Hong Kong Business

ANNUAL '14

2013

10 PAGES KEY ECONOMIC STATISTICS 18 TOP INDUSTRIES REVIEWED brain drain looms in hong kong hong kong mulls audit oversight reforms Display to 20 December 2014

HONG KONG BUSINESS ANNUAL 2014 1

Contents Annual 2014

2014 OUTLOOK 10 12 14 16 18

Hong Kong to outperform in 2014 Brace for a downward pressure in 2014 Brain drain looms in Hong Kong HK strengthens foothold as a legal hub Hong Kong mulls audit oversight reforms

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MOST READ IN 2013 20

A month-by-month review of Hong Kong’s top stories in 2013

COMPANIES AND INDUSTRIES 26 28 30 32 34

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Hong Kong's telco exports jumped 21% in 2013 Hong Kong is the world’s largest exporter of electronics Total exports of household electrical appliances slumps Hong Kong as a major exporter of AV equipment Hong Kong’s exports of IT equipment expanded 1% in 2013 Why Hong Kong’s hardware industry needs efficient management Precious material makes up 86% of Hong Kong’s jewellery exports Clothing industry is the third largest manufacturing employer in Hong Kong Hong Kong’s textile industry boosts exports A majority of SMEs dominate Hong Kong’s printing industry Small and medium-sized companies lead Hong Kong’s lighting industry Handbag manufacturers move their production to Mainland China China is the largest footwear exporter, manufacturer, and consumer since 2011 Active trading activities boost Hong Kong’s processed food and beverages industry Auto parts and accessories industry continues to grow A peek inside Hong Kong’s air transportation industry Hong Kong’s sea transport industry account’s for its 10th rank in world trading Development of HK's wine industry accelerates

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BY THE NUMBERS 62 63

Labour Force, Unemployment and Underemployment Number of Establishments, Persons Engaged and Vacancies (Other than those in the Civil Service) by Industry Section HONG KONG BUSINESS ANNUAL 2014 3

Contents Annual 2014

74

High-Flyers 2013 74 AIA Hong Kong

100 Noblesse Lifestyle Group

78 Ageas Insurance Co. (Asia) Ltd.

102 Ovolo Hotels

80 AIG

104 The Pacific Cigar Company

82 ALTRUIST

106 RICOH Hong Kong Limited

84 Arakaki Tsusho Corporation

108 Shama Management LTD.

86 Canadian International School

110 Sound Concepts

88 The Cityview

112 The Mercer

90 Freywille

114 Thomas, Mayer & Associes

92 Fujitsu

116 Rhombus International

94 Godiva

96 H채stens 98 Jebsen Marine

88

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Hotels Group 118 Wharf T&T Limited 120 Zchron Design

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ANNUAL 2014

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OPINION

HEMLOCK

Hibernation catch-up

HEMLOCK www.biglychee.com hemlock@hellokitty.com

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fter a good 10 days’ retreat from seasonable boisterous throngs – grinning givers of glad tidings, mindless bearers of gifts, unconvincingly cheerful midnight revelers and massed photographers of fireworks – it is safe to come out: 2014 is here. And some interesting things have been going on. The Hong Kong government gives up trying to squeeze a hefty land premium out of property developers for a particular site and asks them to propose their own. The newspapers’ angle is that this shows Chief Executive CY Leung’s housing targets are under threat. This may be so, but it’s not the real story. The real issue is this absurdity: the government says it wants to increase the supply of affordable homes but at the same time insists on maximizing its revenues from this up-front land development tax. Let’s strip out several factors from the equation, like the global liquidity-driven asset-price bubble, construction costs distorted by white-elephant infrastructure projects and the local property cartel’s profit margins. What you are left with is ‘the unaffordable price of housing equals the high level of land premium’. If the government wants affordable housing, all it has to do is tax housing less (or differently), which it can easily do given its bulging budget surpluses and fiscal reserves. Obviously, there are all sorts of vested interests and insurmountable ‘lack of consensus’ barriers to correcting this extreme illogicality (though nothing a few firing squads couldn’t fix), but on paper it’s that simple. Do you want a) affordable homes or b) ever-growing government reserves? (tick one only). If developers are invited to offer land premiums, there is a theoretical possibility that they will collude behind the scenes to jointly bid low, in effect, and share the spoils in due course. Of course, in practice, the highly respected half-dozen families who control real estate would never do such a thing, would they? Which brings us rather neatly to tycoon Li Ka-shing’s Cheung Kong Infrastructure, which, to the horror of thin-skinned Brits, makes mouth-wateringly high profits while paying very low tax rates in the power-cut-stricken UK. Hongkongers are also shocked, as they witness the South China Morning Post digging around the publicly available data and reporting that CKI enjoys an enviable degree of tax efficiency right here in the Big Lychee (and in Australia, while we’re at it). There have been times when such forthright non-glowing coverage of the Li empire would, quite possibly, not appear in the first place. The conglomerates concerned comprise a big source of media ad revenues, and their proprietor is the tycoon to whom lesser magnates, whether or not they run shoe-shining newspapers, all defer. Maybe this article just slipped through the editorial net during the holidays (keep an eye out in case reporter Toh Han Shih falls from a window). In which case, expect some highly flattering stories about Cheung Kong and Hutchison before long. But maybe this is another of those tantalizing signs of the fading of an old order that has outlived its usefulness to our ultimate masters. Beijing’s frustration with Hong Kong’s tycoons is presumably

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behind the recent suggestion that Mainland officials now blame disunity in the pro-establishment camp – not the pro-democrats – for the Big Lychee’s problematic/farcical governance. It is a telling example of Chinese leaders’ warped perceptions of the world beyond Zhongnanhai. Hong Kong’s problems will be solved if particular groups of shoe-shiners with grudges shut up and get on board with the local administration. As if the same Beijing-appointed administration’s crap policies (housing plus your top 10 other favourites) have nothing to do with it. All you have to do is appoint a government that puts the overall public interest first: it will win broad community support, and you won’t have to scrabble around trying to assemble a motley United Front of grasping billionaires and grubby Communist stalwarts. But of course that would be putting the led in charge of the leaders. Which brings us to the pro-democrats’ annual January 1 march (not to be confused with their annual July 1, June 4, October 1 or other events), which was or wasn’t a test-run for Occupy Central. And which does or does not presage a long, hot 2014 as Hong Kong tries to introduce a version of universal suffrage that fits tidily into a paranoid one-party Communist state. The Standard takes the pro-dems’ mock-referendum on political reform surprisingly seriously, while its usually strident ‘Mary Ma’ editorial sounds half-sympathetic about the relatively low turnout at the demo, and even breaks with the United Front line that Occupy Central will mean the end of civilization. As with the SCMP’s coverage of KS Li, maybe it’s the hangovers, or maybe Beijing’s locally based spin-doctors have made some interesting New Year’s resolutions.

ECONOMIC OUTLOOK

Hong Kong to outperform in 2014

Hong Kong’s economy will likely grow faster next year but why will top talent flee in droves?

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n their year-end reports, analysts painted a slightly rosier economic outlook for the territory: Gross domestic product (GDP) growth should inch higher by a few percentage points, while inflation should moderate slightly. But the prospect of an improving economy may not be enough to keep Hong Kong’s best and brightest from relocating to other Asian countries that offer increasingly competitive compensation, better quality of life, and lower costs to own property. GDP growth and inflation Major investment research firms and banks predict a slim rise in Hong Kong’s GDP growth in 2014. Goldman Sachs Investment Research estimates GDP growth to hit 3.7% in 2014, up from an estimated 3.2% in 2013. DBS calculates GDP growth to improve to 3.0% in 2014 from 2.8% in 2013. Standard and Poor’s forecasts GDP growth to jump to 3.4% in 2014 from an estimated 2.8% in 2013. The credit rating agency 10 HONG KONG BUSINESS ANNUAL 2014

“DBS calculates GDP growth to improve to 3.0% in 2014 from 2.8% in 2013."

said Hong Kong, along with the three other Asian Tiger economies –Korea, Singapore and Taiwan – will likely outperform next year on the back of projected pick-ups in US growth and global trade. “Just as these economies have underperformed in the weak global trade environment of recent years, they should do well on the back of higher export growth next year,” said Standard & Poor’s. Hong Kong will also be kept afloat by firm mainland China growth and accelerated demand from developed markets, said Goldman Sachs in an economics research report released in November. DBS noted that Hong Kong must capitalize on emerging opportunities in China to bolster its growth. “We foresee opportunities from China’s growing services sector, demand for consultancy expertise, as well as the need to build transportation networks and utilities to support its urbanization drive. 2014 is not only a decisive year for China, but can be one for Hong Kong too. However,

if Hong Kong sits back and relies on traditional growth drivers such as mainland tourist spending and property investment, disappointment seems likely. With regard to inflation, analysts believe it will moderate next year due to lower residential rent increases, resulting from government-led property cooling measures. The benign price outlook for commodity imports will also contribute to slightly lower inflation, said Goldman Sachs. But overall, Hong Kong’s economic outlook is somewhat rosier than previous years, said Peter Lee, Divisional President – Greater China, CPA Australia. “However sentiment is being held back by high office rents and increasing competition from other Asian economies,” he added, referring to data from the CPA Australia Hong Kong Economic Sentiment Survey. The survey, which polled 225 of the organization’s members in the finance and accounting profession, revealed that 21.8% expressed a positive

ECONOMIC OUTLOOK outlook on the Hong Kong economy in 2014, up from just 12.8% last year. But 27.1% of the respondents gave a negative outlook to still outnumber the bullish group. Growth hurdles and talent drain The CPA Australia poll enumerated a list of hurdles that could hamper Hong Kong’s economic growth, and consequently, its regional competitiveness in 2014. High office rental was voted as the factor that will most negatively impact Hong Kong’s economic outlook, garnering agreement from 16.4% of respondents. Other perceived threats include increased competition from other Asian economies (13.8%), slower growth in Mainland China (13.8%) and high property prices (13.3%). DBS also expressed caution on the seemingly booming trade numbers in recent months, suggesting it is more an effect of a very low base during the year and may not translate to a sustained rise in 2014. “Despite recent improvement in both export and import numbers, we have identified worrying export trends in many product categories. Re-exports of consumer goods have been falling consistently over the past two years and growth of re-exports of capital goods and raw materials has decelerated since the beginning of 2013,” said DBS. There is also growing concern that Hong Kong’s top talent will be tempted to seek greener pastures abroad – and pose a serious threat to the territory’s long-term growth and prosperity. The CPA Australia survey showed that more than one in four

respondents -- predominantly from the financial services, retail, property and public practice services – are contemplating leaving Hong Kong to work in rival Asian hubs, namely Mainland China and Singapore. To be sure, Hong Kong is still the top country of choice when it comes to financial services and professional services, with over half of respondents ranking Hong Kong as the most competitive compared to the other two countries. But its apparent edge in other industries is waning. Mainland China, for instance, was ranked by the same respondents as the most competitive market for trading, and logistics and tourism. Many are expressing dissatisfaction with the Hong Kong’s development path despite the continued high employment rates. Unemployment is predicted to stay between 3.3% to 3.5% in 2014, based on DBS estimates. Citing their reasons for a possible overseas move, 36.9% of respondents said they lack confidence in Hong Kong’s future. Respondents were also critical of the deteriorating living environment (20.0%), work-life balance (13.9%) and high property prices (13.9%) in the territory. It also does not help that salary expectations are subdued, with only 24.4% of respondents expecting a salary increase of more than 4.5% in 2014. “Professionals are attracted to move elsewhere for higher monetary benefits and a better quality of life. The issue for the government now is not only how to attract foreign and local talent but how to retain them in the war for talent,” said Lee.

“Around 20% or roughly 1.3 million of the Hong Kong population live in poverty, according to a recent study."

Poverty and property In addition to winning back top talent, Lee said the government should address poverty in Hong Kong. Around 20% or roughly 1.3 million of the Hong Kong population live in poverty, according to a recent study. “The government should review its public housing strategies and work to increase the supply of public housing to support those in need. An increase in social security spending would also help reduce the levels of poverty in Hong Kong. “However, we need to bear in mind that any new supply of property will come into effect after a few years. Therefore it will take at least 1 to 2 years to see a major shift in the demand-supply situation of property,” said Lee. In the meantime, the government has been taking steps to cool property prices so they can become more affordable to home owners, retailers and businesses. “With property prices negatively impacting the economy, the government needs to ensure that the current cooling measures are maintained and where appropriate, adjusted to stabilise the market,” advised Lee. Given government interventions, property prices for residential, retail and office sectors are all expected to go down. 60.1% of respondents in the CPA Australia poll expect residential property prices to decline in 2014. Of these, 28.9% predict a decline of 1% to 10% in prices. “This represents a significant jump in the percentage of respondents expecting a decline in prices in these markets from the previous survey,” said Lee. Meanwhile, the office property market is less clear-cut. Respondents were almost evenly split on deciding whether office property prices will increase (40.4%) or decrease (39.9%) in 2014. DBS concurs that there will be a mild drop in prices in 2014 instead of a steep slide. “In 2014, potential buyers will become increasingly cautious as Fed tapering is around the corner. This means that while pent-up demand for property remains strong, potential buyers may choose to hold off buying for a while longer. The presence of strong demand would prevent any sharp fall in property prices beyond 10% in 2014.” HONG KONG BUSINESS ANNUAL 2014 11

PROPERTY OUTLOOK

Brace for a downward pressure in 2014 Experts believe property price to tumble by double digits.

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downtrend in property prices and rents in all sectors of the Hong Kong property market looms for 2014, if the downward adjustment in the fourth quarter of 2013 is anything to go by. It turns out the strong doubledigit increases in retail and industrial property prices seen in the past couple of years have been offset by the corrections that followed. The slumping tenant demand and policy measures do not help either, and even support from low interest rates and limited supply won’t help rein in the downward pressure in property prices, warns Simon Smith, Senior Director for Asia Pacific at Savills Research. Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International concurs and notes, “The downside will vary in intensity, with residential and retail property prices tumbling by double digits, while the others are likely to see smaller single-digit corrections.” For instance, in the luxury 12 HONG KONG BUSINESS ANNUAL 2014

“The downside will vary in intensity, with residential and retail property prices tumbling by double digits, while the others are likely to see smaller single-digit corrections."

residential market, Smith notes that prices in the five traditional districts all declined marginally by 1.2% to 2%. Prices in Mid-Levels and Pokfulam both dropped modestly by 1.2%, while those on the Southside fell by about 2% in Q3. He adds that townhouse prices followed a similar trend as the luxury apartment market. In Q3/2013, overall townhouse prices dropped by 1.6%, with prices on The Peak and Southside declining by around 1.6% and 1.7% respectively. Falling rents The leasing sector does not paint a better picture either, with rents expected to fall by an average 5-8% in 2014, according to Ricky Poon, Colliers’ Executive Director of Residential Sales. Blame it on cost-conscious tenants becoming more inclined to downgrade and the rentals of larger units becoming more negotiable. Even so, Poon believes demand from non-financial tenants will stay fairly resilient. Strata-titled vendors are likely to adopt a wait-

and-see attitude about prices, and more units will be offered for lease rather than sale. Luxury residential rents are also expected to soften as some companies cut their budget and trim housing allowances for expatriate staff, some tenants opting to relocate to less prestigious locations or downsize their accommodation. The government’s cooling measures have started to take its toll on the volume of home sales as well. Residential transactions slumped 38%, from a monthly average of 6,800 in 2012 to 4,200 in the first eleven months of 2013, which was even lower than the monthly average of 4,700 during the SARS period (March to May 2003) and accounted for only 51% of the long-term monthly average of 8,200 (January 1996 to December 2012), according to Joseph Tsang, Managing Director of Jones Lang LaSalle Hong Kong. “We expect sales activity to remain weak, given the downside risks from looming interest rate hikes

PROPERTY OUTLOOK and the potential for yet more policy measures from the government next year. Therefore, capital values in the residential sector will remain under pressure and continue with mild corrections,” Tsang adds. The primary residential market is said to be the most active among Hong Kong’s property sectors. Thomas Lam, KnightFrank’s Director & Head of Research & Consultancy Greater China, notes that developers’ aggressive pricing strategies revitalized the market with the return of long-term investors and local buyers seeking to upgrade their homes—both hindered by the Double Stamp Duty previously—as well as Mainland buyers who were previously saddled with the Buyer’s Stamp Duty. Grade A office market A recent release from Colliers International forecasts Grade A office rents to remain flat in 2014. Tenants will also opt to stay put while occupiers will remain cost conscious. In terms of demands for office space, Wendy Lau, Colliers’ Executive Director of Office Services says that it will remain fairly flat in Central. However, in the case of office spaces with a large floor area, the demand is predicted to be

slightly higher specifically in places such as Causeway Bay, Wanchai, and Quarry Bay. On the other hand, Ben Dickinson, Head of Markets at Jones Lang LaSalle Hong Kong has a slightly more optimistic outlook for Grade A Office demands, remarking that he expects the leasing demand to recover in 2014 amid improvements in the global economy. Landlords, though, might consider increasing office rents if the number of vacancies in buildings falls below 5%, says Colliers International. Likewise, Jones Lang LaSalle believes that with the improved demand, low vacancy rates, tight supply, as well as increasing affordability in the coming year, rents may trend higher by about 5%. With the rental decline spreading from Central to other business areas and the increasing concerns of slowing demand, Savills expects office prices to follow suit, possibly registering up to a 5% decline in 2014 to keep yields on a par with this year. Colliers, on the other hand, expects a bigger dip in prices (7%) which may oblige vendors to offer discounts. Therefore, Grade A office yields are expected to increase by 25bps or more next year. Amid the implementation of cooling measures, Knight Frank’s

Joseph Tsang

Simon Lo

Simon Smith

Thomas Lam

Lam believes that Grade-A office sales remains sluggish, with most transactions involving small floor plates. He adds that with a lack of new Grade-A office supply in traditional business districts, buildings that have converted into office use are expected to attract attention from companies requiring large spaces. Retail market There are buyers out there in the retail marketplace, but they have been constrained by a supply bottle-neck, with the growth of retail sales outstripping that of new retail property stock. Helen Mak, Colliers’ Senior Director of Retail Services, warns that consolidation in other property asset classes has dampened market sentiment. “Overseas retailers remain positive, but they are acting cautiously. As a result, rents are set to fall by around 5% and prices by about 11% during 2014,” she forecasts. Prime street shop rents, specifically, are expected to fall by 0% to 5% in 2014. Shopping centers, on the other hand, could well see further growth of 5% to 10%, as predicted by Savills. While prices have begun to make inroads into negative territory, they foresee modest downside next year of 0% to 5%. On the other hand, Tom Gaffney, Head of Retail at Jones Lang LaSalle Hong Kong, thinks that the Christmas and New Year holidays brought in more tourists and further boosted consumer spending by end of 2013. “This shift in spending patterns will continue to broaden and benefit mid-end retailers. Against this background, we anticipate retail rents to grow at a moderate pace of about 2–4% for the whole of 2014.” With the slowing of sales growth, Knight Frank expects the growth of retail sales to further slow as well, weakening the bargaining power of landlords in prime retail areas, resulting in a more stable rental environment. “In the sales sector, following the introduction of the Double Stamp Duty, only around 730 retail property sales transactions took place in the third quarter of 2013. Their total sales value amounted to around HK$6.2 billion, the lowest level since the first quarter of 2009.” HONG KONG BUSINESS ANNUAL 2014 13

Hiring and Salary OUTLOOK

Brain drain looms in Hong Kong

The Mainland's sluggish growth has negatively impacted Hong Kong’s hiring market.

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ong Kong's proximity to Mainland China is widely regarded to be an advantage than otherwise, but we can't say the same for the job market. The Mainland's sluggish growth and political changes have negatively impacted Hong Kong’s hiring market. In fact, cautious employers are now taking a longer time before recruiting people into roles, which went from 6 to 8 weeks in the previous year to around 10 to 12 weeks. The global, including China’s stubborn economic conditions, made companies more discerning with each new hire. This is reflected in a more stringent screening process and higher expectations on potential employees from both companies as well as recruiters. “This increased caution might have the propensity to lead to the perception of a ‘brain drain’ in Hong Kong,” shares Andy Bentote, Senior Managing Director, Page Group, Hong Kong and Southern China. 14 HONG KONG BUSINESS ANNUAL 2014

“This increased caution might have the propensity to lead to the perception of a ‘brain drain’ in Hong Kong."

Pallavi Anand, Director of Robert Half Hong Kong, concurs and says “Amid global economic uncertainty, companies are taking longer to fill positions and this scenario will likely continue. As hiring managers take time to justify each hiring decision, they are becoming more demanding with the level of skills and experience that they are willing to accept.” This means that candidates will often find themselves facing multiple rounds of interviews before a hiring decision is made. Hong Kong also sees fierce competition in talent attraction from Mainland China. Bentote notes that Shanghai has emerged to be an increasingly viable option as a regional hub for companies looking to establish themselves in Asia Pacific. “Adding to Hong Kong’s hiring industry issues is the competition from Mainland China which has led to more and more Hong Kong candidates looking at broader or larger roles in Mainland China cities,” says Bentote.

In comparison to all the other industries, the financial and banking sector has the highest demand for employees. Financial sector is most active in the job market According to Anand, emerging Asian banks are the most active in the job market in 2013. Chinese banks in particular, have been ramping up their recruitment this year. “Within the banking and financial services industry, professionals with experience in compliance and risk management continue to be in high demand as companies navigate unprecedented regulatory shifts while growing their core business,” says Anand. She adds that within the financial services sector, they are seeing a strong demand for technology staff, including developers and IT infrastructure specialists. Although this is definitely good news, Bentote says that the slight improvement in the banking sector is nowhere near 2008 levels.

Hiring and Salary OUTLOOK Furthermore, the development in HK’s recruitment has resulted in the decline of the number of expat professional hires, many of which are based in the financial services industry. “A focus on lifestyle considerations such as availability of schools, housing costs and pollution levels has resulted in expats looking at other cities as more desirable options to gain employment,” Bentote suggests. “The takeaway from this is that in Hong Kong, companies and recruiters alike need to take the opportunity to address these factors and develop viable solutions and alternatives to strengthen the country’s position as an attractive destination for jobseekers. This could include better incentives and increasing a more favourable work-life balance,” he adds. Another interesting trend is that employees are becoming more apprehensive about switching careers. In the past, career choices may have been primarily influenced by financial rewards, but Anand says that the importance of job security and stability when candidates are making decisions is growing. “Candidates also have higher expectations in terms of workplace culture and career development opportunities nowadays,” she adds.

Keeping top talent With employees having higher expectations and more demands, Matthew Bennett, Managing Director for Robert Walters says that hiring managers should focus on keeping their top employees by offering competitive wage increases, promoting organizational stability, career progression and training. He further elaborates that employees often view periods of slow growth as an opportunity to improve their skills and knowledge. Enabling them to do so will make them feel valued and aid in retaining them in the organization. Retaining and keeping staff engaged becomes more challenging when employers need to think beyond rewarding employees financially. The high cost of living coupled with a sluggish economy does not help the situation either. “While salary is not the only factor employees consider, a competitive remuneration package can often be the difference between attracting and keeping talented employees and losing top performers and the valuable institutional knowledge these individuals possess,” says Anand. A steady outlook for 2014 According to Michael Page’s Bentote, the outlook for the recruitment market in Hong Kong is not without

Andy Bentote

Pallavi Anand

Matthew Bennett

rays of light. “As a response to the growing attrition of expat professional hires in Hong Kong, companies and recruiters are looking to organic options such as “localization” which has seen an increase in demand for local hires as replacements to expats.” He adds that they also foresee a specific and strong demand for candidates with specialist skills in retail, marketing and sales. Moreover, he shares that while Hong Kong’s hiring industry might seem to have hit a period of steady activity, the country continues to be seen as a safe place for companies looking to grow and expand into China. This presents genuine opportunities for the placement of quality candidates into exciting roles. Furthermore, companies are now looking for the highest-performing recruits. There’s also been a lot of change among senior employees, which has led to widespread promotion for middle managers. Middle management has therefore seen a skills gap and is an area companies will look to fill in 2014. But Hong Kong is a small market and hiring managers may struggle to find employees who meet their skills and experience criteria. Based on the increase in employee salary this year (3.5%) and job movers’ pay increments of 10-15%, Bennett foresees that these trends are likely to be repeated in 2014. “Of course, if the economy picks up we’ll see increased recruitment activity, particularly if China’s renewed commitment to economic growth comes to fruition. In 2014, we expect to see retailers showcasing their products to Chinese tourists in Hong Kong with an eye on future sales ventures.” Anand, on the other hand, predicts the impact new regulations will have on the demand for certain jobs. “An explosion in new regulations across all industries is causing a surge in demand for risk and compliance experts. The war for talent is making it increasingly difficult for companies to attract and retain professionals with these skills and experience.” She adds that companies in Hong Kong are struggling to generate profits while complying with global and domestic regulations introduced this year, such as anti-money laundering (AML), Basel III, IFRS and FATCA. HONG KONG BUSINESS ANNUAL 2014 15

LEGAL OUTLOOK

HK strengthens foothold as a legal hub Aggressive reforms and outward-looking promotions of arbitration services seen to boost Hong Kong's legal market.

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ong Kong is determined to cement its reputation of being a global hub of international legal services in the coming years through aggressive promotion and reforms. One recent reform was the enactment of the Legal Practitioners (Amendment) Ordinance 2012. This Ordinance, when it comes into operation, will allow law firms in Hong Kong to practice in the form of a limited liability partnership, thereby protecting the personal assets of an innocent partner from liability caused by the professional default of his/her fellow partners," says the Department of Justice's Legal Policy Division. With the amendment in place, the government expects more foreign law firms to set up their offices in Hong Kong, strengthening its reputation in the region. As of December 2013, Hong

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"HKIAC goes from strength to strength in meeting the changing needs of arbitration users and ensuring the efficiency and effectiveness of the arbitral process."

Kong has a total of 1,237 practicing barristers, 7,852 practicing solicitors and 1,364 registered foreign lawyers. There are a total of 817 Hong Kong solicitors firms and 72 registered foreign law firms. "The presence of such an array of local and international lawyers enables Hong Kong to provide top quality legal services in numerous different areas to meet the need of the local and international business community," the Department of Justice says. In terms of arbitration, Hong Kong is pursuing four key initiatives. Statutory Framework First, in an effort to improve the statutory framework for arbitration, a new Arbitration Ordinance (Cap 609) came into force in June 2011. The measure unifies the region's previous domestic and international

arbitration regimes so that both are now regulated based on the Model Law of the United Nations Commission on International Trade Law. The measure also seeks to enhance the confidentiality of arbitration proceedings and related court hearings, the Department of Justice says. The Enforcement Network Second, in order to improve the enforcement of arbitral rewards, the government has taken further steps to enlarge Hong Kong's enforcement network. "Although Hong Kong arbitral awards are already enforceable in over 140 jurisdictions under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), further steps in this regard had been taken to enlarge Hong Kong’s enforcement network in

LEGAL OUTLOOK July 2013 when the Arbitration Ordinance was amended to introduce provisions to implement the Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards which was concluded between Hong Kong and Macao in January 2013," government says. The provisions enable the summary enforcement of Macao arbitral awards by Hong Kong courts. Emergency rules and procedures Third, new provisions were also included in the Arbitration Ordinance to keep abreast with innovations in the arbitration sector on emergency rules and procedures. The new provisions complement the 2013 Hong Kong International Arbitration Center (HKIAC) Administered Arbitration Rules and the 2012 International Chamber of Commerce Rules of Arbitration. "Borne out of five years’ experience of the use of the original 2008 Administered Arbitration Rules, several rounds of public consultation, review by the HKIAC Rules Revision Committee and extensive consultation with practitioners, arbitrators and other stakeholders, the New Rules embody a step forward for arbitration in Hong Kong, ensuring the Rules reflect the very best of modern practice in international commercial arbitration," says Ruth Stackpool-Moore, managing counsel for HKIAC. "Overall, the revisions take the existing Rules, already recognized worldwide as a leading set of institutional rules, and ensure they continue to be ‘state of the art’, reflecting other leading rules and representing best practice in international arbitration," Stackpool-Moore adds. She says in 2012, HKIAC enjoyed a 40-percent increase in the number of cases fully administered in accordance with its rules compared to 2011 figures. "With the introduction of the New Rules there is no doubt these numbers will continue to grow, as HKIAC goes from strength to strength in meeting the changing needs of arbitration users and ensuring the efficiency and effectiveness of the arbitral process,"

she says. Providing support to arbitration organizations in the region other than the HKIAC is also at the core of the government's effort to enhance arbitration in Hong Kong. "In recent years, the Hong Kong Government has been actively engaged in facilitating the establishment and growth of other world class arbitral institutions in Hong Kong. In 2008, the Parisbased International Chamber of Commerce opened the first overseas branch of the Secretariat of its International Court of Arbitration in Hong Kong. In 2012, the China International Economic and Trade Arbitration Commission (CIETAC) also set up its Hong Kong office, which is the first such center established by CIETAC outside the Mainland," the Department of Justice says. The government has also decided to allocate part of the space in the West Wing of the former Central Government Office to house law-related non-government institutions that include arbitration and mediation institutions. The building's renovation is tentatively scheduled to be completed in 2017, and is expected to attract other reputable arbitration bodies and lawrelated organizations to set up their offices in Hong Kong. Promotion outside Hong Kong Lastly, in order to promote arbitration services outside Hong Kong, the government maintains its network with professional and trade-related bodies in mainland China and around the world, mainly through legal services forums which were previously held in Shanghai and Guangzhou. This year, the event will be held in Qingdao. “The Secretary for Justice and his predecessor have also since 2009 visited prominent commercial centres in overseas countries (including London, Toronto, Kuala Lumpur, Seoul, Paris, Singapore and The Hague) to promote the competitive edges of Hong Kong in the provision of legal and arbitration services. In 2014, the Hong Kong Government will focus on promoting Hong Kong’s arbitration services in emerging markets in Southeast Asia, such as Vietnam,

Andy Randall

Ruth Stackpool

Cambodia and Myanmar," the government says. The government is also keen on developing mediation services in the region through Mediation Ordinance (Cap 620) which provides a legal framework for mediation without hampering the flexibility of the mediation process and addresses issues such as confidentiality and admissibility of mediation communications. To ensure the confidence of the public in the mediation process, the Hong Kong Mediation Accreditation Association, a non-statutory and industry-led single accreditation body for mediators in the form of a company limited by guarantee, was incorporated in August 2012. The body ensures the quality of mediators and consistency of standards in the industry. A 'Mediate First' Pledge Reception was also held last July 2013 to encourage more organizations to first consider mediation before resorting to court litigation. One hundred sixty companies to date have signed the pledge. The Secretary of Justice has also established in November 2012 the Steering Committee on Mediation to promote and develop mediation to resolve disputes in Hong Kong. Other opportunities Overall, managing partner Andy Randall of Walkers Hong Kong says the legal market has been fairly stable in 2013 despite competitive pressures. “However amid the wave of mergers between the major international firms, the legal market has become more competitive, with a fleet of large law firms around the work operating with major global networks," he says. Looking forward, Randall says among the sectors with significant opportunities include initial public offering deals which he expects to increase in Asia. On the private equity side, he believes there is likely to be a greater flow of transactions as well as mergers and acquisitions as businesses look to alternative avenues other than organic growth. These opportunities provide an avenue for the Hong Kong legal market and legal system to further strengthen its reputation. HONG KONG BUSINESS ANNUAL 2014 17

ACCOUNTING OUTLOOK

Hong Kong mulls audit oversight reforms All eyes are set on how Hong Kong government effect reforms on audit oversight after a study showed it fails to meet international standards.

I

n a study conducted by Deloitte LLP, results show that the highly-developed Hong Kong does not meet the requirements for membership of the International Forum of Independent Audit Regulators (IFIAR), a group of independent audit regulators in different jurisdictions around the globe. The study was commissioned by Hong Kong’s independent statutory board, Financial Reporting Council (FRC), to evaluate Hong Kong’s audit regulatory regime using international standards and practices of independent audit oversight as scorecard. Paul Gillis, Professor at Peking University's Guanghua School of Management, stressed that reforms in Hong Kong system of audit regulation is long overdue. “Hong Kong has retained a system of self-regulation of the profession by the Hong Kong Institute of CPAs. 18 HONG KONG BUSINESS ANNUAL 2014

"The main gaps of Hong Kong’s audit regulatory system focus around the following: governance structure and funding source of the Hong Kong Institute of Certified Public Accountants (HKICPA)."

The rest of the world learned its lesson after the Enron scandals of the last decade and toughened the oversight of auditors by putting in place independent regulators,” Gillis said. Gaps between Hong Kong’s existing audit regulatory regime and international standards were reviewed by making comparison against (i) requirements for gaining regulatory equivalence of the European Commission (EC) and membership in IFIAR; and (ii) the audit regulatory regimes of five jurisdictions--the United Kingdom, the United States, Canada, Australia and Singapore. Gillis further noted that accountants in Hong Kong have preserved control of the process by “conceding only to symbolic reforms.” However, he noted that the increasing importance of the Hong Kong Stock Exchange to world financial markets and the

increasing number of accounting frauds in Hong Kong and China are making reforms in the oversight of the accounting profession critical. The results Deloitte explained in its study that the European Commission (EC) the equivalence transition status granted to Hong Kong that expired for audit reports on financial years beginning on or after 1 August 2012. “In June 2013, we learnt that the EC had amended Decision 2011/30/EU. This granted a further 10 countries EC equivalence; it extended the transitional status granted to seven countries; [and] it did not extend the transitional period granted to Hong Kong, India and Israel,” the professional services firm said. According to Deloitte, the main gaps of Hong Kong’s audit regulatory system focus around the following:

ACCOUNTING OUTLOOK governance structure and funding source of the Hong Kong Institute of Certified Public Accountants (HKICPA). The HKICPA, the only body authorized by law to register and grant practicing certificates to certified public accountants in Hong Kong, has been scrutinized, specifically the membership rules of its Council and its source of funding. The governing body of the Institute is its Council. The study said the remaining members of the HKICPA Council are not current practitioners but the constitution of the HKICPA Council does not require that the ‘non-practicing’ Council members have not within the past three years, carried out statutory audits, held voting rights in an audit firm, been a member of the administrative or management body of an audit firm or been employed by, or otherwise associated with, an audit firm. “This means that, whilst at any one time the HKICPA Council may in fact comprise a majority of ‘non-practitioners’, a change in the membership of the Council may result in it ceasing to meet this requirement,” the study raised. The remedy “Implementing additional changes to align with European Union requirements, over and above those mandated for EC equivalence, may improve the standard of audit regulation in Hong Kong,” Deloitte noted. However, Deloitte said that the requirements will not lessen the burden on a Hong Kong auditor wishing to audit a company incorporated or listed in Europe. The FRC said the intention of the study is to assist the Government in developing reform proposals to further enhance the independence of the city’s audit regulators. Gillis stressed that the reforms must create an independent audit regulator in Hong Kong that is not under the influence of the profession. “The process needs sufficient transparency such that there is public accountability. Hong Kong legislators need to be wary of pressures by the accounting profession to weaken these reforms,” he noted. According to the Council, the

proposed reform aims “to ensure that Hong Kong’s audit regulatory regime is benchmarked against international standards whilst being appropriate in the local context.” “The FRC has engaged in discussions on the broad framework for an independent audit regulatory system,” the Council, an independent statutory body set up under the Financial Reporting Council Ordinance, said. It added that the government plans to conduct a public consultation next year and if necessary, legislative initiatives will also take place. “We remain committed to actively supporting the process leading to the successful completion and implementation of independent audit regulatory reform in Hong Kong,” FRC guaranteed. The proposed framework The HKICPA, the government and the FRC jointly developed a proposed framework for an improved audit regulatory system combining international standards and local suitability. The framework covers six major areas: inspection, investigation, discipline, registration, standard setting and continuing professional development. Reforms in these areas are intended at achieving IFIAR membership and obtaining EC equivalence. In the framework, the HKICPA’s functions—registration, continuing professional development and standard setting—will be subject to oversight by the independent oversight body. Inspection, under the proposed framework, will be the function of the independent oversight body. The Institute may only inspect auditors of Hong Kong-listed firms when directed by the body. The HKICPA will no longer have the power to investigate complaints concerning audits of listed companies. This function will continue to be an activity exclusive to the FRC. The oversight body will also be the sole responsible for taking disciplinary action against Hong Kong-listed company auditors arising from inspection and investigation activities. The Institute has already circulated to its members an

Daniel Lin

Paul Gillis

information paper and request for comment. “I think people were still trying to absorb and understand what’s going on – but since then we have developed guiding questions for them to look at particular aspects and help people concentrate on key issues,” Raphael Ding, chief executive and registrar of the HKICPA said. Other views The HKICPA agreed with the study noting that the auditing regulation body must be sufficiently independent from the auditing profession in terms of its governance structure and funding. “The biggest element that is missing from our existing system is independence,” Ding said. However, he pointed out that the independence required of the system must not be expected from the Institute as it is a members’ body. “We cannot be regarded as independent,” he said, adding that the lack of independence of HKICPA has nothing to do with the methodologies of auditor regulation or the quality of its regulatory activities. “It’s purely to make it an independent process. So the three sides – the Institute, government and FRC – are very clear that this is the ultimate objective,” Ding emphasized. The HKICPA said although there is a need to benchmark Hong Kong’s audit regulatory system with the international standards, the reforms must also consider its appropriateness to the local context. “Hong Kong is an international financial centre so we’re benchmarking against international standards but we cannot blindly copy from other jurisdictions,” Susanna Chiu, HKICPA president said. Commenting on calls for reform to establish an independent body to oversee the accounting industry, Grant Thornton partner Daniel Lin said that the immediate challenge for accounting firms would be striking a balance between professional needs and market regulation requirement. “We believe the reform would be appropriate in the local context to maintain Hong Kong’s competitive advantages as a springboard to help Chinese companies to propel into international market," he said. HONG KONG BUSINESS ANNUAL 2014 19

TOP NEWS IN 2013

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about HK$98.80 a square foot a month at the end of the third quarter. AVIATION

Door did not open midflight on Emirates flight to HK

AGRIBUSINESS

Asian Citrus’ winter orange crop yield slip by 6%

Asian Citrus announced that its total actual Winter Orange crop yield were down by 6% YoY to 161k tons, which were broadly in-line with the tonnage indicated in the previous preliminary trading update statement.

transportation?

