Hong Kong is much more than a “China gateway.” Its efficient infrastructure, energetic people and alluring landscape make Hong Kong a must-consider stop for U.S. businesses of all dimensions, but especially the small- and medium-size newcomer, says Andrew Wylegala, chief commercial consul, American Consulate General Hong Kong, U.S. & Foreign Commercial Service.
About Andrew Wylegala
Chief Commercial Consul
American Consulate General Hong Kong U.S. & Foreign Commercial Service, USDOC
During his 20 years with the U.S. Commercial Service, Andrew has helped U.S. firms — especially small and medium-size ones — meet their trade and investment objectives. He has worked in markets as diverse as Mexico and Germany, and his 2008-2012 posting to Hong Kong marks for him a welcome return to Asia. He’s focused on the Obama Administration’s National Export Initiative to double U.S. exports and generate 2 million American jobs within five years. Hong Kong offers a strategic platform for the Initiative; he’s eager to talk to all interested companies, and sees particular potential for those in consumer, life science, environmental, education and design areas.
Andrew received the U.S. Department of Commerce Bronze Medal for superior federal service three times, most recently in Baghdad, from which he opened a satellite Commercial Service office in the Kurdish region of Iraq.
Spotlight on Hong Kong with Andrew Wylegala
Tell a little about your experience in the Hong Kong market.
Hong Kong rates as the top experience of my half-dozen postings with the Commercial Service. Where else can you have a luxurious breakfast at 1,600 feet in the world’s tallest hotel, then hop a 30-cent seat on a 100-year-old tram, to be dropped at the trailhead of a stunning walk along the ridge of a mountain that leads to a welcoming beach, all by noon?
My Hong Kong team of a dozen and I have helped hundreds of U.S. firms do a thriving trade in and through this Special Administrative Region of China. It is stimulating work because the sales are as likely to involve customers in the mainland of China and other Asian countries, or in places even farther afield, such as Russia or the U.A.E., as they are from the local Hong Kong market.
Hong Kong has always been far more than a “China gateway.” And with the rise in the importance and complexity of doing business in mainland China, more than ever, Hong Kong can be instrumental to the success of new-to-Asia American firms. The efficiency of the infrastructure, the energy of the people and allure of the place, all make Hong Kong a must-consider stop for U.S. businesses of all dimensions, but especially the small- and medium-size newcomer.
Take, for example, a Cocoa, Fla., sun-care products firm that cracked 10 new markets over the last two years, all after appointing a Hong Kong distributor. The region is the company’s fastest growing and represents 20 percent of its global business. This wouldn’t have been possible without Hong Kong’s open, transparent import regime and regulatory framework — aided by a hand from the Commercial Service’s matchmaking.
In consumer goods, especially cosmetics and personal care, Hong Kong is an oasis of laissez faire. From this unique hub, our exporters can fill shelves, introduce new products, and find help to service and tackle the many trickier regulatory regimes all around Asia.
How does the Hong Kong market differ from the rest of Asia?
To start, there’s the Pacific Bridge Initiative (PBI). It began in November 2010 as a U.S.-export-enhancing collaboration among local chambers and government-affiliated bodies to boost the Obama Administration’s effort to double U.S. exports in five years, the National Export Initiative (NEI). Tellingly, the motive force behind the PBI was Hong Kong’s Trade Development Council — or HKTDC — the statutory body that promotes Hong Kong’s commerce so well. While the concept sounds simple, and perhaps a no-brainer for a trade-dependent economy like Hong Kong’s, the PBI approach also reflects the city’s geography and strategic take on regional and global commerce. Simply put, Hong Kong “gets trade” and wants to deal with American firms.
Hong Kong is uniquely positioned to boost U.S. exports because it’s a free port with tariff- and exchange-control-free international trade. It also stands out for its world-class service and by virtue of being a five-hour flight from over half of the world’s population!
It is known for hosting the friendliest mixture of Eastern and Western cultural traits. Discrimination — or immutable preferences, for that matter — on national origin is rare. Where else are cabbies who can navigate Cantonese, English and Mandarin prominent?
The world knows few government procurement systems as open and transparent as Hong Kong’s, and corruption is uncommon. It’s a big city with one of the lowest incidences of violent crime on the planet. Hong Kong has long been known as one of the premier financial centers of the world, and that stature grows via its unique franchise in developing Chinese Yuan-denominated financial products “offshore” from the mainland. (Even after returning to Chinese sovereignty in 1997, Hong Kong maintains its own currency, pegged to the U.S. dollar.)
For example, not only can firms settle trade accounts in Yuan when advantageous, but Hong Kong-based firms of any nationality can issue bonds in Yuan, while Hong Kong and mainland investors have new opportunities to invest in one another’s stock markets, further cementing Hong Kong’s status as a regional and global financial hub.
It also holds a similarity to the United States. Not only does Hong Kong enjoy what a risk consultancy qualified as the best judicial system in Asia, but, with its base in Common Law, it offers a system that Americans find familiar. Hong Kong is a place where U.S. companies can reliably conclude and enforce business contracts. Intellectual Property (IP) is an enormous concern when U.S. firms venture into mainland business. In Hong Kong your innovations can enjoy strong physical and legal protections, and you can find expertise to help defend precious IP when tackling the major market just to the north.
