Growth potential unlocked for European firms in HK
Hong Kong has become a magnet for overseas enterprises eyeing a stake in the Greater Bay Area
Editor’s note:
The establishment of the Hong Kong Special Administrative Region 25 years ago has unlocked a treasure trove of “remarkable growth stories” for both the special administrative region and the Chinese mainland, says Frederik Gollob, chairman of the European Chamber of Commerce (EuroCham) in Hong Kong.
These stories are extraordinarily gripping, narrating how the HKSAR has retained what Gollob calls its “very unique footprint, vibes and infrastructure”. It’s a feather in the city’s cap and has lured international companies to Hong Kong to explore and expand their presence in Asia. The tales also tell of the mainland’s further opening-up to the world, including to international companies, says Gollob.
Currently, there are more than 2,000 European companies operating in Hong Kong with either their regional headquarters or offices, or just a local office, in the city and their parent companies based in Europe.
It’s indisputable that Hong Kong has a wealth of allure in its own right, drawing foreign companies to the city to establish their Asian presence, he says. As a renowned international financial center, Hong Kong boasts a simple tax regime and a low tax rate, free flow of capital, a robust legal system, an array of financial products and a pool of talents in all disciplines, all of which have set an optimal tone for doing business. But Hong Kong’s unique and prominent position is only amplified by the mainland, where rapid development in the past decades has stunned the world.
The mainland’s economic muscle and its gigantic market have constantly tempted overseas companies and investors to set up shop
there. However, the discrepancies in regulations, laws and practices on the mainland could deter some businesses from entering the market, warns Gollob. Fortunately, Hong Kong is an entry point for overseas enterprises to access the mainland, reconciling the regulatory and cultural differences that could derail business collaboration and restrict business services, he says.
“Obviously, for many countries, Hong Kong is the gateway to the mainland. I would say, for a large proportion of European companies operating in Hong Kong, the ability to do business with the mainland is one of their overriding benefits.”
Lure of GBA
Since the Guangdong-Hong Kong-Macao Greater Bay Area development plan was unveiled, the EuroCham has focused greater attention on the region, adding the promotion of commercial, industrial, economic and financial exchanges among Europe, Hong Kong and other cities in the Greater Bay Area to its agenda. “To European countries, the Greater Bay Area is a very compelling concept and also a very important target market for offering our services and products from a Hong Kong perspective. We’re very eager to explore the potential of the Greater Bay Area,” says Gollob.
There are certain areas that European companies find particularly attractive, including financial services, insurance services, technology products and innovation on sustainability, he says.
Environment-friendly innovations and applications create not only another common ground, but also more synergies for European countries and the Greater Bay Area, as well as the mainland, as a whole.
For example,
Dutch companies, spotting the huge demand for new energy, as well as the zealous research and development activities on green innovations in China, have cooperated closely with China in new and clean energy, Gollob explains.
For that reason, coupled with having critical ports in Europe, the Netherlands has also become one of Hong Kong’s top three trading partners. The other major partners — Germany and France — are Europe’s two largest economies and markets that supply plenty of goods and services to Hong Kong and, through Hong Kong, to the mainland — primarily industrial goods, cars and financial services.
“Sustainable technology is also something the European Union and European companies have set very high goals for themselves. This, I think, will also benefit Chinese customers overall,” says Gollob.
“And, the interesting thing is there are a lot of similarities between Europe and mainland when it comes to developing not only wind and solar energy, but also the hydrogen economy. So, I do foresee growing trade relations and opportunities as hydrogen will become a major source of energy with all the related applications.”
According to HKSAR government data, the merchandise trade between Hong Kong and the European Union in 2020 fell to 54 billion euros ($58.08 billion) — 12 percent lower than in 2019. But bilateral trade picked up by 24 percent as of last year to 67 billion euros, Gollob says.
The resilience and dynamism that Hong Kong-EU trade has exhibited is substantially attributed to the keen demand from the mainland market, says Gollob. The market was still going strong amid the crippling pandemic last year, so was the European market. Since Hong Kong has long been serving as an entrepot for merchandise trade between the mainland and Europe, the eager demand from both the mainland and Europe has led to bustling trade in the SAR, he says.
Future links
The mainland’s ever-growing demand for goods and services has acted as a security blanket or buffer for Hong Kong, softening the crippling blow from COVID-19 that has disrupted the SAR’s supply chain. The mainland’s role in sustaining and beefing up trade exchanges between Hong Kong and Europe can’t be overlooked. “The Chinese mainland is one of the world’s biggest markets and, therefore, very appealing to European companies. The entire mainland and the Greater Bay Area have made Hong Kong an attractive place to do business,” says Gollob. But the pandemic has hindered collaboration between China and European companies.
The EuroCham and the HKSAR government are still trying to “get the right policies and regulations in place” to allow European companies to practically and maximally exploit the Greater Bay Area’s potential, says Gollob. The ease of transportation and preferential policies supporting regular commutes between Hong Kong and other cities in the Greater Bay Area, and favorable policies concerning business and income taxation, are a step forward, allowing European companies to become fully engaged in the Greater Bay Area market.
As for future links in merchandise trade and investment, as well as commercial and business collaboration between Europe and Hong Kong, Gollob is positive about a long-term partnership and trade relationship. European companies generally adopt an upbeat attitude when it comes to tapping the mainland market and the Greater Bay Area, in particular.
The caveat, however, is that a positive picture can only emerge if the most pressing issues created by the pandemic can be fixed. The continuing travel restrictions (which interrupt business trips and commutes between Hong Kong and the mainland), as well as a disrupted global supply chain, have generated a lot of uncertainties. We have to find an answer to the problem and retain confidence in Hong Kong and the mainland from a European and international investor’s perspective, Gollob reckons.
The EuroCham, he says, is obliged to “lubricate” conversations with the Hong Kong authorities and all stakeholders in Hong Kong, voice all the challenges that could deter European companies from doing business in Hong Kong and other Greater Bay Area cities, and proactively hammer out a solution through dialogue.
To European countries, the Greater Bay Area is a very compelling concept and also a very important target market for offering our services and products from a Hong Kong perspective. We’re very eager to explore the potential of the Greater Bay Area.” Frederik Gollob, chairman of the European Chamber of Commerce in Hong Kong