The Hong Kong International Airport (HKIA) opened for business in 1998, providing world-class infrastructure to support growth in air traffic in one of the world’s most pivotal business and cargo markets. In the last 10 years, Hong Kong passenger traffic has more than doubled from 27.4m to 56.5m1.

AVIATION

Four of the 10 world's most dangerous airlines are Asia's

60 airlines were rated based on the number and deadliness of the hull losses (destroyed airplanes) they have suffered in the past 30 years, and how they have fared more recently. Cathay Pacific was ranked third safest while Singapore Airlines was ranked 30th.

COMMERCIAL PROPERTY

Hutchison Whampoa appoints Charles Lee Yeh Kwong as non-executive director

According to a release, the board of Directors of Hutchison Whampoa announced that Mr Lee Yeh Kwong, Charles has been appointed as Non-Executive Director of the Company with effect from 18 January 2013.

Emirates denies UK reports that a door on one of its Airbus A380s opened in midflight. It also denied there was loss of cabin pressure during the flight. The airline refuted stories that the door of Flight EK384 between Bangkok and Hong Kong opened mid-air, adding that at no point was the safety of the flight in jeopardy. AVIATION

Hong Kong airport 5th busiest airport in 2012

Asia-Pacific airports finished the year with a strong +7.1% increase in passenger numbers while the Middle East recorded a remarkable passenger traffic growth of +12.1% in 2012 compared to 2011. Beijing (PEK) was the busiest airport in the region in 2012 handling more than 81 million passengers.

AVIATION

Can Hong Kong maintain its competitive advantage in air

COMMERCIAL PROPERTY

Rents at Central dropped in 2012

CBRE Group Inc. said average rental prices in Central fell some 12% last year as banks shed employees and moved to cheaper locations due to weaker corporate finances. Colliers International Seattle said the average rent for prime offices in Central was 20 HONG KONG BUSINESS ANNUAL 2014

COMMERCIAL PROPERTY

Suspect on fake government release caught

Police arrested a 32-yearold man in connection with the online circulation of

a fraudulent Government press release on measures to address the overheated property market. Commercial Crime Bureau Technology Crime Division officers arrested the man in Happy Valley for having access to a computer with criminal or dishonest intent. COMMERCIAL PROPERTY

Bullish Hong Kong property outlook for 2013

Cushman & Wakefield said that China's recovery and its rising domestic consumption will bode well for Hong Kong's economy in 2013. While this will fuel the trade sector, it will also lure more Mainland Chinese to Hong Kong for both business and leisure. ECONOMY

This sector is the largest spending area in Hong Kong's 2013 budget

Education will be the single largest spending area with estimated recurrent expenditure for 2013-14 of $63 billion, representing more than one-fifth of total recurrent government expenditure, as stated in Financial Secretary John Tsang's 2013 Budget speech.

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COMMERCIAL PROPERTY

Sai Kung site up for grabs

Minsheng Hong Kong CEO Lin Zhihong estimates attaining total assets, including off-balance-sheet items, of US$13 billion in three years. Total assets stood at US$4.3 billion in 2012. He identified trade financing as the bank’s bread and butter. AVIATION

AVIATION

COMMERCIAL PROPERTY

Hong Kong’s budget airlines on high-growth trajectory

Approved mortgage loan applications dropped 12.3% to $18.6b

Aviation industry sources said these budget airlines or lowcost carriers today constitute some 5% of all seats at Hong Kong. Tripling this percentage seems likely because of the increasing number of budget airlines. Among these carriers are Jetstar Hong Kong, China’s Spring Airlines and Dragonair. AVIATION

British Airways to fly A380 to Hong Kong

British Airways has revealed that Hong Kong and Los Angeles will be the first destinations for its new Airbus A380 fleet. BA will operate the A380 to Hong Kong from November 15. Flights on the Hong Kong route are available for travel from November 15 with prices starting from £559 return in economy and £1,900 in Club World.

According to Hong Kong's Monetary Authority, the number of mortgage loans approved fell 12.3% to $18.6 billion. Meanwhile, the number of mortgage applications in February fell 24.5% month-on-month to 9,013. In its residential mortgage survey results for the month, the authority said mortgage loans drawn down fell 23% to $12.2 billion. COMMERCIAL PROPERTY

Hong Kong's weekend primary home sales dropped 43%

According to Maybank Kim Eng, weekend primary residential property sales dropped 43% WoW to 65 units, largely due to the market’s anticipation of SHK Properties (16)’ major launch, 782-unit The Riva in Yuen Long. The price list of 50 specialty units were uploaded to the project’s website last week with starting ASP of HKD15k psf of GFA. FINANCIAL SERVICES

Minsheng Hong Kong aims to triple assets

HKIA voted world's 4th best airport

Regal Airport Hotel and HKIA were honored with the Skytrax World Airport Awards 2013. It is the third consecutive win for Regal Airport Hotel, which is located at HKIA. Skytrax said Regal secured the top spot because of its proximity and convenience to HKIA. The 1,200-room hotel is directly connected to HKIA’s passenger terminal through an enclosed bridge.

Colliers International has been appointed as the sole agent to offer a mega house development site in Sai Kung (the Property) for sale by public tender. The tender will close at 12 noon on 28 June 2013. The Property is located at Nam Pin Wai Road, which is close to the Hiram’s Highway in Sai Kung. COMMERCIAL PROPERTY

Check out Cheung Kong's new 402-unit project in Tsuen Wan

According to Maybank Kim Eng, The Rise (402-unit in Tsuen Wan), developed by Cheung Kong, may become the first project to be launched after the new Residential Properties (First-hand Sales) Ordinance to become effective on 29th April. The project comprises of 234, 156 and 12 two-bedroom, threebedroom and specialty units, respectively.

AVIATION

Cathay Pacific, Dragonair passenger load factor edged up to 83.4%

Cathay Pacific Airways released combined Cathay Pacific and Dragonair traffic figures for March 2013 that show an increase in the number of passengers carried compared to the same month in 2012, alongside a decrease in cargo and mail tonnage.

FINANCIAL SERVICES

Citi appoints Christopher Laskowski as Hong Kong head of corporate, investment banking

Laskowski, a veteran privateequity banker, will cover Hong Kong-based clients and the Hong Kong investment banking team will report to him. He will continue to head the Asia-Pacific privateequity advisory practice, or the Alternative Assets Group, and be the Chief Operating Officer of the Corporate and Investment Banking for the region. HONG KONG BUSINESS ANNUAL 2014 21

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AVIATION

Aviation headquarters unveiled

According to a report, Chief Executive CY Leung officially opened the Civil Aviation Department Headquarters on May 23. Located on the southeast corner of Airport Island, it has a gross floor area of 41,000 square metres. AVIATION

Australia’s Jetstar optimistic about JV in Hong Kong

Low-cost airline Jetstar Airways based in Melbourne remains confident it will get approval for its Hong Kong joint venture, Jetstar Hong Kong, by the end of this year and said it can meet the principal-place-of-business requirements. COMMERCIAL PROPERTY

Warehouse tenants in Hong Kong suffer from

undersupply

According to Colliers International, Hong Kong’s industrial property market faced uncertainties due to the slowdown in re-exports. Following weakening performance in late 2012, the three-month moving average of re-export volume decreased from 7.8% year-on-year (YoY) in 4Q 2012 to 5.1% YoY in 1Q 2013, according to the government’s statistics.

AVIATION

3 biggest threats to Cathay's growth in 2013

According to Maybank Kim Eng, Cathay is facing a challenging 2013 due to: 1) a bloodbath yield environment for the full service carriers (FSC) with declines of 3%5% seen in 1Q13; 2) a near zombie state cargo markets; and 3) mounting cost pressures from higher staff cost and airport charges.

Hong Kong's median family income up to $22,000

According to the Census & Statistics Department, Hong Kong's overall median monthly household income is now $22,000. The Quarterly Report on General Household Survey for January to March 2013 said 7.6% of domestic households had a monthly household income of $80,000 and above, while 16.2% of them had less than $8,000.

Hong Kong to boost agriculture opportunities in Australia

Australia’s Minister for Agriculture, Fisheries and

MARKETS AND INVESTING

Li takes over Dutch waste-toenergy firm

The acquisition of AVR Afvalverwerking B.V. by a consortium led by Asia's richest man, Li Ka-shing, follows a US$412 million investment in New Zealand's Envirowaste, another waste processor. Both investments were made through Li’s Cheung Kong Infrastructure Holdings (CKI) that is leading the consortium.

AGRIBUSINESS

Agricultural, marine scholarships launched

According to a report, scholarships and grants under the Agricultural Products Scholarship Fund and the Marine Fish Scholarship Fund are now open for applications until August 30, the Agriculture, Fisheries & Conservation Department.

FINANCIAL SERVICES

AGRIBUSINESS

22 HONG KONG BUSINESS ANNUAL 2014

Forestry, Joe Ludwig met up with the agribusiness delegate from Hong Kong at the 2013 AUSVEG convention on the Gold Coast of Queensland. AUSVEG National Convention, Trade Show and Awards for Excellence just took place on the first weekend of June.

COMMERCIAL PROPERTY COMMERCIAL PROPERTY

Check out this data centre in Tseung Kwan O up for grabs

The Government invited tenders for the development of a high-tier data centre in Tseung Kwan O. The site, Tseung Kwan O Town Lot No. 122 in Area 85, Wan Po Road, has an area of about 10,300 square metres. It is about 500 metres from Tseung Kwan O Industrial Estate.

Rents of street-level shops in HK to inch 8% higher

According to Colliers International’s Hong Kong Retail Market Research & Forecast Report 1Q 2013, street-level shops in the four key traditional shopping locations – Central, Causeway Bay, Mong Kok and Tsim Sha Tsui – registered a milder growth in early 2013.

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AGRIBUSINESS

Why Hong Kong is a hot market for Australia's food producers

Hong Kong is a densely populated city with very little agricultural land. Therefore, the city relies heavily on imported produce and meat to feed its population. Hong Kong’s importers and distributers are always looking for good quality food, and Australian agricultural products have become coveted for their high quality. AVIATION

Cathay Pacific announces Maldives to Hong Kong flights

Cathay Pacific Airways has announced it will begin operating services between the Maldives and Hong Kong from this October. Flights will be operating between Ibrahim Nasir International

COMMERCIAL PROPERTY

Hong Kong still the most expensive city in the world for retailers

FINANCIAL SERVICES

HKEx to introduce CES 120 Futures

CES 120 was developed by China Exchanges Services Company, Ltd, a joint venture of HKEx, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, to track the performance of the largest and most liquid China stocks listed in Mainland China and Hong Kong. Airport in Male’ and Hong Kong every Wednesday, Thursday, Saturday and Sunday. AVIATION

Cathay Pacific will offer freighter flights between Hong Kong and Mexico

Cathay Pacific Airways said the freighter flights will make it the first and only airline operating this service linking Hong Kong and Mexico. Cathay Pacific COO Ivan Chu said this is the first such freighter service between Hong Kong and Mexico and is a very important step in bringing these two economies closer together. COMMERCIAL PROPERTY

Fortune REIT looks to buy more malls in HK

Fortune Real Estate Investment Trust will buy a shopping mall complex in Hong Kong for US$754 million, according to Bloomberg. Fortune REIT operates 16 malls in Hong Kong. Fortune REIT recently signed a memorandum of understanding with Cheung Kong Holdings, its parent firm.

AVIATION

Delta Air Lines to fly to Hong Kong

Delta Air Lines will begin daily service in June 2014. The company also announced that tickets for the SeattleHong Kong flight will become available on August 24. The routes, however, are subject to government approval.

International property advisors CBRE said Hong Kong’s retail rent ranks the first at US$4,328 (HK$33,758) per square foot per annum. Behind Hong Kong are New York, Paris, and London at US$3,050, US$1,220, and US$1,156, respectively. Other top-10 prime global retail markets are Sydney, Zurich, Tokyo, Melbourne, Moscow and Brisbane. COMMERCIAL PROPERTY

Aging factories being remade into gleaming offices

Hong Kong redevelopers are turning more and more old factories and warehouses into offices to cope with the huge demand for office space in the city with the world’s second-highest rents. Centaline Property Agency Ltd noted that Pamfleet Group and Gaw Capital Partners bought over US$7 billion of the city’s industrial properties in the year ended June 30.

AVIATION

Cathay Pacific’s first class cabins look classier

Cathay Pacific Airways has enhanced and redesigned its first class suite with the help of the famous Londonbased architecture firm. Toby Smith, general manager product for Cathay Pacific Airways, said the first class cabin have been outfitted with handmade sculptures by artists Maria Lobo and Linda Leviton.

FINANCIAL SERVICES

Hong Kong's monetary base dipped $2.1b

According to CCB International, fund flows out of Hong Kong amid a slightly higher risk-free rate. Hong Kong's monetary base declined slightly, by HK$2.1b over the past week to reach HK$1,235b. Hong Kong's 10year treasury yield inched up to 2.86%. HONG KONG BUSINESS ANNUAL 2014 23

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AVIATION

Cathay Pacific objects to Jetstar's airport licensing approval in Hong Kong

Approval of the application for a licence to operate in Hong Kong by Jetstar Hong Kong would be a violation of Article 134 of Hong Kong’s Basic Law because Jetstar Hong Kong does not meet the requirement that it must have its principal place of business in Hong Kong. AVIATION

HKIA's passenger trips jumped 8.2% to 5.6m

Passenger trips at Hong Kong International Airport in August rose 8.2% year-on-year to 5.6 million, while air-traffic movements rose 6.3% to 32,395. Cargo volume grew 2.7%, to 337,000 tonnes. The Airport Authority said visitor traffic and Hong Kong resident traffic, up 8% and 13% year on year, drove

August's growth in passenger volume. COMMERCIAL PROPERTY

Cofco to list commercial property business in HK via reverse takeover

State-owned Chinese conglomerate Cofco has set in motion a reverse takeover bid that will result in a Hong Kong listing for its commercial property business in mainland China. Cofco said it plans to inject the assets of 12 property projects in cities across China into the Hong Kong Parkview Group, one of its subsidiaries listed in Hong Kong. FINANCIAL SERVICES

Hong Kong’s monetary base jumped to HK$1,237b

According to CCB International, Hong Kong’s monetary base rose slightly, by HK$0.2b over the past week to reach HK$1,237b. Hong Kong’s 10-year treasury yield followed the downward trend of the US 10-year Treasury yield, falling slightly to 2.65% by the end of last week, down from 2.73% the week before.

Meeting 2014 will be held in Hong Kong, hosted by the Ministry of Finance. Finance ministers, as well as senior central bank officials of APEC member economies, will gather in Hong Kong for the ministerial meeting in September of next year. AVIATION

The Buildings Department approved 19 building plans in August – six on Hong Kong Island, two in Kowloon, and 11 in the New Territories. Five were for apartment and apartment-commercial developments, 12 were for commercial developments, and two were for communityservices developments.

Cathay Pacific inks Bangkok Airways code-share

FINANCIAL SERVICES

Cathay Pacific Airways announced that it will be adding the popular holiday destinations of Koh Samui and Krabi in Thailand to its network early next month following a code-share agreement reached with Bangkok Airways.

The APEC Finance Ministers' 24 HONG KONG BUSINESS ANNUAL 2014

Barclays believes a combination of market (liquidity) and regulatory (risk weight floor) forces will drive mortgage rates higher ahead of a hike in US benchmark interest rates. Mortgage rates can rise ahead of US rate hikes. Mortgage rates are set by the Hong Kong banks. FINANCIAL SERVICES

Yue Xiu Group to take control of Chong Hing Bank Ltd

COMMERCIAL PROPERTY

Hong Kong landlords adopting more cautious leasing stance

According to CBRE, some landlords have turned more cautious during the quarter. This comes on the back of sluggish demand coupled with current and/or future vacancies rising in some buildings. This is not only confined to Central, but also some buildings in Tsim Sha Tsui and Kowloon East.

FINANCIAL SERVICES

APEC 2014 meeting to be held in Hong Kong

2 reasons why Hong Kong banks' mortgage rates could spike

COMMERCIAL PROPERTY

19 building plans get goahead

Yue Xiu will buy three quarters of Chong Hing Bank US$1.5 billion. Yue Xiu is the trading arm of the Guangzhou city government and is engaged in real estate, securities and transportation infrastructure. Chong Hing, one of Hong Kong's four family-run banks, is the second bank in Hong Kong to receive takeover offer.

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100 Taiwanese conglomerates identified mainland China as their No. 1 market with total sales of US$372.8 billion followed by Hong Kong with US$47.4 billion.

UBS, Macquarie, JP Morgan, BBY, Patersons Securities and Record Point dominated East Coles’ Investment Banking (IB) Research Results for 2013. The study aims to identify which investment banks and bankers corporate Australia values the most highly across investment banking services overall, mergers & acquisitions (M&A), equity capital markets (ECM), debt capital markets (DCM) and equities research. FINANCIAL SERVICES

COMMERCIAL PROPERTY

Hong Kong loses to London as world’s most expensive office market AVIATION

Cathay Pacific names new big boss

Cathay Pacific Airways announced that Rupert Hogg will take up the position of Chief Operating Officer in the airline with effect from March 2014. Mr Hogg will at the same time become a Director of Cathay Pacific.

Coinciding with the company’s 15th anniversary, Plaza Premium Lounge (PPL) has entered a new era with the opening of their flagship Lounge at Hong Kong International Airport. Centrally located in the airport’s West Hall and measuring 15,000 ft², the expansive 24-hour retreat will be the largest pay-in lounge in Asia.

AVIATION

Meet the man behind airport pay-in lounge concept in Hong Kong

Hong Kong Business recently had the chance to speak with Song Hoi-see, founder and CEO of Plaza Premium Lounge Management. He shared his inspiration in pioneering the airport pay-in lounge concept in Hong Kong over a decade ago. AVIATION

Plaza Premium Lounge opens Asia's largest pay-in lounge

COMMERCIAL PROPERTY

Hong Kong's Pollock's Path at The Peak ranks costliest street in the world

According to Billionaire.com, real estate on the world’s most prestigious streets proves to be in demand despite economic uncertainty and unstable property markets elsewhere. The findings based on data provided by Knight Frank proves that property in the most desirable corners of the globe is still changing hands for high price tags. FINANCIAL SERVICES

Hong Kong is a gold mine for Taiwanese firms

A report released by China Credit Information Service shows that Taiwan's top 100 firms derive 85% of revenue from China and Hong Kong. In 11 Asian markets, the top

London’s West End unseated Hong Kong-Central as the world’s highest-priced office market, but Asia continued to dominate the world’s most expensive office locations, accounting for four of the top five markets, according to CBRE Global Research and Consulting’s semiannual Global Prime Office Occupancy Costs survey.

Guess which Hong Kong bank is the most defensive to liquidity tightness

According to Barclays, the market has underappreciated Hang Seng Bank’s core business which should generate an attractive ROE of 20.5% for 2014E. Hang Seng Bank is most defensive among its Hong Kong banking peers to liquidity tightness in the event of tapering and is most positively geared to rising benchmark interest rates in the medium term.

COMMERCIAL PROPERTY

Swire Properties acquires CITIC Pacific arm for $3.9b

Swire Properties announced that it has entered into an agreement through Marvel Glory Limited, a joint venture company formed with other partners, to acquire a whollyowned subsidiary of CITIC Pacific Limited which indirectly owns DCH Commercial Centre or HK$3.9 billion. FINANCIAL SERVICES

6 in 10 Australian corporates eye raising equity in 2014

MARKETS AND INVESTING

Hong Kong-based First Pacific seizes foothold in Philippine agriculture

First Pacific Natural Resources Holdings BV will acquire the stake in RHI for US$51.2 million after key shareholder, Roxas & Company, cleared the sale of 279.25 million shares at P8.00 (US$0.184) per share. Roxas & Company will retain control of RHI with its 35% stake but will share management with First Pacific. HONG KONG BUSINESS ANNUAL 2014 25

company and industry - telecommunication industry

Hong Kong's telco exports jumped 21% in 2013 Exports of major items like parts of telecommunications equipment, apparatus for transmission and reception of voice, images or other data, and telephone sets and mobile phones all increased by different degrees.

H

ong Kong exports a variety of telecommunications equipment, ranging from basic telephones to sophisticated system products. Major export items include corded phones, cordless phones, mobile phones, etc. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephone sets in value terms in 2011. Another major export category is parts and accessories, including parts for system products and a variety of mobile phone accessories. Hong Kong also exports different kinds of telecommunications apparatus with radio reception, like walkie talkies and base stations for telecommunications. Other items include navigational apparatus like GPS devices and telephone switching/exchange equipment. Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, where various production processes like PCB assembly,

plastics injection moulding and sheet metal working are carried out. Their Hong Kong offices focus mainly on product design and development, industrial engineering, management, logistic support and marketing, etc. In the wake of this relocation, most of such companies have been re-classified as non-manufacturing establishments, despite the fact that they have manufacturing activities across the boundary. Against the fast changing markets, Hong Kong companies emphasise quick response to render effective marketing services to their customers, and to monitor the changing product trends. Many companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, and ISO 14000 - a standard for environmental management system. Hong Kong’s exports of

"Exports to the Chinese mainland, the largest market, expanded 32% in the first seven months of 2013." telecommunications equipment increased 21% in the first seven months of 2013. Exports of major items like parts of telecommunications equipment, apparatus for transmission/reception of voice, images or other data, and telephone sets/mobile phones all increased by different degrees. Exports to the Chinese mainland, the largest market, expanded 32% in the first seven months of 2013. Exports to the US and the EU also increased amid continued consumer demand for telecommunications products, while sales to ASEAN expanded 20% in the period. Sales Channels Hong Kong companies usually sell their products on OEM and ODM basis to overseas telephone companies and specialised importers of telecommunications equipment, which are capable of obtaining approvals from relevant telecommunications authorities in the corresponding markets. Aftersales services, such as installation and maintenance, are usually undertaken by the overseas buyers, while Hong Kong suppliers provide technical support to their buyers. On the other hand, a few Hong Kong companies promote their own brand products in markets like the US and the EU. Some companies also have offices in overseas countries to monitor local distribution and/or after-sales services. Promotion via participation in trade fairs is an effective way for Hong Kong’s telecommunications equipment companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT in Germany, Japan Electronics Show and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers. Industry Trends Amid intensified market competition, Hong Kong companies put more emphasis on ODM manufacturing. Buyers can now provide the industrial design only, such as cosmetic drawings and features, and their Hong Kong suppliers undertake

26 HONG KONG BUSINESS ANNUAL 2014

telecommunication industry - company and industry Performance of Hong Kong’s Exports of Telecommunications Equipment ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total exports by Major Market Chinese Mainland US EU Netherlands UK ASEAN Singapore India Total Exports by Categories Parts of Telecommunications Equipment Other Apparatus for Transmission or Reception Telephone Sets/Mobile Phones Radar/Radio Navigational Aid Apparatus

2011 HK$Mn. Growth % 2,466 -76 354,327 +25 315,183 +27 356,793 +21

2012 HK$Mn. Growth % 377 -85 413,269 +17 362,34 +15 413,646 +16

Jan-Jul 2013 HK$Mn. Growth % 113 -1 267,665 +21 238,351 +23 267,778 +21

2011 Share % Growth % 44 +28 10 -7 12 +11 4 -4 1 +5 6 +9 2 -6 5 +22

2012 Share % Growth % 47 +25 10 +18 11 * 4 +6 1 -2 6 +4 2 -12 5 +4

Jan-Jul 2013 Share % Growth % 49 +32 9 +6 10 +14 3 +4 1 +18 6 +20 2 +15 5 +14

2011 Share % Growth % 47 +25 28 +2 24 +45 1 +5

2012 Share % Growth % 49 +20 28 +16 22 +7 1 +17

Jan-Jul 2013 Share % Growth % 49 +28 25 +2 25 +33 1 +3

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

other operational activities, which range from hardware design, software programming, mechanical drawing, building prototype and samples, to tool-making and production. Some industrial designs may even be done by Hong Kong companies. On the other hand, the fast changing consumer pattern has resulted in low inventory levels in major export markets, requiring quick response for inventory replenishment. Product life cycles have also shortened amid advancement in technology, leading to the need for more frequent changes in product features and specification in order to lure consumers. In this respect, Hong Kong companies are well known for their adaptability and responsiveness to the rapidly evolving consumer tastes and technological changes. CEPA Provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products

of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. General Trade Measures Affecting Exports of Telecommunications Equipment Most telecommunications equipment sold to overseas markets should have to obtain the approval by corresponding telecommunication authorities, e.g. the Federal Communications Commission (FCC) in the US, BABT in the UK and BZT in Germany. Also, these exports are subject to safety requirements. For instance, telecommunications products sold to the US have to be in compliance with the safety requirements of UL/ETL listing or equivalent. Likewise, products exporting to the EU have to comply with relevant

"Against the fast changing markets, Hong Kong companies emphasise quick response to render effective marketing services to their customers, and to monitor the changing product trends."

safety directives, including those of low voltage electrical equipment, and have to carry a CE-mark to show their compliance. With regard to electromagnetic compatibility (EMC), products sold to the US require compliance with FCC standard, while the EU’s CE-mark has also required the compliance with relevant EMC directives. As for sales in the China market, most telecommunications products have to be in compliance with the safety and other requirements of a unified compulsory product certification system known as 3C (China Compulsory Certification or CCC). Hong Kong exporters should be attentive to the growing popularity of green concept in the marketplace. Especially in Europe, consumers are generally conscious of environmental protection. Not surprisingly, the EU has adopted a number of directives for environmental protection, which may have an impact on the sales of telecommunications equipment. HONG KONG BUSINESS ANNUAL 2014 27

company and industry - electronics industry

Hong Kong is the world’s largest exporter of electronics Electronics industry accounts for a huge chunk of export earnings.

H

ong Kong’s electronics industry is the largest merchandise export earner of the territory, accounting for 58% of Hong Kong’s total exports in 2012. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephone sets; the second largest exporter of calculators, sound recording apparatus, computer parts/accessories, radios and video recording/reproducing apparatus (including optical discs recorders/players); and the world’s third largest exporter of video cameras/recorders (including digital cameras) in value terms in 2011. Finished goods constitute about one quarter of Hong Kong’s electronics exports, of which the majority are consumer electronics for domestic use. Major categories include audio-visual (AV) equipment, consisting of radios and optical discs players, hi-fi equipment, TV sets, etc. Hong Kong also exports a variety of computer products, such as desk-top/ notebook/tablet computers, routers, monitors and optical disk drives, as well as telecommunications products like corded/

cordless telephones and mobile phones. Parts and components constitute about three quarters of Hong Kong’s electronics exports, of which the majority are re-exported to the Chinese mainland for outward processing production. Meanwhile, Hong Kong produces and exports a variety of parts and accessories for telecommunications items, AV equipment and computer devices, as well as components like resistors, capacitors, inductors, crystals, resonators, speakers, printed circuit boards (PCBs) and transformers. Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, where various production processes like PCB assembly, plastics injection moulding and sheet metal working are carried out. Their Hong Kong offices focus mainly on R&D activities, product design and development, industrial engineering, management, logistic support and marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities

"Hong Kong’s electronics exports rose by 6% during the first half of 2013." across the boundary. Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc. Hong Kong’s electronics exports rose by 6% during the first half of 2013. While exports of semiconductors and telecommunications equipment/parts grew by different degrees, exports of IT and AV equipment/parts were lacklustre. Exports to the Chinese mainland, which accounted for nearly two-thirds of the total electronics exports, grew by 8% in the period. Exports of electronic parts and components, the major items of Hong Kong’s electronics exports to the mainland, increased steadily on the back of continued expansion of mainland’s outward processing production. While electronics exports to the EU rebounded modestly, exports to the US were sluggish. Elsewhere in Asia, exports to ASEAN, which constituted mainly of parts and components, edged up by 1%. But exports to Japan declined by 9% in the period. Sales Channels Hong Kong manufacturers of finished electronic items mostly produce on OEM and ODM basis for reputable brand names in overseas markets. Some of these major buyers have set up buying offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in North America and Europe, who distribute the merchandise under their own channels or re-sell to their clients for further distribution. For Japan, although imports of electronics are dominated by reverse imports from Japanese production facilities in Asia, some brands like Hitachi, Sharp, Toshiba, Sony and Matsushita have OEM/ODM arrangements with Hong Kong suppliers. There are a number

28 HONG KONG BUSINESS ANNUAL 2014

electronics industry - company and industry Performance of Hong Kong’s Exports of Electronics ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets Chinese mainland EU (27) Germany Netherlands US ASEAN Singapore Japan Total Exports by Categories Finished Products Parts & Components Total Exports by Products Semi Conductors, Electronic Valves & Tubes Telecom. Equipment & Parts IT Equipment & Parts AV Equipment & Parts

of Hong Kong companies marketing electronic products under their own brand names, including Truly, V-Tech, Group Sense, Venturer, GP and ACL. Their sales network covers not only the advanced countries, but also economies like Latin America, Eastern Europe and various parts of Asia. As for parts and components, many manufacturers produce on custom-made basis for famous US, European and Japanese companies, e.g. parts and accessories of computers, recorders, and radio receivers, as well as components/ modules like PCBs and LCDs. Meanwhile, standard components are usually exported directly to distributors and manufacturers in overseas markets, although some Hong Kong companies also have their own sales offices and/or representative offices abroad. Hong Kong is an important trading hub for electronic parts and

2011 HK$Mn. Growth % 9,532 -44 1,841,149 +10 1,202,871 +12 1,850,680 +9

2012 HK$Mn. Growth % 7,393 -22 1,973,389 +7 1,310,755 +9 1,980,782 +7

Jan-Jun 2013 HK$Mn. Growth % 3,006 -13 983,814 +6 653,492 +7 986,820 +6

2011 Share % Growth % 64 +10 8 +3 2 +7 1 -9 6 -4 6 +15 2 +6 3 +3

2012 Share % Growth % 65 +9 7 -2 2 -4 1 +5 7 +9 6 +4 2 * 3 +8

Jan-Jun 2013 Share % Growth % 65 +8 7 +3 2 -4 1 -8 6 -1 6 +1 2 +5 3 -9

2011 Share % Growth % 26 +14 74 +8

2012 Share % Growth % 27 +9 73 +6

Jan-Jun 2013 Share % Growth % 26 * 74 +8

2011 Share % Growth % 29 +7 19 +21 20 +14 13 -2

2012 Share % Growth % 27 +1 21 +16 22 +13 12 +4

Jan-Jun 2013 Share % Growth % 28 +8 23 +19 20 -2 11 -9

components in Asia-Pacific. Many items from the US, Europe, Japan, Taiwan, and South Korea are re-exported via Hong Kong to the Chinese mainland, and vice versa. A number of multinational manufacturers of parts and components have set up their offices in Hong Kong, engaging in sales, distribution and sourcing activities in the region. Promotion via participation in trade fairs is an effective way for Hong Kong’s electronics companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Fair and Electronica in Germany, Taipei International Electronics Show in Taiwan, CommunicAsia in Singapore and Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other

"Hong Kong is an important trading hub for electronic parts and components in AsiaPacific."

emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers. Industry Trends Increasing competition from mainland and other Asian suppliers has long been a threat to Hong Kong companies. In response, many manufacturers have shifted the more labour-intensive processes across the border. They have also changed their product mix to strengthen their competitiveness, moving towards higher value-added and more sophisticated products. While parts and components for consumer electronics are selling well in Asia, major players have re-positioned to supply parts and components for commercial and industrial equipment like computers, telecommunications, navigation systems and automobiles. HONG KONG BUSINESS ANNUAL 2014 29

company and industry - household electrical appliances industry

Total exports of household electrical appliances slumps

Although exports of household lighting products, the major items, continued to expand, exports of thermic domestic appliances, hair dressing/hand drying apparatus and fans declined.

H

ong Kong produces and exports a wide range of household electrical appliances, including: (1) kitchen appliances ranging from food grinders, mixers and juicers to thermic appliances like coffee makers, toasters, electric knives, electric kettles and ovens; (2) home care appliances like electric fans, air conditioning machines, vacuum cleaners, floor polishers, space heaters and irons; (3) personal care products like hair dressing and hand drying apparatus, shavers, hair clippers, massagers, face steamers and electric toothbrushes; and (4) household lighting products. According to the latest available figures, Hong Kong was the world’s second largest exporter of hair dressing apparatus in value terms in 2011. The industry is dominated by manufacturers and traders of smallsized household appliances. Today, most manufacturers have relocated their production facilities to the Chinese mainland to maintain cost

competitiveness. Offices in Hong Kong are mainly responsible for R&D activities, product development, quality control, management, marketing and logistic support. Apart from original equipment manufacturing (OEM), a large portion of Hong Kong companies have their principal business based on original design manufacturing (ODM). These cover product design and development, mechanical drawing, prototyping and sampling, tool-making and production, with buyers providing the industrial/ conceptual design only, such as cosmetic drawings and features. In some cases, the industrial/conceptual designs are undertaken by Hong Kong companies. Hong Kong manufacturers largely adopt a strategy of higher degree of vertical integration to increase valueadded. In addition to product design and development, tool-making, plastics injection moulding, metal parts manufacturing, production and/or quality assurance are all done under one

"Against the fast changing markets, Hong Kong companies emphasize quick response to ensure effective marketing services to their customers, and to monitor the changing product trends." roof. Against the fast changing markets, Hong Kong companies emphasise quick response to ensure effective marketing services to their customers, and to monitor the changing product trends. Moreover, due to the growing concern of quality conscious buyers, more and more companies have strengthened their quality assurance systems. This is evidenced by the growing number of Hong Kong companies certified as complying with ISO 9000, which is an internationally recognised standard for quality management system. Hong Kong’s total exports of household electrical appliances decreased by 11% in the first half of 2013. Although exports of household lighting products, the major items, continued to expand, exports of thermic domestic appliances, hair dressing/hand drying apparatus and fans declined in the period. The US, EU and Japan were the largest export markets, together constituting about two-thirds of Hong Kong’s total exports of household electrical appliances. But exports to these three markets declined by different degrees in the period. Sales Channels Hong Kong manufacturers of household electrical appliances mostly produce on OEM and ODM basis for reputable brand names, of which some have set up buying offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in North America and Europe, who may distribute the merchandises through their own channels or re-sell to their clients for further distribution. As for Japan, although imports of electrical appliances are dominated by reverse imports from Japanese production facilities in Asia, some Japanese brands may have OEM arrangement with Hong Kong suppliers. In any event, after-sales services are usually undertaken by overseas buyers, while Hong Kong suppliers provide technical support for repair and maintenance. There are a few large Hong Kong

30 HONG KONG BUSINESS ANNUAL 2014

household electrical appliances industry - company and industry Performance of Hong Kong’s Exports of Household Electrical Appliances ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market US EU (27) Germany United Kingdom France Japan Chinese Mainland Australia Total Exports by Categories Household Lighting Products Thermic Domestic Appliances Hair Dressing/Hand Drying Apparatus Table/Floor/Wall/Window Fans, Output <125W Domestic vacuum cleaner

manufacturers like Goodway and Megaman marketing electrical appliances under their own brand names, while smaller companies also sell their brand products to overseas markets. Their sales network covers not only the developed economies, but also emerging markets like Latin America and Eastern Europe. Promotion via participation in trade fairs is an effective way for Hong Kong companies of household electrical appliances to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Home Fair and Domotechnica in Germany, and Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.

