At a time when the government is driving for export growth, UK businesses should consider Hong Kong on its own merits as well as being a gateway to China. GrowthBusiness travels to the city to investigate.
At December’s UK-China Joint Economic Trade Commission, discussions focused on how British companies can be part of huge building projects in China such as Beijing’s planned new international airport and the construction of ports on the Chinese coast.
The talks, chaired by business secretary Vince Cable, illustrated the coalition government’s enthusiasm for UK enterprises to engage in international trade in order to kick-start the economy. China is already worth some £7 billion to Britain as an export market, its ninth largest worldwide – and Cable believes that it has even greater potential. But for firms new to developing business relationships in China and wider Asia, the most straightforward point of entry is likely to be Hong Kong.
David Marsden, director of UK, Benelux and Ireland for the Hong Kong Trade Development Council, says, ‘Hong Kong is certainly the easier way of gaining access to mainland markets, because of the use of English and British common law. The regulatory framework is recognisable too. If you wanted to register your brand or company in Hong Kong, you can do it easily in 48 hours online and it won’t cost more than in the UK.’
It is a city on the move, home to a host of large construction projects such as the development of the West Kowloon cultural district. Overseen by British architect Lord Foster, this is expected to create opportunities for British business in architectural and property services, as well as in construction.
However, there is an abundance of opportunities for UK companies aside from infrastructure projects. Exports to Hong Kong from Britain totalled around £3.3 billion in 2010, making it Britain’s second-largest export market in Asia after mainland China. The strongest sectors for UK exports to the city are aero, auto and marine engines, with a value of £454 million from January to September 2011, telecoms equipment (£387 million), fine wines and alcohol (£127 million), and art and antiques (£80 million).
Nick Hansen, managing director of IP phone systems retailer OneSource, has been exporting to Hong Kong for almost five years, with sales to the city now accounting for almost 15 per cent of his business.
He says, ‘It’s a very vibrant market; there’s always something going on and it’s a great doorway into China.’ However, he advises business managers to be wary of cultural differences. ‘You need good local advice to kick off, and to make sure you don’t get lost in the local culture of politeness, where the locals seem to agree with you on everything but actually aren’t interested,’ he adds.
Hansen’s sister company, OneSource Trading, which exports English beers and snacks, is a good example of how selling to Hong Kong can open up doors in China. He says, ‘The resurgence of British ales has hit a note in Hong Kong. The city attracts around 30 million visitors a year from mainland China who are exposed to many more Western goods. We’ve found those from the mainland take the products back with them into the market, which has led to enquiries about distribution possibilities. China is a gigantic market that is hungry for consumer goods.’
Moving up the value chain
Innovation consultancy Excalibur UK started research on doing business in Asia in 2006. ‘You hear a lot about how quickly China is expanding and that there are opportunities for Western companies there,’ says director John O’Connor. He agrees with Hansen that Hong Kong is a natural gateway to China, adding that ‘it’s a fairly welcoming place for Brits’.
O’Connor says that his business, which helps companies develop new products and services, has thrived in Hong Kong since setting up there in 2007. He adds, ‘The Chinese are now looking to move up the value chain from being manufacturing-focused to developing their own products, and we’re well placed to take advantage of that.’
Other consultancy businesses from the UK consider Hong Kong to be fertile ground. Paula Grizzard is managing director of The Back To Work Company, which advises mainly public sector organisations in the UK and has been exploring opportunities to extend its business into Hong Kong.
‘What we saw was a thirst for learning about how Westerners do business,’ she relates. ‘We were discussing organisational change in the petrochemical industry and they were keen to know about how we do it in England.’
O’Connor confirms, ‘There’s still very much a UK brand in Hong Kong; locals still associate the UK with a level of excellence.’
Hong Kong – The obvious choice
For companies wishing to set up a base in Asia, Hong Kong is the most logical place to start. Christopher Watson, MD of window insulation company Inflector, moved to the city in 1998 and, after three years working for someone else, started his own business. He says that the proximity to China means that factory visits and audits can be done in a day. Also, he cites the fact that there is no capital gains tax or VAT as a significant help.
Watson feels that Hong Kong has more of a work- and business-orientated culture than the UK. ‘In my opinion, in the UK a lot of people get something for nothing – there is no incentive to work. In Hong Kong, everyone wants to work. It’s a culture thing, but also a necessity; over here, no-one gets handed money for nothing.’
This ravenous desire for success contributes to the belief that China is set to take over the world, making some feel that now is the time to look for opportunities. Chris Stott, managing director of stationery supplier Pukka Pads, which has a trading office in Hong Kong, says that the Chinese will eventually look to buy up top companies in Europe in their ‘massive spending spree’.
He says, ‘The richest people in the world are in China now and they are all willing to spend their cash. So if you want to grow and if you want to sell your business, you need to be there to be noticed. They love brands – so if you have a good one then you need to be in China.’
Grizzard agrees. She says, ‘A lot of people I talk to back home are looking for new markets. We have to consider where we can bring something new to global markets, and Hong Kong and the Far East is where it’s at.’