8 May 2012
HKTDC survey on the trading environment: close look at a new generation
Abstract: In recent years, the number of trading companies in Hong Kong has risen despite all the challenges facing the industry. This HKTDC Research survey examines how the new generation is adapting to this competitive business environment.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” – Charles Darwin
Hong Kong manufacturers and traders are well-known for being flexible and adaptable to change. Having evolved from a manufacturing base to a services economy in recent years Hong Kong’s business environment has become increasingly competitive amid China’s rapid development, but the number of trading companies is still rising. How the new generation is adapting to such a competitive business environment and how they are different to previous generations are worthy of study.
From manufacturing to trading
According to a recent HKTDC survey*, younger companies are less engaged in manufacturing activities. Among those established prior to 1981, 32% report themselves as manufacturers (regardless of where production takes place) while only 8% of those established in 2009-2011 do so.
The percentage of manufacturers-cum-traders established in the 1980s and 1990s is higher than those set up prior to 1981 and after 2000. This reflects the trend during this period of many manufacturers relocating their production base across the border whilst maintaining their Hong Kong entities as trading companies. The percentage of manufacturer-cum-traders drops significantly for companies established during 2009-2011.
It is not surprising that the newer generations are increasingly pure traders. More than half the companies established from 2009 to 2011 are engaged in trading activities only and this trend is likely to continue.
Respondents’ nature of business in 2011 by year of establishment
|
|
All |
Prior to 1981 |
1981-1990 |
1991-2000 |
2001-2008 |
2009-2011 |
|
Manufacturers |
20% |
32% |
26% |
17% |
14% |
8% |
|
Manufacturers-cum-traders |
38% |
36% |
38% |
43% |
36% |
29% |
|
Traders |
37% |
29% |
33% |
36% |
46% |
56% |
|
Other |
4% |
3% |
4% |
4% |
5% |
7% |
|
Total |
100% |
100% |
100% |
100% |
100% |
100% |
Less reliant on mature markets
Another interesting but less obvious trend is that younger companies are less reliant on mature markets. Over 60% of companies established prior to 1981 export to the US and Western Europe but of those established in 2009-2011, only 45% export to the US and 53% to Western Europe. The proportion of exports to Japan also increases with a company’s age; 22% for firms established between 2009 and 2011, 36% for those established prior to 1981. Paradoxically there appears to be no clear relationship between the age of a company and the percentage of their exports to the Chinese mainland and emerging markets.
Respondents’ export markets in 2011 by year of establishment
|
|
All |
Prior to 1981 |
1981-1990 |
1991-2000 |
2001-2008 |
2009-2011 |
|
US |
54% |
64% |
55% |
50% |
54% |
45% |
|
Western Europe |
58% |
61% |
61% |
56% |
58% |
53% |
|
Japan |
29% |
36% |
30% |
29% |
25% |
22% |
|
Chinese mainland |
49% |
52% |
48% |
51% |
46% |
48% |
|
Emerging markets |
34% |
35% |
34% |
33% |
34% |
36% |
Note: multiple selections of export markets were allowed
Trading more consumer goods
By product category, new companies trade more consumer goods than older ones. 87% of companies established in 2009-2011 export consumer goods, including processed and semi-processed goods and accessories, compared to 77% for those set up prior to 1981. The proportion of the youngest companies (established between 2009 and 2011) that export food & beverage is also higher at 10% compared to an average of 8% for those set up prior to 2009.
Respondents’ export product categories in 2011 by year of establishment
|
|
All |
Prior to 1981 |
1981-1990 |
1991-2000 |
2001-2008 |
2009-2011 |
|
Food and beverage |
8% |
9% |
7% |
7% |
7% |
10% |
|
Consumer goods (processed goods) |
62% |
59% |
63% |
61% |
64% |
65% |
|
Consumer goods (accessories / semi-processed goods) |
19% |
18% |
20% |
18% |
20% |
22% |
|
Parts and components / raw materials |
20% |
21% |
20% |
23% |
20% |
15% |
|
Others |
20% |
24% |
19% |
20% |
20% |
17% |
Note: multiple selections of product categories were allowed
The detailed breakdown below shows that Hong Kong companies, regardless of their age, are mainly exporting a wide range of light consumer goods including garments, giftware, household products, toys and electronics. However, the youngest group of companies exports a distinctly higher number of electronic accessories, computer and telecom products than other groups. The recent outbreak of tablet and smart phone fever may have provided excellent opportunities for a number of new entrants.
Respondents’ export of products (selected consumer goods) in 2011 by year of establishment
|
|
All |
Prior to 1981 |
1981-1990 |
1991-2000 |
2001-2008 |
2009-2011 |
|
Garments/textiles |
19% |
17% |
19% |
20% |
20% |
15% |
|
Giftware/décor/imitation jewellery |
16% |
14% |
17% |
16% |
15% |
16% |
|
Household products/lighting |
13% |
14% |
11% |
12% |
15% |
13% |
|
Toys/games/sporting goods |
10% |
11% |
9% |
11% |
10% |
10% |
|
Electronic accessories |
9% |
7% |
8% |
8% |
9% |
13% |
|
Stationery/paper products/packaging materials |
9% |
10% |
9% |
9% |
7% |
10% |
|
Travel goods/handbags |
8% |
6% |
7% |
8% |
9% |
9% |
|
Other electronic products |
7% |
7% |
7% |
7% |
7% |
8% |
|
Jewellery |
7% |
5% |
8% |
6% |
7% |
8% |
|
Watches/clocks |
6% |
5% |
9% |
5% |
5% |
7% |
|
Computer/telecom products |
5% |
3% |
5% |
5% |
7% |
11% |
|
Electrical appliances |
5% |
6% |
5% |
4% |
5% |
6% |
|
Footwear |
3% |
4% |
2% |
4% |
4% |
3% |
|
Audio-visual equipment |
3% |
3% |
3% |
3% |
4% |
5% |
|
Cosmetics |
3% |
5% |
3% |
3% |
3% |
5% |
Note: multiple selections of products were allowed
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