2011 HK$Mn. Growth % 54 -8 22,008 +2 21,172 +3 22,062 +2

2012 HK$Mn. Growth % 34 -37 21,617 -2 20,888 -1 21,651 -2

Jan-Jun 2013 HK$Mn. Growth % 19 +33 9,740 -11 9,372 -12 9,759 -11

2011 Share % Growth % 30 -1 20 -8 5 -2 3 -27 3 +1 20 +26 7 +6 3 +1

2012 Share % Growth % 27 -11 18 -11 5 -7 3 -4 3 -10 23 +13 7 +1 4 +7

Jan-Jun 2013 Share % Growth % 22 -29 19 -3 5 -6 3 -2 4 +30 25 -12 8 +11 3 -25

2011 Share % Growth % 24 +17 23 +1 9 -2 5 +1 4 +4

2012 Share % Growth % 24 +2 19 -20 10 +6 6 +4 6 +44

Jan-Jun 2013 Share % Growth % 28 +10 10 -56 9 -18 8 -8 8 +22

Industry Trends Hong Kong exporters are subject to fierce competition from other Asian suppliers. Particularly in the case of simple appliances involving lesser technological input, Hong Kong companies have long been competing with Southeast Asian suppliers and local Chinese enterprises. Against this background, Hong Kong companies have enhanced their valueadded. While maintaining their OEM production, they have focused more on ODM business, rendering increased value-added services to overseas customers. The most important attribute of their success in ODM business is product design and development capability, while knowledge of world product trends and diverse consumer preferences in different markets are their edge. As more design works are being undertaken by Hong Kong companies, there is a tendency of overseas importers to shift liabilities arising from defective products to local

"Hong Kong manufacturers of household electrical appliances mostly produce on OEM and ODM basis for reputable brand names, of which some have set up buying offices in Hong Kong for direct sourcing."

manufacturers and traders. It has thus become increasingly critical for Hong Kong exporters to observe laws and regulations in relation to consumer protection and product liabilities in overseas markets. On the other hand, the fast changing consumption pattern has resulted in low inventory levels in major export markets, requiring quick response for inventory replenishment. Product life cycles have also shortened amid the advancement in technology, leading to the need for more frequent changes to product features and cosmetic designs in order to lure consumers. In this respect, Hong Kong companies are well known for their adaptability and responsiveness to the rapidly evolving consumer tastes and technological changes. They constantly upgrade their capability in product and aesthetic designs. Some companies also re-engineer their procurement and production management systems. HONG KONG BUSINESS ANNUAL 2014 31

company and industry - audio visual equipment

Hong Kong as a major exporter of AV equipment Hong Kong was the world’s second largest exporter of sound recording apparatus, radios, and video recording and reproducing apparatus.

H

ong Kong exports a wide range of AV equipment. According to the latest available statistics, Hong Kong was the world’s second largest exporter of sound recording apparatus, radios, and video recording/reproducing apparatus (including optical disc players); and the world’s third largest exporter of video cameras/recorders (including digital cameras) in value terms in 2011. The largest export item is parts and accessories, including parts and accessories for recorders, radios, microphones and speakers. Meanwhile, exports of finished items are mainly for domestic use. Major items include digital cameras and camcorders, headphones/ earphones and microphones, as well as video recorders/players like the Blu-ray disc players. Other items like simple radios, digital radios and car radios, hi-fi equipment and large-screen TV sets are also among Hong Kong’s exports. Most Hong Kong manufacturers have relocated their production facilities to

32 HONG KONG BUSINESS ANNUAL 2014

the Chinese mainland, where various production processes like PCB assembly, plastics injection moulding and sheet metal working are carried out. Their Hong Kong offices focus mainly on R&D activities, product design and development, industrial engineering, management, logistic support and marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary. Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management

"The Chinese mainland was Hong Kong’s largest export market, constituting over half of the total AV equipment exports." system, etc. Hong Kong’s total exports of AV equipment declined by 9% during January-July 2013. Although exports of major items like parts and accessories and TV cameras/digital cameras declined, exports of headphones/earphones edged up by 3% in the period. The Chinese mainland was Hong Kong’s largest export market, constituting over half of the total AV equipment exports. During January-July 2013, exports to the mainland, of which the majority were parts and accessories for processing production, decreased by 5%. Exports to the US and the EU were also lacklustre. Sales Channels Hong Kong manufacturers of AV equipment mostly produce on OEM and ODM basis for American, European and Japanese brand owners. Some of overseas buyers have set up offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in North America and Europe, who may distribute the merchandise under their own channels or re-sell to their clients for further distribution. In any event, after-sale services are usually undertaken by overseas buyers, while Hong Kong suppliers provide technical support for repair and maintenance. There are also a number of large Hong Kong companies marketing AV equipment under their own brand names, while smaller companies also sell their brand products to smaller importers and distributors in overseas market. Their sales network covers not the advanced countries as well as emerging economies like Latin America and Eastern Europe. Promotion via participation in trade fairs is an effective way for Hong Kong companies of AV equipment to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Fair in Germany and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential

audio visual equipment - company and industry Performance of Hong Kong’s Exports of AV Equipment ^ 2011 Domestic Exports

2012

Jan-Jul 2013

HK$Mn.

Growth %

HK$Mn.

Growth %

HK$Mn.

Growth %

805

-20

644

-20

299

-29

Re-exports

211,492

-5

22,854

+5

113,153

-9

of Chinese Mainland Origin

168,239

-4

178,788

+6

90,232

-8

Total Exports

212,296

-5

223,498

+5

113,452

-9

Total Exports by Major Markets 2011

2012

Jan-Jul 2013

Share %

Growth %

Share %

Growth %

Share %

Growth %

Chinese Mainland

50

-3

56

-18

56

-5

EU

10

-17

9

-6

9

-15

Germany

3

-4

3

*

3

-21

Netherlands

2

-29

2

-1

2

-19

US

10

-24

9

-3

9

-9

Japan

8

+11

8

-2

1

-21

ASEAN

8

-3

7

-10

7

-7

Share %

Growth %

Share %

Growth %

Share %

Growth %

Parts and Accessories

54

-5

59

+9

60

-6

TV Cameras and Digital Cameras

12

-5

11

-3

12

-7

Headphones, Earphones, & microphones

4

+2

6

+45

6

+3

Audio/Video Recorders and Players

8

-7

6

-28

4

-34

TV Receivers

6

-9

5

-5

5

-19

Radios

4

-5

4

-5

3

-36

Total Exports by Categories 2011

buyers. Industry Trends Hong Kong is a popular sourcing centre for high-end AV products, notwithstanding the keen competition in the low-end market segment. In view of intensified competition, especially those related to OEM production, Hong Kong companies have enhanced their value-added and put more focus on ODM business, rendering increased value-added services to overseas customers. The most important attribute of their success is their product design and development capability, while knowledge of world product trends and consumer preferences in different markets is also their edge. The fast changing consumer pattern has resulted in low inventory levels in major

export markets, requiring quick response for inventory replenishment. Product life cycles have also shortened amid advancement in technology, leading to the need for more frequent changes in product features and specification in order to lure consumers. In this respect, Hong Kong companies are well known for their adaptability and responsiveness to the rapidly evolving consumer tastes and technological changes. CEPA Provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to

2012

"Promotion via participation in trade fairs is an effective way for Hong Kong companies of AV equipment to explore market opportunities."

Jan-Jul 2013

the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. In the main, the CEPA origin criteria for Hong Kong items include: (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; and (3) fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong. Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the value-added percentage. HONG KONG BUSINESS ANNUAL 2014 33

company and industry - information technology equipment industry

Hong Kong’s exports of IT equipment expanded 1% in 2013

Exports of computer parts and accessories rose steadily. On the other hand, complete computers and office machines declined.

H

ong Kong exports a wide range of information technology (IT) products, especially computer parts and accessories like motherboards, keyboards, power supplies, display cards, memory cards and cables and harnesses. According to the latest available statistics, Hong Kong was the world’s second largest exporter of computer parts and accessories in value terms in 2011. Also, a number of Hong Kong companies are engaged in the trading and/or manufacturing businesses of computer peripherals and items like USB flash drives, monitors, hard disk drives and optical disk drives, as well as complete set computers such as notebooks, desktops and tablets. Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, where various production processes like PCB assembly, plastics injection moulding and sheet metal working are carried out. Their

Hong Kong offices focus mainly on product design and development, industrial engineering, management, logistic support and marketing, etc. In the wake of this relocation, most of such companies have been re-classified as non-manufacturing establishments, although they have manufacturing activities across the boundary. Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, ISO 14000 - a standard for environmental management system, etc. Hong Kong’s exports of IT equipment expanded 1% in the first seven months of 2013. Exports of computer parts

"The Chinese mainland was the largest export market for Hong Kong’s IT equipment industry, absorbing over two-thirds of the total exports." and accessories rose steadily, although exports of complete computers and office machines declined in the period. The Chinese mainland was the largest export market for Hong Kong’s IT equipment industry, absorbing over two-thirds of the total exports. Exports to the mainland, mainly parts and accessories, had slowed down. While exports to the US declined, exports to the EU rebounded in the period. Sales Channels Many IT equipment manufacturers produce on OEM/ODM basis for large manufacturers and brand-names in the US, the EU and Japan. While some sell directly to the Hong Kong purchasing offices of prominent Japanese, European and US computer companies, some large manufacturers have subsidiaries or sales offices in the US and EU for marketing and after-sales services. Others export directly to overseas importers/distributors, which may distribute and sell the products under their private labels. Promotion via participation in trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) is an effective way for Hong Kong’s IT equipment companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT in Germany, Japan Electronics Show and Hong Kong Electronics Fair. Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong IT equipment companies to establish connections with potential buyers. Industry Trends In view of the keen market competition, Hong Kong companies have changed to strengthen their competitiveness by moving towards business of higher value-added and more sophisticated products. Now, they put more focus on ODM business, rendering value-added services to overseas customers. The most important attribute of their success is their product design and development capability, while knowledge of world product trends

34 HONG KONG BUSINESS ANNUAL 2014

information technology equipment industry - company and industry Performance of Hong Kong’s Exports of IT Equipment ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market Chinese Mainland US EU Netherland Germany ASEAN Japan Total Exports by Categories Computer Parts & Accessories Computers Office Machines

2011 HK$Mn. Growth % 2,381 +109 377,004 +14 275,162 +15 379,386 +14

2012 HK$Mn. Growth % 3,170 +33 423,667 +12 316,592 +15 426,837 +13

Jan-Jul 2013 HK$Mn. Growth % 1,281 -14 234,116 +1 175,050 +2 235,397 +1

2011 Share % Growth % 68 +12 6 +10 6 +11 1 -4 2 +18 8 +45 3 +11

2012 Share % Growth % 69 +15 6 +21 5 -3 1 -3 1 -19 8 +9 3 +21

Jan-Jul 2013 Share % Growth % 68 +1 6 -8 6 +17 1 -12 2 +10 8 -9 3 -3

2011 Share % Growth % 46 +7 33 +28 20 +10

2012 Share % Growth % 47 +13 34 +15 20 +8

Jan-Jul 2013 Share % Growth % 48 +9 33 -4 19 -6

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

and consumer preferences in different markets are also their edge. The fast changing consumer pattern has resulted in low inventory levels in major export markets, requiring quick response for inventory replenishment. Product life cycles have also shortened amid advancement in technology, leading to the need for more frequent changes in product features and specification in order to lure consumers. In this respect, Hong Kong companies are well known for their adaptability and responsiveness to the rapidly evolving consumer tastes and technological changes. CEPA Provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of

origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. General Trade Measures Affecting Exports of IT Products Exports of IT equipment to most overseas markets are subject to safety requirements of the corresponding countries. For instance, certain electronic products sold to the US have to be in compliance with the safety requirements of UL/ ETL listing or equivalent. Likewise, products exported to the EU have to comply with relevant safety directives, including those of low voltage electrical equipment, and have to carry a CE-mark to show their compliance. With regard to electromagnetic compatibility (EMC), products sold to the US require compliance with FCC standard, while EU’s CE-mark has also required the compliance with relevant EMC directives. As for sales in the China

"Product life cycles have also shortened amid advancement in technology, leading to the need for more frequent changes in product features and specification in order to lure consumers."

market, most electronic products, including IT equipment, have to be in compliance with the safety and other requirements of a unified compulsory product certification system known as 3C (China Compulsory Certification or CCC). Hong Kong exporters should be attentive to the growing popularity of green concept in the marketplace. Especially in Europe, consumers are generally conscious of environmental protection. Not surprisingly, the EU has adopted a number of directives for environmental protection, which may have an impact on the sales of IT equipment. These include the restrictions on batteries and accumulators that contain mercury, as well as the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) that came into effect in July 2006. The Chinese mainland has adopted similar environmental protection regulations. HONG KONG BUSINESS ANNUAL 2014 35

company and industry - building materials and hardware industry

Why Hong Kong’s hardware industry needs efficient management

Against the fast changing markets, Hong Kong companies emphasize quick response to ensure effective marketing services to their customers.

H

ong Kong exports a number of building materials and hardware. The largest export item is electrical apparatus for building, including air-conditioning machines, relays, switches, electric conductors, electric insulators, wires and cables. Hong Kong also exports a variety of building hardware like nails, screws, nuts, hand and machine tools, sanitary ware and locks and keys. Meanwhile, steel/iron such as steel tubes and steel pipes for building, as well as wood/board for building, including fibreboards, wooden doors and wooden window frames, also share a significant portion of total exports. Other smaller export items include plastic tubes, plastic pipes, paints, wallpapers, tiles, floor coverings, sheet glass, lime, cement, marble, stone, sand and gravel. The industry is characterised by dependence on imported raw materials

and semi-finished goods. For production of building materials and hardware requiring large space and special treatment, most Hong Kong companies have relocated their production facilities to the Chinese mainland on the grounds of cost and environmental considerations. Offices in Hong Kong are mainly responsible for quality control, management, marketing and logistic support. In the wake of the relocation, these companies have been re-classified as nonmanufacturing establishments, despite the fact that they have manufacturing activities across the border. The success of Hong Kong’s building materials and hardware industry lies in efficient management. Against the fast changing markets, Hong Kong companies emphasise quick response to ensure effective marketing services to their customers, and to monitor the

"The industry is characterized by dependence on imported raw materials and semi-finished goods." changing product trends. Moreover, due to the growing quality consciousness of overseas buyers, many companies have strengthened their quality assurance systems. The Chinese mainland is the largest export market, sharing more than 60% of the total exports. Sales to the mainland increased by 7% in 2012 and continued to grow by 9% in the first half of 2013. Exports were also affected by the rise of local Chinese suppliers, which have posed a threat to Hong Kong companies in the mainland market. Sales Channels Hong Kong exporters of building materials and hardware usually sell their products directly to constructors, builders, real estate developers, architects and relevant sub-contractors in overseas markets. Some companies also sell to specialised importers, who then distribute the products to their clients. As for the Chinese mainland, potential buyers include state-owned and private real estate developers, builders and subcontractors. Hong Kong companies also sell to commercial project owners who have been authorised to conduct infrastructure and construction projects in the mainland and other Asian countries, as well as construction project developers who undertake private real estate development projects. Promotion via participation in trade fairs is an effective way for Hong Kong companies of building materials and hardware to explore market opportunities. Important trade fairs related to the industry include the National Hardware Show in Las Vegas, Hong Kong International Building and Decoration Materials & Hardware Fair, and Light+Building in Franfurt. Business missions organised by the Hong Kong Trade Development Council to specific markets also provide opportunities for Hong Kong companies to establish connections with overseas buyers. Industry Trends Environmental protection has increasingly affected the production of building materials and hardware. Against this background, many manufacturers have begun to review their production facilities and processes

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building materials and hardware industry - company and industry Performance of Hong Kong’s Exports of Building Materials and Hardware ^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Markets Chinese mainland USA EU (27) Germany Japan ASEAN Total Exports by Categories Electrical Apparatus for Building Building Hardware Other Materials for Building Iron/Steel for Building Wood/board for building

2011 HK$Mn. Growth % 969 -3 122,345 +13 82,347 +10 123,315 +13

2012 HK$Mn. Growth % 962 -1 129,977 +6 89,074 +8 130,939 +6

Jan-Jun 2013 HK$Mn. Growth % 476 * 63,611 +5 41,552 -1 64,087 +5

2011 Share % Growth % 64 +17 8 +5 9 +1 3 +15 5 +10 6 +6

2012 Share % Growth % 64 +7 8 +11 8 -3 2 -4 5 -2 6 +9

Jan-Jun 2013 Share % Growth % 65 +9 8 +3 7 -8 2 -17 4 -6 6 +8

2011 Share % Growth % 70 +8 14 +13 11 +65 4 +6 1 +5

2012 Share % Growth % 71 +7 13 -1 12 +15 3 +2 1 -1

Jan-Jun 2013 Share % Growth % 70 +5 12 -10 13 +34 3 -9 1 -12

*Insignificant ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies.

in order to comply with such regulations. The introduction of management system complying with the international environment standards, notably the ISO 14000, is to be a focus of the industry. On the back of keen competition from the mainland and Southeast Asia in the low-end market segment, Hong Kong companies have diversified their businesses to higher value-added products. Compliance with BS of the UK and ASTM of the US are the cutting edge of companies selling higher-end building materials and hardware, especially to western markets. But buyers in Asia outside Japan are still more costconscious, who are sourcing mainly for mass construction projects in the region. CEPA The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and subsequently expanded in following years. All products

made in Hong Kong, subject to CEPA’s rules of origin, enjoy duty-free access to the Chinese mainland. General Trade Measures Affecting Exports of Building Materials and Hardware Initiation of anti-dumping proceedings in western countries against goods originating from the Chinese mainland, including certain building materials and hardware, has been a concern for Hong Kong companies with sourcing or production activities in the mainland. For instance, the US has imposed anti-dumping duties on the mainland-origin iron construction castings, copper pipe and tube, heavy forged hand tools, steel wire rope and steel concrete reinforcing bars. Meanwhile, the EU has anti-dumping duties against certain tube and pipe fittings of iron or steel, steel ropes and cables and certain stainless steel fasteners originated in the mainland. Product Trends Alongside a steady growth of the markets for building materials and hardware, there is a demand for do-it-yourself

"Environmental protection has increasingly affected the production of building materials and hardware."

(DIY) products for interior decoration. As a result, demand for floorings, wall coverings, paints and fittings serving for DIY purposes, as well as hardware and electrical tools like electric screwdrivers, drill drivers, hand pumps and DIY home security systems, is gathering strength. Moreover, building hardware is increasingly designed with emphasis on easiness of installation and maintenance. Products like parts and accessories for sanitary ware and domestic drainage systems have become standard-sized items, thus facilitating repairing and replacement by users. With the advancement of technology, durability of items like wooden boards has been enhanced by improving fireproof, waterproof and scratch resistance capabilities. In addition, moulded kitchen sinks of fibreglass have become popular, due mainly to its seamless surface, durability and easiness to clean. New types of materials are continuously being adopted. HONG KONG BUSINESS ANNUAL 2014 37

company and industry - jewelry industry

Precious material makes up 86% of Hong Kong’s jewellery exports Gem-set jewellery is the most popular category, particularly diamonds set in 14K or 18K and in yellow and white gold.

H

ong Kong's jewellery industry can be broadly classified into two sectors: jewellery made of precious metal and imitation jewellery. In terms of value, some 86% of Hong Kong's total exports of jewellery are made of precious material. Hong Kong's jewellery industry is known for its flexibility in accommodating customer needs. Production of fine jewellery encompasses a wide range of medium to high-priced products. The most popular product category is gem-set jewellery, particularly diamonds set in 14K or 18K and yellow/white gold. Hong Kong manufacturers are good at producing small stones jewellery with elements of contemporary fashion. Their gem-setting skills and design capability are competitive compared with world-class European manufacturers. Hong Kong has a highly skilled and productive labour force capable of handling small orders and making elaborate designs at reasonable prices. The overall technology level of the

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precious jewellery industry is perceived by manufacturers to be above competitors like Thailand but below the world leaders such as Italy and Japan. Most notably, Hong Kong is leading in the production of gold items. Although high value-added processes are still retained in Hong Kong, manufacturing processes are increasingly shifted to the Chinese mainland, mainly to Shenzhen and Panyu. Hong Kong has long been recognised as a leading centre for the production of jade jewellery. Major items are bangles, rings and pendants. Hong Kong has also evolved into a leading trading and distribution centre for pearls in recent years, partly due to the fast emerging Chinese and South Sea pearl industry and the recent decline of the Tahitian pearl industry. Despite the global economic slowdown, Hong Kong’s exports of precious jewellery remained resilient in recent years. Yet after expanding by 35% in 2011, export growth

"The US and the EU remained Hong Kong’s dominant markets for precious jewellery, accounting for some 47% in 2012." moderated to 14% in 2012. While prices of precious metals and stones have surged, exports in volume terms actually registered only a mild increase. The US and the EU remained Hong Kong’s dominant markets for precious jewellery, accounting for some 47% in 2012. But their market shares have decreased from some 57% in 2010, as sales (in value terms) to these two markets have been slower than average. By contrast, Hong Kong’s exports of precious jewellery to India saw remarkable expansion these years, growing by 531% and 101% in 2011 and 2012 respectively, amid India’s emergence as a jewellery producer which subcontracts to the Chinese mainland. Besides, exports of precious jewellery to UAE also saw impressive growth of 48% and 85% in 2011 and 2012 respectively, as UAE has developed into a diamond hub for the region. On the other hand, Hong Kong’s exports of pearls, gem-stones and rough diamonds dropped 8% in 2012, after strong growth of 31% in 2011. Hong Kong's jewellery exporters are facing intensifying competition from suppliers in the Chinese mainland and other countries, particularly India and Thailand. This, together with the price fluctuation of precious metals, diamonds, precious stones and materials, has somewhat trimmed down their profit margins. Yet, compared with other industries, jewellery makers are already in a better position to pass cost increases onto buyers and end users if they are caused by price surges of precious materials, which make up the most part of a jewellery article's value. On the other hand, overseas retailers and importers often press Hong Kong suppliers for extended credits, exchange for unsold items, shorter delivery lead time and better designs. The impact of the RMB's appreciation on the precious jewellery industry is modest compared with other industries because mainland content only accounts for a relatively small part of a jewellery article's value, compared with costs of precious materials, which are primarily imported into the mainland for export processing. On the other hand, Chinese government’s policy on encouraging consumption will continue to shore up the purchasing power and import appetite of Chinese residents, and facilitate the sales of jewellery articles to the mainland, as well as retail sales in Hong

jewelry industry - company and industry Performance of Hong Kong’s Jewelery Exports ^ Precious Jewellery (SITC 897.3) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Precious Jewellery by Market US EU United Kingdom France Italy India Switzerland Macau ASEAN UAE

2010 HK$Mn. Growth % 7,219 +25 27,378 +21 19,069 +24 34,597 +21

2011 HK$Mn. Growth % 8,382 +16 38,210 +40 23,825 +25 46,592 +35

2012 HK$Mn. Growth % 8,718 +4 44,535 +17 23,414 -2 53,253 +14

2010 Share % Growth % 35.2 +20 21.4 +8 5.7 +2 5.8 +30 3.5 +2 1.1 +9 7.8 +38 3.6 +53 4.9 +25 3.0 +26

2011 Share % Growth % 33.8 +29 19.0 +20 5.6 +31 5.5 +28 2.8 +8 5.2 +531 7.3 +26 6.7 +150 5.6 +56 3.3 +48

2012 Share % Growth % 29.5 * 17.4 +4 7.6 +56 4.0 -17 2.0 -19 9.2 +101 8.9 +40 6.1 +4 5.6 +14 5.3 +85

Note: ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies. * Insignificant.

Kong contributed by Chinese visitors. Hong Kong is the world's second largest exporter of imitation jewellery after the Chinese mainland. In 2012, total exports of imitation jewellery amounted to HK$8.9 billion. Unlike fine jewellery, imitation jewellery is rarely domesticmade but re-exported from origins outside Hong Kong, notably the Chinese mainland, which accounts for 93% of all exports from Hong Kong. In 2012, exports of imitation jewellery dropped 1%, after increasing by 7% in 2011. Sales Channels The jewellery industry of Hong Kong is by and large export-oriented. The trade is characterised by a subcontracting system under which small- and medium-sized factories provide subcontracting services, such as mould making, precision casting, gem-setting, polishing and electroplating, to larger manufacturers or local jewellery retailers. Mass production of jewellery products is normally restricted to established manufacturers which are equipped with more sophisticated and automated production machines. The jewellery items made for exports usually bear buyers' brand names or logos. Some

jewellery makers have set up overseas offices and outlets to promote sales. Online display is another growing trend. Some Hong Kong manufacturers are making inroads into retail and distribution in Hong Kong, helped by the flourishing tourist industry. According to Hong Kong Tourism Board’s survey, in 2012, vacation overnight visitors spent some HK$17.6 billion on jewellery, accounted for 18% of their total spending on shopping; as for those from the Chinese mainland, the share was higher at 20%. A few Hong Kong jewellers have expanded their retail network to the Chinese mainland through franchising and cooperative arrangement. They have successfully earned a recognised brand image there. A recent survey conducted by the HKTDC showed that, when buying low-to-medium and medium-to-high-end brands, Hong Kong brands were the top choice, compared with local and foreign brands, of mainland consumers. The survey also discovered that Hong Kong brands have a premium of 35.9% over their domestic counterparts. Promotion via participation in trade fairs is an effective way for Hong Kong companies to explore export opportunities. Besides, HKTDC

"In 2012, exports of imitation jewellery dropped 1%, after increasing by 7% in 2011."

from time to time organises study missions for Hong Kong manufacturers to visit specific markets for establishing new business relations. Industry Trends Articles of jewellery are getting more fashion oriented. Innovative designs are important for moving up-market. In doing so, it is necessary for manufacturers to have more metallurgical knowledge. New technology also allows the development of new or innovative designs. Jewellery, which used to target the high-end market, is also following more closely with the fashion trend and targeting at the younger, middle income level market segment, some in the form of brand jewellery. Recent technological development allows massive production of jewellery products with good quality and competitive prices. While Hong Kong's jewellery industry remains basically a handicraft industry, a number of larger establishments have made use of sophisticated and automated production equipment. These manufacturers integrate advanced production techniques, such as electroforming, with handicraft skills to enhance their efficiency. HONG KONG BUSINESS ANNUAL 2014 39

company and industry - clothing industry

Clothing industry is the third largest manufacturing employer in Hong Kong Hong Kong is not only a leading production centre but also a hub for clothing sourcing globally.

I

n recent years, traditional markets, such as the US, the EU and Japan, have rendered clothing exporters from developing countries, including ASEAN and Bangladesh, more preferential market access, which has in turn impaired the competitiveness of Hong Kong and mainland manufacturers. Along with rising labour costs, RMB appreciation and stricter environmental regulations on the Chinese mainland, an increasing number of Hong Kong and mainland clothing manufacturers have relocated their production of lower-end and mass products to Southeast Asian countries like Bangladesh, Vietnam and Indonesia. Their manufacturing operations on the mainland are now focused on more sophisticated and higher value-added items or urgent orders. Hong Kong’s total exports of clothing fell by 17% year-on-year in the first

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month of 2013 after a decrease of 8% in 2012. In January 2013, Hong Kong’s domestic exports of clothing saw a decline of 51%, while re-exports fell by 17%. Among the chief export destinations, Hong Kong’s clothing exports to the US decreased by 21% in the first month of 2013, while those to the EU declined by 26%. Clothing exports to major EU markets including Germany, the UK, France, the Netherlands and Italy fell by 19-38%. Taken together, sales to the US and the EU accounted for more than 63% of Hong Kong’s total clothing exports. Meanwhile, sales to Japan dropped by 6%, but Chinese mainland market gained 14% in January 2013. Product wise, Hong Kong’s exports of woven wear fell by 19% year-on-year in the first month of 2013, with woven wear for men/boys and women/girls decreasing by 20% and 19%, respectively. Meanwhile, exports of knitted wear decreased by 18%, clothing accessories fell by 5% and other

"In January 2013, Hong Kong’s domestic exports of clothing saw a decline of 51%, while re-exports fell by 17%." apparel articles slid by 17%. Sales Channels Hong Kong’s clothing manufacturers have comprehensive knowledge about sourcing and products. They are able to understand and cater for the preferences of the dispersed customer bases. Exporters also have good knowledge of international and national rules and regulations governing clothing exports, such as rules of origin, quota restrictions, tariff rates and documentation requirements. Cut, make and trim (CMT) arrangements are common, although many Hong Kong manufacturers have moved to higher value added activities such as design and brand development, quality control, logistics and material sourcing. A few well-established local manufacturers have entered into the retailing business, either locally or in overseas markets. Many of them have retail networks with their own labels in major cities around the world including Beijing, London, New York, San Francisco, Shanghai, Singapore, Sydney, Taipei and Tokyo. Some well-known manufacturing retailers include Baleno, Bossini, Crocodile, Episode, Esprit, G-2000, Giordano, JEANSWEST, Moiselle and U-2. As a global sourcing hub in Asia, Hong Kong attracts a number of international trading houses and major retailers. Buyers sourcing from Hong Kong include American and European department stores (e.g. Macy’s, JCPenney, Federated, Karstadt Quelle, C&A), discount stores (e.g. Sears, Target and Carrefour), specialty chains (e.g. The Gap, The Limited) and mail order houses (e.g. Otto and Great Universal Stores). Many international premium designer labels – such as Calvin Klein, Donna Karen, Ralph Lauren, Tommy Hilfiger and Yves Saint Laurent – source clothes in Hong Kong through their buying offices or other intermediaries Hong Kong’s fashion designers have been gaining worldwide reputation for their professional expertise, sensitivity to current trends and ability to blend commercialism with innovation. Medium to high-priced fashion clothing bearing Hong Kong designer labels is being sold/ have been sold in renowned department stores overseas such as Bloomingdale’s,

clothing industry - company and industry (HK$ billion) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports by Market US EU Germany United Kingdom France Netherlands Italy Japan Chinese mainland Australia Canada by Categories Woven wear For men or boys For women or girls Knitted wear For men or boys For women or girls Clothing accessories Of textile fabrics Of non-textile fabrics Other apparel articles

C&A, Harrod’s, Isetan, Macy’s, Marui, Mitsukoshi, Nieman Marcus and Seibu. To establish connections and explore market opportunities, Hong Kong manufacturers and traders have involved themselves actively in international shows led by the Hong Kong Trade Development Council (HKTDC), including the ones in Beijing, Budapest, Chengdu, Dalian, Dubai, Dusseldorf, Hong Kong, Moscow, Mumbai, Paris, Tokyo, Warsaw and Jakarta. ‘Hong Kong Fashion Week’ is organised twice a year and attracts international suppliers and buyers to participate in the exhibition. Organised by TDC, ‘World Boutique, Hong Kong’ is the first independent event in Hong Kong dedicated to promoting designers’ collection and brands from around the world. Also

2012 Growth % -29 -8 -9 -8

Jan 2013 Value Growth % 0.1 -51 15.6 -17 14.3 -20 15.7 -17

2011 Share % Growth % 35.0 -3 33.0 -5 8.4 * 8.2 -14 3.5 -3 3.2 -6 3.5 +1 7.3 +15 4.8 +39 2.8 +8 3.5 +4

2012 Share % Growth % 36.9 -3 29.6 -17 7.5 -18 7.2 -19 3.3 -14 2.7 -24 3.2 -18 7.4 -8 5.2 -2 2.8 -6 3.5 -9

Jan 2013 Share % Growth % 33.0 -21 30.2 -26 8.1 -19 6.5 -29 3.7 -24 3.1 -27 2.5 -38 7.2 -6 6.0 +14 3.6 -17 3.4 -24

2011 Share % Growth % 33.6 +3 12.6 +12 20.9 -1 15.9 -2 5.1 +4 10.8 -4 7.7 +14 2.3 +12 5.4 +15 42.8 +1

2012 Share % Growth % 33.6 8 12.5 -9 21.1 -8 15.5 -11 5.0 -11 10.5 -11 8.0 -5 2.3 -9 5.7 -3 42.9 -8

Jan 2013 Share % Growth % 37.8 -19 13.5 -20 24.3 -19 15.5 -18 5.3 -18 10.2 -18 7.1 -5 2.1 +4 5.0 -9 39.6 -17

Value 2.8 187.8 177.7 190.6

organised by TDC, ‘Lifestyle Expo’ is to give overseas’ visitors and buyers a flavour of the excellence and value of Hong Kong products. Industry Trends Online shopping and marketing: Online shopping is increasingly popular in Hong Kong’s major markets, including China. According to China Internet Network Information Center (CNNIC), the total number of online shoppers on the Chinese mainland exceeded 242 million in 2012, boasting a turnover of RMB$760.9 trillion in the first three quarters of 2012. With apparel accounting for the biggest share of the online spending, more than 60% of the online shoppers bought clothes online last year. The growing variety of online shopping sites, plus the mushrooming of social

2011 Growth % -14 +2 +1 +2

Value 2.0 173.1 161.9 175.1

"Consumers gradually resume spending on fashion products, but still opt for items that offer comfort, function and value-for-money – and nothing too radical."

media marketing and mobile retailing, is expected to boost online shopping and sales further. This trend has also encouraged the development of some online shopping technologies, such as virtual fitting, video shopping and mobile snapshot for clothing, which are now applied on various online shopping platforms, such as Tmall.com and VANCL.com. Growing importance of private labels: Private or house labels, in essence, have become an increasingly effective marketing tool among garment retailers. In order to differentiate as well as upgrade the image of their products, major retailers have started to put a stronger emphasis on their own labels. Renowned retailers such as H&M and Marks & Spencer have owned their private labels. HONG KONG BUSINESS ANNUAL 2014 41

company and industry - textile industry

Hong Kong’s textile industry boosts exports

With more than 72% of the textile re-exports originating from the Chinese mainland, Hong Kong’s re-exports of textiles of China origin registered an increase of 37% in January 2013.

