Hong Kong Manufacturing SMEs: Preparing for the Future

116ConclusionsHong Kong manufacturing SMEs face manyissues going forward. These include uncertainglobal markets, rising costs in their traditionalproduction locations, changes in legal andregulatory environments, an increasingly difficultcompetitive environment, Chinese MainlandPolicies affecting operations in the Mainland, anda host of operational and strategic issues. All ofthe issues identified above are significant in and ofthemselves, but they must also be put into properperspective and context in order to understandwhat the future may hold.Perspectives on Key IssuesThe global economy has been experiencing adownturn, but the global economic environmenthas actually been quite good for most of the last30 years. The RMB is under pressure to appreciate,but the consensus among economists everywhereexcept the Chinese Mainland has been that it hasbeen severely undervalued for a long time. Labourcosts are rising in the Chinese Mainland, but forwell over a decade previously they were virtuallyunchanged in real terms. Utility costs are rising inChina, but some utility prices, like electricity arestill well below global norms. Legal and regulatorychanges in China are affecting Hong Kong SMEsoperating in the Mainland, but the Chinese legaland regulatory system allowed them to set upand operate in the first place. The competitiveenvironment is becoming tougher, but it was theinitial lack of Mainland companies with knowledgeof processes, products, and markets that allowedmany Hong Kong companies to become establishedin the first place. Chinese policies about industrialdevelopment are affecting SME operations in theMainland, but again Chinese development policiesallowed the Hong Kong firms to set up as well.SMEs by their nature face strategic and operationalissues, but successful SMEs find ways to overcomethese issues.Some interviewees expressed a view that HongKong manufacturing companies, particularly SMEs,became established through a particular set ofcircumstances that may indeed change forever. Ifso, then many Hong Kong manufacturing SMEswill face difficult times. However, with changealso comes opportunity. It will be the ability andwillingness of the Hong Kong companies to changeand to exploit existing and new opportunities thatwill determine their future.Looking BackHong Kong industry has evolved enormously overthe last few decades. Thirty years ago, few wouldhave imagined the important role that Hong Kongindustrial corporations would play in today’s globaleconomy. Fewer still would have imagined thatthe key to this importance would not be artificiallytrying to keep industrial activities within HongKong, but rather it would be adjusting to changingcircumstances and pioneering new productionlocations outside of Hong Kong. This is just oneexample of the constant reinventing of Hong Kongindustry that has occurred over the period.Looking back, the success of Hong Kong industryhas depended on its ability to take advantage ofopportunities resulting from major developmentsin the global economy, such as reduction of tradebarriers, increasing affluence in global markets,improvements in transportation and communicationtechnology, containerisation, the emergence ofmodern supply chains, the separation of productionfrom other corporate activities, and the reintegrationof the Chinese Mainland into the worldeconomy. Similarly, looking forward, the successof Hong Kong industry will depend on its abilityto take advantage of opportunities resulting fromfuture developments in the global economy. Ittherefore makes sense to project what some ofthese developments might be.