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New Bridge and Pearl River Delta West (5): Demand for Professional Services

After the opening of the Hong Kong-Zhuhai-Macau Bridge (HZMB), Hong Kong will not only have direct land transport link with Zhuhai, but will find its land distance with Zhongshan and Jiangmen in the vicinity of Zhuhai greatly shortened. The HZMB will contribute to Hong Kong's economic and people-to-people links with western PRD. In order to assist Hong Kong companies in making early plans for development, HKTDC Research conducted preliminary studies in Zhuhai, Zhongshan and Jiangmen as well as Yangjiang which lies further west but is still within the HZMB's three-hour economic circle to explore business opportunities worthy of attention in western PRD thanks to easier accessibility.

Push for industrial restructuring and upgrade

In recent years, Guangdong province and PRD in particular, has vigorously promoted industrial restructuring and upgrade. Under the Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), one of the key policies for the manufacturing sector, other than accelerating the development of advanced manufacturing and high-tech industries, is to transform and upgrade traditional industries. These include building brands, improving product quality, adopting advanced technology and modern management, increasing R&D investment and strengthening process design.

Due to rising labour costs, both Hong Kong and mainland manufacturers are actively transforming and upgrading in order to maintain competitiveness. In this upgrade process, it may create demand for professional services outside the manufacturer. HKTDC’s survey on manufacturers shows that Hong Kong manufacturers have been actively upgrading in the past few years, and among the different strategies, the effectiveness in improving product quality, product design and brand development is the most significant. Meanwhile, the survey report released by the Chinese Manufacturers' Association of Hong Kong in 2014 on its members also shows that most of the manufacturers are enhancing their competitiveness by developing more products (59.3%) and creating their own brand (38%). From these findings, and taking account of the development strategies of Hong Kong producers, it is expected that the demand for product or industrial design, branding and other professional services will also increase.

Table: Effectiveness of business transformation and upgrading in the PRD
Table: Effectiveness of business transformation and upgrading in the PRD

As for mainland enterprises, they also adopt a similar strategy in the transformation and upgrading, including brand development and improving product design. According to a HKTDC survey on mainland enterprises in Guangdong in 2013, transformation and upgrading as given, the vast majority of the respondents indicated that they have increased or are considering to increase investment to enhance competitiveness. Development and promotion of own brands, as well as upgrading product design and R&D capability, are the most important areas for mainland investment.

Chart: Area where Guangdong enterprises will increase investment
Chart: Area where Guangdong enterprises will increase investment

Guangdong firms seeking support from external service providers

According to the survey, many respondents have already begun to adjust their business and operational strategies and have made corresponding investments. The main strategy of these enterprises was to nurture the development of the domestic markets (48%), while 31% and 29% of the surveyed companies indicated an intention to further develop their trade in the overseas mature markets and the overseas emerging markets respectively. In order to implement their investment and business adjustment plans, most enterprises surveyed indicated a need to seek support from external service providers. The most sought-after services were those related to product development and design (53.5%), with brand design and promotion (52.5%) coming close second. Overall, around 60-70% of the enterprises surveyed indicated a wish to obtain such services from Hong Kong or from overseas.

Table: Will consider or already using services from other companies
Table: Will consider or already using services from other companies

The above survey finds that Guangdong enterprises (including western PRD companies) are actively seeking general upgrading, adopting strategies with emphasis in improving product design and brand development, etc. In the process, many Guangdong enterprises intend to look for cooperation with professional service providers from external source. Yangjiang, for example, its Economy and Information Technology Bureau had arranged collaboration of local businesses with design institutes in Guangzhou, Foshan, Shunde and Dongguan. These ventures were of good effectiveness, according to participating businesses.

Guangdong firms have good impression on Hong Kong design

In seeking professional services from external source, a large proportion of the respondents have indicated interest in using service providers from Hong Kong or overseas, which is to bring more market space to related professional services in Hong Kong. In developing the mainland market, many Hong Kong professional service providers, from their base in Hong Kong, arrange for staff to work in the mainland or contact with the mainland business partners according to needs. When the bridge opens to traffic, it will greatly enhance the connectivity between Hong Kong and western PRD, making it easier for contacting mainland customers and managing positions established in western PRD.

Enterprises in Zhongshan, Jiangmen, Yangjiang and other places have good impression on Hong Kong producer services. For example, one respondent in Zhongshan noted that local manufacturers face increased costs, compelling them to go for automation. It also exerts growing pressure for businesses in transformation and upgrading as well as improving internal management. On the export side, a variety of certifications, regardless of product or plant, are required. The company reckoned that certification agents of Hong Kong are more strict and conscientious than their mainland peers and the certification practices and requirements are helpful in enhancing the company itself.

