Hong Kong,
The Asian Tiger Still Lives
Reprinted in
part from Export America, Feb.
2003
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Hong
Kong at a Glance
- Total area:
1,099 square
km (six times
the Size of
Washington
D.C.)
- Population:
6.8 million
(2002)
- GDP: $176.1
billion (2001)
- GDP Growth:
1.5% (2002)
- Inflation:
-3.0% (2002)
- GDP by
sector:
services
85.6%,
industry
14.3%,
agriculture
0.1.%
- Currency: HK
Dollar
- Exports:
clothing,
textiles,
electrical
machinery,
jewelry
- Imports:
consumer
goods, capital
goods,
machinery, raw
materials,
food stuffs
|
 Hong
Kong, one of the so-called
Asian tigers of the 1990s, may
have lost a step or two during
the current slowdown, but no
snaggle-toothed feline is
this.
As one of
the world's most open and
dynamic economies, Hong Kong
boasts the second-highest per
capita income in Asia (at just
over $23,000). The keys to
Hong Kong's economic success
lie in its liberal market
philosophy, market
transparency, free flow of
information, and strong legal
system. Hong Kong is a
"free port," with
virtually no duties or
tariffs, allowing U.S.
businesses to easily reach its
6.8 million consumers. U.S.
exports to Hong Kong totaled
$14.1 billion in 2001. Hong
Kong is the world's largest
transshipment center and is
positioned to play an
important role for U.S.
businesses wishing to expand
their exports to the biggest
tiger of them all--China.
"For
small and medium-sized
companies, Hong Kong is the
best route into China,
providing effective and
familiar business laws and
practices," says Barry
Friedman, senior commercial
officer of the U.S. Commercial
Service in Hong Kong. The main
advantages to using Hong Kong
to enter China include
well-developed infrastructure,
strong communication networks,
and excellent rail and road
links to the booming southern
provinces. In addition,
explains Friedman, "Hong
Kong has an English-speaking,
Western-oriented business
culture."
Business
in a Hong Kong Minute
But the
Hong Kong market is well worth
targeting on its own, never
mind the allure of the
mainland. The first thing a
visitor notices is Hong Kong's
fast-paced business climate.
Because Hong Kong is among the
most competitive markets in
the world, U.S. companies need
to make decisions quickly and
respond to buyer inquiries
immediately. According to
Olivia Cheng, president of
California based World Medical
Trade Organization (WMTO),
"Business moves quickly,
and you have to be ready to
act fast in Hong Kong."
One of the best ways to sell
products and services in Hong
Kong is through agents and
distributors, which minimizes
initial investment in the
market. Hong Kong has an
extensive network of' agents
and distributors who are eager
to buy and sell competitively
priced, quality U.S. products.
The Hong
Kong government plans to spend
$30 billion over the next five
years to significantly improve
infrastructure, including
schools, roads, communication
facilities, and government
buildings. This activity will
open many opportunities for
U.S. companies.
Beyond
bricks and mortar, Hong Kong
is the world's most
service-oriented economy,
including financial, legal,
and advertising services. The
services sector grew at an
annual rate of 6 percent
between 1991 and 2000. After
rebounding from the Asian
financial crisis in 2000, the
Hong Kong economy slowed in
2001, as a result of the
global economic downturn.
However, this should not deter
U.S. exporters, who will be
well poised in the market as
the economy strengthens.
Finding
Buyers Without the Brother
Hong Kong
is a key Asian technology hub.
Leading sectors include
telecommunications and
information technology
products and services,
electronics, medical
equipment, and security
products. The medical
equipment industry provides
multiple opportunities for
U.S. companies. World Medical
Trade Organization (WMTO), a
U.S. company specializing in
opening Asian markets for
medical-related products, has
used the U.S. Commercial
Service in Hong Kong to locate
distributors.
Based in
Newport Beach, California,
WMTO markets and distributes
U.S. medical equipment
throughout Asia. When WMTO
decided to enter the Hong Kong
market with PapSure, an early
detection device for cervical
cancer, it relied on the
expertise of the U.S.
Commercial Service, a division
of the Commerce Department
that helps small and
medium-sized U.S. companies
find new markets around the
world. WMTO chose a
distributor using a service
called Gold Key, which matches
U.S. exporters with
pre-qualified distributors and
agents, as well as arranges
videoconferences and
face-to-face meetings.
As part of
the Gold Key, the U.S.
Commercial Service arranged
For WMTO to meet with seven
companies in just two days,
providing complete background
information on each company.
This significantly cut the
time and cost of finding a
distributor in Hong Kong,
according to WMTO's Cheng:
"Choosing a good
distributor is important to
us, since we are giving
exclusive rights to this
company. The Commercial
Service staff was very
experienced and well connected
in the Hong Kong community.
