web: uk.tdctrade.com

Photos courtesy of: Dreamstime.com

Hong Kong

SECOND EDITION

Hong Kong