From interviews with enterprises in Yangjiang, Zhongshan, Jiangmen and other cities, it is found that these businesses have high regard for professional design of Hong Kong, such as industrial design. A major cutting tool manufacturer in Yangjiang said that they also make use of Hong Kong design, reckoning that there is some competitiveness. The manufacturer was of the opinion that products of the mainland industrial design students can look beautiful, but the structure is complex and production process is more difficult (such as the mould is complex), while the advantages of Hong Kong's industrial design is not only attractive appearance, but also the structure which takes into account time efficiency in production.

The strengths of industrial design in Hong Kong lie in more contact with the world of different design styles, enabling it to grasp the design trend. On the other hand, not just the use of foreign production technology, Hong Kong’s design profession also understands the mainland's production technology and is able to combine the international design trends with the mainland production environment. Precisely because of the slower industrial development of western PRD than the east, it leaves more room for development.

“Going out” and brand strategy bring service needs

In addition, some brand companies located in Zhongshan, Jiangmen or even Yangjiang are also planning to gradually explore expansion in overseas markets or further expand overseas markets from the original focus on the domestic market. One electrical appliances manufacturer in Zhongshan, for example, said in an interview that the proportion of its exports in total sales is gradually increasing. When mainland enterprises enter the international market, Hong Kong’s design services with its understanding of the world market provide them with consultancy services related to industrial design not only to improve the range of design, but also safety standards, local culture of overseas customers as well as patents and other technical issues.

Using external service providers to assist in brand building is one of the development strategies of Guangdong enterprises. Meanwhile, brand development and marketing are also the strength of Hong Kong. For example, interviews with enterprises in Zhongshan also found that local businesses have made use of Hong Kong designers and advertising companies to assist in the development of the brand image and for corporate advertising, respectively. It goes further that some Zhongshan brands, through sponsorship of Hong Kong TV shows, launch branding promotion that targets consumers in southern China.

Zhongshan has some achievements in the development of traditional industries, including lighting, clothing, household electrical appliances and furniture. In brand development, the city is also very active, which reportedly has 45 well-known trademarks in China. Meanwhile, Jiangmen and Zhuhai also have 13 and 10 famous national trademarks, respectively. As for the provincial well-known brand products or provincial famous trademarks, these cities boast even more. Under the general direction of industrial upgrading, the demand for professional services in brand design and marketing is also expected to rise further. Hong Kong’s design profession can help these brands to develop regional brands into national brands, as well as towards the specific direction of international brands, or build up proper positioning strategy for their products/ services in the mainland and overseas markets.

The need for different types of training

The development of western PRD will create more demand for different types of training. Yangjiang, for example, proposed to enhance the building of the local talent team, especially in the training of senior tourism management in the overall tourism development planning. According to the city’s tourism department, more than 600 people have attended tourism training sponsored by government units since 2014. Experts in the relevant fields were invited to teach these courses which were mainly for management-level personnel. Zhongshan Xiaolan Chamber of Commerce also pointed out that the local chambers of commerce held a lot of training every year, which are actively participated by companies to improve the management quality. According to a catering establishment which positions itself in the high end in Zhongshan, local talent is a challenge and now with the cooperation of local vocational schools, they are training students to take up the position of junior employees. Different types of training will also be provided to other employees of different levels, some of whom will be sent to Guangzhou, or have the trainers (including those from Hong Kong) come over to teach, particularly in management processes and service training.

In addition, the manufacturing enterprises in western PRD are adopting the strategy of automation development, the process of which involves a lot of different professions. A possible demand for professional consultancy services by local business is how to do better, faster and enhance the efficiency of the entire process. According to the HKTDC survey, among Guangdong enterprises which will seek out support services, 63.6% said they would consider using Hong Kong or overseas service providers providing services like "business consultancy, corporate management and training". Therefore, the potential demand for professional advisers and training services is also worth noting.

Establishment of producer service zones in industrial parks

As mentioned above, Zhongshan, Jiangmen, Zhuhai, Yangjiang and other cities have set up different industrial parks or new- and high-tech zones, a development of which is that these parks focused more on ancillary development of producer services. Within many industrial parks there are special zones earmarked for producer services, introducing related service providers such as industrial design into the parks. Jiangcheng Yinling Technology Industrial Park in Yangjiang, for example, has an incubation centre, housing producer services such as logistics as well as commercial facilities. Incubation centres of some industrial parks even provide preferential rent to attract more service providers.

Taking industrial design very seriously, Jiangmen plans to set up technology parks and encourage industrial design services in the city’s new- and high-tech zone, providing non-manufacturing space to related businesses in the incubator centre. Pengjiang district in Jiangmen is also building an industrial design centre with special characteristics. The HZMB is set to greatly facilitate Hong Kong service sectors providing services to Jiangmen. However, when these services intend to establish a local base by integrating the local elements with the advantages of Hong Kong to develop regional markets, they may take note of the privileges offered by these parks in the form of incubation centres.

Content provided by Picture: Billy Wong
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