T

he textiles industry – comprising spinning, weaving, knitting and finishing of fabrics – had a total of 751 manufacturing establishments as of September 2012, employing 5,478 workers, or 5.1% of the local manufacturing workforce. The textiles industry is one of Hong Kong's major export earners, accounting for 2.2% of the total exports in the first month of 2013. In recent years, with rising production costs and stringent environmental regulations, an increasing number of manufacturers have shifted their production of lower-end products to the Chinese mainland and Southeast Asian countries. Their manufacturing operations in Hong Kong are focused on sophisticated and high value-added items, including quality ring-spun, open-end yarn, fine gauge knitted fabrics as well as complicated dyed and printed fabrics. To enhance competitiveness in the global market, some Hong Kong textiles companies have formed strategic partnership with indigenous Chinese

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companies. For instance, some of them join force with mainland cotton suppliers in producing cotton textiles. Hong Kong's textiles industry is a major supplier to the local clothing industry. Producing textiles locally, Hong Kong textile manufacturers have an advantage in accommodating orders from local garment manufacturers in short notice. Meanwhile, a significant portion of textile exports is destined for use in Hong Kong companies’ offshore production of garments, especially on the Chinese mainland. After a 7% decrease in 2012, Hong Kong’s textile exports soared by 40% in the first month of 2013. Re-exports, accounting for more than 98% of total textiles exports, experienced a surge of the same magnitude, while domestic exports rebounded with a 39% rise. With more than 72% of the textile re-exports originating from the Chinese mainland, Hong Kong’s re-exports of textiles of China origin registered an increase of 37% in January 2013.

"The Chinese mainland remains to be the city’s predominant export market, accounting for more than 62% of Hong Kong's textile exports in January 2013." Asia is the leading market for textiles exported from Hong Kong, accounting for more than 92% of Hong Kong’s textile exports. Of the top 10 export destinations, nine of them are in Asia. The Chinese mainland remains to be the city’s predominant export market, accounting for more than 62% of Hong Kong's textile exports in January 2013. Other major export markets of Hong Kong textiles include Vietnam, Indonesia, Bangladesh, Cambodia, Sri Lanka, the US, Thailand, India and the Philippines. In particular, because of Vietnam’s cheap labour and WTO membership, many foreign investors, including those from Hong Kong, have set up garment factories there. This gives rise to sustained demand for textile imports, making Vietnam the second largest market for Hong Kong’s textile exports, after the Chinese mainland. Product-wise, Hong Kong's exports of textile yarns (up 86%), woven fabrics (up 26%), knitted or crocheted fabrics (up 30%) and cotton (up 28%) all rebounded strongly, in the first month of 2013. Sales Channels Hong Kong is both a leading production centre and a global hub for clothing sourcing. As such, Hong Kong's textiles industry is well positioned to serve both local and overseas clothing manufacturers and merchandisers. While many Hong Kong textile manufacturers and traders supply their products to the clothing manufacturers in Asia, particularly on the mainland, international textile companies are also using Hong Kong as a gateway to promote their products to other Asian economies. For instance, Brazil’s fastgrowing fashion industry is attempting to leverage Hong Kong’s trade platform to promote their textiles and apparel on the Chinese mainland. The industry is capable of producing either a wide range of quality products in bulk or specialised items within a short lead-time. Its competitive edge lies in the superb quality and swift response to fashion trends and market demand. The industry has also earned a worldwide reputation for unique quality, expertise, workmanship and flexibility. Hong Kong is an ideal one-stop

textile industry - company and industry Performance of Hong Kong’s Exports of Textiles^ (HK$ Billion) Domestic Exports Re-exports of China -Origin Total Exports by Markets China Vietnam Indonesia Bangladesh Cambodia Sri Lanka US Thailand India Philippines by Categories Textile Yarns Woven Fabrics Knitted or Crocheted Fabrics Cotton Special Yarns and Fabrics Man -made Textile Materials Finishing accessories Textile Made-up Others Floor Coverings

shopping centre for buyers looking for new and trendy fabric materials. The Interstoff Asia International Fabric Show, held twice a year in spring and autumn, is a significant marketing and sourcing platform in the region for both fabric manufacturers and buyers alike. Organised by the HKTDC, the Hong Kong International Home Textiles Fair offers a wide range of high quality products such as bathroom textile, bedroom textile, kitchen textile, carpet and floor covering. It is a specialist platform, giving exhibitors and buyers of home textiles immediate access to markets in Asia and beyond. Industry Trends In line with the global manufacturing landscape and fierce competition across the board, Hong Kong's textiles industry has been moving

2011 Value Growth % 1.576 -19 86.215 * 61.016 +1 87.791 *

2012 Value Growth % 1.441 -9 80.358 -7 57.650 -6 81.798 -7

Jan 2013 Value Growth % 0.107 +39 6.747 +40 4.884 +37 6.855 +40

2011 Share % Growth % 67.6 -5 6.3 +19 4.0 +12 3.4 +12 3.8 +18 1.6 =2 1.6 +9 1.5 -3 1.0 +9 1.3 +24

2012 Share % Growth % 65.4 -10 6.9 +2 4.1 -5 4.0 +8 4.7 +15 1.8 +3 1.7 -2 1.4 -12 1.0 -2 1.3 -11

Jan 2013 Share % Growth % 62.2 +60 7.3 +35 5.0 +21 5.0 +16 4.9 +6 2.0 +23 1.8 -7 1.4 -3 1.4 +45 1.3 +48

2011 Share % Growth % 26.9 -7 30.8 +2 23.0 +3 18.1 +1 8.3 * 9.0 +8 7.5 +8 3.0 +5 3.7 -2 0.4 +19

2012 Share % Growth % 27.2 -6 29.1 -12 23.3 -5 17.6 -9 8.0 -11 8.5 -12 8.8 +9 2.9 -9 3.0 -25 0.6 +34

Jan 2013 Share % Growth % 30.5 +86 26.0 +26 23.2 +30 16.1 +28 6.8 +11 7.1 +25 9.8 +50 3.2 -5 2.8 +21 0.5 -9

up the value chain to cater to the demand for upmarket textile products with original designs or brands. Today, the operation of the textiles industry in Hong Kong is focused mainly, if not all, on higher value-added activities such as sales and marketing, quality control, designs and development, while offshore plants are specialised in production operations. This, in turn, results in a high proportion of re-exports (98%) in Hong Kong’s textiles exports portfolio. With rising labour costs, RMB appreciation, fluctuations in raw material prices and stricter environmental regulations on the Chinese mainland, many Hong Kong's textiles manufacturers have re-allocated their production facilities to other Southeast Asian countries, like Vietnam, Cambodia and Bangladesh.

"Today, the operation of the textiles industry in Hong Kong is focused mainly, if not all, on higher value-added activities such as sales and marketing, quality control, designs and development, while offshore plants are specialised in production operations."

A few companies have even set up offshore production in Latin America (e.g. Mexico) to take advantage of preferential treatments allowed by regional trade agreements such as North American Free Trade Agreement (NAFTA). To stay tuned to the advancements of manufacturing technology and product requirements, the textiles industry, as a capital-intensive business, has invested heavily to keep up with the latest technological trends. Advanced production technologies are sourced mostly from vendors from Germany, Italy, Spain, Switzerland, Japan and South Korea. Modern technologies like automatic web spreading, nano bio-functional materials finishing and Texparts® Zero Underwinding are no strangers to local manufacturers. HONG KONG BUSINESS ANNUAL 2014 43

company and industry - printing industry

A majority of SMEs dominate Hong Kong’s printing industry Export orders are mainly handled by larger printers or dealers, who have established business relationships with overseas customers.

P

rinting is a supporting industry to publishing, advertising and various light consumer goods industries (toys, food, cosmetics etc). Most of them are small and medium enterprises (SMEs) in Hong Kong. Printers in Hong Kong produce a wide range of printing materials, including books, booklets, brochures and leaflets, and paper and paperboard labels, advertising materials, commercial catalogues, calendars, postcards and greeting cards. Some specialise in the production of higher value-added / high tech printing products, such as children’s novelty books with pop-ups and additional objects, cheque books, passports, bills and statements, securities and prospectuses, etc. that require considerable skills, substantial capital investment and confidentiality. Overseas customers are increasingly looking for faster turnaround and shorter delivery time in order to maximise return through smaller but more frequent orders. Hong Kong

printers are known for quality, quick delivery, competitive pricing and ability to cope with short-notice printing jobs. The quality is comparable to that of the US, Germany and Japan, the pioneers in printing technology. Hong Kong printers are also known for their inventiveness and willingness to find solutions to production problems. Major printers are relocating the production to the Chinese mainland with purpose-built plants. Such development has changed the workflow and logistics and greatly improved the efficiency and output quality. The ability to meet high quality requirements has allowed Hong Kong to become a major printing and publication centre in the world, despite the increasing price competition from mainland printers. With the rising labour cost on the Mainland, printers go for more automation and mechanisation. More complex automation can also reduce human errors while increasing efficiency, productivity and quality. Hong Kong’s excellent

"Printing is an industry with constantly updating technology. The ability to catch up with new production techniques is thus crucial." telecommunication networks are great assets of the industry. In effect, publishers in Hong Kong can quickly access information from various parts of the world, an advantage of vital importance to time-sensitive publications. With proximity to the mainland market and a high degree of freedom of the press, Hong Kong has attracted many international publishers/news agencies (esp. media firms) to set up regional centres here. The Financial Times (Asia Edition), The Economist, The International Herald Tribune, etc, are all printed in Hong Kong and some are shipped into China for distribution. Printing is an industry with constantly updating technology. The ability to catch up with new production techniques is thus crucial. Hong Kong printers are equipped with advanced models of lasersetters, electronic colour scanners, electronic page-composing systems, digital printers, automatic finishing systems and one to five-colour printing machines. Many Hong Kong companies are equipped with lamination machines, die-cutting, paper-cutting, shrinkwrapping, folding, hot-stamping and binding machines, etc. to keep the production process in-house to ensure a quality product. Many have also introduced computer-to-plate (CTP) systems, equipment for security printing, as well as latest machines to enhance digital printing capabilities. Sales Channels An estimated 60-70% of the export business is attributable to orders received directly from overseas countries. Within this, about a quarter of them come from major international publishers in Hong Kong. Export orders are mainly handled by larger printers or dealers, who have established business relationships with overseas customers. In an effort to capture overseas business, large Hong Kong printing companies have established offices overseas. In order to expand business networks, explore market opportunities, and promote company image abroad, Hong Kong manufacturers and distributors

44 HONG KONG BUSINESS ANNUAL 2014

printing industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Printed Matter ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports by Market US United Kingdom Germany Chinese Mainland ASEAN Australia Japan by Categories Miscellaneous Books, Brochures etc Paper & Paperboard Labels of All Kinds Children's Picture, Drawing or Colouring Books Printed or Illustrated Postcards, Printed Cards Transfers

may participate in trade fairs and study missions organised by the Hong Kong Trade Development Council (HKTDC), such as the Hong Kong International Printing and Packaging Fair. TDC also organises from time to time study or matchmaking missions for Hong Kong manufacturers to visit specific markets for exploring business potential and establishing new business relations. Other important fairs include Drupa, IPEX, etc. Industry Trends Many trends in printing pertain to the advent of new technology or production techniques. Filmless printing, such as computer-to-plate (CTP), is becoming mature. With CTP technology, images can be transmitted onto a zinc plate directly without the process of colour management and making colour separation films. This development can shorten the prepress production time and produce more defined images. Digital printing enables

2011 HK$Mn. Growth % 1,656 -8 17,110 +2 16,347 +3 18,765 +1

2012 HK$Mn. Growth % 1,469 -11 16,339 -5 15,619 -5 17,808 -5

Jan-Jun 2013 HK$Mn. Growth % 666 -12 7,751 +6 7,206 +3 8,417 +4

2011 Share % Growth % 26.9 -5 11.8 * 4.0 +5 10.8 -5 8.8 +12 5.1 +2 4.3 +21

2012 Share % Growth % 26.9 -5 10.8 -13 3.6 -14 12.8 +13 9.5 +2 4.9 -10 4.3 -4

Jan-Jun 2013 Share % Growth % 24.1 -8 8.9 -15 3.1 -15 16.9 +40 11.2 +16 4.5 -3 5.1 +29

2011 Share % Growth % 54.3 +5 20.1 -1 7.6 -15 5.1 -3 2.6 +6

2012 Share % Growth % 54.0 -6 23.2 +10 7.0 -13 4.5 -17 2.8 +2

Jan-Jun 2013 Share % Growth % 48.2 -5 26.7 +18 7.3 +7 3.2 -27 3.0 *

direct imaging - texts and graphics going directly from the computer to the printing machine without the use of plates. This shortens production time and cost, and improves speed and accuracy. It is easy to operate and suitable for printing small quantities with flexibility, short lead time and customisation (e.g. advertisements and personalised direct mailing, tickets). Some printers are also offering the â&#x20AC;&#x153;total solutionâ&#x20AC;?, including auxiliary services like design, data-processing, translation and editing and electronic publishing etc. Some large printers have developed vertically, such as manufacturing or trading paper, or forming strategic partnerships with suppliers, in order to reduce the effects from paper price fluctuations and allow the company to have better control of material supplies. In other cases, certain work processes, such as colour separation, which used to be subcontracted out, now tend to be internalised.

"An estimated 60-70% of the export business is attributable to orders received directly from overseas countries. Within this, about a quarter of them come from major international publishers in Hong Kong."

This is made possible by new equipment, which incorporates and automates more prepress or finishing functions. This would not only help printers achieve scale economies, but also have better control on quality and streamline production processes. Social-economic developments have great bearings on the industry. As the home printer becomes common, the printing industry is striving for sophisticated printing e.g. four colour printing with complex format and in large quantities, metallic colors, foil stamping or fluorescent colors etc. To reduce operation costs, local printers (mostly larger sized) have shifted a major share of their operations to China. However, they maintain their Hong Kong offices to receive overseas orders. They are also increasingly making use of high tech to cut costs e.g. overseas buyers could place orders from abroad through broadband connections. HONG KONG BUSINESS ANNUAL 2014 45

company and industry - lighting industry

Small and medium-sized companies lead Hong Kong’s lighting industry

The largest exports of light products include battery-operated portable lamps, such as torches, hand lanterns, hand-held incandescent lamps and LED lamps for outdoor, sports uses.

T

he lighting industry of Hong Kong is largely made up of small and medium-sized companies. Their products are usually meant for home improvement and domestic purposes. The largest export categories include batteryoperated portable lamps, such as torches, hand lanterns, hand-held incandescent lamps and LED lamps for outdoor, sports and/or diving uses. Meanwhile, there are a number of companies engaging in the business of electric table, desk, bedside and floorstanding lamps. Other exports include wall and ceiling lighting, chandeliers and lighting fittings, as well as decorative items like Christmas tree lighting sets and lamp shades. The materials used for casings and shades include plastics, diecast metals, crystals, glasses, ceramics and polished brasses. Some companies also produce neon lights, illuminated signs and illuminated name-plates for advertising

purposes and interior decoration. Most Hong Kong lighting product manufacturers have relocated their production facilities to the Chinese mainland. Their offices in Hong Kong are mainly responsible for product development, marketing and logistic support. They usually undertake product design, plastics injection moulding, vacuum coating, enamel plating and assembly production in-house. Against the fast changing market, Hong Kong companies emphasise quick response to the market, while keeping a close eye on product trends. Due to the growing quality consciousness of overseas buyers, many companies have strengthened their quality assurance systems by complying with ISO 9000, which is an internationally recognized standard for quality management system. Hong Kong’s total exports of lighting products surged by 30% in the first half of

"Hong Kong’s total exports of lighting products surged by 30% in the first half of 2013. Sales of major items like discharge lamps, electric lamps and portable lamps all performed well." 2013. Sales of major items like discharge lamps, electric lamps and portable lamps all performed well. The EU and the US are among the largest markets, together absorbing over 40% of Hong Kong’s lighting exports. Exports to these two markets were steady in the first half of 2013. Exports to the Chinese mainland also surged by 132% in the period. Sales Channels Hong Kong’s lighting manufacturers mostly produce on OEM and ODM basis for overseas importers and distributors. In view of intensified competition, ODM has outpaced OEM as their major business. A few manufacturers and traders also promote lighting products with their own brand names or trademarks. Hong Kong companies usually sell directly to overseas buyers, including volume importers and regional distributors of hardware and general merchandise. Some of the companies also deal with buying offices set up by overseas buyers in Hong Kong. Some large Hong Kong companies even sell directly to large-scale retailers like hypermarkets, supermarkets and chain stores, as well as buying groups/ co-operatives of smaller retailers in North America and Europe in order to reduce the levels of distribution and associated costs. Major trade fairs such as the International Home and Housewares Show held in Chicago, the Cologne International Hardware Fair, and the Japan DIY Homecentre Show provide promotion opportunities for Hong Kong traders. The Hong Kong International Lighting Fair organised by the Hong Kong Trade Development Council (HKTDC) is another major event for companies to exhibit their products to overseas buyers. Industry Trends Intensified competition from mainland and other Asian suppliers, which are increasingly equipped with automatic production machines, has long been a threat to Hong Kong companies. In response, Hong Kong manufacturers have differentiated their products by enhancing product features and aesthetic design,

46 HONG KONG BUSINESS ANNUAL 2014

lighting industry - company and industry Performance of Hong Kong’s Exports of Lighting Products ^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports Total Exports by Major Market EU (27) Germany France US Chinese Mainland Japan Canada Total Exports by Products Battery Operated Portable Lamps Electric Lamps & Lighting Fittings Discharge Lamps Electrical Lighting/signalling equipment for cycles/ vehicles Chandeliers & Wall Lighting

and enriched their product assortment by exploring new product lines. In recent years, overseas importers and distributors tend to make smaller-sized orders with higher frequency and shorter delivery lead times in order to minimise inventory. Some Hong Kong companies have therefore re-engineered their procurement and production management systems, in a bid to shorten their manufacturing cycle time and reduce costs in order to meet the market demand. On the other hand, there are an increasing number of Hong Kong manufacturers applying advanced technology for product design and production. For instance, computer aided design (CAD) has been adopted to improve the aesthetic and mechanical designs of lighting products. Applications such as the use of 3-dimension computer aided industrial design (CAID) also facilitate companies to enhance their design capabilities. Modern technology for plating, polishing, sheet metal cutting, die-casting, etc. has also been applied to improve

2011 HK$Mn. Growth % 49 -10 9,799 +2 8,661 +4 9,849 +2

2012 HK$Mn. Growth % 61 +23 9,486 -3 8,399 -3 9,546 -3

Jan-Jun 2013 HK$Mn. Growth % 19 -41 5,635 +30 4,185 +7 5,654 +30

2011 Share % Growth % 26 -9 8 +4 4 * 22 -3 17 -8 15 +61 2 -5

2012 Share % Growth % 25 -5 8 -13 4 * 22 -3 20 +11 11 -31 3 *

Jan-Jun 2013 Share % Growth % 22 +9 6 -7 6 +50 18 +6 31 +132 9 -10 2 +5

2011 Share % Growth % 20 +1 20 +16 14 -17

2012 Share % Growth % 19 -8 26 +23 13 -7

Jan-Jun 2013 Share % Growth % 16 +6 24 +31 26 +211

8

+5

8

-2

5

-7

10

+46

8

-15

6

-22

the product precision and quality. CEPA Provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. In the mainland, the CEPA origin criteria for Hong Kong items include change in tariff heading, performance of specific manufacturing process in Hong Kong, as well as fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong. Product development cost

"Due to environmental concerns, lighting products of higher energy efficiency and longer lifetime are preferred."

incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the value-added percentage. With effect from 1 April 2012, costs of raw materials and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the value-added content originating in Hong Kong is greater than or equal to 15%. General Trade Measures Affecting Exports of Lighting Products Exports of electric lighting products that required external power for operation are usually subject to relevant safety requirements in overseas markets. For instance, certain electrical items sold to the US have to comply with the mandatory requirements of UL/ETL listing or equivalent, in order to meet the federal safety standards. Likewise, products exporting to the EU have to comply with certain directives for safety, and carry a CE-mark accordingly. HONG KONG BUSINESS ANNUAL 2014 47

company and industry - travel goods & handbags industry

Handbag manufacturers move their production to Mainland China

Domestic exports now account for only a very small share of total exports of travel goods and handbags.

H

ong Kong companies export a wide range of travel goods and handbags, which accounted for 46% and 54% respectively. Major products include leather handbags (31%), cases for binoculars, cameras, musical instruments and spectacles (26%), handbags with plastics/textiles sheeting (23%), and wallets and purse (16%). Many Hong Kong manufactures have relocated their production base to the Chinese mainland. Domestic exports now account for only a very small share of total exports of travel goods and handbags. With a good cluster of supporting industries, the competitiveness of Hong Kong exports in terms of productivity, quality, reliability and delivery has been enhanced. Many handbags and luggage fittings (like clips and buckles) are supplied by nearby factories specialising in metal and plastic parts. Some other Hong Kong and mainland manufacturers are vertically integrated, which further enhances quality control and flexibility in

48 HONG KONG BUSINESS ANNUAL 2014

production and creates synergy. Facing keen competition from suppliers in the Chinese mainland and developing countries, some local manufacturers have shifted to high-end/niche markets. Others have developed ODM/OBM business and domestic sales in the Chinese mainland. The worldwide luggage market encompasses a wide range of products with differences in product quality and prices. At one end of the market are highquality, full-featured products that have prestigious brand names, higher prices and selective distribution. Beneath this ‘‘luxury’’ market is a broad middle market in which products are differentiated by features, brand name and price. Within this market, sales are largest at mid and low product price levels. Product differentiation decreases and breadth of distribution increases at lower price levels. At the lower end of the luggage market, unbranded or private label products with few differentiating features are sold in significant volumes and at low

"During 2012, the value of Hong Kong’s total exports of travel goods and handbags dropped slightly by 1% and reached HK$47 billion." margins, competing primarily on the basis of price. During 2012, the value of Hong Kong’s total exports of travel goods and handbags dropped slightly by 1% and reached HK$47 billion. The US was the largest export market for travel goods and handbags (accounting for 25% of total), followed by the EU (21%) and Japan (11%). Sales Channels Many Hong Kong’s travel goods and handbags are exported under OEM arrangements with overseas manufacturers. Buyers usually provide product specifications and designs. Yet, Hong Kong manufacturers are increasingly involved in product design and development, engineering, modelling, tooling and quality control. Apart from producing for the OEM customers, some Hong Kong manufacturers also have their own R&D undertakings to develop new models and produce their own branded products. However, due to the difficulties of reaching individual sellers, most of the local manufacturers prefer selling to overseas importers and distributors, who in turn market to the wholesalers and retailers. Apart from online shopping, retail channels of distribution of the travel goods and handbags industry primarily include department and specialty stores, national and mass merchant retailers, warehouse clubs, and company-owned retail stores. In order to establish connections and explore market opportunities, travel goods and handbags manufacturers and traders can join trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) and to participate in various international trade fairs such as Style Hong Kong, Tokyo International Gift Show and JFW International Fashion Fair (IFF) in Tokyo. HKTDC also organises from time to time study or match-making missions for Hong Kong manufacturers, in particular those OEM manufacturers, to visit specific markets for exploring business potential and establishing new business relations.

travel goods & handbags industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Travel Goods and Handbags^ Domestic Exports Re-exports of China -Origin Total Exports by Markets US EU(27) Italy United kingdom France Japan South Korea China ASEAN by Categories Travel Goods Handbags

2010 HK$Mn Growth % 15 +11 41,705 +9 32,908 +6 41,720 +9

2011 HK$Mn Growth % 19 +23 47,519 +14 35,972 +9 47,537 +14

2012 HK$Mn Growth % 14 -27 47,267 -1 35,288 -2 47,280 -1

2010 Share % Growth % 28.5 +9 23.7 -1 5.1 -15 5.1 -1 3.9 +14 10.3 +10 8.3 +2 8.1 +11 2.9 +11

2011 Share % Growth % 26.2 +5 22.1 +6 5.3 +18 3.8 -15 3.9 +13 10.0 +10 9.8 +35 12.3 +32 3.1 +23

2012 Share % Growth % 25.3 -4 21.4 -4 5.1 -4 3.8 * 4.2 +7 10.8 +8 10.3 +5 10.3 -16 3.8 +22

2010 Share % Growth % 46.9 +12 53.1 +8

2011 Share % Growth % 46.5 +13 53.5 +15

2012 Share % Growth % 46.3 -1 53.7 *

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies. * Insignificant

CEPA Provisions The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and was expanded in subsequent years. All products made in Hong Kong, subject to CEPA's rules of origin, enjoy dutyfree access to the Chinese mainland. Industry Trends Sales of travel goods are largely influenced by the number of travels people undertake. With the rising income and easy access to travel visa/ permit, Chinese tourists are the fastest-growing group of international tourists in the world. Due to closer economic ties with the rest of the world and rising affluence, more Chinese people are planning to travel overseas for either business or leisure purposes. Yet, most of them are looking for value-for-money luggage and other travel goods, which offer a huge market potential for Hong Kong manufacturers. On the other hand, many airlines have stringent allowance on both checked luggage and hand baggage,

many travellers are looking into more lightweight travel goods. Product Trends New fabrics and materials have been introduced, such as micro fleece grid fabric, crinkle nylon/polyester blends, suede skin, etc. Nowadays, many consumers preferred cheaper and more casual softside bags and luggage (whose production is labour intensive), in particular for hybrid luggage, instead of hardside luggage (capital intensive). According to the Travel Goods Association in the US, new design travel bag with 12 possible configurations are getting popular among travellers, because it meets most airline carry-on requirements. Demand for cases for electronic gadgets such as smart phones and tablets is increasing significantly. Cases with different designs and in different materials have become a life style fashion among the young generations. Besides the consumer market, many companies will order them as corporate gifts for

"In order to establish connections and explore market opportunities, travel goods and handbags manufacturers and traders can join trade fair missions organised by the Hong Kong Trade Development Council (HKTDC)"

their clients, creating a new market niche for the industry. Nowadays, people travel more frequent than before, the demand for high-quality travel gear with built-in innovative anti-threat technology for backpacks, leisure bags, photography bags and other travel accessories such as strap, cables and locks are in demand. For example, many credit cards contain RFID chips containing personal information. RIFD blocking accessories (such as waist-wallet and hip pack) are designed which blocks out transmissions and stop personal information from being accessed by identity thieves. Meanwhile, ergonomically-designed items continue to be in high-demand, with new items including luggage with handle systems that can be alternated for left-handed and right-handed people; luggage with a shock-absorbing wheel system that adjusts to surface changes for smooth rolling; and a collection that features a removable wheel and handle system for numerous travel options etc. HONG KONG BUSINESS ANNUAL 2014 49

company and industry - footwear industry

China is the largest footwear exporter, manufacturer, and consumer since 2011

The country’s annual per capita footwear consumption is on the rise.

T

he latest official statistics show that the footwear manufacturing industry had a total employment of 50 workers as of 2011. The majority of footwear manufacturers have set up offshore production facilities on the Chinese mainland to reduce operation costs and stay competitive, leaving only limited capacity in Hong Kong to meet small and quick orders. Some manufacturers, after relocation of production facilities offshore, are classified instead as import-export establishments. At the end of 2011, there were altogether 1,360 import/export establishments hiring 6,410 workers. Hong Kong produces a wide range of footwear suitable for indoor and outdoor activities. The industry is particularly strong at manufacturing women’s shoes, including dressing shoes and casual shoes of real and synthetic leather such as boots and mules. Some companies specialise in men’s casual shoes, like boat shoes, moccasins, loafers and canvas shoes, while others in sports

50 HONG KONG BUSINESS ANNUAL 2014

shoes. Meanwhile, more companies are paying attention to children’s shoes, like funky boots with embroidery, shoes with cartoon characters, rubber boots and school shoes. Sales Channels Many footwear companies in Hong Kong engage in OEM arrangements to produce for leading brands and retailers in North America, the EU and Japan. With improving capabilities in product design and development, engineering, modelling, tooling and quality control, more and more Hong Kong footwear companies engage in ODM projects. Many companies have their own R&D and QC specialists to strengthen the quality of their products. Some Hong Kong footwear companies, such as Le Saunda, Mirabell, Staccato, and Joy and Peace, have also succeeded in building up their own brands with retail network in Hong Kong, Macau and the Chinese mainland. While some footwear exporters prefer selling to overseas

"A number of Hong Kong companies, some with Taiwanese stakes of interest, produce world famous brands, including Adidas, Asics Tiger, Bass, Converse, and Timberland." importers and distributors, many of them are selling to mass merchandisers, such as Wal-Mart, Target, Costco and Kmart. A number of Hong Kong companies, some with Taiwanese stakes of interest, produce world famous brands, including Adidas, Asics Tiger, Bass, Converse, Le Coq Sportive, New Balance, Nike, Reebok and Timberland. A few have been granted licences to produce and distribute foreign brands for the Chinese mainland or Hong Kong market. To establish business contacts with overseas buyers, Hong Kong manufacturers and traders have involved themselves actively in international trade shows led or sponsored by the Hong Kong Trade Development Council (HKTDC), including the ones in Budapest, Dongguan, Dusseldorf, Dubai, Guangzhou and Jakarta. Industry Trends China is not only the world’s largest shoe exporter and manufacturer, but the No.1 footwear consumer, surpassing the US since 2011. Presaging huge potential, the country’s annual per capita footwear consumption (among the urban population) is on the rise and is expected to have exceeded 2.5 pairs in 2012, bringing the total consumption of shoes on the Chinese mainland to reach 3.0 billion pairs, up from the 2011 level of 2.3 billion pairs. Footwear manufacturers nowadays focus more on value-added service. Quick response in sample making, prompt delivery and high quality are widely required. They are also tapping the global green trends by producing shoes made with recycled, eco-friendly and vegan materials. Popular footwear brands including Reebok, Melissa, Bobux, Terra Plana, Nike and Timberland have adopted environmentally-driven manufacturing processes and increased their assortment of “green” footwear items such as shoes made with natural latex rubber and recycled plastic. Nike has also launched a product line called ‘Considered’ where designers are encouraged to design shoes using less harmful adhesives and more recycled

footwear industry - company and industry Performance of Hong Kongâ&#x20AC;&#x2122;s Exports of Footwear ^ (HK$ billion) Domestic Exports Re-exports of Chinese Mainland Origin Total Exports by Market US EU (27) Germany Italy Netherlands United Kingdom Chinese mainland Japan Australia Canada South Korea by Categories Finfished footwear Rubber of Plastic Uppers Textile Uppers Leather Uppers Others Accessories and Parts

materials. Meanwhile, most of these brands have developed eco-friendly packaging solutions by utilising eco-friendly, biodegradable and sustainable materials such as soy-based ink, recycled cork, nylon and foam. For instance, Puma has replaced its original shoe box with a simple cardboard sheet and a special bag made of non-woven polyester consisting of recycled PET. Furthermore, online shopping has been growing in popularity along with ascending internet usage. Most of the renowned brands such as Nike, Crocs and Adidas have responded by setting up online stores where shoppers can choose from a wide variety of shoes in different sizes, colours and styles at different price points. In China, a fast growing market with high potential, the total number of online shoppers on the Chinese mainland

2011 Value Growth % 0.002 -63 43.867 +1 40.048 -1 43.869 +1

2012 Value Growth % 0.003 +53 40.191 -8 36.123 -10 40.194 -8

Jan 2013 Value Growth % * +93 3.641 -11 3.303 -13 3.641 -11

2011 Share % Growth % 34.4 -11 22.3 +5 3.9 +4 3.8 +6 3.7 +52 2.6 -13 8.7 +18 8.0 -6 2.9 -5 2.9 -3 3.6 +24

2012 Share % Growth % 35.4 -6 19.6 -19 3.9 -9 3.7 -12 3.0 -26 2.7 -5 9.6 +2 8.0 -9 3.0 -7 2.7 -14 3.5 -10

Jan 2013 Share % Growth % 31.1 -20 21.4 -17 4.8 -5 4.7 -22 3.5 +10 2.7 -9 9.0 +13 8.8 -8 4.1 -11 3.7 +8 3.5 -37

2011 Share % Growth % 94.1 +1 16.4 -6 11.1 +9 66.3 +2 0.3 +13 5.9 +1

2012 Share % Growth % 93.5 -9 16.3 -9 10.6 -13 66.5 -8 0.2 -34 6.4 *

Jan 2013 Share % Growth % 94.5 -12 16.8 -12 11.1 -29 66.4 -9 0.2 -46 5.5 +20

exceeded 242 million in 2012, boasting a turnover of RMB$760.9 trillion in the first three quarters of 2012. It is expected that the e-commerce retail sales of footwear enterprises in China would reach RMB18 trillion by 2015. Increasingly, ethical sourcing is a common practice among international footwear companies. In response to the social demand for protecting human rights in workplaces, many leading companies have introduced measures to monitor the working conditions in their own factories as well as the contracted factories overseas. For example, most, if not all major footwear brands have established their code of conduct in relation to labour conditions for their contracted factories to abide. To follow suit, Hong Kong companies such as Taizin have introduced their own

"It is expected that the e-commerce retail sales of footwear enterprises in China would reach RMB18 trillion by 2015."

code of conduct to ensure safe and healthy working conditions. General Trade Measures Affecting Exports of Footwear Overall speaking, trade measures for footwear are quite prohibitive. While footwear exports to the US are subject to tariff duties of 0 - 48%, import tariffs of the EU are around 0 - 17%. Meanwhile, Japan applies the tariff quota system with tariff duty ranging from 3.4% to 30%. Tariff rates on leather footwear are broadly classified by shape, material of soles and uppers, and country of origin. Following the expiry of the EUâ&#x20AC;&#x2122;s controversial antidumping duties on leather shoes on 1 April 2011, Hong Kong exporters nowadays are free to export footwear to the EU without being subjected to burdensome anti-dumping duties. HONG KONG BUSINESS ANNUAL 2014 51

company and industry - processed food & beverages industry

Active trading activities boost Hong Kong’s processed food and beverages industry Dah Chong Hong, Four Seas Food Investment, EDO Trading Co, Kwan Hong Yuen Trading Co Ltd, Yu Kee Trading Co Ltd, Sun Shun Fuk are only a few of major food importers/traders in Hong Kong.

T

he processed food and beverages industry in Hong Kong is characterised by its active trading activities. Major food importers/traders in Hong Kong include Dah Chong Hong, Four Seas Food Investment, EDO Trading Co, Kwan Hong Yuen Trading Co Ltd, Yu Kee Trading Co Ltd, Sun Shun Fuk etc. There is a considerable scale of food and beverages production in Hong Kong. Most of this production is for local consumption. Major products include instant noodles, macaroni, spaghetti, biscuits, pastries and cakes. Others include canning, preserving and processing of seafood (fish, shrimps, prawns, and crustaceans); manufacture of dairy products (fresh milk, yoghurt and ice cream); seasoning and spirits. With growing Western interests in oriental food and condiments such as soya sauce, soya milk and oyster sauce, there has been increasing demand for Hong Kong’s food

exports. Some Hong Kong brands, such as Lee Kum Kee and Vitasoy, have expanded their markets vigorously in both Chinese mainland and overseas markets, and received high recognition. The industry has attracted substantial foreign investment. A notable foreign investor is Nissin from Japan, which produces instant noodles in its factory in Tai Po Industrial Estate and is now the leader of Hong Kong's instant noodles market. In 2006, Amoy, a frozen dim sum and sauces producer in Hong Kong, was acquired by Ajinomoto Co., a multinational group from Japan. Large Hong Kong manufacturers have expanded their global network and set up offices or factories in major markets. For example, Lee Kum Kee has factories and regional offices in the mainland, the US and the UK, and Vitasoy has factories in the mainland, the US, Australia and Singapore.

