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Seeking New Opportunities in a Changing World

In recent years, the international trade landscape has been rapidly evolving. While the traditional European and United States (US) markets remain important to Hong Kong's exports of goods, their shares have seen notable declines. For instance, the share of exports to the US dropped from 18.6% in 2003 to 6.5% last year, and that to the European Union also dropped from 10.5% to 6.6% over the same period. On the other hand, the share of exports to the Association of Southeast Asian Nations rose from 6.1% in 2003 to 7.9% last year, making the group of countries Hong Kong's second largest export market after the Mainland. The share of exports to the Middle East also rose to 3.3%.

Geopolitical developments, adjustments to the division of work in the global manufacturing industry and restructuring of the supply chain, coupled with the rise of well-equipped ports in the region, are all reshaping how enterprises set up their production lines and their patterns of exports. They have impacted Hong Kong's export performance. While some large Mainland and overseas manufacturers have been adjusting their supply chain settings over the past few years, many medium-sized manufacturers have yet fully prepared themselves. Moreover, many enterprises are facing challenges arising from the introduction of more stringent environmental, social and governance (ESG) requirements by some major economies, as well as difficulties in gaining access to trade finance in a high-interest rate environment. According to a report released by the Asian Development Bank in September last year, the global trade finance gap had widened further, and was estimated to be equivalent to 10% of global merchandise trade (i.e. US$2.5 trillion).

Having a solid foundation in trade and various related professional services, Hong Kong has the favourable conditions to capture the opportunities created by these changes. The key rests with providing quality and efficient professional services for the commercial and industrial sectors to help businesses to strengthen the management of their supply and value chains, and create higher values for their multinational businesses.

This is the line of thought behind my proposal in this year's Budget to develop Hong Kong into a multinational supply chain management centre. By establishing a single window that provides one-stop services for enterprises, including supply chain management, trade financing, consulting services, talent and corporate training, etc., we seek to attract Mainland manufacturing enterprises to set up regional headquarters in Hong Kong for managing their offshore trade. It is estimated that there are at present over 50,000 medium-sized manufacturing enterprises in the Pearl River Delta and Yangtze River Delta, many of which are engaged in overseas businesses and see the need for certain parts of their manufacturing processes to "go global". Hong Kong's rich experience and favourable conditions have put us in a good position to serve their needs.

Trade financing. Hong Kong has efficient flow of reliable information, as well advanced and robust financial infrastructure. We offer a wide range of financing options to trading enterprises. More than 70 of the world's 100 largest banks operate in Hong Kong, including a number of leading banks in the global trade finance market. Mainland enterprises which have established their operations in Hong Kong would have access to more efficient and lower-cost trade financing services. In addition, the Commercial Data Interchange, launched by the Hong Kong Monetary Authority for gathering corporate data, has 26 banks and 13 data providers as participants. With authorisation from enterprises, participating banks can obtain trade-related data more quickly, thereby streamlining the loan assessment process. As at the end of last year, this arrangement had facilitated more than 13,000 loan applications and assessments, involving an estimated credit approval of over $11.7 billion.

As regards trade settlement, Project mBridge will launch its first phase of service this year. By then, Hong Kong will become one of the first places in the world to settle cross-boundary transactions for corporates using central bank digital currencies (CBDC). It will greatly enhance the speed of cross-boundary payments and reduce related costs.

To effectively help manage the credit risk of buyers, the Hong Kong Export Credit Insurance Corporation (ECIC) underwrites, in addition to goods shipped or re-exported from Hong Kong, goods procured or produced at overseas locations which are then directly shipped to buyers by Hong Kong policyholders. In January this year, we raised the statutory maximum liability of ECIC from $55 billion to $80 billion. Mainland enterprises which have got a foothold in Hong Kong may take advantage of export credit services to better manage risks and, through insurance policies, gain easier access to export finance. Moreover, enterprises may also use ECIC's buyer credit check and market information sharing services to develop their business.

Market expansion and consulting services. When considering business expansion and supply chain management, both Mainland enterprises going global and overseas companies entering the Mainland market need a wide variety of information. To facilitate Mainland enterprises in tapping into new markets and gaining a foothold in Belt and Road countries, the Hong Kong Trade Development Council (HKTDC) has been providing various services through different schemes and services. In particular, HKTDC's Transformation Sandbox (T-box) offers one-stop consulting services covering business operations, production and supply chain solutions, market information, etc., as well as a range of workshops and exchange sessions. They seek to enhance the competitiveness of Hong Kong enterprises in branding, digital transformation, manufacturing and supply chain solutions, opening new markets and achieving sustainability.

Standard certification and corporate training. Hong Kong's professional service providers have ample knowledge and experience in managing multinational supply chains, and in handling such matters as compliance as well as labour and environmental protection. By fostering collaboration between different organisations (such as education and training organisations) and industry stakeholders, we will provide Mainland enterprises seeking to "go global" with training on topics such as ESG with a view to helping them to improve their business reputation and expand their reach. In terms of standard certification, the Hong Kong Quality Assurance Agency is guided by international standards, and provides related services such as certification, assessment, verification, and training. These services can assist enterprises in enhancing their management quality and competitiveness.

In view of the evolving landscape of international geopolitics, in addition to positioning Hong Kong as the multinational supply chain management centre and trade financing centre, we are also making great strides to attract strategic enterprises to expedite the city's development into an international innovation and technology (I&T) centre. We announced in October last year that about 30 strategic enterprises had set up or expanded their operations in Hong Kong. This week, we are welcoming the second batch of about 20 enterprises. Together, they are expected to bring about over $40 billion in investment to Hong Kong, creating over 13 000 jobs, most of which would be research and development-related or management positions. Their presence in Hong Kong will attract upstream, midstream and downstream partners from their relevant industries, promoting the vibrant development of the entire I&T ecosystem in the city.

March 17, 2024