Market Overview

* Hong Kong is an ideal market platform for doing business in Asia, especially Mainland China.  Hong Kong is a "free port" with virtually no duties or tariffs.  Its strong rule of law and respect for property rights make it an ideal strategic platform for U.S. companies, especially small- and medium-size firms, seeking to do business in Asia.  Hong Kong partners typically know, and have close links to, markets in Mainland China and the rest of Asia.

* Key charateristics: Open to international tourism, trade and investment.

• Population: 6.96 million (end-2007).
• Visitors: 28.2 million (2007).
• GDP Per Capita: US$27,565 (2006).
• GDP Growth: 6.2% (3Q/2007).
• Trade to GDP Ratio: 343% (2006).
• U.S. Exports: US$20.1 billion, 5.5% of Hong Kong's imports (2007).
• Major Trading Partners: Mainland China, U.S., EU, Japan, and Taiwan.
• Other: World-class infrastructure; free flow of information; no restrictions on inward or outward investment; no foriegn exchange controls; no nationality restrictions on corporate or sectoral ownership; simple low-tax regime, and world financial center.

* Special Administrative Region of China: Hong Kong has its own common law legal system, currency and customs jurisdiction. Hong Kong's financial, marketing and technical expertise, and sophisticated infrastructure, combined with the Mainland’s rapidly developing manufacturing base, create wide-ranging business opportunities. A majority of Hong Kong manufacturers have moved production to South China’s Pearl River Delta (PRD), with Hong Kong functioning as the region’s services and trade hub. Mainland China is Hong Kong’s largest trading partner, and four thousand Asian and Western multinational firms with interests in Mainland China have their headquarters in Hong Kong.

* Closer Economic Partnership Arrangement (CEPA) with Mainland China: This free trade agreement offers Hong Kong's products and firms preferential access to the Mainland's market. CEPA goes beyond Mainland China's World Trade Organization (WTO) commitments, eliminating tariffs and allowing earlier or preferential access to some services sectors. Overseas companies can partner with, invest in, acquire, or buy into a CEPA-qualified firm in Hong Kong.

Market Challenges

* Increasing integration with the Mainland: As Hong Kong’s Mainland China market access and opportunities have grown, higher costs have led to a hollowing out of its manufacturing sector. Mainland rivals present increasing competition, even in sectors where Hong Kong has long been dominant, like container port handling.

* Firms are bypassing Hong Kong: Companies that go directly to the Mainland China market without sufficient due diligence, however, often face higher costs and longer delays than if they had first engaged a Hong Kong-based intermediary.

Market Opportunities

* Excellent prospects for U.S. suppliers: Over twenty percent of all Hong Kong Government contracts are awarded to U.S. firms. Leading export sectors for U.S. firms include computer peripherals, plastic materials & resins, electronic components, drugs and pharmaceuticals, environmental technologies, mass transit equipment, landscape architectural services, automotive parts and accessories, safety and security equipment, green building materials, and cosmetics and toiletries.

* Major Hong Kong public infrastructure projects include: Hong Kong International Airport Expansion Plan, Kai Tak Airport Redevelopment, Tourism Infrastructure and City Improvement, Disneyland, West Kowloon Cultural District, Port Development, Ocean Park Revamp Plan, Harbor Area Treatment Scheme, the Hong Kong-Macau-Zhuhai Bridge, the Waste Reduction Project, the South Island Line, the Sha Tin to Central Link, and the Guangzhou-Shenzhen-Hong Kong Express Rail Link.

* Hong Kong-based Procurement: Hong Kong is home to a large number of procurement agents and purchasing offices. U.S. suppliers who take time to investigate these networks will find that many purchasing decisions for major projects and conglomerates in Macau, Mainland China or other countries are actually made in Hong Kong.

Market Entry Strategy

* Hong Kong agents and distributors can increase sales of U.S. products in both Hong Kong and Mainland China. Given Mainland China's size and diversity, it is sometimes advisable to work with different agents for different regions of Mainland China.

* Hong Kong firms are eager to work with serious exporters. U.S. firms can show commitment to success in this market by using metric measurements, providing Chinese-language materials, responding quickly to inquiries, meeting relevant standards, and visiting the market for first-hand understanding and relationship building.

* Companies considering entering this market should understand Hong Kong's fast-paced business climate. Decisions are made quickly. Firms must respond immediately to inquiries or risk losing opportunities to faster-moving competitors.