HONG KONG Turning China into Opportunity Peter Woo Chairman Hong Kong Trade Development Council January 2006

I. WHY CHINA? II. WHY HONG KONG? III. A TALE OF 3 CITIES IV. TIME FOR ACTION I. WHY CHINA? II. WHY HONG KONG? III. A TALE OF 3 CITIES IV. TIME FOR ACTION

I. Why should you go to China? Fast Growing Economy: Out performed expectations in past 25 years GDP growth at 8.5% over 10 years GDP at US$2,000 billion - will double in next 10 years Out performed expectations in past 25 years GDP growth at 8.5% over 10 years GDP at US$2,000 billion - will double in next 10 years

The China story Expanding Consumption Power Total retail sales at US$760 billion a year 250 million people in the “middle-class” (20% of population) This group will increase to 25% by 2010 Total retail sales at US$760 billion a year 250 million people in the “middle-class” (20% of population) This group will increase to 25% by 2010

Expanding Luxury Market The China story Huge consumption power of the new rich US$ 2 billion on luxury items in % of the world's luxury market by 2015 Huge consumption power of the new rich US$ 2 billion on luxury items in % of the world's luxury market by 2015

Diverse China Markets BEIJING SHANGHAI HONG KONG The China story Beijing and Bohai Area Shanghai and Yangtze River Delta Greater Pearl River Delta Beijing and Bohai Area Shanghai and Yangtze River Delta Greater Pearl River Delta

China’s future direction: Balanced growth among different regions Further urbanization to lift living standards Move 200 million rural dwellers to cities in next years Build/Expand 200 cities of 3 million people each Balanced growth among different regions Further urbanization to lift living standards Move 200 million rural dwellers to cities in next years Build/Expand 200 cities of 3 million people each

II. Why Hong Kong? Why should you go to Hong Kong for China business? The Hong Kong Connectivity: Connectivity with the world markets Connectivity with the China markets The Hong Kong Connectivity: Connectivity with the world markets Connectivity with the China markets

60 years ago, Hong Kong was nobody Now, we are No. 11 in world trade 60 years ago, Hong Kong was nobody Now, we are No. 11 in world trade The Hong Kong Connectivity Hong Kong’s core business – International Trade and Commerce

Finance Trade and business services Transportation and logistics Finance Trade and business services Transportation and logistics The Hong Kong Connectivity Hong Kong – the international platform for:

Hong Kong – the marketplace for goods and services The Hong Kong Connectivity Close to 100 international trade fairs a year Eight of them going for world No. 1 Over 250,000 out of town buyers in 2005 (only TDC’s trade fair), half of them from Chinese mainland Close to 100 international trade fairs a year Eight of them going for world No. 1 Over 250,000 out of town buyers in 2005 (only TDC’s trade fair), half of them from Chinese mainland

Hong Kong – the unrivalled platform for China business The Hong Kong Connectivity First-mover advantage 50% FDI came from/through HK into China Experiences and business connections Risk management First-mover advantage 50% FDI came from/through HK into China Experiences and business connections Risk management

Mainland Private Enterprises – an added reason for foreign businesses to come to Hong Kong The Hong Kong Connectivity 4 million MPEs and growing. 30% growth in their number p.a. – compounded over last 10 years Hong Kong is their platform under the “ going out ” policy 4 million MPEs and growing. 30% growth in their number p.a. – compounded over last 10 years Hong Kong is their platform under the “ going out ” policy

Hong Kong = Location, location, location The Hong Kong Connectivity At the heart of Asia Three-hour flight to key mainland cities Air routes connect with 150 world cities + 45 cities in mainland At the heart of Asia Three-hour flight to key mainland cities Air routes connect with 150 world cities + 45 cities in mainland

Hong Kong – the ideal regional base The Hong Kong Connectivity About 6,300 international businesses have set up offices in HK, up 5.5% in 2005 Of these, 3,800 are regional headquarters or regional offices Number of Italian companies – 300 (53 are RHQs or ROs) All adopting the “Hong Kong Business Model” ! About 6,300 international businesses have set up offices in HK, up 5.5% in 2005 Of these, 3,800 are regional headquarters or regional offices Number of Italian companies – 300 (53 are RHQs or ROs) All adopting the “Hong Kong Business Model” !

The Hong Kong Connectivity The Hong Kong Business Model Low cost and effective High value-added processes maintained in Hong Kong Other processes moved into the mainland 60,000 Hong Kong-controlled factories in the PRD Low cost and effective High value-added processes maintained in Hong Kong Other processes moved into the mainland 60,000 Hong Kong-controlled factories in the PRD

A tale of three cities: Hong Kong + Shenzhen + Dongguan III. A tale of three cities – HK Plus = A regional economic powerhouse = The best entry point to China's markets = Combined consumer market of 25 million people = A regional economic powerhouse = The best entry point to China's markets = Combined consumer market of 25 million people

China’s innovation & technology centre New “Silicon Valley” – IT + R&D Manufacturing base China’s innovation & technology centre New “Silicon Valley” – IT + R&D Manufacturing base A tale of three cities – HK Plus Shenzhen

Dongguan Quality and competitive production base Clusters of all kinds of manufacturing Ample supply of low cost labour Quality and competitive production base Clusters of all kinds of manufacturing Ample supply of low cost labour A tale of three cities – HK Plus

Average real GDP growth, Compared with Shanghai 11.5% Compared with Shanghai 11.5% Shenzhen 15.8% Dongguan 18.7% Shenzhen 15.8% Dongguan 18.7% A tale of three cities – HK Plus

GDP per capita 2004 (US$) Shenzhen 7,160 Dongguan 8,698 Shenzhen 7,160 Dongguan 8,698 A tale of three cities – HK Plus Compared with Shanghai 6,682 Compared with Shanghai 6,682

PRD's Export Strength Compared with Shanghai73.5 Compared with Shanghai73.5 US$ billion (2004) Shenzhen77.8 Dongguan 35.2 A tale of three cities – HK Plus

"Wait-and-see" no longer a viable strategy Now is the opportune moment China’s markets will be further open under WTO commitments Your competitors are going, what about you? "Wait-and-see" no longer a viable strategy Now is the opportune moment China’s markets will be further open under WTO commitments Your competitors are going, what about you? Hong Kong PRD IV. Time for Action!

HKTDC is the conduit We match-make businesses the world over, specially SMEs HKTDC is the conduit We match-make businesses the world over, specially SMEs Time for Action!

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