External-oriented Development of Hong Kong and the Pearl River Delta

1. External-oriented Development of Hong Kong and the Pearl River Delta Mr Peter Leung Director, Hong Kong Economic and Trade Affairs, Guangdong

2. Introduction of GDETO Director • Trade Promotion Div. • Duties: Support HK businessmen with investments and operations in Guangdong • Admin. and Public Relations Div. • Duties：Assist HK businessmen to invest in Guangdong • Investment Promotion Div. • Duties: Attract Mainland enterprises to invest in HK

3. Guangdong Province (1) • Area: 180,000 sq. km. • Permanent population: 80 million (over 100 million if including the non-permanent population) • GDP: RMB 1,362.6 billion • Primary industry: 109.4 billion (8% of total) • Secondary industry：730.7 billion (54% of total) • Tertiary industry：522.5 billion (38% of total) (The above were statistics of 2003)

4. Guangdong Province (2) • 21 cities at prefectural level or above in the whole Province • Capital city: Guangzhou • Special Economic Zones: Shenzhen, Zhuhai, Shantou • Guangdong is not a single market; large differences in the development among various cities • Guangzhou’s GDP: 346.7 billion • Heyuan’s GDP: 13.7 billion (The above were statistics of 2003)

5. Comparison of Major Cities in PRD (1) (The above were statistics of 2003)

6. Comparison of Major Cities in PRD (2)

7. Comparison of Major Cities in PRD (3)

8. Comparison of Cities Outside the PRD (The above were statistics of 2003)

9. Guangdong’s Advantages (1) • Advantage 1: Cost • Comparison of labour compensation in 2003 (US$/hour):

10. Guangdong’s Advantages (2) • Advantage 2: Industry Chain • Complete up-stream and down-stream industry chain • Example: Humen in Dongguan • Clothing industry • All necessary materials and accessories can be procured within half an hour 　 Production time shortened, overall competitiveness increased

11. Guangdong’s Advantages (3) • Advantage 3: Quality of semi-skilled workers on the rise • Experience accumulated since the opening up of the Mainland market more than 20 years ago • 20 million well-trained workers in the Province • Strengthen training in hi-tech areas to meet the needs of industry upgrade

12. Guangdong’s Advantages (4) • The largest advantage of Guangdong: Close to Hong Kong

13. Hong Kong’s Advantages (1) • Credibility • Rule of law, respect for contract • Institutionalisation • Well-established legal and professional systems, procedures and rules • Market-oriented • Market economy • Government does not participate in or interfere with market operations

14. Hong Kong’s Advantages (2) • International Financial Centre • Comprehensive financial system • Freedom in foreign exchange • Own currency • International Logistics Centre • Advanced logistics facilities • Robust growth in air and sea transport

15. Hong Kong’s Advantages (3) • Information Centre • Free flow of information • Internet hub one of the most Internet-savvy cities in the world • Trade Networks • More than half a decade’s experience in trade • Free trade

16. Complementary Advantages of Hong Kong and Guangdong • GDP per capita in PRD: ~US$ 5,000 • Services sector developing in Guangdong 　 Heading towards the comprehensive “well-to-do” (全面小康) stage • Strong complementarity between HK’s services sector and Guangdong’s manufacturing sector 　 Complementary advantages bring mutual benefits to each other

17. Europe America Asia Middle East Africa Oceania Major Markets of Guangdong & Hong Kong (1)

18. Major Markets of Guangdong & Hong Kong (2) • Around 70% of Guangdong’s products are exported to other places through Hong Kong  Guangdong & HK: External-oriented economy  Much similarity and room for cooperation

19. Major Problems Faced by Hong Kong Businessmen (1) • Problem 1: Do Hong Kong businessmen know well about the situation in the Mainland? • Status-quo and advantages of various places of Guangdong • Partners for cooperation in the Mainland • Modes of cooperation in the Mainland

20. Major Problems Faced by Hong Kong Businessmen (2) • HK businessmen have extensive international market networks, with clients spreading over Europe, US, Canada, South-east Asia, etc. • Problem 2: How to make better use of these networks and fully cooperate with Guangdong’s enterprises to increase the market shares together?

21. Major Problems Faced by Hong Kong Businessmen (3) • Guangdong’s services sector has been growing rapidly in recent years • HK’s services sector is also actively extending their businesses to the Mainland • Problem 3: How can HK’s services sector help their counterparts in the Mainland to develop? • Do they understand their target customers in the Mainland? • How to reduce the worries of their counterparts and to avoid causing barriers to cooperation?