They understood the product,
provided our criteria to
medical distributors strong in
the OB-GYN field, and arranged
meetings, which we appreciated
the most."
According
to U.S. government statistics,
Hong Kong was the United
States 15th-largest trading
partner and 13th-largest
export destination in 2001,
and bilateral trade totaled
$23.7 Billion. U.S. exports to
Hong Kong U.S. exports to Hong
Kong in the first quarter of
2002 were down 18.2 percent
over the preceding year due to
sluggish domestic consumption
and capital investment.
Reaching Customers in Hong
Kong
For many American products
and services, initial market
penetration in Hong Kong does
not require an investment of
millions of dollars of company
funds. Given that Hong Kong is
a "free port" with
virtually no duties or
tariffs, and that it has a
wide-ranging network of agents
and distributors, a
well-managed market
penetration system with a
moderate investment in market
development is generally all
that is required initially.
Due to its open nature,
however, Hong Kong is among
the most competitive and
price-sensitive markets in the
world. Companies considering
entering this market should be
aware that the Hong Kong
business market is extremely
fast-paced. Decisions are made
quickly, and companies need to
be able to respond to
inquiries immediately or they
risk losing the market to
faster moving suppliers.
Numerous American products
and services can be found in
Hong Kong, and throughout
China. Many excellent
Agents and
distributors for China are
located in Hong Kong, although
given China’s size and
diversity, it is usually
necessary to work with different
agents for different regions
of China. Hong Kong
companies are eager to talk to
potential exporters and
have a
strong interest in
representing quality,
competitively priced U.S.
products from companies
committed to the market.
Commitment to the market is
demonstrated in various ways
but should include quoting in
metric, providing Chinese
language material, responding
quickly to inquiries, meeting
relevant standards, and
visiting the market for
first-hand understanding and
relationship building.
Distribution
and Sales Channels
One of the
best ways to sell products in
Hong Kong is through the use
of agents or distributors. It
is also an excellent way of
minimizing the initial
investment in the market.
There is a wide rage of
companies that can serve as
agents or distributors for
U.S. firms. Other options for
pursuing Hong Kong's market
are establishing an office or
partnering. Companies looking
to sell equipment needing
long-term maintenance,
technical support or
installation, or that are
seeking to become involved in
infrastructure projects,
frequently seek to partner
with local companies.
Direct
Marketing
Hong Kong
has a well-developed network
of retail outlets.
Supermarkets, department
stores, convenience stores,
and modern shopping malls have
become increasingly popular,
because of their easy access,
convenient location, and
seven-day availability.
Consumers prefer buying
products from retail outlets
to buying products on-line, as
they consider retail shopping
a leisure activity. Direct
marketing accounts for less
than 1 percent of total retail
sales, though it has increased
in popularity following the
economic slowdown in 1998.
Many who lost their jobs
turned to direct marketing
while others who suffered pay
cuts joined direct marketing
companies to augment their
incomes. Sales of direct
marketing companies surged
between 5 percent and 10
percent over the past few
years. Many local companies,
particularly Chinese herbal
health supplement distributors
have adopted direct marketing.
The lack of
home-grown e-commerce sites in
the Chinese language in Hong
Kong has limited the growth of
on-line shopping. Because
there is a well-developed
retail distribution system and
an abundance of conveniently
located outlets, consumers in
Hong Kong have no incentive to
shop on-line; there is no
price advantage and they
cannot inspect products.
The major
selling factors are the same
as in the United States:
price, quality, timeliness in
delivery, and service. Initial
sales require more
face-to-face contact, as
Asians generally place a
premium on developing personal
connections.
Pricing Products
If possible, quote in
metric, on a deliverable basis
to Hong Kong (e.g., CFR or CIF
rather than FOB). Hong Kong
companies have many options,
so American companies must
make it as easy as possible
for customers to buy their
products.
Sales Service / Customer
Support
Some sort of local
presence, whether it is a
branch office or an agent or
distributor, is very important
in getting established in the
market. Business in Hong Kong
(and elsewhere in Asia)
requires relationships that
can only be developed with
some kind of local presence.
Prompt after-sales service is
also crucial to succeeding in
this competitive market.
For
Additional Information
For more
information about business
opportunities in Hong Kong,
visit http://www.export.gov/comm_svc/eac.html
to find your local office or
call the U.S. Commercial
Service at (800) USA-TRADE
(872-8723), or visit http://www.export.gov/
for Hong Kong market research.
You may
wish to visit these companion
articles prepared by the
Michigan District Export
Council:
Hong
Kong WebGuide
Date Updated: March 27, 2007
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