What are some thriving industries or opportunities that U.S. exporters should be aware of?
Given that Hong Kong purchased some $27 billion from the U.S. in 2010, making it our 12th largest export market and largest trade surplus worldwide, it’s no surprise that U.S. exports to Hong Kong are diversified, comprising products that range from electric diodes and telecom gear to food, wine and other consumer goods. Aviation equipment, software, certain bulk commodities, licensing and franchising, and green build technologies and services are all lucrative opportunities as well.
Cosmetics and toiletries were a $263 million market for U.S. firms in 2010, with growth over the coming year to exceed 20 percent — driven largely by mainland consumers, nearly 30 million of whom visit Hong Kong annually. Should that kind of opportunity register with your firm, don’t miss the U.S. Pavilion at Cosmoprof Asia, an annual Hong Kong staple. Luxury consumer goods, across the board, are hot commodities, in fact. Small wonder that Coach, Inc. will shortly be the first U.S.-domiciled company to list in Hong Kong.
Film and TV content from the States is another place to shine the klieg lights. Under a de facto free trade agreement that Hong Kong has with Beijing, films co-produced in Hong Kong with U.S. partners count as Chinese works and fall outside the mainland’s screen quotas for domestic films. But even outside that channel, our office found a real hunger for U.S. titles. For example, at last March’s Filmart trade show we helped 30 mostly smaller U.S. exhibitors strike over 100 deals in 11 different markets, with a total value over US$5 million.
In sum, there is plenty afoot in a place endlessly looking to find its next growth engine, as old models such as local manufacturing or outsourcing basic processing work to the Pearl River Delta Region (just across the border) give way to new opportunities, such as biotech or IP trading. As for partnering prospects for U.S. firms, I like firms looking to help Chinese firms go “up the value chain” or outbound via global investment with licensing, branding and production partnership arrangements. Educational and health equipment and services are naturals for a society with both a small set of upwardly mobile youth and a large contingent of elders.
On the environmental front, there’s plenty to clean up, both in terms of Hong Kong’s roadside emissions and local water and solid waste streams, as well as the major environmental opportunities just across the border in China’s Guangdong Province. Upgrading the energy efficiency of Hong Kong’s 40,000 existing buildings will be big business.
Can you share some unique characteristics of the Hong Kong business culture?
Hong Kong is an affluent, services-dominated economy that is both highly cosmopolitan and thoroughly Chinese. Trade, finance, real estate, aspiration for higher educational attainment, and lifestyle trend-following and -setting: These are the drivers of economic and cultural life in Hong Kong.
Newcomers feel at ease approaching business contacts here but should build solid personal relationships around business, respect customs, and prepare for a small dose of Cantonese superstition around the edges of a thoroughly modern and down-to-earth take on life. This is a fast-paced, can-do city, and there is little tolerance for under-prepared proposals, or slow follow-up or customer service. Competition is tough, and — with the planet’s highest retail rents in many cases — there is enormous pressure on turnover and product innovation. Women entrepreneurs have some of the best business concepts going, but the representation of females in top corporate circles is relatively low.
When surveying the economy, don’t let laissez faire structures on the external side mislead you about the domestic economy, which is often a patchwork of cartels. Shareholder rights and stock-market policing are generally sound, but leave room for improvement — perhaps one reason locals have gravitated toward real asset investment.
Can you share some tips for U.S. companies doing business in Hong Kong? What can they expect, and how can they navigate the market effectively?
Appreciate Hong Kong fully: an affluent-if-limited market of 7 million, plus unparalleled entré to the challenging and vastly deeper mainland China market to the north, and a platform to find and serve customers from across Asia and beyond. Learn about and leverage the advantages of “One Country, Two Systems,” the 50-year political framework set in 1997 that allows Hong Kong to operate autonomously from Beijing in non-defense and foreign affairs matters, and under free-market norms, while enjoying privileged access to the mainland China market.
Be quick to react to trends in the fast-paced heart of a broad Asian region that is far from homogenous in business models and consumer tastes. Be ready to localize your products in everything from physical dimensions, to skin tone, to humidity resistance. Being quick to move does not mean throwing due diligence out the window. There are a host of shady actors looking to cash in on the next “China Bonanza,” so care in checking bona fides is a must — something the Commercial Service can assist you with.
Endeavor to grow your business lines and relationships over time. Your job is to create long-term partners in business, not just push containers of product. This is a dynamic part of the world, so be prepared to visit regularly (a few times a year is ideal) to work on promotion, expand relationships, and explore new models and opportunities to keep the business growing.
Begin exploring the market by utilizing Commercial Service (and Foreign Agricultural Service) help, starting with the U.S. Export Assistance Center in your area or with our website (www.export.gov). Hong Kong is a small place with a big ambit. Test Hong Kong’s friendly waters, directly, via one of its world-class trade events. Or — if at all hydrophobic — scramble over our “Pacific Bridge.” Deals await.
Learn more about exporting to Hong Kong
Get more in-depth information about doing business in Hong Kong. Read about market opportunities and challenges, check out upcoming events, and dive into market research — all from the USCS website.
Go to the USCS Hong Kong website
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