Mainland boosts HK's stature

Two constants, he says, are Hong Kong's vibrancy and capacity for change.

"I love the fact that it seems to be continually reinventing itself. It is very skillful at identifying new opportunities and adapting its businesses to new potential," says Galpin, who moved to Hong Kong in 1995, two years before the central government officially took control and reclassified it as a special administrative region under the "one country, two systems" policy.

Of course, there have been notable changes. Galpin says Mandarin, or Putonghua, is now used much more widely in the Cantonese-speaking bastion, and Western companies that come to do business in Hong Kong have gotten "younger and smaller".

Galpin is the head of investment promotion at InvestHK, part of the special administrative region's government. Since 2000, the agency has been responsible for helping foreign and Chinese mainland companies set up operations in the city of 7 million people.

Hong Kong's stature as a global financial hub has been boosted in recent years. The World Economic Forum, a Swiss organization, put the region atop its 2011 index of financial market development, the first time an Asian locale finished No 1 in the survey's four-year history. Hong Kong moved up from fourth place the previous year to overtake the United States and Britain, according to the WEF, "bolstered by strong scores in non-banking financial services such as IPO activity and insurance".

In March of this year, the region was named "the best place to do business" based on a survey of 160 markets around the world by Bloomberg News. Hong Kong's top score of 49 out of 100 (the Netherlands finished second with 48.1) was based on six factors including costs of setting up business, hiring and moving goods and degree of economic integration. For the 18th straight year, Hong Kong was found to have the world's freest economy, according to the 2012 Index of Economic Freedom published by the Heritage Foundation, a think tank in Washington, and the Wall Street Journal.

"One country, two systems" is the model that has allowed Hong Kong to maintain the financial autonomy it enjoyed under British colonial rule, but the policy also has helped open fresh business opportunities, Galpin says.

Hong Kong has long been the "gateway to China" for companies seeking access to the mainland market. But as China's economy continues to grow, the region is increasingly a launch pad for mainland companies aiming to operate abroad.

"Some of these Chinese companies want to use their Hong Kong subsidiaries to make acquisitions around the world," the investment official says. "We are seeing a growing number of law firms, accounting firms and service providers who come to Hong Kong to assist these Chinese mainland companies in their global aspirations."

At the same time, the "one country, two systems" principle has led to closer economic cooperation between Hong Kong and the Chinese mainland. In 2004, for example, State-owned Industrial and Commercial Bank of China acquired the Hong Kong banking subsidiary of Dutch-Belgian financial services firm Fortis NV.

Hong Kong is also becoming more international, largely due to "China becoming so much more important", Galpin says.

According to Invest Hong Kong, the region is becoming a favorite place for big corporations to establish global operations. In the past, Hong Kong was favored more as an Asia-Pacific regional base.

US-based General Electric Co, which does business in more than 100 countries, late last year began moving its Global Growth and Operations unit to Hong Kong's central business district. From there, John Rice, CEO of the unit and vice-chairman of its US-based parent, manages 12 regions including Europe, Canada, Latin America and China.

Japan's Nissan Motor Co announced in November 2011 that it would relocate the global headquarters of its luxury-car brand, Infiniti, to Hong Kong.

"We see a lot of potential in the Hong Kong market," says Takeshi Nakajima, head of global planning for Infiniti. "The city has a wide talent pool, an international and open atmosphere, and is also a major hub for the global economy. Its proximity to the mainland and the ASEAN region make it the ideal location to capture the growing market in these areas."

With China's GDP growing at as much as 9 percent a year, businesses opportunities from the mainland have clearly benefited Hong Kong. Of the 303 companies Invest Hong Kong assisted in setting up shop last year, 20 percent were Chinese. While the mainland is the region's biggest investor, the US and Britain accounted for 39 companies that began operating in Hong Kong in 2011.

In 2009, Suning Appliance Co, China's leading retailer of electrical appliances, established a presence in Hong Kong through a HK$215 million ($27 million, 22.16 million euros) takeover of Citicall, a digital-electronics retailer.

"Hong Kong is a vital platform for Chinese companies to expand overseas," Sun Weimin, president of Suning, told the South Metropolis Daily. "It is an attractive market to Suning."

He says the region's retail market for appliances is estimated at HK$25 billion, which is on par with the biggest mainland cities - Beijing, Guangzhou and Shanghai. Suning plans to open 50 stores in Hong Kong in 2013.

Visitors from the mainland spell business for Hong Kong retailers. The region's retail sales jumped 25 percent in 2011 from a year ago, driven by mainland visitors' consumption of luxury and retail goods, according to Bloomberg News.

As Galpin sees it, Hong Kong is poised to be the undisputed business capital of Asia. "The fact that Hong Kong is part of China and because China is such an important economy have helped Hong Kong's development," he says.

atung@chinadailyusa.com

(China Daily 06/29/2012 page12)