" As people are getting more health conscious, organic food is becoming more popular nowadays." Sales Channels Many Hong Kong food and beverages manufacturers deal directly with overseas importers and supermarket chains. However, Hong Kong’s food and beverages trading companies play a pivotal role to introduce western food to mainland consumers through Hong Kong, and to assist smaller producers in Hong Kong and the Chinese mainland in selling overseas. Many Hong Kong brands have successfully entered overseas markets. Garden (biscuits, cakes and candies), Doll (instant noodles), Vitasoy (soft drink), Amoy, Lee Kum Lee (cooking sauces) and Lam Soon (edible oils) are the leading local brands. Many of these brands appoint distributors and/ or establish overseas offices to promote overseas sales. These Hong Kong brands have expanded vigorously to the overseas markets and received increased international recognition. Some companies also set up overseas production plants to produce and to serve their local markets. For example, Vitasoy Group has spread far beyond Hong Kong and now sells its products in more than 30 markets throughout the world. Besides Hong Kong, Shenzhen, Foshan and Shanghai, Vitasoy Group also has production plants in the US, Australia and Singapore. In order to establish connections and explore market opportunities, processed food and beverages manufacturers and traders can join trade fairs and missions organised by HKTDC such as the Food Expo in Hong Kong, Canton Fair in Guangzhou and Style HK Show in various mainland cities. HKTDC also organises from time to time study or matchmaking missions for Hong Kong manufacturers to visit specific markets for establishing new business relations. Industry Trends Health and wellness offerings are increasingly adapted to meet the expectation of consumers on processed food and beverages. In particular, ageing populations and rising health consciousness are creating a receptive environment for products that aid the “maintenance” of health, such as cholesterol-lowering spreads and high calcium milk. While health issues are creating new openings, microwave and packaged foods also provide a promising growth for the sake of convenience. As people are getting more health conscious,

52 HONG KONG BUSINESS ANNUAL 2014

processed food & beverages industry - company and industry Performance of Hong Kong's Exports of Processed Food and Beverages^ Domestic Exports Re-exports of Chinese Mainland Origin Total Exports by Market ASEAN Vietnam Chinese Mainland Taiwan Macau USA EU Canada Australia by Categories Processed food Poultry cuts and offal, (other than liver) frozen Edible offal of swine, frozen Cuttlefish, squid, octupus, frozen/dried/salted/ in brine Pistachios, fresh or dried Almond, fresh or dried Beverages Spirits obtained by distilling grape wine/marc Wine of fresh grapes (excl. sparkling wine)

organic food is becoming more popular nowadays. Organic foods are foods that are produced using methods of organic farming, which do not involve modern synthetic inputs such as synthetic pesticides and chemical fertilizers. Organic farmers use management system that promotes and enhances biodiversity, biological cycles, and soil biological activity. Organic foods are also not processed using irradiation, industrial solvents or chemical food additives. Organic processors maintain food’s organic status by segregating it from synthetic and other prohibited materials, carefully tracking ingredients, and using detail record keeping. As many crops and livestock are already genetically modified (GM), and many food products are made from genetically modified organisms (GMO), consumers have paid more attention to

2011 HK$Mn. Growth % 2,807 +17 39,418 +14 5,121 +29 42,225 +29

2012 HK$Mn. Growth % 2,939 +5 38,698 -2 6,665 +30 6,665 +30

Jan-Jun 2013 HK$Mn. Growth % 1,344 +10 19,094 +3 4,605 +54 4,605 +54

2011 Share % Growth % 34.9 +61 32.3 +64 33.7 -14 8.1 +18 13.4 +30 2.8 -5 1.3 -15 1.2 +3 0.8 +14

2012 Share % Growth % 36.7 +4 33.5 +2 30.7 -10 6.7 -19 14.2 +5 3.1 +9 1.6 +19 1.2 -1 1.0 +14

Jan-Jun 2013 Share % Growth % 39.5 +8 36.1 +5 22.8 -27 10.0 +169 16.0 +13 2.9 -4 2.2 +49 1.0 -11 1.0 +9

2011 Share % Growth % 83.6 +13 16.7 +5 8.4 -30

2012 Share % Growth % 83.9 -1 11.9 -30 7.4 -13

Jan-Jun 2013 Share % Growth % 84.3 +5 9,8 -32 5.4 -43

0.7

+223

1.7

+133

3.7

+135

5.0 5.3 16.4 5.8 4.4

+31 +87 +26 +17 +43

6.1 6.5 16.1 6.4 4.0

+22 +21 -4 +10 -9

5.0 4.0 15.7 6.2 3.6

+62 -29 -8 +4 -21

GM food labelling. The Codex Alimentarius Commission of the United Nations has not yet reached a consensus on the common standards in respect of GM food labelling. At present, policies on GM food labelling vary in different countries and regions. Regulatory approach on GM food labelling could be broadly classified into a mandatory approach and a voluntary approach. The mandatory approach could be further divided into the “labelling of designated GM products only” and “pan-labelling” approaches. For the former approach, labelling is required if the food products contain designated GM materials. Countries and regions adopting this approach include the mainland, Japan and Taiwan. For the “panlabelling approach”, it requires the labelling of any food that contains GM ingredients exceeding a threshold level.

"The use of online shopping has become increasingly popular for grocery shopping in Asian countries."

Countries adopting this approach include the EU, Australia, New Zealand and South Korea. As regards the voluntary labelling approach, it only requires the labelling of GM food that is significantly different from its conventional counterpart, in terms of composition, nutritional value and allergenicity. The US and Canada are adopting this approach. The use of online shopping has become increasingly popular for grocery shopping in Asian countries. In Taiwan and Japan, many working housewives would place their orders via internet to buy food, including fresh fruits and vegetables. On the mainland, online grocery shopping is getting popular in big cities such as Beijing and Shanghai; shoppers prefer buying packaged/processed foods and snack rather than fresh food items online. HONG KONG BUSINESS ANNUAL 2014 53

company and industry - auto parts and accessories industry

Auto parts and accessories industry continues to grow Industry on a journey in exploring full potential in Hong Kong.

A

lthough the auto parts and accessories industry is not a major industry in Hong Kong, a large variety of auto parts and accessories are exported. Product-wise, car radios are the largest single items amid the strong position of Hong Kong in exporting a wide range of consumer electronics, including audio-visual equipment for incar entertainment. Hong Kong also exports certain direct parts and accessories for motor vehicles and motorcycles. A wide range of other parts and accessories for automobiles are also on the export list. These include pneumatic tyres, safety glass, rear-view mirrors, locks, car seats, lead-acid batteries, electrical lighting, alarms, navigational equipment, wiring sets, counters and meters, exhaust systems as well as certain parts for use in combustion piston engines. Only a few Hong Kong companies are engaged in the production of engineering components for automotive industry. This is because on one hand Hong Kong does not have an automotive industry. On the other hand, it is difficult for Hong Kong

engineering parts manufacturers to enter the European and US markets as they lack track records. Most overseas buyers have their established suppliers’ network already. In Hong Kong, more manufacturers are becoming interested in the production of auto parts and accessories, and higher value-added products are being developed. Hong Kong manufacturers are also competitive in producing higher-end audio and security systems. Many local manufacturers are small electrical or metal work factories. Most of them actually carry out production in mainland, or have set up joint-ventures with Chinese or overseas companies there, to take advantage of the lower production costs and proximity to the mainland market. Hong Kong exports a great variety of auto parts and accessories, which cover different industrial sectors, ranging from electrical appliances and electronics to metal and plastics parts or mechanical components. Some products may have exported under categories of electronic products, and mechanical or plastic parts.

"Hong Kong manufacturers are also competitive in producing higher-end audio and security systems." But relevant trade statistics do not have detailed breakdowns for particular items exclusively used in automobiles. One salient feature of Hong Kong’s exports of auto parts and accessories is the dominance of re-exports, which account for about 99% of total exports. This may suggest the importance of Hong Kong as a trading centre and entreport for auto parts, in particular, for the Chinese mainland market. Sales Channels Most manufacturers produce on OEM basis for car assemblers or for their parts suppliers. However, some large manufacturers also produce under their own brand names and designs, and export either through exporters, agents or directly to overseas importers who buy in bulk and distribute to car dealers, service stations and department stores. Major US aftermarket chain-store retailers who are large enough may import directly from manufacturers. Apparently, co-operation with international auto component suppliers will help local manufacturers enter the international market and upgrade their technology standards. Establishing joint ventures with Chinese partners may also help in exploring the Chinese market. Participation in international trade fairs and exhibitions will not only help Hong Kong companies to know the latest technologies and the product trends, but also meet with potential business partners and overseas manufacturers. Major international trade fairs include AAPEXAutomotive Aftermarket Products Expo in Las Vegas and the Automechanika in Frankfurt. The HKTDC also organises from time to time study missions for Hong Kong manufacturers to visit specific markets for establishing new business relations. Industry Trends Major players of the world auto industry have shifted production close to their markets to gain better access and to reduce costs. This trend has encouraged parts suppliers to follow suit. As many Asian countries have considered the development of auto industry as one of the major pillars of their economic growth, auto parts suppliers with a presence in the region will gain a definite advantage.

54 HONG KONG BUSINESS ANNUAL 2014

auto parts and accessories industry - company and industry Export Performance of Hong Kong’s Auto Parts and Accessories Industry^

Domestic Exports Re-exports of Chinese Mainland Origin Total Exports By Market Chinese mainland USA EU (27) Germany Netherland Japan ASEAN By Categories Radiobroadcast receivers for motor vehicles Parts and accessories pf motor cycles/cycles/invalid carriage Radio navigational aid apparatus Revolution counters, production counters, taximeters, mileometers, etc., speed indicators/ tachometers Parts for use with spark-ignition internal combustion piston engines, nesoi Parts for use in the compression ignition internal combination engines New pneumatic tyres of rubber Chassis fitted with engines, for motor vehicles

2011 HK$Mn. Growth % 39 +43 14,969 +6 11,091 +6 15,008 +6

2012 HK$Mn. Growth % 16 +59 15,890 +6 12,164 +10 15,907 +6

Jan-Apr 2013 HK$Mn. Growth % 8 +24 4,883 -4 3,570 -9 4,891 -4

2011 Share % Growth % 26.8 +4 18.7 +5 18.2 +2 4.8 -19 4.1 +11 9.5 -5 6.7 -18

2012 Share % Growth % 23.3 -8 22.4 -28 17.0 -1 4.5 -1 3.7 -5 11.2 +25 6.6 +4

Jan-Apr 2013 Share % Growth % 25.3 +6 22.0 -9 19.0 +7 5.0 +8 4.8 +36 7.0 -45 7.6 +9

2011 Share % Growth % 14.9 -5

2012 Share % Growth % 15.6 +11

Jan-Apr 2013 Share % Growth % 11.0 -45

11.9

+31

12.4

+10

12.4

-2

12.5

+20

16.8

+42

15.4

+20

11.7

-22

10.9

-1

14.4

+36

9.2

+14

8.4

-2

8.4

-13

6.0

+17

3.6

-36

4.3

-15

4.1 1.2

+26 -6

3.6 2.3

-6 +111

3.9 3.7

-5 +117

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies. Trade figures for different product groups are based on HS classification system and maybe different from values under the SITC system.

For example, an increasing number of foreign automobile assemblers have formed joint ventures in the Chinese mainland. In the meantime, assemblers tend to rely more on a few first-tier suppliers, and require these suppliers to play a greater role in product design and innovation. These first-tier suppliers in turn need to subcontract out more of their production of less sophisticated components, leading to increased opportunities for competitive lower-tier manufacturers. With growing pressure on cost and quality, the automotive industry has increasingly adopted advanced information technology in design and manufacturing. Computer aided design has become a popular tool

in many industries, and is getting mature in automotive geometric design. Computer aided manufacturing, which is largely related to numerical control machining, is also being adopted. Other new technology being adopted in the automotive industry includes rapid prototyping and virtual reality. Some auto parts makers are also forming joint ventures to boost their technology know-how as well as expanding the product range. Some auto parts and accessories suppliers have brought their operations in line with certain environmental management system requirements, especially the standards of ISO14000, which is particularly emphasised by certain first-tier manufacturers. This is because

"One salient feature of Hong Kong's exports of auto parts and accessories is the dominance of reexports, which account for about 99% of total exports."

multinationals are promoting not only their “green” vehicles that are characterised by cleaner emission and energy saving, but also their overall “green” corporate image in view of the increasing concerns over environmental protection worldwide. In this regard, multinationals have increasingly required their supply chains to practise environmental friendly production. CEPA The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and subsequently expanded in following years. All products made in Hong Kong, subject to CEPA’s rules of origin, enjoy duty-free access to the Chinese mainland. HONG KONG BUSINESS ANNUAL 2014 55

company and industry - air transport industry

A peek inside Hong Kong’s air transportation industry A number of HK’s industries, businesses, and services are largely dependent on air transport .

T

he air transport industry can be divided into the cargo and passenger sectors. These two sectors overlap since over half of Hong Kong’s airfreight is carried in the holds of passenger aircraft rather than pure freighters. There are scheduled and nonscheduled carriers operating in both the cargo and passenger sectors. In the cargo sector, there are two major cargo types, namely, express cargo and heavy-lift cargo. Hong Kong International Airport The Hong Kong International Airport (HKIA) at Chek Lap Kok, which allows 24-hour operation, was opened with a single runway and facilities in July 1998. The second runway and associated facilities were opened in May 1999. In view of long-term passenger and cargo growth, after the public consultation conducted in 2011, Airport Authority Hong Kong (AAHK) has proposed to the government to construct a third runway. With the government’s support, AAHK received the Environment Impact Assessment (EIA) Study Brief in

August 2012, which sets out the scope of environment issues to be addressed in the Study. In cooperating with the construction of the Hong Kong Link Road, which will connect the Hong Kong–Zhuhai–Macau Bridge with the new Hong Kong Boundary Crossing Facilities, there will be 28 stands entering service in end-2014. Besides, new infrastructure projects integrating the airport’s facilities have been started. The two air cargo terminals in the airport are privately-run. The larger one is known as the SuperTerminal 1 (ST1). With more than 390,000 sqm of gross floor area, ST1 is one of the most advanced and largest air cargo facilities in the world. It can handle over 3.5 million tonnes of cargo. In 2013, Hong Kong Air Cargo Terminal Limited (Hactl), the company which operates ST1, received the Best Business (Application) Gold Award at the Hong Kong Information and Communication Technology (ICT) Awards. The other cargo handling terminal at HKIA, Asia Airfreight Terminal (AAT)’s Terminal 2, was added

"35% and 39% of Hong Kong’s total exports and imports were done through air transport in the first five months of 2013, compared with 26% and 19% in 1980 respectively" in March 2007. There is an airfreight forwarding centre at HKIA, providing space for warehousing, loading platforms, truck parking bays and offices. In March 2008, Cathay Pacific was awarded the contract to build and operate a third cargo terminal with an area of 10 hectares. The first stage of the Cathay Pacific Cargo Terminal opened in February 2013 with full operations scheduled for end-2013. This is expected to increase HKIA’s cargo handling capacity by 50% to 7.4 million tonnes from the current 4.8 million tonnes. In an effort to enhance operational efficiency, HKIA has adopted the printing of integrated radio frequency identification (RFID) baggage tags since January 2008. The new tags, which combine an embedded RFID chip with a barcode, replace traditional barcode-only baggage tags. RFID tags can be read more quickly and contain more information, with readable rates at 97% compared with 80% for barcodes. Air transport has become more important to Hong Kong trade over the years. 35% and 39% of Hong Kong’s total exports and imports were done through air transport in the first five months of 2013, compared with 26% and 19% in 1980 respectively. Hong Kong’s efficiency in customs clearance and its status as a free port are among the main contributors to this increase. Simple customs clearance and 24-hour operation of HKIA makes it convenient for goods destined for the Chinese mainland to go through Hong Kong for the mainland. In 2012, Hong Kong’s total exports by air reached HK$1,154 billion, up 3.1% from 2011. For imports by air in the same year, they reached HK$1,509 billion, up 3.1% from 2011. In terms of export by air, the Chinese mainland, the US and India were the largest markets in 2012, representing respectively 27.8%, 14.5% and 5.8% of Hong Kong’s total exports for that year. On the import side, the Chinese mainland, Taiwan and Singapore were the largest markets in 2012. They represented, respectively, 12.2%, 11.3% and 10.9% of Hong Kong’s total imports by air during the year. Service Providers

56 HONG KONG BUSINESS ANNUAL 2014

air transport industry - company and industry Industry Data Hong Kong International Airport

2011

2012

2013*

Air cargo Throughput (‘000 tonnes)

3,938

4,025

1,626

Year-on-year (YoY) growth (%)

-4.6

+2.2

+2.3

No. of passengers handled (million)

53.9

56.5

23.9

YoY growth (%)

+5.9

+4.8

+3.9

March 2013

2012

2013*

Source: Hong Kong International Airport * January-May

Air transport industry Number of Establishments

145

4,025

1,626

24,748

+2.2

+2.3

Vacancies

205

56.5

23.9

YoY growth (%)

+5.9

+4.8

+3.9

Business Receipts (HK$ billion)

2010

2011

2013*

Hong Kong-based airline and helicopter companies

93.2

106.7

1,626

Local representative offices of overseas airline companies

1.1

1.3

+2.3

Service activities incidental to air transportation

19.1

20.9

23.9

YoY growth (%)

+5.9

+4.8

+3.9

Employment

Source: Quarterly Report of Employment and Vacancies Statistics, Census and Statistics Department

Sources: Key Statistics on Business Performance and Operating Characteristics of the Transportation, Storage and Courier Services Sector in 2011, Census and Statistics Department

There are more than 100 international airlines providing about 1,000 scheduled passenger and all-cargo flights each day between Hong Kong and about 180 destinations worldwide, including 48 mainland cities. There are approximately 590 nonscheduled passenger and cargo flights each week on average. Exports Based on the latest available statistics, Hong Kong’s exports of air transport services increased by 11.3% to HK$ 89.8 billion[1] in 2011, representing 35.9% of total transportation service exports for that year. Besides air cargo handling business, another potential for Hong Kong to export air transport-related services is airport management services, especially in the operation of air cargo terminal. This can be done either by investing in air cargo terminals overseas, or by providing consultant services. Hong Kong is well positioned to tap into this market, as more and more airports around the world, particularly the Chinese

mainland, are to be privatised or operated on a commercial basis. A success story is the Chinese-foreign joint venture company (JV) - a joint venture between AAHK and Hangzhou Xiaoshan International Airport Co. Ltd. Under the joint agreement which lasts for a long-term period starting from 2006, HKIA owns 35% of the joint-venture, while the rest is owned by the Hangzhou government. In 2012, HXIA’s passenger volume grew 9.2% from 2011 to 19.1 million, while cargo throughput increased 10.5% to 338,400 tonnes. During 2012-13, a new domestic passenger terminal (T3) and a second runway entered service successively. Besides HXIA, AAHK has also entered into different forms of cooperation with various airports on the Chinese mainland, namely Zhuhai Airport, Shanghai Hongqiao International Airport and Beijing Capital International Airport. The Mainland-Hong Kong

"There are more than 100 international airlines providing about 1,000 scheduled passenger and all-cargo flights each day between Hong Kong and about 180 destinations worldwide, including 48 mainland cities."

Closer Economic Partnership Arrangement (CEPA) Under China’s WTO commitment, foreign services providers are permitted to operate minority-owned joint venture aircraft and maintenance services enterprises. Since the implementation of the Regulations on Foreign Investment in the Civil Aviation Industry in August 2002, China has been allowing foreign companies to invest, through joint ventures, in the construction of runways, passenger terminals and cargo terminals, as well as in other supporting services such as ground services, aircraft maintenance, air catering, hotels and restaurants, and aviation fuel supply. Foreign investment in air traffic control remains off-limits. Under CEPA, Hong Kong services suppliers (HKSS) are allowed to establish contractual joint venture, equity joint venture or whollyowned operations to provide airport management services and airport management training and consultation services for small and medium HONG KONG BUSINESS ANNUAL 2014 57

company and industry - sea transport industry

Hong Kongâ&#x20AC;&#x2122;s sea transport industry accounts for its 10th rank in world trading According to the Hong Kong Shipowners Association, the total tonnages of ships owned or managed by its members exceed 133 million deadweight tonnes, or 8.7% of the worldâ&#x20AC;&#x2122;s total fleets.

T

he sea transport sector is of vital importance in supporting Hong Kong's status as the world's 10th largest trading entity. During 2012, Hong Kong handled 269.3 million tonnes of seaborne and river cargo. About 70% of seaborne cargo was transported by ocean-going vessels. Of the seaborne cargo handled in the aforesaid year, 117.1 million tonnes (62%) were transhipment cargo. The Chinese mainland was the biggest source and destination of Hong Kong's transhipment cargo. Hong Kong handled 23.1 million TEUs of containers in 2012, down 5.2% from 2011. Of the total, 75.8% were handled by container terminals at Kwai Tsing terminals, with the rest handled midstream by Hong Kong's mooring buoys and by river trade facilities. In the first five months of 2013, total containerised throughout reached 8.84 million TEUs, down 9.1% from the year-earlier period.

The moorings also handle most of Hong Kong's break bulk cargo. Bulk shipping takes care of bulky, unpacked goods such as oil, gas, grain, minerals and timber. Liner shipping Sea cargo to and from Hong Kong is carried both by liners and bulk vessels. Liner shipping is operated under a scheduled timetable with pre-announced rates and destinations. Many key routes are under liner conferences (agreements by the main shipping lines on tariffs and sailings). Hong Kong is a major hub with about 410 container liner services per week connecting to more than 520 destinations worldwide. The larger container lines have invested in advanced systems to provide cargo tracking information and improve efficiency. They often form alliances or

"The Hong Kong-Zhuhai-Macau Bridge (HKZMB), a large-scale crossborder infrastructure linking the three places, is expected to be completed in 2016." merge with other transport providers to develop door-to-door multi-modal services. Many liners are also forming alliances amongst themselves to increase efficiency and reduce cost in a very competitive environment. Vessel sharing has enabled the liners to offer a more flexible service in terms of global coverage, higher frequency of departures and a greater choice of routes. Container Terminals Hong Kong has nine existing container terminals with a total of 24 berths at Kwai Chung and Tsing Yi Island, operated by several private consortia. Through various productivity enhancement measures, their combined throughput capacity is some 20 million TEUs per year. The Hong Kong government has launched a feasibility study on the construction of Container Terminal 10 at Southwestern Tsing Yi, while taking into considerations of the environmental impact and economic situation. River Trade Terminal The Pearl River links Hong Kong with many manufacturing centres in Southern China, which has become the main cargo base for the territory. River trade grew fast in the last two decades, rising from 9.3 million tonnes in 1990 to 80.4 million tonnes in 2012. To cater for increasing river trade, a dedicated terminal, the River Trade Terminal (RTT), was established in 1996 and became operational in November 1998. RTT is located in the west of Tuen Mun. Service Providers Shipowners own ships to obtain an income. In the liner shipping market, ship owners rent ships to a shipping line. In the bulk shipping market, ships are rented on a time or voyage basis to a ship charterer or ship operator. As at January 2012, the Hong Kong fleet of ships over 1,000 gross tonnes consisted of 766 ships and the total tonnage reached 42.2 million deadweight tonnes with an average age of 9.4 years. As at end-June 2013, 2,283 vessels were on the Hong Kong Shipping Register (HKSR), boasting a total of more than 83

58 HONG KONG BUSINESS ANNUAL 2014

sea transport industry - company and industry Industry Data Total port cargo throughout (million tonnes) Total Ocean-going Exports and imports Transhipments River trade Exports and imports Transhipments

2012 269.3 188.9 71.8 117.1 80.4 39.4 41.0

% of total 100% 70.1% 38.0% 62.0% 29.9% 49.0% 51.0%

2013* 62.5 42.4 15.3 27.1 20.1 10.8 9.3

% of total 100% 67.8% 36.1 63.9% 32.3% 53.7% 46.3%

Total container traffic (million TEUs) Total Kwai Tsing Terminals Ocean vessels River cargo vessel Mid-stream operation and other berths Ocean vessel River cargo vessel

2011 24.4 17.4 15.1 2.4 7.0 2.3 4.6

2012 23.1 17.5 15.2 2.3 5.6 1.5 4.2

2013* 5.3 4.1 3.5 0.6 1.2 0.3 0.9

12/11 Change -5.2% +0.3% +0.9% -3.0% -19.0% -36.6% -10.1%

2009 99.9 1.1 58.6 4.3 35.9 19.9

2010 127.7 1.5 78.3 4.1 43.9 20.4

2011 136.8 2.0 78.2 3.9 52.7 19.4

11/10 Change +7.1% +33.3% -0.1% -4.9% +20.0% -1.0%

Exports (HK$ billion) Exports of Sea Transport Services Passenger Freight Ship Chartering Others* Share of total services exports

million gross registered tonnes, making HKSAR the 4th largest shipping register in the world following Panama, Liberia and Marshall Island. According to the Hong Kong Shipowners Association, the total tonnages of ships owned or managed by its members exceed 133 million deadweight tonnes, or 8.7% of the world’s total fleets. Shipping lines tend to own and/or lease a group of ships which they deploy on predetermined liner routes. Ship operators rent ships from owners and use them to carry bulk cargoes from port to port. The aim of the operators is to reduce the number of wasted voyages and this requires careful selection of the ship, routes and cargo. Shipping lines use shipping agents to sell their freight space in a particular port. The shipping broker acts to match the supply of bulk vessels from operators/owners with the demand for bulk cargo shipments by the charterers. Exports According to the latest

available statistics, Hong Kong earned HK$136.8 billion from exporting sea transport services in 2011 (accounting for 19.4% of total service exports in 2011), up 7.1% from 2010. Unlike air transport, passenger revenues constituted an insignificant part of the export of sea transport services. More countries are seeking to privatise their port operation and/or develop new ports to be run on a commercial basis. An exportable sea transport service from Hong Kong is thus the development and management of ports on the Chinese mainland and the wider region. Hong Kong port operators are already active in this field. Modern Terminals, a Hong Kong terminal operator, invest and operate several container terminals in Shenzhen, and has expanded its business to the Yangtze River Delta since 2004. Hutchison Port Holdings (HPH) Group, another Hong Kong terminal operator, has a network of operations

"As at end-June 2013, 2,283 vessels were on the Hong Kong Shipping Register (HKSR), boasting a total of more than 83 million gross registered tonnes, making HKSAR the 4th largest shipping register in the world following Panama, Liberia and Marshall Island."

that comprises 320 berths in 52 ports around the world, handling 76.8 million TEUs worldwide in 2012. Recent Developments and Market Outlook South China ports have been developing quickly in the past years. Shenzhen was the world’s fourth busiest port in 2012, handling 22.9 million TEUs (up 1.6%), while Guangzhou remained the seventh, handling 14.5 million TEUs (up 2.1%). Shanghai was the busiest seaport on the Chinese mainland in 2012, handling 32.5 million TEUs. According to the World Bank’s Logistics Performance Index (LPI), Hong Kong scored 4.12 to rank 2nd in the world, following Singapore. In terms of international shipment performance, Hong Kong ranked 1st among 155 economies. With an aim to cut emissions of air pollutants near the port areas, 17 Hong Kong major freight liners have signed up the Fair Wind Charters (FWC). HONG KONG BUSINESS ANNUAL 2014 59

company and industry - wine industry

Development of HK's wine industry accelerates

Hong Kong sweetens position as a wine trading and distribution centre for the whole region.

H

ong Kong's wine industry is supported by a significant pool of experienced fine wine merchants with good wine knowledge and international wine trade experience. Besides wine trading and distribution, wine-related business includes auction, retailing, warehousing, catering and transportation. Since the removal of all duty-related customs and administrative controls in February 2008, Hong Kong has further developed into a wine trading and distribution centre for the region, particularly the Chinese mainland. Hong Kong is the only place in the world that has entered into an agreement with the mainland Chinese Government, allowing wine imports to go into China under CEPA and enhanced customs facilitation measures. Hong Kong has a significant pool of experienced fine wine merchants with good wine knowledge and international wine trade experience. Amid the growing demand for wine in Asia, the Hong Kong government removed all duty-related customs and administrative controls for

wine in February 2008 to facilitate the development of Hong Kong as a wine trading and distribution centre for the region, particularly the Chinese mainland. Besides wine trading and distribution, wine-related business includes auction, retailing, warehousing, catering and transportation. Following the deregulation, development of the wine industry has accelerated. Wine imports surged some 80% in the first year. This increase in employment was equivalent to about 1,000 full time jobs, 60% of which were for front-line staff; and the number of wine-related manpower and professional courses (including sommelier training as well as wine business/management courses) grew from 21 in 2007 to 86 in 2009. The number of participants in these courses reached over 8,500 in 2009, representing an increase of more than two times as compared with about 2,400 participants in 2007. Hong Kong is the only place in the world that has entered into an agreement with the mainland Chinese Government, allowing wine imports to go into China

" After years of strong growth, the value of wine imports saw a drop of 17.7% in 2012 and 1.4% year-onyear in the first 10 months of 2013." under CEPA and enhanced customs facilitation measures. This makes the city an unrivalled gateway to China, attracting industry players from around the world to launch or expand their business in Hong Kong. Hong Kong, being a dutyfree port with good air connectivity and storage facilities, is regarded by Asian investors as the most cost-effective and convenient distribution hub to store their investment-grade wines for delivery to their markets on-demand. Since the weather in Hong Kong is not suitable for growing grapes, there is only very little wine production in Hong Kong, and therefore insignificant domestic exports. Virtually all exports are re-exports of imported wines with Asia being the major market. Chinese mainland and Macau, taking up some 84% of the total in 2012, are the major wine exporting destinations of Hong Kong. On the other hand, Hong Kongâ&#x20AC;&#x2122;s wine imports have expanded fast since the elimination of import duties in February 2008. In 2012, imports of wine amounted to HK$8.1 billion, a four-fold increase from 2007. After years of strong growth, the value of wine imports saw a drop of 17.7% in 2012 and 1.4% year-on-year in the first 10 months of 2013. Most of the imported wines originated from European countries such as France and the United Kingdom, but there has also been a significant share coming from Australia. During the first 10 months of 2013, wine imports in volume terms dropped slightly by 1.6% year-on-year. About 37% of the imported wines were reexported in 2012. The rest â&#x20AC;&#x201C; about 63% of wine imports were brought away from Hong Kong by individuals or retained in Hong Kong, for storage or immediate consumption. Sales Channel Hong Kong has kept its title as the largest wine auction centre in the world for three consecutive years since 2010, with the total auction sales amounting to HK$1.2 billion in 2012, according to Wine Spectator. Domestically, wines are sold through off-trade channels such as supermarkets, specialty stores and convenience stores, and on-trade

60 HONG KONG BUSINESS ANNUAL 2014

wine industry - company and industry Performance of Hong Kong's Wine Trade Wine (HS 2204-5) Trade in value terms Total Exports Domestic Exports Re-exports Imports Wine Exports by Market (by value) Asia Chinese Mainland Macau Vietnam Japan Taiwan USA

channels such as bars, restaurants and club houses. According to Euromonitor International, wine sales in Hong Kong amounted to US$416 million, or 12.9 million liters in 2012, up 33% and 22% respectively compared to five years ago. For 2013 to 2017, it is forecast to grow 9% per annum in value terms and 4% per annum in volume terms. Off-trade channels account for approximately 46% of total wine sales in value terms and 64% in volume terms in 2012. Industry Trends According to Euromonitor International, wine sales in Asia amounted to US$70.7 billion or 5.9 billion litres in 2012, up 64% and 45% respectively compared to five years ago. For 2013-2017, wine sales are forecast to grow 11% per annum in value terms and 8% per annum in volume terms. Sales in China are more spectacular, with an amount of US$40.5 billion or 4.3 billion litres in 2012, up 125% and 55% respectively compared to five years ago. For 2013-2017, sales are forecasted to grow 17% per annum in value terms and 10% per annum in volume terms. To support on-demand delivery to Asian market, storage facilities are necessary and being built and converted in Hong Kong. With the

2011 HK$Mn Growth % 1,913 +43.2 * -73.6 1,913 +43.2 9,790 +40.2

2012 HK$Mn Growth % 1,768 -7.6 * -100.0 1,768 -7.6 8,061 -17.7

Jan-Oct 2013 HK$Mn Growth % 1,308 -12.2 * * 1,308 -12.2 6,510 -1.4

2010 Share % Growth % 97.2 +43.6 42.1 +59.6 48.8 +33.7 2.9 +2.1 0.3 -21.8 1.2 +173.5 0.9 -21.9

2011 Share % Growth % 91.5 -13.0 53.9 +18.5 30.0 -43.3 3.4 +8.9 0.9 +215.1 1.3 +3.8 3.3 +248.9

2012 Share % Growth % 89.8 -14.2 49.0 -21.7 29.4 -13.0 4.0 +0.2 3.2 +253.9 1.7 +21.1 2.8 -51.9

assistance of the government and the industry, the Hong Kong Quality Assurance Agency launched the Wine Storage Management Systems Certification Scheme, the first of its kind in the world. The Scheme has been enthusiastically supported by the industry, with a total of 38 fine and commercial wine storage facilities, wine storage facilities in wine retailers and wine transportation service providers accredited as of March 2013. General Trade Measures Affecting Wine Exports Chinese mainland is the biggest export market for Hong Kong. It imposes the following taxes on wine: import tariff (14% for bottled wine and 20% of bulk wine), value added tax (17%) and consumption tax (10%), which results in an effective tax rate as high as about 48-56%. The two most critical pieces of legislation concerning wine imports are the wine standards and the wine labelling law, both of which are administered by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). Some standards that apply to wine are “Standards for the Administration of Wholesaling of Alcoholic Products”, “Standards for Administration of Retailing of Alcoholic

"According to an ad hoc survey carried out by the Commerce and Economic Development Bureau to evaluate the economic benefits of wine duty exemption, about 850 new wine-related companies were set up in Hong Kong in 2008 and 2009, bringing the total to 3,550"

Products”, “Measures for the Administration of Wine Distribution” and “Hygiene Standards of Distilled and Brewed Wine”. However, these standards do not necessarily correspond with international standards. To facilitate the movement of wine imports into the Chinese mainland through Hong Kong, the Customs and Excise Department (C&ED) of Hong Kong and the General Administration of Customs of the Chinese mainland signed on 9 February 2010 the "Co-operation Arrangement on Customs Facilitation Measures for Wine Entering the Mainland through Hong Kong". C&ED has stepped up efforts to tackle counterfeit wine, which include establishing a dedicated investigation team; forming an alliance with the industry to strengthen co-operation in intelligence collection and enhance their capacity in monitoring market activities; setting up a specialist team under the alliance, drawing in experts to assist in enforcement against counterfeit wine; as well as establishing a liaison network with overseas and Chinese mainland enforcement agencies to enhance its capability in intercepting suspected counterfeit wine and verify wine authenticity. HONG KONG BUSINESS ANNUAL 2014 61

numbers | indicators Labour Force, Unemployment, and Underemployment Period

Labour force

No. ('000)

Percentage change over the same period in preceding year (%)

2010

3 631.3

-0.8

157.2

-

4.3

7.2

2.0

2011

3 703.1

2.0

126.7

-

3.4

63.3

1.7

2012

3 785.2

2.2

124.5

-

3.3

57.6

1.5

7/2012 - 9/2012

3 781.8

1.5

131.7

3.3

3.5

59.2

1.6

8/2012 - 10/2012

3 784.6

1.7

130.1

3.4

3.4

57.6

1.5

9/2012 - 11/2012

3 782.8

1.6

126.7

3.4

3.3

53.3

1.4

10/2012 - 12/2012

3 794.9

1.7

116.8

3.2

3.1

55.9

1.5

11/2012 - 1/2013

3 826.5

2.4

120.5

3.4

3.1

60.3

1.6

12/2012 - 2/2013

3 835.1

2.1

123.1

3.4

3.2

58.6

1.5

1/2013 - 3/2013

3 852.7

2.4

132.5

3.5

3.4

61.1

1.6

2/2013 - 4/2013

3 851.7

2.4

133.5

3.5

3.5

61.8

1.6

3/2013 - 5/2013

3 869.7

2.6

134.2

3.4

3.5

63.2

1.6

4/2013 - 6/2013

3 877.2

2.5

132.1

3.3

3.4

61.4

1.6

5/2013 - 7/2013

3 883.5

2.3

134.0

3.3

3.5

58.8

1.5

6/2013 - 8/2013

3 887.1

2.5

135.8

3.3

3.5

58.4

1.5

7/2013 - 9/2013

3 884.3

2.7

134.2

3.3

3.5

57.0

1.5

8/2013 - 10/2013

3 877.9

2.5

130.1

3.3

3.4

56.8

1.5

9/2013 - 11/2013

3 869.9

2.3

127.2

3.3

3.3

55.3

1.4

Unemployed ('000)

Unemployed rate (seasonally adjusted) (%)

Unemployed rate ( not seasonally adjusted) (%)

Underemployed ('000)

Underemployment rate (%)

Notes : # Provisional figures - Not applicable. Source : General Household Survey Section (3), Census and Statistics Department

Starting from 2001, annual figures are compiled based on data collected in the General Household Survey from January to December of the year concerned as well as the mid-year population estimates by District Council district compiled jointly by the Census and Statistics Department and an inter-departmental Working Group on Population Distribution Projections. The labour force refers to the land-based non-institutional population aged 15 and over who satisfy the criteria for being classified as employed population or unemployed population. The employed population comprises those persons aged 15 and over who have been at work for pay or profit during the 7 days before enumeration or have had formal job attachment. The unemployed population comprises all unemployed persons. For a person aged 15 or over to be classified as unemployed, that person should : (a) not have had a job and should not have performed any work for pay or profit during the 7 days before enumeration; and (b) have been available for work during the 7 days before enumeration; and (c) have sought work during the 30 days before enumeration. However, if a person aged 15 or over fulfils the conditions (a) and (b) above but has not sought work during the 30 days before enumeration because he/she believes that work is not available, he/she is still classified as unemployed, being regarded as a so-called "discouraged worker". Notwithstanding the above, the following types of persons are also classified as unemployed: (a) persons without a job, have sought work but have not been available for work because of temporary sickness; and (b) persons without a job, have been available for work but have not sought work because they: (i) have made arrangements to take up a new job or to start business on a subsequent date; or (ii) were expecting to return to their original jobs. Unemployment rate refers to the proportion of unemployed persons in the labour force. "Unemployment rate (seasonally adjusted)" refers to the unemployment rate adjusted for seasonal variations. Starting from May 2008, the seasonally adjusted unemployment rate is compiled by the X-12 ARIMA method to replace the previous X-11 ARIMA method. The seasonally adjusted unemployment rates since November 2006 January 2007 have also been revised using the new method. Figures prior to November 2006 – January 2007 refer to the seasonally adjusted unemployment rates based on the X-11 ARIMA method. Seasonal adjustment is not applicable to annual average unemployment rates. The underemployed population comprises those employed persons who have involuntarily worked less than 35 hours during the 7 days before enumeration and have sought additional work during the 30 days before enumeration, or have not sought additional work but have been available for additional work during the 7 days before enumeration. Following this definition, employed persons taking no-pay leave due to slack work during the 7 days before enumeration are also classified as underemployed if they worked less than 35 hours or were on leave even for the whole period during the 7-day period. The underemployment rate refers to the proportion of underemployed persons in the labour force. 62 HONG KONG BUSINESS ANNUAL 2014

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section B: Mining and Quarrying Year

Month

Establishments

Person engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

2

0.0

72

1.4

***

***

Dec

2

0.0

73

2.8

***

***

Mar

2

0.0

74

1.4

***

***

Jun

2

0.0

76

-8.4

***

***

Sep

2

0.0

77

6.9

***

***

2012

2013

Industry Section B: Mining and Quarrying Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

11 820

-2.4

106 780

-4.3

2 367

2.6

Dec

11 716

-2.5

105 308

-4.6

2 773

42.5

Mar

11 660

-2.4

104 022

-3.7

2 599

-9.1

Jun

11 609

-2.2

103 350

-4.0

2 680

-9.8

Sep

11 586

-2.0

103 914

-2.7

2 700

14.1

2012

2013

Year-on-year % change

Person engaged

Industry Sections D & E : Electricity and gas supply, and waste management Year

Month

Establishments

Person engaged

Vacancies

No.

