Surviving commercial challenges in the PRD

Eddy Li writes that HK companies need to take advantage of the city’s strategic position by exploring opportunities in mainland free trade zones, B&R, e-commerce, as well as available development funds

The SAR government has recently started its sixmonth public consultation on “Hong Kong 2030+: Towards a Planning Vision and Strategy Transcending 2030”, which is an extensive planning blueprint on how the city could provide a more “livable, workable and enjoyable” environment in the face of a huge challenge posed by a growing population. In this planning proposal, the future strategic position of Hong Kong is mentioned, which will develop a “three-hour living circle and one-hour intercity traffic circle within the Greater Pearl River Delta (PRD)” by 2030.

This is undoubtedly good news for Hong Kong businessmen who invest in the PRD. But as exciting as it sounds, Hong Kong investors in the PRD today are facing challenges that are severer than ever. On one hand, the Hong Kong dollar which is pegged to the US dollar has stayed at a high level of exchange rate; the renminbi, despite its depreciation against the US dollar, hasn’t actually lost much of its value because other major currencies (such as the Japanese yen, the euro and the British pound) are devaluing at faster rates. On the other hand, the labor cost on the mainland is growing rapidly, with the government putting the implementation of “five insurances (endowment, medical, unemployment, employment injury, and maternity) and housing fund” in place.

So how can the Hong Kong-funded companies in the PRD area survive the challenges to enjoy the vision of 2030?

The first practical and feasible tactic is to utilize the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) set up by the Hong Kong SAR in accordance with the national 12th Five-Year Plan (201115). The BUD Fund is aimed at providing funding support to assist Hong Kong enterprises in exploring and developing the mainland market by developing strong brands, upgrading and restructuring operations, and promoting domestic sales on the mainland. This aim indicates that any Hong Kong investors in the PRD area can apply for this fund; what’s more, up to April this year, only about 30 percent of the HK$1 billion BUD Fund has been successfully taken up, which means it is still very much available. Companies can use the money provided by the fund to improve their competitiveness.

Second, companies owned by Hong Kong investors in the PRD should pay attention to the rising trend of e-commerce. Nowadays, shopping is a behavior that’s no longer restricted to shopping in person. Actually, the popularity of online shopping is surpassing that of traditional purchasing; online shopping is now an indispensable part of people’s daily life. Electronic commerce has not only changed people’s lifestyle, but also

Only about 30 percent of the HK$1 billion BUD Fund has been successfully taken up, which means it is still very much available. Companies can use the money provided by the fund to improve their competitiveness.”

reduced the cost of business operation greatly. The use of e-check, e-signature and e-shop can, to a great extent, cut down the cost of business operation in many industries.

If the business environment is truly damaging the profits of Hong Kong enterprises in the PRD, businessmen can always choose to tap other emerging markets. Benefiting from the Belt and Road Initiative, there are more potential markets for us to explore and develop, such as the Southeast Asian markets along the 21st-Century Maritime Silk Road and the Central Asian countries along the Silk Road Economic Belt. With lower labor costs there and supportive policies and matching logistics facilities provided by the central government, there definitely will be satisfying solutions for us.

As mentioned in “Hong Kong 2030+”, the three pilot free trade zones in Guangdong — Nansha, Qianhai and Hengqin — will be easily accessible in the future. Hong Kong companies which want to stay in the PRD area can find a way to get into these free trade zones; they will enjoy greater advantages there than most of the firms operating outside. At the moment, these Guangdong free trade zones are acting somehow as competitors to Hong Kong internationally and regionally. As a Chinese People’s Political Consultative Conference member, I submitted a proposal this year suggesting that Hong Kong and the Guangdong free trade zones should maintain healthy competition, which facilitates in-depth cooperation. This requires that the free trade zones should understand the role of Hong Kong, so as to cooperate and coordinate with us to build a world-class economic region. If Hong Kong companies in Guangdong can enter the zones, the prospects for the whole region will be more promising.