Phoenix TV News report on June 17, 2020
Guangdong TV Evening News report on June 19, 2020
To review the latest developments in Hong Kong-invested manufacturing industry in the Greater Bay Area, the Chinese Manufacturers’ Association of Hong Kong commissioned a research team of Prof. WEI Xiangdong and Dr. CHOW Man-kong at China Economic Research Programme of Lingnan University, to conduct a research project addressing abovementioned issue, under the support of the Trade and Industry Department, the Government of the Hong Kong Special Administrative Region. The research report on “the Operation and Contributions of Hong Kong-Invested Manufacturing Industry in Greater Bay Area, and the Development Strategies of Transformation and Upgrading” has been finally completed. Today (17 June), a summit and a press conference was held for the aforementioned report.
Mr. Dennis NG Wang-pun, Chair of The Chinese Manufacturers' Association of Hong Kong mentioned that, this report specifically focuses on those Hong Kong-invested firms simultaneously in both Hong Kong and any of the nine cities in the Greater Bay Area. To understand these companies’ current business situations and contributions, a large-scale survey, in-depth interviews and focus groups interviews were conducted. The research finds that their contributions to economy cannot be replaced. In addition, this report draws lessons from 11 countries including the United States, Germany, Israel, Singapore, South Korea and Denmark about how these countries adopt their industrial policies to shed light on Hong Kong’s industry and reshape their brand. Overall, this report helps to increase awareness of Hong Kong’s traditional industries to Industry 4.0 and suggests several policies for future transformation and industrial upgrading.
Prof. WEI Xiangdong, Director of China Economic Research Programme of Lingnan University pointed out that, the report analysed the number of operating manufacturing enterprises that are Hong Kong-invested in nine cities in the “Guangdong-Hong Kong-Macao Greater Bay Area” in the past five years through big data analytics. According to the data collected, the number of active Hong Kong-invested manufacturing enterprises in nine GBA cities over the past five years has been on a steady increase. There were 21,345 registered enterprises in 2018, with a cumulative registered capital of RMB 317.7 billion, and approximate 2.71 million of employees. In 2017, the operating profit reached RMB 54 billion. Meanwhile, based on the survey findings and big data collected, estimations had been made on the business performance of Hong Kong-invested manufacturing enterprises in nine GBA cities in 2017-18: the amount of investment is around HKD 468.1 billion and their turnover is around HKD 900.3 billion; taxes amounted to around HKD 28.1 billion and loan amounted to around HKD 227.6 billion.
The report pointed out that most Hong Kong businessmen engaged in nine cities in the “Guangdong-Hong Kong-Macao Greater Bay Area”, statistically they were not classified as “manufacturing” as most of their identities in Hong Kong are traders. However, the actual operation of their business may be different from traditional import and export traders. Their daily business activities in Hong Kong involve technical support services related to the manufacturing industry. Although these activities are critical in the manufacturing process of the manufacturing industry, the employees are only classified as service industry employees, and its GDP contribution is also classified as a service industry. As a result, the actual contribution of the Hong Kong-invested manufacturing industry has not been fully reflected, making the form of “external development” of Hong Kong manufacturing industry are therefore often underestimated in terms of its actual scope, scale and contribution.
The report also conducted a large-scale survey of Hong Kong-funded manufacturing companies. The 400 Hong Kong-invested manufacturing companies participating in the survey were found to have factories mainly set up in Dongguan, Huizhou, Guangzhou, and Shenzhen. Most of interviewed enterprises owned more than one factories. Also, most of these businesses were established in the 1990s (42.8%), covering various sectors, among which“clocks and watches” and "electronics" accounted for a relatively higher proportion. In the early years, most Hong Kong businessmen entered the Pearl River Delta in the form of the “three-plus-one” trading-mix. However, due to the continuously changing business environment and the promotion of the central government’s policy, the investment method of Hong Kong capital in the Mainland has become a different story. The survey results showed that most of the interviewed companies were sole proprietorships (76.8%). In addition, the past reliance on exports has changed. At present, most of them are concurrently engaged in export and domestic sales (59.3%), reflecting that many Hong Kong companies have invested in the domestic market, and their sales strategies have gradually shifted to a structure that takes into account of both internal and external needs.
