Hong Kong Manufacturing SMEs: Preparing for the Future

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42Hong Kong Trade DevelopmentCouncil (January 2010) 91In January 2010, the Hong Kong Trade DevelopmentCouncil conducted a survey to gather the latestopinions of Hong Kong companies regarding theirviews on business prospects, the current ordersituation, as well as likely changes in the tradingpractices of overseas buyers. The results of the surveyrevealed that Hong Kong exporters were cautiouslyoptimistic as to the business outlook for 2010. A totalof 35 per cent of the surveyed companies believedthat their export performance would be better in2010 than in 2009, while 52 per cent thought thattheir businesses would perform at about the samelevel. 50 per cent of the surveyed companies thoughtthat their sales to Mainland China would fare betterin 2010, with 37 per cent thinking that sales to LatinAmerica would improve, and 32 per cent believingthat sales to Central and Eastern Europe would getbetter in 2010 (see Exhibit 25).Exhibit 25. Business Outlook for 2010 byExport Market (January 2010)NeutralOptimisticOverall 52 35Chinese Mainland 42 50Latin America 52 37Central and Eastern Europe 56 32Western Europe 55 31Japan 52 32United States 48 35Source: Hong Kong Trade Development Council.By industry sector, 51 per cent of respondentsthought that the market for consumer electronicswould improve in major markets in 2010, with 42per cent holding that view for watches and clocks,35 per cent for footwear, 35 per cent for preciousjewellery, 34 per cent for toys and games, and 32per cent for clothing (see Exhibit 26).Exhibit 26. Business Outlook for 2010 byProductProduct Neutral OptimisticFootwear 58 35Consumer electronics 40 51Watches and clocks 47 42Clothing 54 32Household products 57 29Imitation jewellery 57 28Toys and games 48 34Precious jewellery 47 35Source: Hong Kong Trade Development Council.The respondents were asked to indicate the likelychanges in trading practices of their clients in 2010as compared to 2009. Most respondents agreed thatthere would be an increase in the number of ordersplaced, that buyers would increase their inventorylevels, and that the average quantity of orders wouldincrease. However, most respondents disagreedthat buyers would place orders earlier, shortencredit periods, or allow for longer delivery leadtimes. Thus the trading environment facing HongKong manufacturers seemed to remain challengingthroughout 2010 (see Exhibit 27).Exhibit 27. Trading Practices of OverseasBuyers in 2010 vs. 2009PracticeMeanResponseBuyers will order a wider variety of products 3.23Export products will fetch higher prices 3.16Buyers will place more orders 3.14Buyers’ inventory levels will be higher 3.11Average quantity per order will be higher 3.01Buyers will place orders earlier 2.81Buyers will agree to shorter credit period 2.65Buyers will allow longer delivery lead time 2.58Note: On a scale of one to five, with one suggesting “stronglydisagree” and five suggesting “strongly agree.”Source: Hong Kong Trade Development Council.91 Hong Kong Trade Development Council, “On the RoadRecovery: Assessment of 2009 Christmas Sales in MajorMarkets,” 29 January 2010.
43The Chinese Manufacturers’Association of Hong Kong (April2010) 92In March and April of 2010, The ChineseManufacturers’ Association of Hong Kong (CMA)conducted a survey to understand the businessenvironment in the PRD, members’ perspective onthe business outlook, and strategies to cope withchallenges and to grasp opportunities. The 2010survey indicated that prospects were improving sincesimilar surveys carried out in 2008 93 and 2009. 94 Themost important factors affecting business reportedin the 2010 survey were labour costs, raw materialprices, additional costs and risk arising from labourlaw and regulations, and risk of appreciationof the RMB (see Exhibit 28). With the economyrecovering, increasing operating costs once againhave become the prime concern of the Hong Kongfirms. The CMA found that the strategies that firmsadopted are similar across the three years, but the2010 results showed a strengthening in efforts inindustrial upgrading, transformation, and relocation(see Exhibit 29). A further breakdown of some ofthe strategies may be found in Exhibit 30.92 The Chinese Manufacturers’ Association of Hong Kong, “Surveyon Members’ Views on the Business Environment in the PearlRiver Delta,” April 2010.93 The Chinese Manufacturers’ Association of Hong Kong, “Surveyon Members’ Views on the Business Environment in the PearlRiver Delta,” April 2008.94 The Chinese Manufacturers’ Association of Hong Kong, “Surveyon Members’ Views on the Business Environment in the PearlRiver Delta,” April 2009.Exhibit 28. Factors Affecting the Operation of Hong Kong Manufacturers in the PRDMain Factors Affecting Business Operation 2008 2009 2010Raising / expensive labour costs 3.52 3.04 3.61Raising / high raw material prices 3.52 2.73 3.45Additional costs and risk arising from labour laws and regulations 3.46 3.22 3.44Risk arises from change of RMB exchange rate 3.49 2.89 3.20Customers pressing prices na 2.98 3.13Labour shortage 3.05 na 3.09Insufficient orders na 3.08 2.39Short supply of water and electricity 3.27 na naNote: 4= “very severe impact,” 3= “severe impact,” 2= “some impact,” 1= “no impact,” na = not available.Source: The Chinese Manufacturers’ Association of Hong Kong.Exhibit 29. Strategies Adopted by Hong Kong Manufacturers, April 2010Rank Strategies Proportion of Companies Adopting the Strategy (%)1 Expand markets 73.82 Improve the quality level / value-added of products 66.33 Develop more new products 59.44 Upgrade technology 56.35 Improve technical or operating process 53.86 Adopt advanced machines / equipment 46.97 Outsource certain production procedures 41.38 Relocate the factories 33.18 Merger or reorganisation 33.110 Branding 26.911 Give up manufacturing and switch to trading business 14.412 Close down the business 5.6Note: Each responding company can choose more than one strategy.Source: The Chinese Manufacturers’ Association of Hong Kong.