22. Organised by the Trade Development Council (TDC), World SME Expo is a SME-focused exposition which serves as a one-stop platform for SMEs to access a full range of trade services, market knowledge and business advice provided by the TDC, the private as well as the public sectors. Date: 16 - 18 / 11 / 2004 (Tue - Thu) Venue: HK Convention and Exhibition Centre 22

23. Objectives: • To create a platform for companies and organisations to exhibit products and services to support the development of SMEs. • To provide a one-stop shop where SMEs can access a full range of useful services, attend informative seminars, participate in forums, and obtain market advice which addresses their unique business and marketing needs. • To establish a marketplace where SMEs can explore a bonanza of business opportunity and enter into co-operation with appropriate partners. • To develop World SME Expo into a trade platform for SMEs all over the world. • Attendance: • SMEs from different product and service sectors in Hong Kong and the region are expected to attend World SME Expo. They will include owners, directors, senior executives, marketing managers, financial controllers, entrepreneurs and new business start-up executives. In addition, local enterprises from mainland China and SMEs from around the world will also visit World SME Expo and conduct business discussions with Hong Kong SMEs. 23

24. Exposition: • The Exposition will feature a wide array of products and services targetting at SMEs, provided by all relevant trade and service sectors of the Hong Kong economy, including banks and finance companies, accounting firms, lawyers, professional services and training consultants, IT companies, industry and trade support organisations, government departments, associations, and many more. Mainland trade promotion organisations, mainland enterprises which provide support services for developing the China market, consulates, trade commissions, international chambers of commerce in Hong Kong, various Asian trade promotion organisations, world trade organisations and worldwide SME associations will also showcase their services that may facilitate partnership between SMEs in Hong Kong and their home countries. • Ten Thematic Pavilions: (i) China Opportunity; (ii) Global Business Connections; (iii) Industry Support; (iv) IT and E-Commerce; (v) Management and Marketing; (vi) SME Financing; (vii) Professional Services; (viii) Trade Services; (ix) Training and Information; (x) World Market Access 24

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28. Major Problems Faced by Hong Kong Businessmen (4) • An official of the National Development and Reform Commission once said: In the eyes of foreign enterprises, HK is a city of China; In the eyes of Mainland enterprises, HK is an international city; In the eyes of HK people, what kind of a city is HK?

29. Business Opportunities through CEPA • Legal services: • Mainland law firms can employ HK lawyers • (15) qualified HK lawyers to practise in the Mainland • HK residents can take legal qualification examinations in the Mainland • HK firms can set up representative offices and have joint operation (not partnership) with Mainland firms • Relax the minimum stay requirements (no restrictions in Guangzhou and Shenzhen)

30. Other Potential Opportunities • Clients: • Foreign firms • There are 76,000 HK firms in Guangdong • There are some 20,000 Taiwanese firms in Guangdong • There are some 10,000 foreign firms in Guangdong • Many foreign firms from Europe want to set up firms in HK for entering China

31. Other Potential Opportunities • Private local firms • The GDP of private enterprises is about 40% of the total GDP in the Province. • Many of them want to set up firms in HK. • There are already over 280 firms listed in the HK Stock Exchange. • Many are queuing up for their turn. • Foreign trade • Guangdong is the largest export and import centre for the Mainland, accounting for one-third of the total national foreign trade (about US$250 billion in 2003)

32. IP Professional Services • This is a growing sector by itself but is only at the very early stage. • The concept of Intellectual Property Rights is growing but violation to it is widespread. • We need to put efforts to cultivate our market.

33. Method of Cultivation (1) • Contacts/Promotion • Diversify our business into related legal field, e.g.: • Legal service for commercial contracts (foreign trade, merge & acquisition, trademarks registration, patent registration, etc.) • Arbitration – Use HK’s advantage as the arbitration centre between Mainland companies and their foreign counterparts

34. Method of Cultivation (2) • Joint efforts with other professionals, e.g.: • With bankers/accountants for listing • With HK designers – IP vs Design • With building services for infrastructural projects • With exhibition & conference organisers for product and trade promotion • Other examples as in the SME Exposition

35. We need to • Understand the needs of our clients • Let our clients know the benefits of our services to them • Coordinate with other services to provide more “one stop” services • Understand the global market and our own niches in the market • Build up stronger links with foreign partners to gear up our preparation for the international market

36. Thank You!