Year-on-year % change

No.

Year-on-year % change

No.

Year-on-year % change

Sep

338

5.0

10 288

-6.2

***

***

Dec

371

13.8

10 275

-3.2

***

***

Mar

392

15.6

10 326

-0.4

***

***

Jun

412

23.7

10 592

2.6

***

***

Sep

419

24.0

10 835

5.3

***

***

2012

2013

HONG KONG BUSINESS ANNUAL 2014 63

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section F : Construction sites (manual workers only) Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

1 209

5.8

72 238

13.4

511

-4.3

Dec

1 158

-1.2

70 578

1.7

801

142.7

Mar

1 228

7.4

77 803

10.1

930

39.6

Jun

1 247

7.8

82 542

15.1

1 025

74.3

Sep

1 315

8.8

76 804

6.3

885

73.2

2012

2013

Year-on-year % change

Person engaged

Part of Industry Section G : Import/export trade and wholesale Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

116 360

-1.3

555 375

-1.6

8 236

6.4

Dec

116 110

-1.0

554 628

-0.9

7 705

9.0

Mar

116 774

-0.2

557 985

0.1

10 443

16.7

Jun

116 335

-0.7

554 372

-0.7

10 117

10.7

Sep

115 976

-0.3

551 628

-0.7

10 135

23.1

2012

2013

Year-on-year % change

Person engaged

Part of Industry Section G : Retail Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

63 972

0.8

259 694

2.7

8 954

45.9

Dec

63 909

1.0

260 246

2.1

7 556

20.4

Mar

64 960

2.0

262 670

2.3

9 404

15.0

Jun

65 046

1.6

264 805

2.1

8 124

17.8

Sep

64 929

1.5

264 751

1.9

9 186

2.6

2012

2013

Year-on-year % change

Person engaged

64 HONG KONG BUSINESS ANNUAL 2014

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section H : Transportation, storage, postal and courier services Year

Month

Establishments No.

Year-on-year % change

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

9 616

-1.3

166 891

1.9

3 542

45.7

Dec

9 569

-2.0

167 241

1.1

3 014

20.2

Mar

9 661

-0.5

168 108

1.5

3 615

13.1

Jun

9 652

-0.1

169 346

1.6

4 101

20.3

Sep

9 673

0.6

170 988

2.5

3 642

2.8

2012

2013

Person engaged

Industry Section I : Accommodation and food services Year

Month

Establishments No.

Year-on-year % change

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

16 779

-0.2

273 746

2.8

12 942

62.0

Dec

16 971

1.2

274 195

3.0

11 859

31.9

Mar

17 204

2.1

275 590

2.4

15 546

40.9

Jun

17 201

1.6

276 207

1.4

12 970

5.7

Sep

17 073

1.8

275 895

0.8

14 362

11.0

2012

2013

Person engaged

Industry Section J : Information and communications Year

Month

Establishments No.

Year-on-year % change

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

11 209

5.6

97 478

6.3

2 151

-4.0

Dec

11 368

5.7

97 230

4.2

2 480

11.6

Mar

11 604

5.8

98 376

3.3

2 679

8.2

Jun

11 807

6.6

101 073

5.4

3 054

28.3

Sep

12 035

7.4

102 577

5.2

3 015

40.2

2012

2013

Person engaged

HONG KONG BUSINESS ANNUAL 2014 65

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Section K : Financing and insurance Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

20 996

4.8

206 674

ยง

3 510

-26.2

Dec

21 271

3.2

207 700

0.2

4 112

-1.3

Mar

21 430

3.6

207 594

-1.1

5 055

10.9

Jun

21 683

4.0

207 346

0.2

5 260

19.9

Sep

22 114

5.3

210 930

2.1

5 840

66.4

2012

2013

Year-on-year % change

Person engaged

Industry Section L : Real estate Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

14 539

4.5

125 645

4.7

3 807

32.0

Dec

14 673

3.0

125 938

3.0

2 932

17.1

Mar

14 929

5.1

126 997

4.0

3 756

15.1

Jun

15 071

5.0

126 415

1.7

3 523

23.1

Sep

15 100

3.9

126 041

0.3

3 833

0.7

2012

2013

Year-on-year % change

Person engaged

Industry Sections M & N : Professional and business services Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

40 254

3.9

335 862

3.1

8 507

27.5

Dec

40 557

3.6

337 408

2.6

8 709

32.3

Mar

41 356

5.0

341 540

3.4

8 697

4.0

Jun

42 017

5.3

344 544

3.4

9 169

-2.0

3.7

8 778

3.2

2012

2013

Year-on-year % change

Person engaged

Source: Census and Statistics Region 42Department, Hong Kong Special Administrative 348

Sep

578

66 HONG KONG BUSINESS ANNUAL 2014

5.8

265

numbers | indicators Number of Establishments, Persons Engaged and Vacancies (other than those in the civil service) Analysed by Industry Section Industry Sections P - S : Social and personal services Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

42 382

3.5

450 752

2.3

14 822

6.6

Dec

42 732

3.7

454 210

2.8

13 065

5.0

Mar

43 644

4.7

458 638

3.2

17 330

6.2

Jun

44 194

4.5

460 973

2.3

17 690

7.3

Sep

44 840

5.8

463 756

2.9

15 620

5.4

2012

2013

Year-on-year % change

Person engaged

All industry sections covered in the survey Year

Month

Establishments No.

No.

Year-on-year % change

Vacancies No.

Year-on-year % change

Sep

349 476

1.1

2 661 495

1.6

69 460

20.4

Dec

350 407

1.1

2 665 030

1.3

65 095

18.0

Mar

354 844

2.1

2 689 723

1.9

80 165

14.6

Jun

356 276

1.9

2 701 641

1.7

77 858

9.9

Sep

357 740

2.3

2 706 461

1.7

78 299

12.7

2012

2013

Year-on-year % change

Person engaged

Notes : (1) Establishments in construction sites refer to number of sites, while persons engaged and vacancies refer to manual workers only. Please refer to "Limitations of the Survey" in Part V of the Quarterly Report of Employment and Vacancies at Construction Sites. (2) Industrial coverage of retail trade is slightly incomplete in the present context. Main omissions are hawkers and retail pitches (other than market stalls). (3) Industrial coverage of the transportation, storage, postal and courier services is rather incomplete in the present context. Main omissions are taxis, public light buses, and part of goods vehicles and inland freight water transport. (4) Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation. (5) Industrial coverage of the financing and insurance is slightly incomplete in the present context. Main omissions are monetary authorities and self-employed insurance agents with no business registration. (6)Industrial coverage of professional and business services is slightly incomplete in the present context. Main omissions are renting and leasing of recreational and sports goods. (7)Industrial coverage of social and personal services is rather incomplete in the present context. Main omissions are industry sections T & U ("Work activities within domestic households" & "Activities of extraterritorial organisations and bodies"); and religious organisations, authors and other independent artists, and some social and personal services. (8)Starting from March 2009 round of the SEV, the survey coverage has been expanded to include more economic activities in some of the industries due to the change in industrial classification. The industries concerned are in Industry Section H Transportation, storage, postal and courier services, Industry Section N Administrative and support services and Industry Sections P - S Social and personal services. (9)Figures relate only to those industries covered. Figures relating to the civil service are excluded. (10)The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to March 2000 whereas the statistics prior to March 2000 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article entitled "Revision of the Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics. *** Data are not released in order to safeguard confidentiality of information provided by individual establishments. § Increase or decrease within 0.05%. Source : Employment Statistics and Central Register of Establishments Section, Census and Statistics Department

HONG KONG BUSINESS ANNUAL 2014 67

numbers | indicators Nominal Wage Indices for employees up to supervisory level (excluding managerial and professional employees) by selected industry section (September 1992 = 100) Import/export, wholesale and retail trades

Manufacturing Year

2012

Month

Accommodation and food service activities ^

Transportation

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Jun

170.2

+3.8

189.5

+4.3

163.3

+3.2

156.0

+7.6

Sep

173.6

+4.2

193.0

+3.0

166.6

+3.3

158.6

+7.7

Dec

172.8

+1.6

195.1

+3.7

166.4

+2.9

163.2

+8.4

Mar

176.7

+2.4

197.0

+3.6

166.9

+3.6

162.7

+6.9

Jun

181.6

+6.5

195.1

+3.0

169.4

+3.7

167.2

+7.2

2013

Financial and Insurance activities Year

2012

Month

Real estate leasing and maintenance management

Professional and business services

Personal service

All Selected Industry Sections #

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Jun

196.2

+2.6

193.4

+5.3

192.0

+5.7

226.3

+9.5

182.1

+5.1

Sep

200.4

+4.3

196.9

+6.7

194.7

+5.3

234.7

+9.0

185.6

+4.8

Dec

201.8

+6.1

199.8

+7.1

192.7

+3.7

240.7

+8.4

187.5

+5.1

Mar

204.0

+5.3

202.5

+5.8

194.4

+3.3

235.8

+7.3

188.8

+4.7

Jun

206.2

+5.1

211.1

+9.2

203.1

+5.8

241.9

+6.9

191.6

+5.2

2013

Manufacturing Year

2012

Month

Import/export, wholesale and retail trades

Transportation

Accommodation and food service activities ^

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Index

Year-on-year % change

Jun

110.6

+0.5

122.9

+1.0

106.0

-0.1

101.2

+4.2

Sep

119.4

-0.1

132.8

-1.3

114.6

-1.0

109.1

+3.3

Dec

109.6

-2.5

123.7

-0.5

105.5

-1.3

103.5

+4.0

Mar

110.7

-1.5

123.4

-0.4

104.6

-0.4

101.9

+2.8

Jun

112.6

+1.8

121.0

-1.6

105.1

-0.8

103.7

+2.5

2013

Notes : The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to March 2004 whereas the statistics prior to March 2004 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article "Revision of Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics. Â ^Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation. 68 HONG KONG BUSINESS ANNUAL 2014

numbers | indicators Financial and insurance activities Year

2012

Month

Real estate leasing and maintenance management

Professional and business services

Personal service

All Selected Industry Sections #

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-on-year % change

Jun

127.3

-0.7

125.5

+2.0

124.6

+2.4

146.8

+6.0

118.2

+1.7

Sep

137.8

0.0

135.4

+2.3

133.9

+1.0

161.4

+4.5

127.7

+0.4

Dec

128.0

+1.8

126.7

+2.7

122.2

-0.5

152.6

+4.0

118.9

+0.9

Mar

127.8

+1.3

126.9

+1.8

121.8

-0.7

147.7

+3.2

118.3

+0.7

Jun

127.9

+0.5

131.0

+4.4

126.0

+1.1

150.1

+2.2

118.9

+0.6

2013

Notes : The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to March 2004 whereas the statistics prior to March 2004 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article "Revision of Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics. ^ Accommodation services cover hotels, guesthouses, boarding houses and other establishments providing short term accommodation. # Refers to all industries covered by the Wage Enquiry, including the electricity and gas supply industry, sewerage and waste management activities industry and publishing activities industry, whose statistics are not separately shown. '0.0' denotes increase or decrease of less than 0.05%. As from 2011, the Real Wage Indices are derived by deflating the Nominal Wage Indices by the 2009/10-based CPI(A). To facilitate comparison, Real Wage Indices prior to 2011 have been re-complied using the 2009/10-based CPI(A). Source : Wages & Labour Costs Statistics Section (1), Census and Statistics Department

Table 025 : Real Salary Indices (A) for Middle-level Managerial and Professional Employees Analysed by Selected Industry Section (June 1995 = 100)

Year

Manufacturing, Electricity and Gas Supply

Building and Construction and related Trades

Import/Export Wholesale and Retail Trades

Transportation, Storage, Communications and Travel Agencies

Financing and Insurance

All Selected Industry Sections

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

Index

Year-onyear % change

2009

106.4

-0.7

103.5

-0.2

116.7

-2.3

110.6

-1.0

129.2

-3.4

116.4

-2.4

2010

105.0

-1.3

104.5

+0.9

116.0

-0.6

110.4

-0.1

130.3

+0.8

116.5

0.0

2011

102.7

-2.2

106.5

+1.9

116.8

+0.7

108.3

-1.9

131.4

+0.9

117.0

+0.5

2012

102.1

-0.6

108.1

+1.5

118.1

+1.1

109.3

+0.9

130.2

-0.9

117.7

+0.5

2013

100.7

-1.4

110.2

+1.9

118.8

+0.5

108.5

-0.8

128.7

-1.2

117.7

0.0

Notes : The above statistics are compiled based on the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 and the series has been backcasted to 2004 whereas the statistics prior to 2004 are based on HSIC Version 1.1. Users may also download "HSIC Version 1.1-based statistics" for reference. For more details on the revision of HSIC, please refer to the feature article "Revision of Hong Kong Standard Industrial Classification" published in the November 2008 issue of the Hong Kong Monthly Digest of Statistics. HONG KONG BUSINESS ANNUAL 2014 69

numbers | indicators Seasonally adjusted Consumer Price Indices Average monthly rate of change (%) during the latest 3 months Year

Month

Composite Consumer Price Index

Consumer Price Index (A)

Consumer Price Index (B)

Consumer Price Index (C)

Sep

-0.6

-1.9

-0.1

+0.2

Oct

+1.2

+2.7

+0.6

_0.3

Nov

+1.3

+2.8

+0.7

+0.4

Dec

+1.2

+2.7

+0.6

+0.3

Jan

+0.3

+0.4

+0.3

+0.3

Feb

+0.4

+0.5

+0.4

+0.4

Mar

+0.3

+0.4

+0.4

+0.3

Apr

+0.5

+0.5

+0.5

+0.5

May

+0.3

+0.3

+0.3

+0.3

Jun

+0.4

+0.4

+0.4

+0.3

Jul

+0.2

+0.2

+0.2

+0.2

Aug

-0.5

-1.9

0.0

+0.2

Sep

-0.4

-1.8

+0.1

+0.4

Oct

+0.4

+0.3

+0.4

+0.4

Nov

+1.2

+2.6

+0.7

+0.4

2012

2013

Notes : '0.0' Denotes increase or decrease of less than 0.05%. Â The seasonally adjusted indices are subject to revision up to 3 years after original publication. Four series of Consumer Price Indices (CPIs) are compiled to reflect the impact of consumer price changes on households in different expenditure ranges. The CPI(A), CPI(B) and CPI(C) are compiled based on the expenditure patterns of households in the relatively low, medium and relatively high expenditure ranges. By aggregating the expenditure patterns of all households covered by the above three indices, a Composite CPI is also compiled to reflect the impact of consumer price changes on the household sector as a whole. The year-on-year rate of change in this index is generally taken to reflect overall consumer price inflation. The CPI(A), CPI(B) and CPI(C) respectively cover some 50%, 30% and 10% of households in Hong Kong. The average monthly household expenditures (in HK$) of these groups during the base period (i.e. October 2009 - September 2010) were $4,500 - $18,499, $18,500 - $32,499 and $32,500 - $65,999 respectively. Taking into account the impact of price changes since the base period, the monthly household expenditure ranges of the CPI(A), CPI(B), and CPI(C) adjusted to the price level of 2012 are broadly equivalent to $5,000-$20,500, $20,500-$36,000 and $36,000-$72,900 respectively, and that of the Composite CPI is broadly equivalent to $5,000- $72,900. The Composite CPI is compiled based on the expenditure patterns of all these households taken together. With seasonal variations removed from the original series, the seasonally adjusted CPIs enable a more meaningful comparison of figures in consecutive months. Since the month-to-month change of the seasonally adjusted series still tends to fluctuate due to other irregular factors, the trend of the CPIs may be more clearly discerned by looking at the average monthly rates of change in the seasonally adjusted indices during the latest 3 months. Source : Consumer Price Index Section, Census and Statistics Department

70 HONG KONG BUSINESS ANNUAL 2014

numbers | indicators Summary of Key Statistics 2001

2006

2011

2012

Female

Male

Female

Male

Female

Male

Female

Male

3 432 000

3 282 000

3 587 000

3 270 100

3 768 600

3 303 000

3 827 300

3 327 300

Demographic Characteristics Population Sex ratio (including foreign domestic helpers)

956

912

876

869

Sex ratio (excluding foreign domestic helpers)

1 021

971

948

943

23 059

25 160

31 031

34 595

44 165

51 286

42 781

48 777

Expectation of life at birth (years)

Number of live births

84.6

78.4

85.5

79.4

86.7

80.3

86.3#

80.6#

Sex specific mortality rate

4.2

5.8

4.6

6.4

4.9

7.2

+

+

57.5

61.6

55.8

61.1

55.4

55.4

55.4

60.6

Never married (%)

59.5

34.3

30.3

34.6

30.1

34.5

30.2

34.6

Widowed and divorced/separated (%)

13.0

4.1

13.8

4.3

14.5

4.9

14.4

4.8

9.5

9.9

14.0

15.4

15.5

17.6

15.8

18.1

Marriage, fertility and family conditions Marital status Now married (%)

Crude marriage rate Number of persons living alone Number of single parents

12

162 031

182 648

185 005

209 027

195 061

-

-

47 215

14 216

60 675

15 748

64 040

17 665

-

-

1 463 800

1 936 500

1 621 200

1 950 600

1 760 400

1 942 700

1 813 100

1 972 100

50.8

73.0

52.6

70.9

53.0

68.4

53.6

68.7

Labour force characteristics Labour force Labour force participation rate (%) Number of employed persons Employers

27 500

138 000

28 700

122 100

27 700

96 100

25 100

94 700

Employees

1 326 200

1 539 000

1 458 000

1 527 500

1 612 900

1 601 700

1 663 500

1 623 500

36 700

166 100

55 500

188 000

57 600

165 100

62 200

177 000

Self-employed Unpaid family workers Numbers of underemployed persons Underemployed rate (%) Number of unemployed persons

16 900

2 500

18 200

2 800

12 900

2 300

12 800

2 100

24 600

60 200

26 200

60 000

19 400

43 900

15 600

42 000

1.7

3.1

1.6

3.1

1.1

2.3

0.9

2.1

56 500

117 800

60 800

110 200

49 200

77 500

49 600

74 900

Unemploment rate (%)

3.9

6.0

3.8

5.7

2.8

4.0

2.7

3.8

Median duration of enemployment (days)

74

76

70

77

71

77

65

80

Median monthly employment earnings (HK$) Including foreign domestic helpers

8,800

12,000

8,000

11,500

9,300

13,000

10,000

14,000

Excluding foreign domestic helpers

10,000

12,000

9,300

11,500

11,000

13,000

11,000

14,000

Number of recipients of Comprehensive Social Security Assistance

206 791

190 677

272 999

248 612

231 617

211 705

218 937

199 831

Number of persons receiving Social Security Allowance

307 834

251 656

318 106

262 734

356 573

302 065

371 340

314 652

Social welfare

Notes : # Provisional figures + Not yet available - Not available @ Figures are for the corresponding school year. For example, figures for 2012 represent the figures for the school year 2012/13. * Figures include teachers of kindergartens, primary day schools, secondary day schools, approved post-secondary colleges and University Grants Committee funded institutions. ** Figures exclude persons living in non-domestic households and student dormitories. There were 169 192, 277 437 and 179 917 persons living in non-domestic households and student dormitories in 2001, 2006 and 2011 respectively. ~ Figures include persons living with spouse and/or child(ren), regardless of whether they were living with parent(s) or not. ^ Figures include persons living with person(s) other than parent(s), spouse and child(ren).

HONG KONG BUSINESS ANNUAL 2014 71

High-Flyers 2014 Profiles of Hong Kong’s Outstanding Enterprises and Business Leaders

AIA Hong Kong 74 | AGEAS Insurance Company (Asia) Limited 78 | AIG 80 | Altruist 82 | Arakaki Tsusho Corporation 84 CDNIS 86 | The Cityview 88 | Freywille 90 | Fujitsu 92 | Godiva 94 | Hästens 96 | Jebsen Marine 98 Noblesse Lifestyle Group 100 | Ovolo Hotels 102 | The Pacific Cigar Company 104 | RICOH Hong Kong Limited 106 Shama Management LTD. 108 | Sound Concepts 110 | The Mercer 112 | Thomas, Mayer & Associes 114 Rhombus International Hotels Group 116 | Wharf T&T Limited 118 | Zchron Design 120

CONTRIBUTING WRITERS: Kapila Bandara, Gloria Fung HONG KONG BUSINESS ANNUAL 2014 73

ENTERPRISE AWARD

AIA HONG KONG

AIA Hong Kong, The Real Life Company, responds to genuine, practical life concerns

A

s the preeminent life insurer in the Asia-Pacific, AIA Hong Kong has dedicated itself to helping its customers plan their future through the highs and lows of their lives. For more than 80 years, AIA Hong Kong has been on a journey with its customers over generations, satisfying their evolving insurance and financial needs. “Our new brand positioning, The Real Life Company, is also about our history. We have been in Hong Kong for over 80 years and we have assisted a lot of customers with their wealth and financial planning needs,’’ says Bonnie Tse, General Manager, Marketing and Business Strategy for AIA Hong Kong and Macau. “We are well positioned to know what they need to help them plan their future.’’

74 HONG KONG BUSINESS ANNUAL 2014

AIA Hong Kong and Macau are members of the AIA Group Limited. The AIA Group Limited established operations in Hong Kong in 1931. It has the largest team of financial planners –10,000 – in Hong Kong and Macau. The new brand positioning, The Real Life Company, introduced in July 2013, is the result of extensive research across nine markets, involving more than 100 focus groups. It is a platform to engage existing and new customers who are seeking a practical life insurer. Tse says the brand positioning provides guidance for the company’s business planning, product design, operations, frontline staff, internal training and even service standards. “It is a core value we all share,’’ Tse emphasizes.

Bonnie Tse General Manager Marketing and Business Strategy, AIA Hong Kong and Macau HONG KONG BUSINESS ANNUAL 2014 75

AIA HONG KONG PHILOSOPHY

AIA Hong Kong and AIA Macau are subsidiaries of AIA Group Limited. AIA Group Limited established its operations in Hong Kong in 1931. AIA has the largest team of financial planners in Hong Kong and Macau. It is also the leader in developing innovative insurance products that meet customer needs at every stage of their lives. AIA offers products ranging from individual life, group life, accident, medical and health, and personal lines insurance to investmentlinked products with over 100 investment options. It is also dedicated to providing superb product solutions to meet the distinct financial needs of high net worth customers.

76 HONG KONG BUSINESS ANNUAL 2014

She explains that this marketing transformation began early last year at the leading insurer. “AIA Hong Kong is customercentric. We provide the right solutions to customers based on their needs.’’ She cites a marketing maxim that says ‘make what you can sell and sell what you can make’, to further underline the customer focus, adding that AIA Hong Kong is about making and selling what the customer needs. “This is customer-centricity.’’ To engage customers on social media, the company launched a Facebook fans page and floated four campaigns that has already drawn 31,000 fans. “I am confident we will reach greater numbers,’’ Tse predicts. The Facebook approach also included practical tips such as healthy diets, nutrition, sport and fitness ideas for smart and healthy living. “AIA is keen to promote a healthy lifestyle,’’ Tse says. She points out that it is only through understanding the real needs of customers that AIA Hong Kong can be a real life partner and help plan their lives. “We did a lot of analysis, about the customer base and the population. We segment our customers and one of the segments we identified is young adults. We define young as those between 18 years and 34 years old. Young adults account for 44% of the labour force in Hong Kong. They have a lot of financial commitments.’’ To engage young adults, who are yieldfocused, AIA Hong Kong created a new experience, including sponsoring K-POP events promoted through social media, including a mini-site. “We grew the number of fans from 7,000-8,000 to over 10,000 now,’’ Tse reveals. She says that based on the findings related to young adults, AIA Hong Kong understood that they desire flexibility and affordability.

Because they have different financial commitments, flexibility allows them to adapt and switch with ease. One product that provides the flexibility for young adult customers is "Cheerful Life", a whole life investment-linked assurance scheme that provides life coverage and investment to fulfil the needs of individuals at various stages of their lives. Tse describes "Cheerful Life" as “a good example of customer-centricity’’. Among other things, the product allows customers to determine the coverage they require by specifying the face amount, subject to a minimum of US$50,000, or HK$375,000. It offers the customer the option to contribute additional premium for investment on a lump sum basis, or regular basis. It is a flexible plan that, like a Lego brick, allows the customer to add to the assurance scheme depending on individual protection or investment needs, Tse elaborates. “These initiatives show how we put ourselves in the shoes of our clients and make sure they know it is important for them to plan ahead,’’ Tse says. The "Cheerful Life" plan was promoted on a mini-site www.goAIA. com.hk Besides, “Executive Care Pro 2” and “Multiple Care Pro 2” offer customers much more comprehensive coverage. Percutaneous Coronary Intervention, where stenosis of at least 50% is detected in one coronary artery as opposed to two previously, is now a compensated condition. The enhancement also features an increase in the advance payment from 10% to 20% of the critical illness sum assured, subject to a maximum of US$30,000 per life, instead of US$12,500. Tse says that providing a series of comprehensive insurance product makes life easier for customers.

MOST Outstanding Enterprise Photo (left): In 2013, AIA Hong Kong has supported the ‘Medecins Sans Frontieres Orienteering Competition’ for the 12th consecutive year. Both participant numbers and donation raised reached record highs at the 2013 event. Photo (top-right): With the theme “A Hand to Lead, A Vision to Serve”, participants of the 2013 AIA Young Leaders Development Programme visited Thailand in August 2013 to build houses for low-income families with their bare hands to improve the families’ living conditions.

As for upgrading products, Tse explains that the product life cycle is open-ended and as life changes and the market evolves, AIA Hong Kong needs to upgrade and strengthen the coverage offered to bridge the critical illness protection gap. Based on a 2012 in-house survey of those who own insurance, medical and critical illness insurance were found to be among the top three plans that people have bought, or plan to buy in the next 12 months. “We understand that customers are really concerned abut medical expenses,’’ Tse says. Medical costs in Hong Kong are continuing to rise. These products and initiatives demonstrate that AIA Hong Kong cares about the well-being of Hong Kong’s people, Tse says. She cites the AIA Hong Kong Healthy Living Index survey to underline that more needs to be done to educate Hong Kong people about their health-related concerns. The multi-market survey found that Hong Kong scored 58 out of a possible 100 points, placing

the city of among the third lowest of 15 AsiaPacific markets. It found internet addiction, being overweight, and sleep deprivation, as issues that endanger health of Hong Kong residents. Tse remarks that the findings were an eye-opener. A fairly high proportion of adults, or 64%, in the city admit being addicted to online activities – significantly higher than the regional average of 56%. A study in June 2013 also found that more than 50% of Hong Kong people are under protected in medical cover, Tse points out. AIA Hong Kong, Tse notes, invests “a lot of resources to do research to understand what customers need’’. While engaging its customers through a multitude of channels, AIA Hong Kong continues to do its part for the community through various undertakings including fund-raising for non-profits, scholarships for students, and educational initiatives. AIA Hong Kong has been awarded the Caring Company logo for over 10 years. The AIA Foundation, established in 1995, maintains a strong focus on education and its flagship project is the Young Leaders Development Programme. More than 400 university students in Hong Kong have benefited. Scholarships granted amount to HK$5.3 million since 1995. AIA Hong Kong has supported the international non-profit Medecins Sans Frontieres Orienteering Competition for 12 consecutive years and has been rewarded for being the top fund-raiser, and one of the most supportive organizations in 2013.

Photo (middle): AIA Hong Kong’s new brand positioning “The Real Life Company” signifies AIA’s commitment to be the real partners of customers, to go through their highs and lows with them.

FAST FACTS •

4th largest listed life insurer by market capitalisation in the world (Source: Bloomberg, 20 September 2013)

• History of over 90 years in Asia Pacific •

100% ownership in 15 out of 17 geographical markets (including operations in the Philippines in which percentage holding is 99.78%)

•

Serving the holders of more than 27 million individual policies and over 16 million participating members of group insurance schemes

• Embedded value of US$32.2 billion as of May 2013 • Total assets of US$147 billion as of May 2013

HONG KONG BUSINESS ANNUAL 2014 77

AGEAS INSURANCE COMPANY (ASIA) LIMITED

PHILOSOPHY

Ageas Hong Kong is driven by its determination to constantly increase the excellence of its products and services, and to nurture lasting relationships with its customers. It sees these as the crucial factors that will ensure it further strengthens its leadership role as a financial services provider in Hong Kong.

Innovative life insurer delivers top-tier services and pioneering products

A

geas Insurance Company (Asia) Limited, one of Hong Kong’s leading insurance companies, has again been honoured with the Hong Kong Business High Flyers Award in the Life Insurance category. This is the seventh consecutive year the firm has received this prestigious recognition, which reflects its strong reputation in the Hong Kong insurance industry and its innovative and competitive services and products. The company is a wholly-owned subsidiary of the Ageas Group, one of Europe’s top 20 insurance companies, which is headquartered in Belgium and has a heritage dating back more than 180 years. Humorous approach to financial literacy One of its most recent achievements has been Ageas Hong Kong’s highly successful and impactful campaign featuring renowned artiste Dodo Cheng, who is famous for managing her money wisely, and Ageas spokesperson Dayo Wong. This underlined the company's motto, "Partners in Insurance", and gave Ageas a distinctive voice in the industry by highlighting the importance of financial planning and offering tips about this in a humorous and interactive way. “The campaign was hugely successful in terms of both its marketing and financial results. It

78 HONG KONG BUSINESS ANNUAL 2014

projected an image of Ageas as an enterprising player in the insurance industry that delivers financial knowledge and high-quality services to its customers," explains Ageas Hong Kong’s Chief Executive Officer, Stuart Fraser. Concerted efforts raise brand profile Last December, Ageas also became a title sponsor of the high-profile “Joey Yung in Concert 1314", a stunning and extraordinary series of performances by the Cantopop diva that took place between the run-up to Christmas and early 2014. “We were delighted that our brand was associated with Joey’s concerts,” says Fraser. “I’m sure they definitely made this a memorable Christmas and New Year for everyone. The concerts are called ‘1314’ because that aligns with the Chinese version of the Ageas slogan about our mission to offer our customers lifelong insurance protection,” Fraser says. Professionalism pays dividends In fact, the public’s recognition of the Ageas brand and its reputation are a tribute to its pragmatic leadership and the professionalism of its 2,800-strong Hong Kong sales force. Its members pledge themselves to be customer focused and responsive to their clients’ needs at all times,

Life Insurance This page clock-wise: Ageas Hong Kong is the first insurance company in Hong Kong to employ U-tie technology, QR Code and AR App to integrate its advertising campaigns with mobile apps; Ageas Hong Kong is proud to be the title sponsor of “Joey Yung in Concert 1314” Opposite page: Ageas Hong Kong’s CEO Stuart Fraser regards its dedication to excellent service and responsiveness to market needs as key factors in its success

FAST FACTS and to help them look after themselves and their financial affairs throughout their lives. Safeguarding and building wealth Ageas Hong Kong products cater for the full spectrum of financial planning needs. For instance, the Elite Choice Insurance Plan gives customers the chance to denominate their policy in their own choice of a mix of four different currencies – USD, HKD, AUD and RMB. They can review and adjust this mix every five years. The innovative plan thus opens up the possibility for them to benefit from potential currency appreciation as well. Cheers, another Ageas Hong Kong investment product, combines the dual roles of investment and life protection. "Cheers has enhanced our competitiveness in the investment-linked assurance sector, because it satisfies the growing demand for a single plan that covers both investment and wealth protection," Fraser points out. High-tech innovation Besides innovative marketing strategies, Ageas Hong Kong pioneers the use of the latest social media technology to get its advertising messages across. For example, it was the first insurance company in Hong Kong to employ U-tie technology, QR Code and AR App to integrate its advertising campaigns with mobile apps. In addition, the company has launched the Ageas

Facebook Fanpage to engage with customers directly. Other technology initiatives have further boosted the quality of Ageas products and services. It has created free, easy-to-use smartphone apps for its customers to use for specific purposes, such as planning retirement and education funds and protecting investments. The Ageas online portal also gives them an easy way to check policy details and do their own financial housekeeping. Moreover, Ageas consultants have an armoury of effective IT tools. One of them is the new Ageas CDA – a portable, interactive recruitment presentation programme that runs on iPad – which agency managers can use to recruit highly-skilled financial professionals.

•

The Ageas Group’s net profit from its insurance operations amounted to 497 million euros during the first nine months of 2013 – a year-on-year (YoY) increase of 11%. Of this, it earned 168 million euros during the third quarter alone.

•

The net profit of Ageas operations in Asia totalled 101 million euros during the same nine months, a YoY increase of 2%. Its Hong Kong operation contributed 20 million euros of this.

Getting messages across Among its many other “firsts”, Ageas Hong Kong takes great pride being the first insurer ever to place identical neon signs on both sides of Victoria Harbour. The company also embraces world-class sports events, including premier golf tournaments. It has been the title sponsor of the HKPGA Championship since 2010. Good corporate citizenship is another key element of Ageas Hong Kong’s core values. The company has been a member of the Hong Kong Council of Social Service’s Caring Company logo scheme ever since it was established in 2002. HONG KONG BUSINESS ANNUAL 2014 79

AIG

PHILOSOPHY

AIG aims to be the best general insurance company in Hong Kong. Our mission starts with being “an Employer of choice in an Industry of choice”. This means not only working with our customers and our business partners but also our staff and industry stakeholders to ensure this vision becomes a reality.