Page 1 and 2: Hong Kong Manufacturing SMEs:PREPAR
Page 3 and 4: ContentsForeword 2Executive Summary
Page 5 and 6: 3In this report and the accompanyin
Page 7 and 8: 5Cost reduction strategies may incl
Page 9 and 10: 7In order to answer these questions
Page 11 and 12: 9Exhibit 2. Exhibit 3.Global Stock
Page 13 and 14: 11Exhibit 6.Exhibit 7.Hong Kong’s
Page 15 and 16: 13Hong Kong manufacturing firms RMB
Page 17 and 18: 15hour in Bangladesh, US$0.33 per h
Page 19 and 20: 17Utilities and sewage charges are
Page 21 and 22: 19tax if they carried out export pr
Page 23 and 24: 21demand and production (such as in
Page 25 and 26: 23In recent years, China has become
Page 27 and 28: 25keep costs down rather than inves
Page 29 and 30: 27specific infrastructure projects,
Page 31 and 32: 29markets. 71This included helping
Page 33 and 34: 31Failure to DifferentiateMany Hong
Page 35 and 36: 33The Impacts of Developments on Ho
Page 37 and 38: 35performance). Note that the figur
Page 39 and 40: 37The RMB appreciation and inflatio
Page 41 and 42: 39In spite of these challenges, the
Page 43: 41Exhibit 23. Measures Taken to Cop
Page 47 and 48: 45Industry Situation ReportsWhile i
Page 49 and 50: 47Exhibit 33. Exports of Watches &
Page 51 and 52: 49that it is unlikely production wo
Page 53 and 54: 51factory in Cheung Sha Wan. The co
Page 55 and 56: 53Renley focuses a good deal of att
Page 57 and 58: 55The Consumer Electronics Industry
Page 59 and 60: 57Issues for Hong Kong Consumer Ele
Page 61 and 62: 59Some Hong Kong owned firms have a
Page 63 and 64: 61Suga has occasionally been challe
Page 65 and 66: 63In terms of dealing with regulato
Page 67 and 68: 65• Having a manufacturing base i
Page 69 and 70: 67Exhibit 41. Textiles and Clothing
Page 71 and 72: 69China’s Labour Contract Law is
Page 73 and 74: 71Case Study - Lever Style Incorpor
Page 75 and 76: 73and potential customers know of L
Page 77 and 78: 75are likely to yield them profits
Page 79 and 80: 77Exhibit 46. Top Mould and Die Exp
Page 81 and 82: 79under pressure to reduce prices.
Page 83 and 84: 81Some Hong Kong firms are finding
Page 85 and 86: 83Datamatic has worked hard to deve
Page 87 and 88: 85• Companies that try to compete
Page 89 and 90: 87Exhibit 52. Exports of Toys, Baby
Page 91 and 92: 89into the medium-term. A further s
Page 93 and 94: 91• As the entertainment and toy
Page 95 and 96:
93Company StrategySilverlit constan
Page 97 and 98:
95Silverlit plans to continue manuf
Page 99 and 100:
97Strategies to Meet the Challenges
Page 101 and 102:
99Central Governments, who set up r
Page 103 and 104:
101manufacturing jobs, which is sti
Page 105 and 106:
103• Strategies to deal with envi
Page 107 and 108:
105Strategies to Deal with Internal
Page 109 and 110:
107• Identify the key functional
Page 111 and 112:
109• Superior visionSuperior visi
Page 113 and 114:
111• Implement suitable workplace
Page 115 and 116:
113• Plan for successionSuccessio
Page 117 and 118:
115• Joint or place branding and
Page 119 and 120:
117New OpportunitiesOne major devel
Page 121 and 122:
119management, especially when it c
Page 124:
Federation of Hong Kong Industries3
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