When the Chinese mainland began opening up to the world at the start of its reform and opening-up policy 40 years ago, Hong Kong-based companies in turn started playing a vital role in helping shape the economic landscape of the country.
“It’s lucky for me to have witnessed the process of the mainland’s opening-up over the past four decades,” said Zen Wei Peu, co-chairman and executive director of Hong Kong-based Road King Infrastructure.
The opening-up of the mainland has created huge opportunities that were not available beforehand to Hong Kong enterprises, Zen told the Global Times on Friday.
“Our parent company Wai Kee Holdings started its quarry business on the mainland in 1984… After Road King was set up in 1992, we began operating highways on the mainland, and in 2004, we entered the domestic property market,” Zen said.
“Before 1984, all of our business was based in Hong Kong,” Zen said.
But Zen’s business focus has gradually been shifting to the mainland over the past years and the revenue of his company’s property business reached more than 20 billion yuan ($3.13 billion) in the mainland market in 2017, while that sector in Hong Kong earned less than HK$7 billion ($900 million) during the same period.
Road King is one of many examples showing that more and more Hong Kong companies are pursuing business ventures on the mainland thanks to opportunities brought about by the opening-up policy, rising domestic market demand and relatively cheap labor costs.
Huge changes
Hong Kong enterprises have largely helped the mainland in advancing international trade and the manufacturing industry over the past 40 years, said Nicholas Kwan, director of research for the Hong Kong Trade Development Council.
With changes in the country’s development needs, Hong Kong firms are now more expected to share experience with mainland companies to further enhance the advanced manufacturing and services sectors as well as to help them understand how to protect intellectual property, Kwan told the Global Times.
In the early years of the mainland’s opening-up, Hong Kong companies were among the first batch of overseas investors to enter the mainland market, bringing capital, technology and global ties with them.
Enterprises from Hong Kong also transferred their manufacturing businesses to the mainland, mainly in cities of neighboring Guangdong Province, including Shenzhen, Dongguan and Guangzhou.
“During the early years of the mainland’s opening-up, when Road King entered the market to operate highways in cities like [Guangdong’s] Zhuhai, there were few business regulations and rules,” Zen said, adding that in the following years, laws and rules gradually rolled out to regulate issues such as environmental protection and business security.
“The building-up of market regulations is one of the improvements that impressed me the most in the domestic business environment during the last four decades,” Zen said.
Helmuth Hennig, managing director of Hong Kong-based Jebsen Group, found that the biggest single change that occurred over the past 40 years was in the retail landscape.
Founded in 1895, Jebsen is a privately held marketing, distribution and investment organization in China.
“After China joined the WTO in 2003, the market further opened and the ability of Chinese consumers to buy overseas brands grew,” Hennig told the Global Times on Friday.
The booming development of the internet on the mainland also triggered a steady flood of information, which has continued to this day. These events, combined with a growing middle class and Chinese elite as a result of China’s rising economy, have changed the global face of retail, Hennig noted.
“Another area I would like to highlight is in the investment industry,” he said. “As China has changed, we too have adapted our business model to reflect these changes.”
Continuous contribution
“Foreign-funded firms in Hong Kong are able to contribute through continuously participating in the opening-up, as Hong Kong has a unique combination of advantages to partner with investors, intermediaries and project owners worldwide,” Hennig said.
Zen also noted that Hong Kong firms have some well-known advantages such as good compliance of law and regulations, which sets an example for mainland firms to better conduct business with other foreign investors.
But Hong Kong companies are now also facing some challenges as their technology is lagging behind that of some mainland firms, Zen said, noting that companies from Hong Kong are expected to tie up with mainland companies and make joint efforts to explore new opportunities along the China-proposed Belt and Road initiative routes.
Opportunities & challenges
The business environment on the mainland has largely benefited from the opening-up policy as the country has shifted to marketization and globalization from its previous planning nature, according to Kwan.
Before the Chinese government adopted the reform and opening-up policy, the domestic market was less attractive to foreign investors because most businesses were State-owned and they could only participate in investment via global planning, Kwan said.
But over the past 40 years, the mainland market, especially in sectors such as light manufacturing and some consumer industries, has largely been keeping up with international markets, according to Kwan.
Hong Kong has been serving as a springboard for many global firms that wish to invest on the mainland, he noted.
The Chinese government in April vowed to further open up the country’s market to foreign investors.
“In previous years, the opening-up of the mainland mainly focused on investors from developed countries such as the US and those in Europe,” Kwan said.
But developing markets such as Southeast Asia, Africa and the Middle East also have large investment potential and are expected to form closer ties with the Chinese market in the future, he noted.
The director also pointed out that the country’s opening-up is still facing some challenges in the global markets. For example, the trend of deglobalizaion, which rose after the outbreak of the global financial crisis in 2008 and after the emergence of trade protectionism in recent years in markets like the US and Europe.
Such barriers in the global markets may pose a negative impact on China’s opening-up in the next five or 10 years because that’s what happens “when you plan to open the door while others try to close theirs,” the director said.
But China’s position has changed over the past 40 years, as the country can both attract capital from foreign investors while also making investments across the globe, which is important for a country’s economic growth in the changing international business environment, said Kwan.
—— Article excerpt from《Global Times》