Employer of choice provides RIGHT environment for talent to thrive

O

ne of the biggest general insurers which combines local knowledge, global experience and financial strength, AIG Insurance Hong Kong Limited, aims to be the employer of choice in an industry of choice. Over the years, the company has attracted those who seek a career in general insurance providing broad opportunities and experiences, and it takes pride in a staff turnover rate that has dropped in three consecutive years. AIG HK, the fully-owned subsidiary of American International Group, Inc., believes that through its commitment to promoting inclusion and diversity of people, ideas, and skills, it will be a better business partner to customers, a better citizen in the communities in which it operates, and a better place for its employees to work. Customer centricity The company also adopts a customer centric mindset, reflected in initiatives such as the launch of CyberEdge that addresses evolving risks that businesses face. This innovative idea is a response to growing cyber-crime threats and data breaches. Responding to customer needs means keeping the AIG HK promise to assist at the “moment of truth,’’ when claims are presented.

80 HONG KONG BUSINESS ANNUAL 2014

At AIG HK, there is a culture that respects and embraces individual and cultural differences. “In Hong Kong we aim to be an Employer of Choice in an Industry of Choice. This means not only working with our customers and our business partners but also our staff and industry stakeholders to ensure this vision becomes a reality,” says Marc Breuil, President and Chief Executive Officer of AIG HK. Embracing diversity For years, diversity and inclusion have been a focus at AIG HK, where several key attributes make the company a prime consideration for potential employees, including the disabled. Just so that the disabled are at home in the office, AIG HK has conducted site audits to understand accessibility needs and to prioritize improvements. Moreover, AIG sponsors a Scholarship program of The Chinese University of Hong Kong (CUHK) which rewards physically disabled and ethnic minority students for their academic excellence. Mr. Breuil is also a member of the Insurance, Financial and Actuarial Analysis (IFAA) Advisory Committee at the CUHK to provide strategic advice and industry knowledge to the curriculum design of the Business School.

GENERAL INSURANCE This page clock-wise: Making a difference: AIG supported the Hong Kong community by making a charitable contribution of HK$500,000 to four local charities. The AIG Hong Kong management team (standing) meets with charity representatives (front); Mission Possible provides a meaningful association between the Hong Kong Sevens, charitable awareness and giving; AIG hosted the All Blacks 7s players at the Hong Kong office. Opposite page: Mr. Marc Breuil, President & Chief Executive Officer, AIG Insurance Hong Kong Limited

FAST FACTS • AIG Insurance Hong Kong Limited is a member of American International Group, Inc. (AIG).

"People want career opportunities, training, and to be listened to when they have something to say, and an environment in which they feel that they can contribute," says Mr. Breuil. Broadening opportunities for employees In keeping with its goal of broadening the types of opportunities and experiences available to employees at every level, AIG HK is also an Equal Opportunities Employer, hiring physically disabled employees and is also committed to seeking out ethnic minority populations in its analyst programs. They will also embrace the values of not fearing change; challenging the status quo, eagerness to explore and experiment, taking calculated risks, and tolerating failure. AIG HK’s strength is not only reflected in its finances, but also its philanthropy which helps to make a positive difference in the community. The company donated HK$500,000 to support Mission Possible, a new charity established by The Peter Bennett Foundation to address Hong Kong’s most pressing social issues. Mission Possible has nominated four charities

to receive HK$125,000 each from AIG. These are Po Leung Kuk Special Children Development Fund, which helps special needs children; the Community Chest Rainbow Fund, which helps disadvantaged families and individuals; Food Link which seeks to alleviate hunger in Hong Kong by helping to reduce food wastage and allocating food to the poor; and Lighthouse Benevolent Fund, which focuses on the needy in the construction industry.

•

The financial strength of AIG Insurance Hong Kong Limited is confirmed by global rating agencies: A+ (stable outlook) by S&P, A2 (stable outlook) by Moody’s and A by AM Best. The company has also been awarded a counterparty credit rating of cnAAA on S&P’s newly introduced Greater China Regional Scale. This is the highest rating available on that scale.

• AIG’s strategic vision is to be the most valued insurance company

Sustainable principles at work AIG also launched Volunteer Time Off in the Asia Pacific region (including Hong Kong) last year which is the first region outside the US to roll out this important initiative. Employees may take two days off work per year and join company-sponsored or personal volunteer activities during working hours. These two volunteering days are not part of paid annual leave. Apart from philanthropy, AIG puts sustainable principles into practice at office worldwide to make AIG a more efficient, green organization. HONG KONG BUSINESS ANNUAL 2014 81

ALTRUIST

PHILOSOPHY

Altruist is committed to bringing clients with “WEALTH-HEALTHWISDOM”, a total well-being solution.

A goodwill brand with loyal and satisfied customer

W

e all have different life goals: life protection, a worry-free retirement, education fund for children at the best schools and colleges, buying new house/car… Building a sound financial plan can help to achieve these goals. “Ever since our company was founded in 2001, we have been dedicated to providing quality financial services to our customers in the essence of Altruism; just as our company name suggests: for the happiness and welfare of others.” Mr. Albert Lam, President of Altruist Financial Group (Altruist), said proudly. With this commitment to serving clients with excellent financial planning services, no wonder Altruist has been awarded the Hong Kong Business High Flyers Award continuously since 2005.

Protection lays a strong foundation While insurance protection should be the root of financial planning, most people overlook. Lam explained, “Financial planning includes two major categories: long term protection and saving. Protection products are designed to shield individuals against loss, while saving products seek to accumulate wealth through investment. These two elements serve different roles, yet they complement each other.” “In general, people tend to demand investment products rather than protection policies; yet the basic logic of financial planning is that, relevant 82 HONG KONG BUSINESS ANNUAL 2014

protection products must be employed before focusing on any saving products.” Lam further elaborated such common pitfall by taking retirement planning as an example. “Thanks to the medical advancement, people are having a longer average life expectancy. But the undeniable fact is that when people are getting older, it also implies more regular trips to the doctor and means occasional hospitalization. While quality medical treatment often comes with expensive bills, if you do not want the medical expenses to consume your retirement fund, a comprehensive coverage is just as essential.” Only pick what suits you best Most clients do encounter challenges in choosing financial products from different service providers available in the market, and Altruist’s independence just comes in right to help. “As an independent financial advisory company, it is not the product providers that we represent, but the clients!” Lam also pointed out that some industry practitioners are merely sales-driven products sellers. “Simply taking money out from client’s pocket, and propose scattered and unorganized financial plans in a narrowed sense is not really taking care of the client. At Altruist, we are concerned about catering the client’s genuine needs. Backed up by our one-stop shop platform, our financial consultants can easily tailor personalized financial

FINANCIAL PLANNING This page clock-wise: Client seminar; Flag selling day; Coastal Cleanup. Opposite page: Mr. Albert Lam, President of Altruist Financial Group

FAST FACTS • Founded in 2001 by Mr. Albert Lam

solutions, purely based on the unique needs of clients.”

• First joint venture insurance agency license in Shenzhen & Ningbo • Independence is our competitive advantage

Quality and integrity While people’s financial situation does not stay the same throughout life, regular review of financial plans is very important. “Our professional consultants are taught to harness a close relationship with clients. The only aim is to ensure the financial solution that the client acquired is kept up-to-date with his/her ever changing needs in different stages of life.” This high degree of professionalism and integrity in financial planning makes Altruist stand out in the market. With clients continuously referring more and more new customers, this is a living proof of the company goodwill. “Altruist is now serving the third generation of some families: the grandparents, parents and now the children also come to us as they grow up and get married, looking for a trusted partner to take care of their financial needs. I believe that we retain our customers because our brand is the top in terms of Quality and Integrity.” Lam explained. Giving back to the community Clients are not the company’s only concern, Altruist also engaged in the local community at different levels. The company sponsored various charitable activities of organisations such as Otic Foundation, Green Council etc; plus offering scholarships for the outstanding students at the Polytechnic University of Hong Kong and Kwantlen Polytechnic University in Canada. Awarded with the caring Company Logo

• Recognised as a Caring Company since 2003

since 2003, the whole Altruist family is actively participating in various charities and fund-raising projects such as the Walk for Millions, voluntary services such as blood donation, flag selling days and other volunteer activities for the benefit of underprivileged groups; demonstrating its heart to serve the community better with the steadfast belief of Altruism — the core value at Altruist which makes it a goodwill brand. HONG KONG BUSINESS ANNUAL 2014 83

ARAKAKI TSUSHO CORPORATION

PHILOSOPHY

We wish to establish the cosmetics empire with the company motto, “Live lively”, to love ourselves, and to treat ourselves in the best way to enjoy life. We insist on providing high quality Japanese beauty products to our customers, believing that cosmetic is a daily necessity for women, and the pursuit of beauty is the ultimate goal in women’s life. Bringing happiness to our customers is our greatest pleasure and we are here to promise the quality of the products and we sincerely wish that every female could enjoy beauty and the quality of life.

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Live Lively, the way to enjoy beauty and the quality of life

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t is said that beauty is in the eye of the beholder, but creating that beauty is all within the powers of women. With the right makeup, the face is a canvas that can be turned into a stunning masterpiece. But finding the right tools and products isn’t always as easy as it sounds; we should expect nothing less than perfection when it comes to products that we apply to our bare skin on a daily basis. This is exactly the sentiment Mika Arakaki shares. The Managing Director of Arakaki Tsusho Limited, a company that’s credited for bringing some of the popular Japanese cosmetics brands including Bandi, Dear Laura and Cuore, to Hong Kong, Arakaki understands the importance of a good makeup product from a user’s perspective. “Makeup is so close to our everyday life, we wear it on our skin and we are sending a message to the world through the way we look. It’s a very personal experience,” she says. For Arakaki, however, it’s much more than sharing this special beauty experience with other women around the world. With distribution in Hong Kong, Taiwan, Singapore and the USA, bringing Japanese products to these countries is also about sharing the passion and culture of Japan

with the world. “People associate Japanese products with great quality, sensitivity and affordability. They choose Japanese products because they want to feel the connection with Japanese culture and what it represents,” she explains. The brands Arakaki distributes are inspired by Japanese animation characters. From crimefighting Sailor Moon to fantasy hero story Dragon Ball, cosmetic products become a medium not only for beautifying but also for customers to engaging in the very unique Japanese anime culture. “Hong Kong girls love cute things, and when they open a compact case that’s like the one Sailor Moon uses, they really connect to the cute sentiment as well as a the image that they are reminded of from the cartoon.” But as cute as these anime characters are, no girl wants to walk around town looking like they’ve stepped out of a cartoon. And this Arakaki agrees with. “It is very important that I ensure the quality of each of these products we carry are of the best quality. I try every single one of these products to make sure they are up to my standard.” Beyond keeping up with her high standards,

BEAUTY & COSMETICS This page (clockwise): K-palette 1 Day Tattoo Real Lasting Set; Ryuspa Blessing of Beauty series; BiosMist Japan; CreerBeaute 20th Anniversary Sailor Moon Series Collection; Ryuspa Refining Blessing from the Deep Sea series Opposite page: Mika Arakaki, Managing Director of Arakaki Tsusho Limited

FAST FACTS Arakaki is also mindful to ensure that all products are true to their claim. “It is crucial that we are true to ourselves and to our customers. Honesty is always the best way; we ensure these makeup products can actually do what they claim. Because our customers trust that we deliver top quality, it is crucial that we maintain our reputation.” Arakaki believes makeup is not only an essential part of a woman’s daily routine, but should also be something that is fun. That’s why it’s important for her to ensure her products are safe to use, “The customer shouldn't have to worry about the quality of a product. It’s something that is very personal and close to our skin, these products absolutely have to be of the highest quality.” It is only through this dedication to quality, she says, that customers will have the confidence to continue purchasing her products. “There are so many products on the market and the only way to build a royal customer base is to let the products speak for themselves. If the products are good, they will return for more.” As for her plans to further spread her beauty philosophy and Japanese beauty and anime culture around the world, she’s looking to tap into the growing interest in anime in the USA and in France. “People in both of these countries are increasingly interested in Japanese culture and anime. They are fascinated with the dedication Japanese people put into everything and our attention to detail is also reflected in our products,” she explains. With the anime fan base burgeoning across the globe, it’s easy to image where Arakaki and these product fit into the big picture. To Arakaki, the company is more than just a distributor of beauty products; it’s her way of connecting the world with Japan.

• Arakaki Tsusho Corporation (Japan headquarter) was established on 1st January, 1980. •

The company developed to become one of the top three import and export cosmetics companies in Okinawa

• Arakaki Tsusho Limited provided more than 30,000 kinds of products • Arakaki Tsusho Limited (Hong Kong branch) was established on 13th March, 2012. • The company’s own brand, BiosMist (beauty machine) was developed in 2012. • Arakaki Tsusho Co., Ltd. (Taiwan branch) was established in August 2013. • Arakaki Tsusho (S) Pte. Ltd. (Singapore branch) was established in October 2013. • Planning to expand to other Asian countries such as Thailand, Vietnam and Indonesia.

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CDNIS

PHILOSOPHY

Canadian International School of Hong Kong strives to develop responsible global citizens and leaders through academic excellence. It accomplishes this goal by involving teachers, students, parents, alumni and administrative staff in all the school's initiatives to improve the quality and monitoring of education. In addition to innovative use of state-of-theart information technology, the school includes fostering environmental education and action among its responsibilities for preparing future leaders. This philosophy extends to supporting the surrounding community as well. The school emphasises service to the community in addition to academic excellence.

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Turning Mirrors into Windows

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ournalist Sydney J. Harris is quoted as saying, “The whole purpose of education is to turn mirrors into windows.” When you gaze into a mirror, the only thing you see is your reflection and a limited area around you. However, when you look out a window, the view can be almost endless. Since first opening its doors in 1991, Canadian International School of Hong Kong has provided a dynamic and progressive education to its students. Head of School Dave McMaster says, “We take our role in shaping responsible global citizens and leaders of tomorrow very seriously, which means giving our students the tools they need to achieve their best, both inside and outside the classroom and long after they walk out the doors of our school.” CDNIS students have the distinct advantage of being the only students in Hong Kong to receive dual matriculation to which CDNIS aptly refers to as a “dual academic passport.” CDNIS graduates leave the school with two distinctly different diplomas, the Ontario Secondary School Diploma and the International Baccalaureate Diploma, both recognized by top post-secondary institutions around the world. In fact, students are also eligible to receive the bilingual Chinese and English IB Diploma, with some members of the 2013 graduating class the first to receive this distinction. Head of Guidance Bob Bate says, “We believe this best prepares our students for the ever-changing world that is

more interconnected and interdependent than ever before. Admissions officers from prestigious universities around the world including McGill University, University of British Columbia, University of Toronto, Oxford, London School of Economics, Harvard, Yale, and HKU actively seek out CDNIS students because they know CDNIS students are best prepared for the rigors of university.” CDNIS’ Guidance and Career Education Department provides ongoing support to students as soon as they begin contemplating their postsecondary options. The school’s aim is to ensure students maximize their chances of being accepted into world class universities and more importantly, into programmes the students are passionate about. In grade nine, students are assigned a guidance counsellor who works with them over the next four years. By grade 12, the counsellor has a thorough understanding of the students’ strengths, programmes of interest, and desired university location. Bate says, “This continuity of support ensures counsellors get to know their students very well and are able to actively counsel and support students in their university applications and career exploration.” Students participate in workshops geared at preparing them for the post secondary application process. This includes strengthening their interview skills and ensuring their portfolio’s are comprehensive and well thought out. Information sessions ensure students and parents fully

INTERNATIONAL SCHOOL This page: The 31,000 square metre campus is home to more than 1,800 students and 270 staff with students enrolled across 15 grade levels from Pre Reception (3-year olds) to Grade 12 Opposite page: Dave McMaster, Head of Canadian International School of Hong Kong

FAST FACTS • Canadian International School of Hong Kong was established in 1991 and has evolved from a small campus of 81 students to a school with over 1,800 students and 270 staff representing 42 nationalities. • A through-train International Baccalaureate World School offering the Primary Years, Middle Years and Diploma Years Programme in addition to the Ontario Secondary School Diploma all on one campus.

understand application deadlines and entrance requirements, which vary from university to university and country to country. During school breaks, students can participate in overseas university tours to Canada, the US or the UK where they tour the campuses and meet with admissions officers. The overseas university tours have helped CDNIS strengthen its ties with leading universities around the world as more than 300 university admissions officers visit the campus every year. One undertaking CDNIS is proud of is their partnership with Cambridge University. This past summer, four Cambridge professors spent a week at CDNIS offering courses specifically geared at students considering careers in Medicine, Engineering, Politics, International Relations, Physical Sciences or Health Sciences. Many universities also place considerable importance on a student’s involvement in service, extra-curricular activities and leadership outside the classroom. This sometimes will be the deciding factor when admissions departments are selecting students for their university. Upper School Principal John Jalsevac says, “These universities know academic rigor is not

sacrificed even though CDNIS students are involved in an array of extra-curricular activities. Our average overall IB score was 36 this year, compared to the world average of 29. These results have positioned CDNIS in the top 10% of schools offering the Diploma Programme. Almost all of these students are also extremely active outside the classroom, both at school and in the community.” While CDNIS is internationally known for its excellence in education, it prides itself on being a warm, caring community where everyone places a high priority on relationship building. Students are encouraged to maintain a balance between academic work and extra-curricular opportunities, with sporting, arts and cultural achievements valued equally. Also, as the leaders of tomorrow, the school wants to make sure its students understand the importance of giving back to their community and that they are fortunate to be in the position they are in. With this privilege comes responsibility and it is CDNIS’ hope that in 10, 20 or 30 years alumni will be well known for the importance they place on giving back in an effort to make the world a better, more peaceful place.

• As a non-profit organization, all the school’s funds are reinvested to continually upgrade and improve the school’s facilities and learning resources.

HONG KONG BUSINESS ANNUAL 2014 87

THE CITYVIEW

PHILOSOPHY

The Cityview strives to attain higher standards through genuine personal service and attention to detail, including environmental issues. After our conversion into a fourstar hotel in 2008, we have attracted travellers from all over the world, keeping the ‘international’ flavour of our former brand while upgrading the facilities. The high percentage of repeat customers and the number of prestigious awards indicates that the hotel is meeting its objectives satisfactorily. We also treasure our staff, offering continuing training and job monitoring to ensure that staff is working with a profession attitude and to the best of their ability.

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A Fresh New View

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ith a passion for delivering topnotch hospitality service without making a dent in the environment, The Cityview continues to dedicate itself to strive for excellence, all they while keeping up with international eco-standards Eco-friendliness isn’t something that is traditionally associated with the hospitality industry – when care given to deliver the best customer service possible, hotels often go to great lengths to please, albeit doing so in a way that spares nothing in terms of resources. Conservation and preservation are put to the side in favour of service that meets and exceeds client expectation. But this trend is being challenged by many international organisations as well as ecoconscious travellers. Unnecessary wastage is being frowned upon and many hotels are beginning to take notice. However, The Cityview, located in Kowloon’s Yau Ma Tei, has been at the forefront of eco-hospitality long before it’s become the hot button issue that it is today. The hotel’s general manager Alex Wu and his team has been working for the past several years to lower the hotel’s carbon emission, all the while coming up with creative ways to reduce, reuse and upcycle.

Participating in Earth Check, an international certification that evaluates a hotel’s eco-friendliness, The Cityview has gone from a bronze grading to achieving silver this year. “We’ve improved tremendously in the past year. We’ve excited on the benchmark in seven of the 11 check points, such as electricity use and carbon emission. This is a great achievement for an independent hotel like The Cityview,” Wu explains. He also goes on to share that The Cityview is the only independently owned and operated hotel in Hong Kong to achieve this Silver Certificate, an achievement that he and his team are extremely proud of. “Because we’ve seen the results of our hard work, we’re currently investing even more into our eco-initiative,” Wu explains. “We’ve purchased new chillers and switched to LED lighting. We are also recycling soap and encouraging our guests to reuse their towels and bed sheets. All of these add up to and play a significant part in our hotel lowering its carbon footprint.” Most recently, the hotel is developing several projects to further lower its footprint as well as to create unique experiences for guests. “We installing a water plantation system, which we will be installed in our rooftop,” Wu explains. And from this water plantation system, the hotel will be growing its own

GREEN CITY HOTEL This page clock-wise: City Cafe, Crystal Ballroom, Christmas tree made with plastic bottles, Executive Room Opposite page: Alex Wu, General Manager of The Cityview

FAST FACTS

lettuce and herbs, which along with bringing a welcomed bit of greenery to the space, also cuts down on the effects food transportation has on the environment. And to better understand the hotel’s area of weakness, The Cityview submitted itself to a carbon audit, which gave Wu and his team new perspective on how they can do even more to protect the environment. “We’ve discovered that 75 per cent of our carbon emission comes from our use of electricity. We’re working on replacing old appliances, which help us be more energy efficient,” he says. Compared to last fiscal year, we have reduced 146 tons of carbon emissions which in turn saving around HK$280,000 electricity fee. The hotel is not only working within itself to help the environment, but also with guests and local organisations to promote green living. “We work closely with the charity organization in Hong Kong that distributes food to those in need. We share with them clean leftover foods and it’s a great way for us to help others and cut down on wastage,” says Wu.

The hotel also held a green campaign during Mar to May 2013, which allowed guests to collect points for using public transit, enjoying low carbon meals at the hotel, requesting a checkout with no receipt as well as reusing towels and bed sheets. “With their points, guests can redeem an environmental souvenir. It’s a great way for us to engage our guests in our initiative and allow them to help make a difference on the environment.” While the hotel works on becoming more ecofriendly for the sake of leaving a positive impact on the environment, the industry is quickly gaining notice. This past year, the hotel’s been nominated, shortlisted and named for several reputable awards, which recognises its contribution to leading the industry both locally and internationally. And most recently, the hotel took home a certificate of merit from the Hong Kong Award for Environment Excellence, an achievement that Wu is clearly proud of. But it doesn’t stop here for The Cityview – “As we continue to revamp our guestrooms throughout the next year, we will be installing energy conversation lighting in the rooms.

•  • • • • •

Oct 2013 - The Cityview participated in Yan Oi Tong Plastic Recycling Partnership Scheme 2012 and awarded with Second Runner-up by Yan Oi Tong EcoPark Plastic Resources Recycling Centre. Jun 2013 - The Cityview earns 2013 TripAdvisor Certificate of Excellence Jun 2013 - AsiaRooms.com Hotel Awards 2013 recognised The Cityview as one of the 10 hotels which implement Best Eco-Friendly Initiative to protect and conserve the environment. We are the only Hong Kong hotel being awarded. Jun 2013 - GHM Gold Pearls Awards 2013 recognized The Cityview as The Best City Hotel May 2013 - Recognized by the community as one of the most prestigious environmental award schemes in Hong Kong, the Hong Kong Awards for Environmental Excellence encourages businesses to adopt green management and also give them an opportunity to benchmark their environmental excellence. The Cityview is happy to be one of the winners to receive Certificate of Merit on Hotels and Recreational Clubs Sector, which is also the only individual hotel in Hong Kong awarded. Jan 2013 - The high standard of environmental performance practiced by The Cityview has been recognized by EarthCheck; the world's leading certifier of travel and tourism organisations. The Cityview has joined industry leaders from 70 countries with more than 1,300 companies by being awarded EarthCheck Silver Certified status, which is also the only individual hotel in Hong Kong got such achievement. To gain this, we have had to report our environmental footprint to independent auditors and adhere to internationally recognized standard of Best Practice.

HONG KONG BUSINESS ANNUAL 2014 89

FreyWille

PHILOSOPHY

“I believe that art is important for a happy life. To see the good, the beautiful, in everything around us makes us more positive, interesting people. It connects us together. My wish is to bring happiness.” Dr. Friedrich Wille

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Without passion, there wouldn’t be any art at all

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n 60 years, FREYWILLE has successfully established a jewelry line that has become an aspirational brand for women all over the world. As a global leading jeweler of artistic enamel, it has collaborated with the most important artists of 20th century such as Claude Monet, Gustav Klimt, Hundertwasser, Alphonse Mucha, attracting thousands of collectors who breathlessly awaited each creation and line. Over the decades, FREYWILLE designers have endeavored to refine the intricate production process to make each piece of jewelry a precious work of art. “All of the manufacturing takes place in Vienna with an emphasis on quality and attention to detail. Although the process of designing and developing the final product may take several years of research and design, FREYWILLE is proud to offer numerous collections,” shares FREYWILLE’s CEO, Dr Friedrich Wille. According to Dr Wille, their team of artists, designers and jewelers is continuously doing refined work to create collections full of emotions and philosophy. “The priceless value of humanity is transmitted through the hands of our passionate artists and through the uniqueness of materials and artistry, appealing to the individuality of every FREYWILLE’s devotee.” “At FREYWILLE, we believe that people are the most essential part in every aspect of life. We all have feelings. Each of us experiences

an array of emotions every day as part of our existence,” says Dr Wille. He adds that they all explore their emotions and dedicate time to capture these complex and delicate feelings in their pieces of jewelry. “We constantly aim to enrich our collections with symbols from other cultures and with history and art. Besides that we take inspiration from travel and the beauty of the world,” he adds. FREYWILLE’s philosophy is fundamental human value. It has collaborated with more than five hundred employees across the globe, and served as a basic channel through which the beauty of these employees' designs influence the outside world. This is what unites them all each of them sharing the joy of success and the compelling elements of their common growth. The company’s 60 years in the high-end jewelry business is largely defined by their most soughtafter creations. Dr Wille shares that some of their collections remain popular throughout the years. “For example the Hommage à Claude Monet was launched in 1996, and our clients still love it,” says Dr Wille. Apart from the renowned Claude Monet collection, for FREYWILLE, a Viennese company committed to art from its very roots, the Hommage à Gustav Klimt collection has not only been another best seller, it has also been an important source of inspiration for many years. “This collection is a tribute to Vienna’s role in the Art

Enamel Jewelry This page from top to bottom: Handbag Minaudière Soirée Parisienne Charms Watch Princess Victoria Scarf Pashmina Double Face Daisy Ring Earrings Luna Piccolissima Pendant Luna Piccola Tie Pendant Messager d’Amour Bordered Bangles Ring Lumière des Diamants Opposite page: Dr. Friedrich Wille, CEO of FREYWILLE

FAST FACTS • 1950s : Folkloric designed enamel jewelry • 1960s : Created a collection for Harrods, decorated with Swarovski crystal • 1970s : Formed an association with YSL • 1980s : Royal bangle, Egyptian collection • 1990s : Diva bangle, “Hommage à Claude Monet”, Iris collection • 2000-07 : Halfmoon pendant, “Hommage à Hundertwasser”, Spiral of Life collection • 2008: Diva bangle, “Ode to Joy of Life,” Heavenly Joy collection • 2011: Luna Piena pendant “Hommage à Gustav Klimt”, Hope collection

Nouveau movement and the exceptional artist, Gustav Klimt. The designs of this collection are inspired by some of Klimt’s most famous paintings, yet are an independent work of art by the FREYWILLE artists,” Dr Wille explains. Their latest collection Passionate Russia, which was launched in fall 2013, is another great success among our customers and exceeds all our expectations. This collection is a true unique masterpiece from FREYWILLE, a tribute to a country rich in art, culture and history. “Nothing of importance in the world has ever been accomplished without passion - without passion there wouldn’t be any art at all,” says Dr Wille. “We create a value that money can't buy, such

as love, the joy of life, the pure happiness that we find in the simple things of life, nature and art .These are some of the core values that we believe in at FREYWILLE,” he adds. According to Dr Wille, it is the company’s desire to use its creations to visualize the wonderful aspect of human existence, not just the beauty of nature in all its glory but also the magic it inherits which only the power of the heart can bring to light. With their in-house team of artists and their absolute dedication to bridge the gap between art and jewelry, FREYWILLE’s team will constantly and consistently surprise the world with designs full of joy and passion.

•

2012: “Floral Symphony” Collection, “The Spirit of Africa” Collection, 18k solid gold Daisy ring, Gold-plated Waterdrop pendant

HONG KONG BUSINESS ANNUAL 2014 91

FUJITSU

PHILOSOPHY

Shaping tomorrow with you.

Fujitsu excels at delivering industry-leading managed services for companies of all sizes

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eading ICT solutions and services provider Fujitsu Hong Kong, leverages more than five decades of innovation and technology in playing the role of partner for private and public corporations that require long-term commitments and robust technology solutions. In recent years, as demand grows for cloud solutions for data access at all times, Fujitsu Hong Kong is responding by providing one-stop-shop service, helping businesses take the first step on the road to cloud adoption. Cloud growth Fujitsu Hong Kong is assisting enterprises to embrace a pay-as-you-use model that ultimately helps them shift from capital expenditure to operating expenditure, optimizing efficiency and effectively leveraging Fujitsu’s resources. Derek Yiu, General Manager, Solutions and Services Business at Fujitsu Hong Kong, sees cloud and IT managed services as key areas of growth. He believes that CIOs are not only facing greater demands on IT infrastructures, but critically, talent as well. Enterprises are desperately trying to build IT teams, which can design and deploy platforms, then efficiently, systematically and securely manage systems.

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Yiu explains that more enterprises are accepting the cloud model and are adopting it into business. They are becoming more comfortable with the fact that their data and systems reside at the cloud solutions provider. They are realizing the “intangible” benefits of outsourcing management of IT services, too. As with running a utility, customers do not need to worry about the provisioning, monitoring and maintenance, so with the cloud. When a trusted service provider takes up responsibility for the smooth operation of IT services, enterprises gain peace of mind. Today more multi-national corporates (MNCs) are working towards a regional hub model, controlling all infrastructure out of the US, Europe and Asia. By embracing the cloud and consolidating IT deployments across the world, they can drastically reduce costs. As a truly global company with worldwide footprint, Fujitsu excels at delivering industry-leading managed services to support multisite and multi-environment execution as a regional IT hub. Customised solutions Yiu says key verticals including FSI, retail, telco, logistics / manufacturing and the public sector, will

Leading ICT Solutions and service provider

continue to grow. However, Fujitsu understands that one-size does not fit all, and is increasingly focused on customization and designing different, bespoke applications. For example, FSI organizations need speed and security, while retailers focus more on store operations and require speedy turnaround of IT deployments and real-time access to data. Fujitsu is a partner to the world’s leading passenger transportation system manufacturer with operations in China. The company commissioned Fujitsu and migrated to a cloud environment, embracing a system-as-a-service model. Ondemand services include SAP hosting, utilizedbased services, migration, on-going support and Fujitsu platform products. Fujitsu provides access to a scalable pool of trusted resources from the cloud, lowering upfront technology refreshment cost and helping the company shift to operational expenditure based on IT system demands, and releasing cash flow. Another company that benefited from Fujitsu, is Watami, which deployed Hong Kong’s first ever three-screen queuing kiosk, developed by Fujitsu. The Queuing System Kiosk solution is cloud-ready, and can transmit data from various outlets to a centralized data center. It helps further improve Customer Relationship Management programmes. The customer also adopted CloudStage F softwareas-a-service solution, to increase the effectiveness and efficiency in its business management across multi-country and multi-site operations. Yiu says Hong Kong retailers continue to set up business across the border, requiring data centre operation in Hong Kong and mainland China. Fujitsu Hong Kong will work closely with its China counterparts to ensure retailers can benefit from

seamless operations across the border. In the public sector, Fujitsu Hong Kong, is one of the suppliers to provide Server System Solutions and IT Professional Services to the Hong Kong Government via Standing Offer Agreements (SOAs). As a partner for business, Fujitsu Hong Kong, has the capability to devise highly efficient, low cost, resilient, flexible infrastructure and IT services. Users have ready access to business systems and information, making them accessible yet secure, wherever users need to work. In addition, considering Hong Kong’s IT talent shortage, Fujitsu has noticed a growing demand of IT managed services, which enable enterprises to leverage Fujitsu’s global, deep expertise, ensuring that the best available technologies are applied, freeing up employees’ time to focus on areas of high value to business, such as innovation. In providing custom solutions to business, Fujitsu Hong Kong undertakes tasks ranging from planning, designing and building of data centres to providing managed services and ongoing support and monitoring. This saves time, effort and costs. Fujitsu is also in a unique position to serve as a “Cloud Broker” helping companies to define the most suitable roadmap and cloud architecture, before helping to bridge into the cloud, for example by building them a private cloud, or developing bespoke cloud-based applications. Yiu says Fujitsu can provide various cloud solutions, whether private, public or hybrid, since it runs and manages over 100 Fujitsu data centres worldwide with over 15 years of experience. From business reporting to middleware, Fujitsu has its own products and services that can meet the needs of clients of all sizes. More importantly, innovation is at the heart of Fujitsu. The company invests over US$2 billion annually in R&D. For example, the latest ETERNUS DX disk systems provide unparalleled flexibility to users to align storage performance with business priorities, enabling storage professionals to boost system utilization up to 90 percent. Yiu concludes that Fujitsu values relationships with clients and takes a holistic approach to planning with a well-defined technology roadmap. As a trusted, long-term partner, the company proactively continues to provide support and solutions that empower customers to succeed.

This page (clockwise): Fujitsu provides onestop-shop service, helps companies define the most suitable roadmap and cloud architecture; Cloud-ready 3-screen queuing system by Fujitsu kiosk solution solves Watami queuing problems and enhances CRM; In face of IT talent shortage, companies are looking to leverage Fujitsu’s expertise in IT managed services Opposite page: Derek Yiu, General Manager, Solutions and Services Business, Fujitsu Hong Kong

FAST FACTS • Fujitsu is the leading IT services provider, with approximately 170,000 professionals, serving customers in more than 100 countries. As a leader in ICT solutions and services for 78 years, the group pursues strong innovation initiatives to create new value for customers with R&D investment at USD 2.9 billion. • Operating in Hong Kong for over 50 years, delivering real business value for customers across various industries by combining global expertise with local experience and facilities. The Hong Kong office also serves the Macau market, further extending the outreach of the company’s world-class services and solutions to the gaming and hospitality industries. • In 1997 and 1998 respectively, Fujitsu Hong Kong merged with ICL Hong Kong, a leading computer hardware and services company, and Amdahl, a well-known mainframe computer provider, further strengthening our capabilities in offering mission-critical solutions and services. • Fujitsu has established more than 100 data centres globally, exceeding 1 million square feet of raised floor space.

HONG KONG BUSINESS ANNUAL 2014 93

GODIVA

PHILOSOPHY

For nearly 88 years, Godiva has created the world’s most elegant, hand-crafted chocolate to please and delight customers, from royalty to workers, adults and children. Only the finest quality Belgian chocolate is used, along with high-quality ingredients for fillings and decorations. The company strives to be a business whose goal is customer satisfaction and delight.

