The publishing of the latest report by the Commission on Strategic Development has raised the curtain for the great debate on Hong Kong's role in China's future progress after 25 years of rapid economic growth.

 

In those past 25 years, Hong Kong was a major driving force behind the industrialization of the Pearl River Delta region, as it provided the much-needed capital and expertise. In addition, the Hong Kong stock market has been the single most important source of capital to thousands of enterprises and banks from around the nation.

 

Other than manufacturing, many Hong Kong companies have invested heavily in mainland ports, property developments and other infrastructure facilities. In recent years, Hong Kong retailers of personal health care products, garments and cosmetics have made significant inroads into the mainland market.

 

Meanwhile, more and more mainland enterprises are opening branches and offices in Hong Kong to explore opportunities for overseas expansion. Thousands of mainland business executives have been dispatched to Hong Kong to learn first-hand about Western management styles and market practices.

 

As the mainland is entering a new phase of development, many business leaders are pondering what role Hong Kong can play so that it can remain relevant in the fast changing economic landscape. Hong Kong has thrived in recent years largely by meeting the needs for economic development on the mainland.

 

Those needs, arising from industrialization, were relatively simple and straightforward. Thanks to its geographical location and cultural links, Hong Kong was well positioned to take advantage of the mainland's phenomenal growth.

 

But the needs of the mainland have changed in line with the new emphasis on the development of the services sector. Last year, the central government made it known that the focus has been shifted to attracting direct foreign investment in the services sector rather than the manufacturing sector.

 

This policy should be a boon to Hong Kong service providers, especially those in such areas as logistics, transportation, real estate management and a range of professional services, including accounting, management consultancy, architecture and civil engineering. Another area where Hong Kong can make a great contribution is in trade servicing.

 

There are no shortage of Hong Kong companies that have accumulated a wealth of experience and expertise in the higher value added front end, design, finance, branding and marketing, and the back end, packaging and logistics, of the manufacturing process. This is the expertise that is sorely needed by many mainland enterprises that are keen to move up the value added chain from the production segment of the process.

 

More important, Hong Kong companies must look beyond the neighboring Pearl River Delta region for new opportunities. They should keep in mind that the biggest demand for services will come from the large State-owned enterprises in the Yangtze River Delta area and further north.

 

These industrial behemoths follow a corporate culture that is largely alien to Hong Kong companies, which have been dealing mainly with the many smaller and nimbler private enterprises and cooperatives that dominate the south. But it is worth the effort to overcome the steep learning curve in forging a business relationship with these enterprises.

 

The Hong Kong government has done a credible job in winning the trust of and assistance from the central government. In future, the Hong Kong government should direct its Beijing office to put additional efforts into establishing closer relationships not only with the bureaucrats in the government but also those managing the large State-owned enterprises. The objective is to introduce to the mainland executives what Hong Kong can offer in design, packaging, branding and marketing to help boost overseas sales of made-in-China products under Chinese brand names.

 

(China Daily February 21, 2006)