HK companies eye mainland market

▶ As consumer base expands, business becomes more lucrative

Hong Kong- based companies are increasingly looking at the Chinese mainland market amid global trade headwinds in the post- virus world, as China’s policy to make the domestic market a mainstay in the coming years.

Hong Kong- based companies are increasingly looking at the Chinese mainland market amid global trade headwinds in the post- virus world, as China’s policy to make the domestic market a mainstay in the coming years.

Amid lackluster growth in demand in Western countries, the Hong Kong Special Administrative Region ( HKSAR) government organized a dozen Hong Kong companies to attend the 12th China Processing Trade Products Fair in Dongguan, South China’s Guangdong Province on Thursday.

With retail sales hitting a record high of 41.2 trillion yuan ($ 6.26 trillion) in 2019, the Chinese domestic market is expected to overtake the US consumer market, currently the world’s largest, according to the National Development and Reform Commission, China’s top economic planner.

The rising prominence of the Chinese domestic market has drawn attention from companies in the HKSAR, many of which are under pressure as Hong Kong’s economy was badly hit by the pandemic.

“In the past, we were so focused on export orders from Western markets that we did not pay much attention to the mainland market,” said McArthur Lü, a manager at Dongyu Clothing, a maker of swimsuits.

However, as the rise of ecommerce has largely put an end to the business model of placing large orders and given rise to more customized production and fragmented orders, the difference in profit margins between the domestic and overseas market is narrowing.

“A decade ago, we would receive a single order for 100,000 swimsuits. Nowadays, we make 200 different types of swimsuits to reach that figure,” Lü said. As consumption rises in the mainland, Dongyu Clothing is finding the domestic market to be nearly as lucrative as the Western market.

Lü’s company will sell 30 million yuan worth of goods this year, and although the Western market still accounts for 80 percent of its business, Lu said the growing importance of the domestic market has become very apparent.

Felix Huang, a manager at toy model carmaker Maisto, said that the company’s domestic business has been growing at a breakneck pace, expanding 50 percent annually in the past few years.

This is due to the Chinese mainland’s vast population, rising income levels and consumption demand, and evolving taste toward higher- quality goods, Huang said. “Entering the domestic market is not easy, as China is the maker of toys for the world, but with Generation- Z consumers becoming the driving force of consumption, we really see an opportunity coming,” Huang said.