Regarding the difficulties in business operation in two places, the survey results highlighted the current difficulties encountered by Hong Kong businessmen in mainland China. These difficulties were mainly related to policy systems including tax and administrative matters, environmental protection policies, and labour regulations. Concerning the difficulties in Hong Kong, a larger number of respondents considered Hong Kong’s lack of a complete industrial policy as the key factor that hinders the development of manufacturing industry. Many interviewees remarked that many measures implemented were neither effective nor practical enough, and that Hong Kong manufacturers operating in the form of "external development" had always been neglected by the HKSAR government, with their contributions to the development of the society being disregarded. In addition, the HKSAR government had not devoted sufficient efforts to promote modernized industries to the public. As a result, the entire society despised the value of industries and importance of industries to the development of a sustainable economy.
Dr. CHOW Man-kong, Deputy Director of the China Economic Research Programme of Lingnan University, said that this research reports new research contributions to the research field of Hong Kong-owned manufacturing and the main countermeasures are as follows:
Contributions and novelties of the research:
- The report uses multiple first-hand data to show that the Hong Kong-invested manufacturing industry plays a significant role in contributing to Hong Kong’s overall economy in the form of “external development”, and the same for various Central ministries and units especially the provincial government in Guangdong.
- The report analysed the number of active Hong Kong-invested manufacturing enterprises in Mainland cities in the “Guangdong-Hong Kong-Macao Greater Bay Area” during the past few years through big data analytics. In this way, specific figures and changes in the number of Hong Kong-invested manufacturing enterprises, the number of employees, registered capital, operating profit etc. including nine different cities in the Greater Bay Area have been obtained. Since the number of cases registered or registered by the State Administration for Industry and Commerce is more specific than the statistics mainly sampled by the Bureau of Statistics, the relevant figures precisely reflect the operation of Hong Kong-invested manufacturing in the Greater Bay Area and thus made a major contribution to future research.
Policy recommendations to the Mainland Government (including relevant Central Government departments, Government of Guangdong Province and nine municipalities in the GBA)
- Recommendation 1: The GBA has a good foundation for implementing pilot schemes. It is recommended to establish a cross-regional government management and coordination system, and to set up respective standing institutions to initiate and coordinate the development and cooperation with manufacturing industry in the GBA; to formulate an innovation system based on a better cooperation among the government, industry, academia and research institutes, which combines the strengths of tertiary education institutions and research organizations in the GBA, with the aims of assisting the enterprises to adopt new ways of production and sales, as well as new product development in order to better transform and adding value. These constitute an authentic, entire chain of technology transfer from the results of science and research. To achieve the true collaboration among “Government, Industry, Academia and Research institutes”, it is recommended to have the coordination from the Government; collective funding from the Government/Government and big enterprises; setting up an industrial innovation center with the engagement of various industries’ associations, universities and research institutes; establishing an affiliated applied technology university by such industrial innovation center. 。
- Recommendation 2: To boost the efforts made by nine municipalities in the GBA to reinforce the transformation and upgrading of Hong Kong businessmen who engage in traditional manufacturing sectors; to develop a core value which is mutually beneficial to Hong Kong-invested and Mainland-invested enterprises, and to facilitate the principle and working mechanism of “friendly enterprises for shared innovation and win-win cooperation”.
- Recommendation 3: To improve the institutionalization, standardization, and legalization of policies and related measures; to raise the level of transparency and execution of policies, with more consultations on industries before implementing new measures. It is also expected to provide a quality, fair, and industry-friendly business environment.
- Recommendation 4: To establish “Processing Trade Zone” and “Innovative Government-Industries-Academia-Research Park for Guangdong-Hong Kong-Macau Manufacturing Industry” (or called “Enclaves of Hong Kong-Invested Manufacturing Industry”) in the cities around the GBA, so as to reduce the cost of enterprises initialing upgrades towards Industry 4.0 and to help expedite urbanization of these areas.
- Recommendation 5: To unify fee items for administrations in Guangdong province; to remove outdated and excessive taxes and fee items, as well as unnecessary regional fees; to assign a dedicated department for handling problems encountered by Hong Kong businessmen during deregistration.
