EMBA 2007– The Chinese University of Hong Kong G4 Trading and Manufacturing in Hong Kong – An Asset or Liability? By Group 4: Sunny Chai, Cally Chan, Raymond Ho, Tian Jie, Freda Lam

EMBA 2007– The Chinese University of Hong Kong G4 Controversial quotes -

EMBA 2007– The Chinese University of Hong Kong G4 Agenda Scope of Trading and Manufacturing industry Analysis of Current Situation in HK Economic Considerations – What is our future? Possible Directions of HK Conclusion

EMBA 2007– The Chinese University of Hong Kong G4 Scope of Trading & Manufacturing Industry Manufacturing Import and Export Trading (merchandise) High value-added supporting services – value chain How about Offshore Trading?

EMBA 2007– The Chinese University of Hong Kong G4 Analysis of Current Situation - Trend Development Trend of Industry Relocation –1970s –1980s –1990s Complementary role between HK and Mainland –R&D –Design –Sales and marketing –Order processing –Manufacturing –QC & packaging –Shipping –Trade financing and insurance VALUE CHAIN !!! Survey Result - Place of origin of goods by export value 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% Hong KongChinaOther places Made in

EMBA 2007– The Chinese University of Hong Kong G4 Analysis of Current Situation – Offshore Trade Why Offshore Trade? –Direct shipment vs. Re-export/ Tran-shipment –Improved China port facilities –Increased production hub in YRD –Cost, speed and efficiency consideration Why re-export still increased (36% from 2000 to 2004) ? Throughput of HK cargo rose by 1.3% but Shenzhens by 23%

EMBA 2007– The Chinese University of Hong Kong G4 Analysis of Current Situation - Globalization Can offshore trade contributed to our GDP? Globalization of HK manufacturers –Low cost production and sourcing –Offshore trade (China, Indonesia, Cambodia, ….) –Overseas presence such as sales agents, R&D, etc.

EMBA 2007– The Chinese University of Hong Kong G4 Analysis of Current Situation - GDP GDP of manufacturing drops from 23% to 3.5% from 1980 to 2003 while for trading – increase from 20% to 26% Dollar value of GDP contribution significantly increased for trading

EMBA 2007– The Chinese University of Hong Kong G4 Analysis of Current Situation - Employment A lower unemployment rate from 7.9% in 2003 to 6% in 2005 does not help the manufacturing sector. Where can we house the manufacturing labor? Extracted from Census and Statistics Department and HK Social & Economic Trend 2003 Ed. Number of persons engaged in1992 % 2002 % Manufacturing sector565, %184,5005.3% Import/ export trade sector398, %501, % Wholesale, retail, restaurants and hotels sector 516, %482, % Financing, insurance, real estate and business services sector 314, %441, % Community, social and personal services sector 268, %402, % Others (including unemployment)435, %1,475, % Total Labor force2,498, % 3,487, %

EMBA 2007– The Chinese University of Hong Kong G4 Economic Considerations – Whats our Future? Michael E. Potters research on competitiveness of countries: –Factor driven –Investment driven –Innovation driven HKs competitive advantages: –Geographical location –Nature resources - land –Human capital –Labor cost Shrinking advantage of re-export and port facilities

EMBA 2007– The Chinese University of Hong Kong G4 Economic Considerations – Whats our Future? International finance center and business hub High value-add processes in value chain Innovative driven industries (not primary driver)

EMBA 2007– The Chinese University of Hong Kong G4 Economic Considerations – Whats our Future? Survey by Enright, Scott & Associate in 2005 – best Asia Pacific city for regional HQ Survey by TDC in 2002 on investors in PRD: –19.7 % has office in HK –14.5% has a plan to place an office in HK –49.3% has great interest and potential of opening an office in HK in the future –16.6% is having no plan to do so

EMBA 2007– The Chinese University of Hong Kong G4 Possible Direction of Hong Kong Industries Role of Hong Kong Government Participation of Investors and Business Owners Education and Community Support and Development

EMBA 2007– The Chinese University of Hong Kong G4 Role of Hong Kong Government Non-intervention Policy Not Clearly Defined Industrial Policy Comparing to other Asian countries Market Leads, Government Facilitates

EMBA 2007– The Chinese University of Hong Kong G4 Well-defined Industrial Policy Establish of Industrial Policy to support Hong Kong as an International Business Hub Set up of Industrial Technology Board to help monitoring the policy

EMBA 2007– The Chinese University of Hong Kong G4 Encouraging R&D Investment Diversify Activities in Research & Development ASTRI (Applied Science and Technology Research Institute) High Tech, hi-yeah (problems and losses); Low Tech, lo-yeah (gains and profits) by Elite Ind. Holdings founder – High-Technology vs. Applied Technology

EMBA 2007– The Chinese University of Hong Kong G4 Encouraging R&D Investment R&D Investment Comparison

EMBA 2007– The Chinese University of Hong Kong G4 Further Promoting the Business Hub Hong Kong Trade Development Council InvestHK Nerve Centre – Business Hub

EMBA 2007– The Chinese University of Hong Kong G4 Opportunities through Value-added Approach Proactive Thinking Invest in Value-added Products and Services Maintain Design Expertise and Core Technologies in the organization Make a Difference among your Competition

EMBA 2007– The Chinese University of Hong Kong G4 System Improvement through varies Management Tools Just in Time (JIT); Failure Mode and Effect Analysis (FEMA); Standard Practice Time (SPT); 6 SIGMA; Statistical Process Control (SPC); Total Productive Maintenance (TPM); Quality Control Circle (QCC); 5S, etc.. Employees Training through System Qualification or Participation in Award Competition Opportunities through Value-added Approach

EMBA 2007– The Chinese University of Hong Kong G4 Opportunities through Value-added Approach Value-added through Brand Building For Manufacturing, from OEM to ODM, from ODM to OBM

EMBA 2007– The Chinese University of Hong Kong G4 Opportunities through Value-added Approach Creative Industries (arts, film, music production, publishing, theme park, tutoring and training, healthcare and beauty care, organic food production, and business consultation ) Environmental Protection Industries (300 establishments with employment of some 26,000 persons) Tuen Mun EcoPark ($316 million to build a 19-hectare EcoPark in Area 38, Tuen Mun by the Environmental Protection Department) Directives from EU and other countries

EMBA 2007– The Chinese University of Hong Kong G4 Education & Community Support and Development Education system and Syllabubs in pace with Business Hub development Community Awareness of Technology Change

EMBA 2007– The Chinese University of Hong Kong G4 Conclusion Hong Kong is not feasible for low- value and labour intensive process; look into area which value can be added Continue to provide stable political and social economy, upholding of law, low tax, and free trade policy Enhance development as a Nerve Centre and an International Business Hub

EMBA 2007– The Chinese University of Hong Kong G4 Trading and Manufacturing in Hong Kong – An Asset or Liability Thank You Q & A