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Report Highlights Thriving Cities(HKTDC Watch & Clock, Vol 03,2001)

Vol 3, 2001

Product Features
HK Enterprise Internet

TDC News

Report Highlights Thriving Cities

Business Platform Beckons

Russia Reforms Hold Promise

Report Highlights Thriving Cities

HONG Kong and Shanghai are strategic partners serving as growth engines in the Asia- Pacific region and gateways to the Chinese mainland, not head- on competitors, says Hong Kong Trade Development Council (TDC) chief economist Edward Leung.

"Regardless of competition, Hong Kong is Shanghai's largest foreign investor and fourth most important trade partner. Hong Kong investment in Shanghai has brought not only capital, but also management expertise. On the other hand, new opportunities in Shanghai provide Hong Kong companies with a strong bridgehead to extend business activities in the Yangtze River Delta,"Leung says.

"Hong Kong will remain a major source of international capital for Shanghai in fostering its economic development,"he adds.

While Shanghai has worked hard to become an internationally oriented economic centre, Hong Kong, an established cosmopolitan city, evolves toward becoming a first- class world city.

"If Hong Kong and Shanghai continue growing at their respective average rates as for the last decade, it will take about 15 years for Shanghai to catch up in terms of total economic size. It will take about 20 years for Shanghai to catch up in per- capita income.

Leung's comments accompany the release of a TDC report entitled The Two Cities - Shanghai‧ Hong Kong. The new report addresses the degree of competition and complementarity between Hong Kong and Shanghai from various perspectives.

The two cities are deemed complementary in developing new technology and acquiring new knowledge. To build a knowledge- based economy, information matters more than technology. Free flow of information gives Hong Kong a definite advantage. While Shanghai has a strong industrial base to support industrial research and development, Hong Kong has an edge in commercializing new technology.

Shanghai, with dominance in the Yangtze River region, is the gateway to central and northern China, while Hong Kong is a driving force in the Pearl River Delta. Shanghai will be a trade hub serving inland provinces and cities in the central and northern mainland, whereas Hong Kong's coverage is much wider throughout the Asia- Pacific region.

Both cities have their own cargo catchment areas. Hong Kong's main shipping rivals are ports in Shenzhen, while Shanghai faces challenges from Ningbo and others.

The respective airports serve different areas. Shanghai is an air- cargo hub for eastern China, while Hong Kong dominates the south. They face varied challenges to expand these roles. Shanghai strives to improve international traffic rights, whereas Hong Kong must enhance its dedicated integration with southern China. Indeed, Shanghai is Hong Kong's largest airport partner on the mainland.

Hong Kong plays a primary role as a financial centre serving the region. Its secondary role is as a conduit for foreign capital inflows to the mainland. The main role for Shanghai is mobilizing domestic funds to fuel mainland economic reforms.

With an expected escalation of foreign investment in the mainland, Shanghai will become more important as a China headquarters for multinational corporations, while their regional business remains based in Hong Kong.

Both cities have cultivated pools of talent. Hong Kong has a critical mass of entrepreneurs, professionals, management and commercial talent in various sectors, while Shanghai offers industrialists, industrial engineers and a relatively well- educated, skilled workforce.


Business Platform Beckons

BY looking to Hong Kong, Latin American companies can utilize an ideal platform to establish or expand business activities in Asia, TDC chairman Peter Woo recently told business leaders in Mexico, Chile, Argentina and Brazil.

During an excursion aimed at diversifying and strengthening Hong Kong's overseas economic ties, Woo delivered a key message that Hong Kong, in addition to being a competitive trading hub, has a "first- mover"advantage as a partner to explore opportunities on the Chinese mainland. Mainland trade flow is expected to double within five years of China joining the World Trade Organization (WTO).

Speaking at a series of business lunches, Woo said Hong Kong's superior trade- services platform, transparent legal system and low tax base make it "Tailor- made for business"and a "haven for entrepreneurs".

He said the mainland's additional market opening within WTO should mean unprecedented business opportunities via Hong Kong. TDC can assist and serve Latin American companies to establish strategic alliances in Hong Kong and on the Chinese mainland.

Through TDC's Internet portal, tdctrade.com, overseas companies gain access to more than 100,000 companies in Hong Kong. National chambers of commerce in Latin America show keen interest to forge online links with tdctrade.com to assist companies within the region. With a daily hit rate reaching 1.8 million, the content- rich portal is a fast track to global supply chains anchored in Hong Kong.

In Santiago, Woo met with Chilean economic minister Jose de Gregorio to explore closer co- operation and discuss Hong Kong's role as a service platform for Asian markets. De Gregorio expressed eagerness to create alliances and business opportunities involving Hong Kong SMEs and their Chilean counterparts.

Last year Hong Kong trade with Central and South America reached US$6.2bn, up nearly 22% on 1999.

The trip was Woo's first to Latin America since becoming TDC chairman in October 2000. TDC operates offices in Mexico City, Santiago, Buenos Aires, Sao Paulo and Panama City.


Russia Reforms Hold Promise

THE latest income tax cut in Russia, from a progressive rate up to 30% to a 13% flat rate, stimulates consumer spending and generates new demand for Hong Kong consumer goods, says TDC economist Wing Chu.

In releasing a new TDC market report, Chu said the tax cut, coupled with Russian president Vladimir Putin's ongoing economic reforms, including import liberalization and tariff cuts, can help Hong Kong companies to achieve market progress.

"Since mature markets are hotly competitive and approaching saturation, Hong Kong companies are advised to diversify into emerging markets. Russia is one possible choice.

"As Russia recovers from economic downturn, income levels and living standards improve. Despite increased consumption and demand, consumer goods account for only a small portion of Russia's industrial output. Hong Kong companies can step forward to satisfy emerging import demand from 146 million Russian people"Chu believes strong market niches exist for Hong Kong companies. He anticipates excellent potential for mid- range consumer electronics, plus parts and components to facilitate Russian electronics production.

Last year, Hong Kong exports to Russia reached US$147m, up 39% on the previous year. The major export items included parts and accessories for office machines and computers, watches & clocks, footwear, toys and a variety of sporting goods.

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