- Recommendation 6: To introduce measures for Hong Kong businessmen which reduce the cost of loans and finance in the Mainland; to gradually construct a multi-level, multi-channel, and diversified investment and financing system.
- Recommendation 7: To reinforce the protection and enforcement of intellectual property rights; to strengthen Government officers’ awareness and legal enforcement of intellectual property rights.
Policy recommendations to the HKSAR Government
- Recommendation 1: The HKSAR Government should actively create favorable conditions for the consolidation of all parties and the promotion of cross-border cooperation; set up a higher-level, cross-sectoral dedicated department; jointly establish a sustainable Industry 4.0 ecosystem to promote Hong Kong’s industrial as well as scientific and innovative development; actively promoting collaboration with Guangdong province so as to lead the participation of local universities and research institutes in the operation of various industrial innovation centers.
- Recommendation 2: To change the Government function; to strengthen communication and collaborations with manufacturing enterprises so as to proactively understand their needs; to formulate transformation blueprints and specify the concept of transformation and upgrading to Industry 4.0; to strengthen the promotion of how to stage a phase plan for a gradual actualization of Industry 4.0, and improving their understanding on the positive impacts bought by the enhancement of each phase, so as to reinforce their determination and confidence in industrial upgrading.
- Recommendation 3: To fully review the funding mechanism and evaluation system of tertiary education, and to recognize the contributions of scholars who participated in applied research. The HKSAR government is recommended to take the lead in setting up a “Traditional Manufacturing Industry Innovation Alliance”, and to encourage sector’s unity and cooperation for enhancing enterprises’ of self-led research.
- Recommendation 4: To initiate a comprehensive review on the existing support measures; to include Hong Kong-invested enterprises running in “front shop, back factory” model as the beneficiary of various industrial and innovative subsidy scheme; to actively provide manufacturers with appropriate tax incentives and subsidies, with a view to stimulate the sector’s motivation for transformation and upgrading.
- Recommendation 5: To encourage Hong Kong businessmen to enter the Mainland domestic sales market through a collective action model, and establish effective sales channels and networks; to set up an institution which exclusively offers consultation services to Hong Kong businessmen to explore opportunities in domestic sales market. It is expected that the overall competitiveness of Hong Kong-invested manufacturing enterprises can be further enhanced through collective actions.
- Recommendation 6: To assist enterprises to explore business opportunities with the implementation of “Belt and Road Initiative”, and to provide extra specific policy support, including joint inspections, exhibitions, investment promotion and brand promotion.
In the second part of the Future Direction of Hong Kong Industrial Development Summit Forum, experts and scholars participating in the discussion include:
- Dr. WANG Chunxin, Head of Policy & Economic Research, Bank of China (Hong Kong)
- Prof. HE Junzhi, Associate Dean of Institute of Guangdong-Hong Kong-Macau Development Studies; Director of Centre for Studies of Hong Kong, Macao and Pearl River Delta, Sun Yat-sen University
- Dr. LI Xiaoying, Associate Professor in Institute of Guangdong-Hong Kong-Macau Development Studies, Sun Yat-sen University
- Prof. Francis T LUI, Former Head of Economics Department, the Hong Kong University of Science and Technology; Honorary Director of China Economic Research Programme, Lingnan University
- Mr. KWAN Ka-Ming, Nicholas, Director of Research, Hong Kong Trade Development Council
For further inquiries or any related questions about this forum, please contact Dr. CHOW Man-kong (email@example.com), Deputy Director of the China Economic Research Programme of Lingnan University.
Full-text version of the report “the Operation and Contributions of Hong Kong-Invested Manufacturing Industry in Greater Bay Area, and the Development Strategies of Transformation and Upgrading” in the website of The Chinese Manufacturers' Association of Hong Kong
Download the full-text version of the report from this website
Press reports (Chinese version only)
- 橙新聞：學者促政府帶頭助港資製造業轉型 關家明：內地市場較歐美穩定（6月17日）
- China Daily: CMA: Help HK manufacturers in Bay Area to upgrade (18 June)