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Hong Kong is more than a stepping stone to China; EMERGING MARKETS.

Byline: By John Revill Business Staff

Hong Kong can act as stepping stone into the vast Chinese market for small and medium sized companies in the Midlands, a seminar will be told today.

Chris Jackson, director of corporate development at the Hong Kong Trade Development Council, and Christopher Hammerbeck, executive director of the British Chamber of Commerce in Hong Kong, will address business leaders at Coventry & Warwickshire Chamber of Commerce.

The visit is part of a UK tour by the pair, who are also holding meetings in London and Bristol.

Mr Jackson said: "Hong Kong is an ideal platform for British businesses to get into the opportunities which are coming from the opening up of China over the next few years.

"The Chinese economy over the last 25 years has been dominated by a terrific export performance.

"But the Chinese leadership is introducing measures from January 1, which removes the tax benefits for export orientated Chinese manufacturers. This is part of a broader Chinese effort to re-balance their economy. At present the country has around EUR1 .4 trillion in reserves.

"Liquidity is a problem, but they cannot spend the money domestically too quickly because that would create inflation.

"They need domestic consumption to generate more growth."

This created opportunities for British companies to sell their products into China said Mr Jackson. The cash-rich Chinese companies also needed British expertise as they looked to take their production facilities 'up-market', he added.

"They need to make manufacturing more efficient and less polluting. There is a process of economic maturation in China which represents huge opportunities for medium sized and smaller British companies."

Hong Kong businesses are experienced at working in China, and could lessen the risks, said Mr Jackson. There are around 75,000 manufacturers in the nearby Pearl River Delta which are owned by Hong Kong companies

"The big guys who can sustain a few years of loss and who can make high level political connections face less of a problem getting into mainland China.

"Smaller and medium-sized companies face a much bigger challenge. Which is where Hong Kong comes in."

Mr Jackson said Hong Kong, with a population of seven million, represented a substantial market in its own right as well as a way to launch into China.

The territory receives 15 million visitors per year from the mainland, with many seeing products for the first time there before buying them when they return home.

The former British colony has overcome the Asian economic collapse of the late 1990s and the SARS outbreak, to enjoy three years of growth at an average rate of seven per cent.

"The economy is in good shape. There has been a recognition that Hong Kong needs to keep moving up market if it is to seize the opportunities in China.

"We want to encourage British companies with particular technical skills and services which could have an impact on mainland China."

Mr Jackson said his organisation could arrange for British firms to partner with counterparts in Hong Kong to reduce the risks.

"A British company may have a particular gadget or idea, but the Hong Kong companies have tremendous experience of the Chinese market.

"They can offer contacts and structures to expand."

Under the tax changes coming into effect on January, companies wishing to repatriate their profits from China face a tax of 10 per cent, compared with five to seven per cent from Hong Kong.

Mr Jackson said companies could also use Hong Kong to arrange agents, while there were several other benefits.

"The legal system is basically the British system; there is an independent judiciary with common law and strong IPR legislation and enforcement.

"The government is open and accountable and works in English. Plus, it is easy to register yourself as a company in Hong Kong."

Hong Kong was not as expensive as it was sometimes portrayed, added Mr Jackson.

"There is much more modest offices and accommodation on offer. I live 20 minutes away from the centre of Hong Kong island, on Lantau Island at a three bedroom apartment with a lovely view. That costs less than pounds 1,000 per month."

Financial and insurance companies could find Hong Kong attractive because of the territory's position as the financial centre of the region.

Hong Kong was stronger than Shanghai because it has a freely convertible currency - unlike the Chinese yuan - while the legal system in China was also 'under development' said Mr Jackson.

Some 75 of the world's top 100 banks also had a presence in Hong Kong, while the territory' s stock market was being used by many Chinese companies to float.

"Last year the value of IPOs on the Hong Kong stock exchange was second only to London.

"There is plenty of scope for Midland companies to come to Hong Kong to launch themselves into the world. There is a lot of money coming out of China and being invested there and looking for investment opportunities globally.

"There is a chance for British business to offer them investment opportunities."

Other areas of interest would include logistics and business services, while manufacturers could also benefit.

"Hong Kong is the hub of a huge manufacturing operation. Many, many things are made in China, but many of those are made in the Pearl River Delta. This area is essentially the heart of the world's biggest biggest light manufacturing centre.

"There are regulatory requirements to become more efficient, reduce pollution and improve quality control. This offers an opportunity for British firms. By getting involved in Hong Kong, it doesn't step-by-step expose itself to so much risk."

Mr Hammerbeck said the aim of the visit was to promote Hong Kong to small and medium sized companies.

"There are tremendous opportunities to trade and source goods in the Pearl River," he said.

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Above: Hong Kong. Chris Jackson, left, says it is an ideal platform for British business to get into over the next few years
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Title Annotation:Business
Publication:The Birmingham Post (England)
Geographic Code:9CHIN
Date:Oct 17, 2007
Words:992
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