GODIVA continues to indulge the world with its finest chocolates

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he Lunar New year is fast-approaching and what better way to celebrate it than indulging yourself and your loved ones in the creations of the best chocolatier in the world. Founded by master chocolatier Pierre Draps 88 years ago in Brussels, Belgium, it has evolved into a company that is regarded as one of the finest chocolate makers in the world. Equally a gourmet treat and lifestyle essential, this modern-day luxury chocolate will continue to add a festive spirit to any occasion. Limited edition Year of the Horse collection This year, the company is delighted to celebrate Lunar New Year by paying tribute to the 2014 Chinese horoscope creature: the majestic horse. Named in honor of the legendary Lady Godiva, who famously rode naked through Coventry on a horse, GODIVA presents its Limited Edition Year of the Horse collection which features Lady Godiva-shaped chocolates packaged in iconic prosperous-red and prestigious gold gift boxes. Fusing GODIVA’s Belgian spirit with Chinese New Year’s prosperity and joy, this meaningful festival is better celebrated with friends and family enjoying the most irresistible chocolates to ever be created. For 2014, GODIVA has specially selected popular seasonal fruits for aromatic dark, milk and

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white chocolate delicacies. Angelababy, a multi-talented artist in Hong Kong, is the current image girl for GODIVA’s CNY Limited Collection. As a true Chinese beauty, Angelababy represents the intelligent, energetic, talented and warm-hearted spirit of the Chinese zodiac horse in her exclusive shoot for GODIVA. Captured under the golden sunlight at the Château Sainte-Anne Club in Brussels, Belgium and dressed in a stunning elegant red gown and vintage-chic style, she gracefully poses in her horse-and-carriage ride to this historic location. The GODIVA 2014 CNY Limited Collection is an assortment of incredibly creative flavors. The Cheval Noir Poire Caramel is a luxurious ganache of Venezuela milk chocolate and Santo Domingo dark chocolate blended with crunchy cameral pears and vanilla, coated in silky-smooth dark chocolate. On the other hand, milk chocolate fans are sure to enjoy Cheval Lait Cerise Praliné. This treat’s milk chocolate shell is filled with the signature almond praliné blended with cherries, honey and Vanuatu chocolate. White chocolate lovers, though, will surely delight in Cheval Blanc Ananas. This delicacy consists of seasonal pineapple is mixed with macadamia nut cream to make a Dominican Republic white chocolate ganache. Blended perfectly with crunchy crispies, The Carré

Premium Chocolatier Milk Crunchy’s sweetness perfectly melts in your mouth. Its strawberry counterpart, the Carré Dark Strawberry is a combination of fresh strawberry and rich dark chocolate. GODIVA luxury gift boxes To celebrate the Lunar Year of the Horse, GODIVA presents a limited-edition chocolate gift box. The elegant GODIVA 2014 Chinese New Year Carré Gift Box contains Carré Milk and Carré Dark Strawberry pieces, packaged in beautiful classic Chinese style, to represent prosperity and all the good things to come. On the other hand, the GODIVA Chinese New Year Liquor Gift Box contains Cherry Cordial, Raisin Fine Champagne and Cherie liquors in divine rich dark chocolate selections. The brand-new GODIVA 2014 Chinese New Year horse chocolates, carrés and rich assorted chocolates are displayed like elegant jewelry pieces in the limited-edition Luxury Gift Boxes.

This page clock-wise: 2014 Chinese New Year Key Visual, GODIVA Gift Boxes, 2014 Chinese New Year Decadence Hamper Opposite page: Angelababy, the image girl for GODIVA's CNY Limited Collection

FAST FACTS • With exquisite taste, premium quality, seasonal packaging, exclusive boutiques and innovative products, GODIVA Chocolatier is dedicated to over 88 years of excellence and innovation in the Belgian tradition. •

Recognized around the world as the leader in premium chocolates, we bring the most ultimate chocolate experience and emotional appeal of gifting to chocolate lovers worldwide.

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GODIVA Chocolatier produces many different chocolate pieces that fall into different categories and are often mixed and matched to create a wide range of collections for personal, sharing, holiday and special occasion use.

The GODIVA 2014 Gold Collection is wrapped with bright red ribbon in a Chinese bow, with a gold keychain keepsake bearing the Lady Godiva symbol. The GODIVA 2014 Chinese New Year Hamper Collection’s specially edited selections of assorted chocolates and popular items bring best wishes for loved ones. The Delight Hamper and Decadence Hamper both contain Chocolate biscuits, Carré Gift Box, Milk Cocoa Powder, and other luxurious treats which make it the ultimate surprise in generous, prosperous gifting. It is GODIVA’s excellent and exceptional creativity which makes all their creations simply irresistible. With the committment to make the finest chocolates, the world is yet to delight in their more delectable flavors in the years to come. HONG KONG BUSINESS ANNUAL 2014 95

HÄSTENS

PHILOSOPHY

I have the strong belief that quality sleep is important to people’s health, and I realise that when I introduce a best quality bed like Hästens to people in Hong Kong is bringing them a good health and a better life. I really have no doubt to take up this mission. Hästens has 160 years history manufacturing beds in Sweden; all beds are handmade with 100% natural material which means zero damage to the human body. Hästens’ commitment makes me and my team work harder to tell people why a quality deep sleep means so much to them.

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The Secret to Sleeping Well

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urning the Asian consumer’s conception of what a good mattress is upside down, Hästens’ luxury bedding is quickly gaining a following of luxury seekers who understands the importance of a good night’s sleep. While the name is becoming increasingly recognisable in Hong Kong, Hästens has been driving the luxury bedding industry for 160 years. Along with cotton, wool and steel, the Swedenbased manufacturer’s is also filled with horsehair, a unique material said to offer the perfect balance of support, firmness and breathability. Beyond their beautiful designs, Hästens beds are ergonomically built to provide deeper, more restorative sleep. Ultimately, explains Eson Chen, Managing Director of Hastens, the brand believes the right bed will not only provide a cosy place to snuggle up, but also enhances the sleeper’s health due to a boost in the quality of your snooze time. “Traditionally, the Asian customer believes a mattress needs to be hard to be supportive. But at Hästens’, we’re able to offer them something that has the right amount of spring and yet gives support to every inch of our body,” says Chen. Hästens continues to bring to Hong Kong new models each year that draws upon the traditions of its manufacturing knowhow, all the while incorporating new technology into creating new beds that evolve to suit the needs of the modern-day sleeper. Not only that, but the brand has a unique way to share the Hästens sleeping experience with customers through its hotel and home bed trails. Two of the new models that are finding their way to homes across the city are the Lenoria and the

Platinum series. While one offers much more than the benefit of a great night’s sleep, the other is the fruit of contemporary engineering and development. “Our clients who understand the important of seizing every opportunity to rest are now finding it increasingly important to have a comfortable bed in their study and even offices,” says Chen. The Lenoria, he explains, is exactly the right model for those who are looking for more than just a bed for resting. A hub for relaxation An adjustable bed that is designed, as Chen puts it, “entertainment”, the Lenoria not only provides easy access for elderly to get in and out of bed, but is also gaining a young following who enjoys doing other activities in bed. “Because of the way it can support our bodies at every angle, the Lenoria a great place to read, work and watch television. It’s really much more than a bed, but rather, a hub for relaxation.” Unlike conventional adjustable beds that give off a clinical-vibe, the Lenoria is beautifully designed and its colour can be customised to blend seamlessly into a home. “Our customers can choose from 17 different colours for the mattress as well as the frame, as well as the firmness of the bed itself. This allows them to truly personalise their sleeping experience.” Another novelty launched this year is the Platinum, a wholly new and innovative fabric that is designed to enhance comfort and beauty of Hästens beds. “This is a very special project for us, because of the uniqueness and the exceptional craftsmanship that goes into making this fabric,

Luxurious Bedding To help potential customers to really appreciate what the beds are all about, Hästens as rolled out a series of bed trial programs, which includes the hotel stay experience and the home bed trial. “For our clients who are first approaching us about what we can offer and are curious about what the Hästens sleeping experience is like, we can arrange a hotel style for them where they’re invited to stay at a top tier hotel in the city. We’ve set up a room there especially for our customers and they can enjoy a night in a relaxed and luxurious environment and engage in a night of deep sleep,” says Chen. And for those who cannot decide which Hästens

This page: Hästens Platinum bed, Hästens Lenoria bed Opposite page: Eson Chen, Hästens' Managing Director

FAST FACTS • Hästens ("Hast" is Swedish for horse) history is the backbone of the company. The brand was founded in 1852, is Sweden's oldest manufacturer of beds and began by primarily making saddles. • The saddle makers of Hästens initially manufactured beds only on demand, which then increased at a rate that making beds over time became the main business for the company. • In the late 1980's, Jan Ryde, the present owner took over the reins at Hästens and thus became the fifth generation to run the privately owned family company. • Hästens bed as the Purveyor to the Royal Court of Sweden, has a 25 years guaranteed against spring and frame breakage.

we’ve decided to make Platinum available for only 1200 beds worldwide,” explains Chen. The name of the fabric is inspired by its subtle sheen; the Platinum fabric is woven to give off a faint, silvery shine, giving it dimension and an added touch of opulence. “The fabric is very plush and with exceptionally buoyancy. It enhances the support and the way the bed interacts with the movement of our bodies during sleep.” A valuable investment With a look at the price tags, it seems sleeping well doesn’t come cheap. Chen understands that a Hästens bed is an investment and he doesn’t expect his customers to understand the real health benefits without experiencing the beds first hand. “After they try sleeping in a Hästens’ bed, they’ll understand what it means to feel truly well rested. You wake up feeling energetic, your mood is better and that’s an important part of starting your day right.”

suits them best, Chen and his staff can arrange home bed trials. “When our clients have decided they want to go for a Hästens bed, they might still have some questions about which model and firmness suits them best. In that case, we will work with them to pinpoint their exact needs and then select a bed that’s right for them.” After this selection process, Hästens will arrange a brand new bed fitting the requirements to be delivered to their homes. “We off them a week of home trial – and once they can truly appreciate the long-term benefits of our beds, it’s simply impossible for them to give up their Hästens bedand we have another happy customer,” he says. But beyond making another customer happy, Chen believes the most important thing is to about to provide an easy way to enhance the lives of his customers. “To know we make a difference in their healthy, their mood and the overall quality of life is what makes me proud to be a part of Hästens.”

• Today, Hästens has 234 stores all over the world, and Asia is one of the fast growing places for introducing good health from Hästens bed's quality deep sleep.

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JEBSEN MARINE

PHILOSOPHY

Jebsen Marine is a premium partner bringing in the finest luxury yachts to ever adorn the seas. With established exclusive dealership networks, Jebsen Marine works closely with the most sought after yachting brands from Europe and the rest of the world to serve the fast growing Asian boating market. As a full-fledged international yachting consultancy, Jebsen Marine offers complete brokerage services from financing to insurance, manned by a team of experienced specialists versed in the commercial and technical fields of yachting.

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CHARTER THE SEAS IN HONG KONG’S BEST YACHTS

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here is no denying that Hong Kong seas are best sailed in the ultimate manifestation of luxury in sea boats – the yacht. For more than 100 years, Jebsen has been the trusted partner of choice for businesses and people to succeed in Greater China. As the leading distributor and marketer of premium products, Jebsen continues to elevate Greater China lifestyles via a diversified portfolio of over 200 leading brands. Jebsen Marine is part of Jebsen’s Luxury Business Unit and was established in 2008 during Shanghai International Boat Show. Despite global economic fluctuations, the company is still achieving sustainable results. Its total revenue in 2012 was over HK$15 billion (about RMB12 billion), contributing to over EURO 2 billion in turnover for the family enterprise worldwide. Jebsen Marine exclusively represents the world’s leading yacht manufacturers. To cater sailing enthusiasts, the company also markets and distributes established sailing yacht brands like Archambault and Hanse. Furthermore, Jebsen Marine also provides full yacht services. The service and after-sales team will look after the maintenance of the customers’ yachts, schedule services, refit projects, assist with berthing, insurance and ensure that yachting remains a pleasure for customers.

There are a number of challenges faced in the yachting business all over the world. In China alone, yachting is still rather uncommon due to infrastructure, licensing, import costs and other day-to-day issues that have yet to be fully ironed out. Jebsen plans to establish as many as eight new dealers in Beijing and along coastal cities within the next two to three years. “We aim to open new, wholly owned offices in locations that are being developed as China’s national hubs for leisure boating. Apart from setting up our network, we also leverage the synergy that we have built between our different Business Units,” shares Lars Petersen, General Manager for Jebsen Marine. For instance, Jebsen Marine has held some joint marketing activities with Jebsen Motors at the Porsche showroom for the car owners. By introducing the yacht lifestyle to these prospects, the company hopes to cultivate interest amongst their existing luxury customers. Jebsen Marine offers a wide range of sailing and motor yachts from the world's best yacht builders. Archambault is the name for sporty boats that are optimized for IRC and/or One Design racing. Benefiting from the latest manufacturing techniques, its range is designed for fast sailing that keeps the boats both powerful and efficient when sailing close to the wind. Since the 1970s,

MOTOR YACHT This page clock-wise: Elegant interior, spacious saloon and large relaxed seating areas for socialising; Spacious cockpit and custom stainless steel staircase with teak treads and mood lighting; Full-width master en-suite with large walk-in shower twin washbasins and toilet in separate compartment; Beautiful galley with ice-maker, fridge, freezer, dishwasher, microwave oven, hob and plentiful storage space Opposite page: Lars Petersen, General Manager for Jebsen Marine

FAST FACTS

Archambault has been enjoying outstanding success thanks to its exceptional marine qualities. Born of one man's vision over 40 years ago, Fairline has the very same passion for excellence, cutting-edge technology and peerless craftsmanship that still runs through the company today. This rare dedication to excellence has won an unusually high level of loyalty from customers and created a luxury brand that's now recognized and appreciated the world over. They build a line-up of world-class motor yachts that win many awards for their innovation and quality, but even more importantly, deliver matchless pleasure and enjoyment to their owners. Hanse Yachts, on the other hand, is one of the fastest growing yacht shipyards in Europe. From the very beginning the concept of the shipyard was to offer technologically sophisticated yachts for private ownership with convenient handling and outstanding value of money. These yachts are the ideal performance cruisers for families who love ambitious sailing. Jebsen Marine has established exclusive dealership networks with prestigious yachting brands. Besides the office in Hong Kong, Shanghai and the newly opened one in Nansha since Oct 12, 2013. Although the industry is still in

its infancy and with sales starting to take off just a few years ago, the company is seeing a growing demand for luxury yachts and upmarket marinas across Greater China. Having brokerage services as a full-fledged international yachting consultancy, Jebsen Marine does not just sell products, but offers a total solution. They also provide a full range of services, including consumer education, captain training, maintenance, and delivery. “We can fly to where the potential buyers are and service them on the spot. When the customer is ready to make the purchase, he/she can fly to the shipyard to see the actual boat and meet with the designers and experts, and decide on the materials, special features, etc. But our relationships with clients don’t just end there — Jebsen Marine is renowned for high-quality after-sales support,” says Petersen. China’s yacht market scale shows an obviously swelling trend. “We are seeing growing demand for luxury yachts and upmarket marinas across Greater China. We firmly believe that with the rapid development of the supporting facilities, the demand for premium yachts will take off in China. We are confident and commit to the China market in the coming future,” says Petersen.

2013: • Jebsen Marine presented the Fairline Targa 38 and newly designed Squadron 60 to the China market. • The Fairline Targa 38 was sold for the first time during the Hong Kong Gold Coast Boat Show. • Jebsen Marine renovated the office in Aberdeen Marina Tower as the Fairline Hong Kong Showroom. • To facilitate the continuous expansion of Jebsen Marine, the office in Aberdeen of Hong Kong was expanded. • In addition to the office at Hong Kong and Shanghai, Jebsen Marine’s third office was opened at Nansha Marina on 10 Oct 2013. • Jebsen Marine has achieved a great accomplishment by selling more than 50 yachts including luxury yachts and sailing boats ever since the business starts.

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NOBLESSE LIFESTYLE GROUP

PHILOSOPHY

Your Home is the Center of Your Life and the Bedroom is the Center of Your Home. After all, you spend a third of your life in bed and therefore by investing in the best quality bed; you invest in a life of health, happiness and wellbeing for yourself and your love ones. Vi-Spring has been hand-making the finest bed in England for over a century using skills and techniques passed down by the generations of traditional British craftsmen. And Treca Interiors Paris offers a more artistic perspective to the meaning of sleep. I am honoured to represent Vi-Spring and Treca Interiors Paris in Hong Kong and I am committed to continue to bring and offer the finer things in life to people of Hong Kong and China.

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A HEALTHLY LIFESTYLE BEGINS WITH A QUALITY SLEEP

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uxury can be much more than meets the eye. Beyond the glitz and glam, true luxury stems from living the good life. And according to Brandon Chau of Noblesse Lifestyle Group, the key is getting a great night’s sleep. We spend a huge bulk of our life in bed, be its sleeping, reading or simply enjoying some me time. While we are discerning when it comes to scoring top luxury items for other aspects of our lives, such as fine watches, cars and jewellery, we often neglect the importance of what a good bed can do for our life. And often it is not until we encounter problems with our sleep that we realise how important it is. Experiencing this first hand, Brandon Chau, founder of Noblesse Lifestyle Group, was concerned with the quality and quantity of his sleep. While the group aims to expand to include a range of lifestyle products that reflect Chau’s passion for luxury living, the core of the brand currently focuses on luxury bedding, naming the British brand Vi-Spring and French brand Treca Interiors Paris, a house dedicated to bedroom designs. “I had sleeping problems a few years back. It was due to stress and I had a lot on my mind. I tried several different things to help improve the situation. But then I began to wonder if changing the bed is the solution,” he recalls. And on a chance encounter on holiday in

London, Chau discovered the luxury-bedding brand Vi-Spring, a British manufacturer specialising in top quality and personalised luxury bed. “At first, luxury bedding seemed to be a novelty concept to me. Then I began to learn more about it; each bed is hand made with all natural materials using traditional technique. I became fascinated with the brand, especially after I tried it for myself,” he says. Chau describes his first experience sleeping on a Vi-Spring bed as “Like I’ve never slept before,” likening the naturally supportive bed to a tailored suit. “Because it’s customised to fit your body and it has no foam, latex or synthetic materials, it provides a very natural and intimate sleeping experience,” he says. After experiencing drastic improvement with his own sleep, he decided to introduce this new sleeping concept to Hong Kong. “I felt there’s a huge demand for a luxury bed like Vi-Spring in Hong Kong because we lead such busy lives in this city and it’s crucial for us to be able to feel energised. With these beds, I’m able to sleep less but feel more energised than ever before.” The bed themselves are unique labours of love, each hand crafted in Britain by seasoned craftsman according to the client’s body type and preferences. “We have a guideline that offers pointers to our clients as to the type of firmness, tension and height of the mattress that best suits them.” But at the end

Luxury living This page clock-wise: Vi-Spring bed model The Magnificence Superb; The Traditional handcraftsmanship; Brandon Chau donating to Cathy Tsui’s foundation at Vi-Spring HK Launch Party; Vi-Spring bed model The Diamond Jubilee Limited Edition; Treca Interiors Paris bed model SuperCad Opposite page: Brandon Chau, Founder of Noblesse Lifestyle Group

FAST FACTS • Vi-Spring first handcrafted their beds in 1901 in London, using only the finest natural materials such as wool, horsetail, cotton, silk and cashmere. It has changed the world of bed making ever since. • Vi-Spring pioneered the first 6 coiled pocket springs, used in both mattresses and divans, to provide an unequaled support and comfort. • Vi-Spring was used by the 1st Class cabin of the Titanic and used by prestigious London Hotels such as The Dorchester and The Goring today. • Vi-Spring is the only bed-maker that offers a lifetime guarantee, a stamp of quality and confidence. • Treca Interiors Paris was the first to introduce the electrical adjustable beds and remains the best in the world combing cutting edge technology, innovative design and French style of sleep.

of the day, Chau says it’s all a matter of personal preference, since the bedroom is the most intimate space a person can own. Chau also saw a need that stretched beyond the realms of the existing repertoire at Vi-Spring and pioneered a range especially for the Hong Kong market. “I saw a demand for baby beds. Baby mattresses are usually made with foam and other synthetic materials. But babies’ bodies are fragile and the support of a good bed is crucial for their development." With regard to fit different customer’s desire, Noblesse Lifestyle Group brought the two brands, Vi- Spring and Treca Interiors Paris, to the group’s portfolio. While Vi- Spring is all about heritage and traditional craftsmanship and technique, Treca Interiors Paris focuses on bringing an element of design into the bedroom and their products are

made to be fully integrated into it. Treca Interiors Paris’ beds are also made entirely by hand, featuring cashmere on one side for the winter months and corn and bamboo fibres on the other for the spring/summer months. “These beds are modern designer items that appeal to a younger crowd. They are ideal for those who want both quality and a unique look.” Bedding is only a starting point for Noblesse Lifestyle Group – Chau is in the process of bringing several other luxury brands to the group’s portfolio. “Our focus is on everything luxury and we aim to deliver quality lifestyle. The bedroom is the centre of the home and I believe it’s a place where you should invest in for the best. In the future, our direction is to bring together a concepts of wellbeing, health and style to create a luxury lifestyle experience.”

• Treca Interiors Paris has been the preferred choice of world leading designers and luxury fashion brands.

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OVOLO HOTELS

PHILOSOPHY

To be a dynamic hospitality owner-operator and lifestyle brand throughout Hong Kong and Asia by providing signature spaces with an intimate and relaxed atmosphere supported by personalised details, innovative technology and unsurpassed all-inclusive service.

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The Ovolo Way

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culture and business hub on the cusp of roaring Mainland China, and quick connections all over Asia, Hong Kong is one of the world’s most glamorous and popular travel destinations. With over 40 million visitors now coming to the city every year the demand for overnight rooms is stronger than ever and to stand out in this competitive hospitality market Ovolo Group has continued to innovate and set new trends in hotel design, service and style. One of Hong Kong’s few independent hotel and serviced apartment operators, Ovolo has been a leading hospitality innovator since 2002. In just ten years, the brand has expanded to include seven locations in Hong Kong as well as one in Melbourne, Australia. 2014 will see Ovolo launch its grandest project to date – the country’s first warehouse conversion hotel with a full allotment of designer restaurants, bars and event spaces in Southside. According to the group’s Chief Operating Officer Dirk Dalichau, Ovolo’s growth has hinged on the brand’s detail-driven approach and continued ability to introduce new services for evolving travel needs. “We focus on our next generation of guests, on including all the technology and features they want, and on always creating smart inspiring spaces for them to enjoy themselves,” he explains. So what is it exactly that these travellers are looking for? According to Dirk, it’s more than just a conventional bed, tv and formalized greeting. Visitors crave a fresh, adaptable accommodation that compliments their lifestyle and allows them to appreciate their surroundings on another level. “In

Ovolo Hotels we create an intimate feature-rich environment that effortlessly caters to the guests intended purpose with the most robust all-inclusive services around – with everything from daily breakfast, in room bar and snacks superspeed WiFi, all day coffee, to daily happy hour drinks being included free.” Through these inclusions, the Group distinguishes itself by cleverly eliminating common travel hassles for guests. A fitting example of this is the new partnership Ovolo struck this year with Hong Kong Broadband Network (HKBN) to become the first and currently only hotel brand to offer its guests complimentary access to thousands of Wi-Fi hotspots around Hong Kong. “It was a smart solution for our international guests who wanted to get online easily without dealing with roaming charges,” Dalichau detailed, adding “We act quickly on ideas like this because we know they can reap rewards. Guests enjoy the experience, remember and recommend our lifestyle hotels.” Bringing a particular attention and flexibility to every element of hospitality has given each journey to Ovolo more substance. Rather than skimp on the standards, they feature premium Malin + Goetz amenities in their washrooms, distinct selections of gourmet treats in the free in-room minibar, and keep introducing new features like salon-grade hair styling accessories that cater the rising proportion of female business travellers. “We find that by focusing on the little touches, like what sweets to include in our welcoming ‘Loot Bag’ sufficient and conveniently placed power sockets, free Ovolo bags and other touches, they all add up and

Lifestyle Hotels This page clock-wise: Exterior of Ovolo 100 Shek Pai Wan Road, Aberdeen; Suite at Ovolo Melbourne; Entrance to Ovolo 2 Arbuthnot Road; Executive Deluxe Room at Ovolo 2 Arbuthnot Road; Lo Lounge at Ovolo 286 Queen's Road Cetnral Opposite page: Mr Dirk Dalichau, Chief Operating Officer of Ovolo Hotels; Mr Girish Jhunjhnuwala, Founder + CEO of Ovolo Hotels; Ms Heddy Li, Executive Director of Ovolo Hotels

FAST FACTS • Named ‘Best Luxury Hotel Brand’ for Hong Kong at World Luxury Hotel Awards 2013 • Named ‘City Explorer Category Winner’ at World Boutique Hotel Awards 2013

produce tremendous value for guests,” Dalichau explains. These features accompany each Ovolo’s distinctive design story, which involves individualized interiors and lay outs that are created to enhance the surrounding environment and the building’s character. “We don’t build our hotels from identical boxes like other chain hotels. Every Ovolo is individually designed to maximize the flow and function of each building, interiors taking on unique characteristics from the surrounding environment in selective textures and aesthetics.” A casual yet personalized communication style accompanies Ovolo Hotels, informed by the group’s mission: ‘Shiny Happy People All Around.’ This mantra applies to the desired guest result and to the recruiting attitude for Team Ovolo. “We are a young dynamic company, always on the lookout for energetic individuals who can contribute their fresh perspectives,” Dalichau mentions, adding “our preference is for our employees to be part of the trendy crowd, who have a sense of fashion and stand out, rather than those who merely blend in and feel more comfortable in more formal traditional settings.” Whatever details goes into the hotel, be in in aspects of hardware or service, they’re all implemented with the user in mind. “It’s all been thought of from the guests’ perspective first so they can work, eat, relax, and party all in these same spaces.”

• Awarded Design Excellence in Hotel Interiors at HA+D Awards 2013 • Received Three Certificates of Excellence from tripadivsor.com in 2013

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THE PACIFIC CIGAR COMPANY

PHILOSOPHY

To bring all Cigar Aficionados the best Havana cigars and all the good things that comes with it.

THE Pacific Cigar COMPANY brings excellence into the cigar lifestyle

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or cigar aficionados, Havana cigars are the best of the best in the market. And for twenty years, The Pacific Cigar Company Ltd has been producing such for its customers. PCC Ltd is the holding company for various subsidiaries as well as its corporate head office. They now have eleven outlets in Hong Kong: nine in Hong Kong Island and two in Kowloon. Of the eleven shops, ten are cigar divans with lounges while the other one is a cigar shop. All of them have one thing in common: they offer the widest selection of cigars in the most elegant of atmospheres. The Pacific Cigar Company’s wholesale team supplies independent retailers, hotels, restaurants and bars carrying Cuban cigars. When the company was appointed distributor in 1992, cigars and Cuban cigars was rather unknown in Asia. There were a few cigar smokers especially in Hong Kong, but it was difficult to buy good quality Cuban cigars. Sir David Tang, PCC’s founder, believes that smoking is a lifestyle and, in order to develop this concept, one needs the availability of cigars combined with an environment where you 104 HONG KONG BUSINESS ANNUAL 2014

can enjoy smoking it. In the same year PCC was founded, he opened the now iconic Cohiba Cigar Divan, the first cigar divan and lounge in Hong Kong. This was soon followed by cigars divans in the region. Since then, the demand for handmade premium cigars has grown tremendously, and the Cuban Habanos brands remain absolute market leader. The lifestyle surround cigar smoking has continued to gain popularity, and despite the complicated smoking regulations in many countries, continues to grow. In fact, if it includes Mainland China’s demand for premium cigars, it is probably well above the ten million mark. Pacific Cigar now has 26 stores spread across seven countries and another two under management in China. Furthermore, its partners have 16 stores and lounges in Japan, Korea, Cambodia, Vietnam, and Philippines. “The key to success is a combination of local presence and strong local management to be able to develop the cigar lifestyle in the market. When we started in Hong Kong, cigar divans are a must to enable cigar aficionados to enjoy smoking, experiment with new cigars, as well as exchange

upmarket distributor This page clock-wise: Siglo 75' Humidor; Siglo Serpent series cigar accessory; Siglo Switch Blade Cutter Opposite page: Dag Holmboe, Chief Executive Officer of The Pacific Cigar Company

FAST FACTS experiences with other cigar smokers,” says Dag Holmboe, Chief Executive Officer of The Pacific Cigar Company. “In today's world, having cigar shops and lounges is really the only way we can communicate with the consumers, a key factor for our success,” he adds. Habanos cigars have a unique taste, flavor, and aroma that set it apart from most other premium handmade cigars. According to Holmboe, they are often asked: ‘Why are Cuban cigars special?’ and the answer is quite simple: “Like premium wine, you need a combination of the soil, the climate, the tobacco plants and the local know how, and Cuba has all this.” He adds that many people believe tobacco is grown everywhere in Cuba, but the tobacco used for handmade cigars comes from a very small part of Cuba, around a place called Pinar del Rio. This place has a micro climate ideal for growing tobacco, and where the Habanos cigars start their journey. “It should also be added that Habanos cigars are 100% hand made, there are literally no machines involved, they are totally done by hand,” Holmboe shares. Developed in late 2002 by The Pacific Cigar Company and launched in 2003, the Siglo brand is now available across Asia Pacific and China, with a further expansion into the US, Canadian and European markets. As a brand, Siglo offers a comprehensive range of cigar trimmings that cigar lovers would require, including humidors, cutters, lighters, cigar cases and ashtrays. Their designs as well as their choice of materials are based on what the consumer is looking for. “Our humidors are renowned for their highest finish and quality using only the finest cedar wood. Our lighters are innovative, efficient and

• The Pacific Cigar Company Limited (PCC) is the exclusive distributor for the Habanos Cigars Brands for Asia Pacific Region. The distribution was granted by Habanos Sociedad Anonima (Habanos S.A.) the only Cuban Enterprise authorized to export the well-known Havanas from Cuba in June 1992. • PCC is the leading cigar retailer across the Asia Pacific with 27 shops in the region, 2 cigar divans in China and 2 stores in Canada Their distributors have 29 stores and divans in Asia Pacific which makes a total of 60 stores and divans spread across Asia Pacific & China.

offer various style in design and materials. Same for our cigar cutters, punchers and other cutting tools,” says Holmboe. They are also going to introduce new materials such as Titanium, Kevlar, Ceramic. The Siglo Accessory has a very strict quality control on all of their products. According to Holmboe, they will not hesitate to reject an entire lot of production if the items do not match their QC criteria. “In addition to high quality standard, we also try to create new items, new designs, to satisfy the most demanding cigar aficionado,” he adds. More selection of men's accessories and golf accessories will soon be available in the market. They are also developing a new line using more exotic leathers. “Siglo is celebrating 10 years. The next 10 years will be as exciting as the first 10,” he says. HONG KONG BUSINESS ANNUAL 2014 105

RICOH hong kong limited

PHILOSOPHY

Creating new values to customers while working towards a sustainable society is the values of Ricoh Group.

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the world’s leading Managed Document Services provider

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ooking back to the late 1970s and early ’80s, Ricoh has always been at the forefront of copy and fax technology. This early surge placed the company as a market leader, and it capitalized the return on fax technology for many years. Currently, it is now one of the leading Managed Document Service and IT solutions providers in the market. Its 50th year in Hong Kong signifies the long and illustrious relationship it has with businesses in the city. The company leads the way, this time, in reducing its reliance on equipment for the office and shifting its emphasis to providing services for businesses. “We’re now moving ourselves from an office equipment provider to an IT services provider,” says Aaron Yim, Ricoh Hong Kong’s Managing Director. Because of the move towards paperless, mobile, and remote ways of working – Ricoh is moving on from hardware-based, “brick-fix” type products, into more innovative communication and technology-based products and services. As one of the market leader of Managed Document Services worldwide, Ricoh has continually developed their expertise to help improve companies’ information management and document processes. Their consultants work side-by-side with the client to review all parts of the process, from the purchase of hardware, software and storage solutions to creating the

applications needed to speed their time to market. Where companies have adopted Ricoh’s Managed Document Services, they have seen the increased revenue that results from good document processes and archiving. 
 Yim said, “We are moving towards being an integrated outsourcing company with complete professional services for all types of companies and industries. We not only provide a full-range of document printing solutions, but also scanning, conversion services, IT services and business process outsourcing so the companies can concentrate on their core missions”. Now celebrating its 50th year of service in Hong Kong, Ricoh is also launching new solutions for helping businesses to catch up with technological changes, such as its new communications solutions like video conferencing and mobile device management to help customers work anytime, anywhere. 
In addition, it assists customers to move to cloud computing while providing the document archiving and storage backup as well. Each stage of the process must be handled efficiently. Improper or inefficient document handling can result in loss of revenue and time. Messy workflow systems can cause mistakes and can prevent companies from getting the right information at the right time to their customers. Having a totally integrated system can lower the

Managed document Services This page clock-wise: A digital signage solution was made possible by the latest Ricoh ultra-short throw projectors; Ricoh showcased their interactive whiteboard and communications solution at the Business Innovation Conference last October. Opposite page: Aaron Yim, Managing Director of Ricoh Hong Kong calls for workplace innovation

FAST FACTS •

In 2013, the company has been positioned in the "Leaders" quadrant of the Gartner’s "Magic Quadrant for Managed Print Services Worldwide." This is the 4th consecutive time they received the distinction.

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Ricoh's Managed Document Services build upon a core foundation of industry-leading hardware and software technologies and document and IT-related services. These services address the business practices surrounding the management of both print and electronic information.

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MDS is not just about creating efficiencies related to document management but it's about helping companies better serve their customers and be more competitive in their markets.

•

Its proven methodology (Understand, Improve, Transform, Govern and Optimize) helps Ricoh pinpoint an organization's key processes and then align them with services that will help customers achieve measurable and sustainable business outcomes.

initial costs and incur less capital expenditure, while making the document handling process faster and easier. Ricoh Hong Kong has the advantage of bringing top quality hardware, software and service support together to provide the total integrated solution for customers. “We’re trying to take this 50-year anniversary to tell everybody that we’re in this change period to migrate into a more IT-based, technology-based organization,” Yim says. “This is what the next 50 years holds – what we’re going to contribute to the business community and society as a whole.” HONG KONG BUSINESS ANNUAL 2014 107

SHAMA MANAGEMENT LTD.

PHILOSOPHY

Shama’s philosophy is to offer serviced apartments that epitomize comfort, style and luxury. Guests experience a warm welcome from staff that personalise the living experience with their professional ethos. Shama is a fusion of boutique and function with modern décor, and an emphasis on clean, simple, contemporary furnishings with a seamless blend of comfort and technology.

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The Shama Touch – Setting New Standards for Stylish Living

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uch more than just a place to rest your head at the end of a long day, be it for short term travelers or expats stationing in the city, Shama, under the ONYX Hospitality Group, offers a unique approach to hospitality that encompasses comfort, class and a sense of community. With serviced apartments dotting the map across major cities in Thailand, China and Hong Kong, Shama brings its unique brand of overseas living to the next level as they roll out new programs for tenants and add a new living concept to the brand. Moving to a foreign city can be an amazing experience and a real cultural stimulation. But finding a home in the right neighbourhood can be a hassle and a nightmare. This is precisely the reason why many choose to build their new homes in Shama serviced apartments. The hassle-free experience can be crucial for those who are already juggling a new job and a new life in the new city. Besides its signature design concept and unparalleled comfort, Shama offers the “no boundaries” program to tenants to ensure not only a pleasant stay at the serviced apartment, but also around the city. For instance, staff provides guests with monthly highlights of what’s happening around town, which

may include everything from cultural events to art exhibitions, and offers exquisite recommendations to the hidden gems of the city. Shama is also keen on helping tenants build a sense of belonging in Shama community during their stay in the city through lifestyle activities such as cooking class. Plus, a Hoodtour program has been introduced to bring tenants on tours around the surrounding area of the serviced apartment. The service also allows long-term tenants the privilege of access to KEE club which is a private club for invitee-only. Since most tenants are corporate clients, the location of Shama serviced apartments is the key to their popularity and success. Locations of these properties are chosen based on their convenience and access to transportation, proximity to key business hubs, entertainment venues and other facilities. The Shama brand has come a long way in providing their signature brand of hospitality to travelers and expatriates in particular since the development of its flagship property in 2001. Now adding to the Shama and Shama Luxe properties, the brand launches Shama Lite, a new approach to serviced apartments that cater specifically for the mid-market who request for quality stay with the same philosophy as Shama at a valueoriented point. Shama Lite properties are located

Serviced Apartment This page clock-wise: Shama Causeway Bay, our flagship property in Hong Kong; Shama apartments combine hip style with supreme functionality; Signature personalized housekeeping service; Shama Heda, the first property in Hangzhou to be opened in 2014 Q1 Opposite page: Elaine Young, Executive Director, ONYX Hospitality Group

FAST FACTS • Shama has serviced apartments dotting the map across major cities in Thailand, China and Hong Kong •

The Shama brand has come a long way in providing their signature brand of hospitality to travelers and expatriates in particular since the development of its first flagship property in 2001

•

Shama has introduced the Hoodtour, a program that brings tenants on tours around the surrounding area of the serviced apartment.

• Shama launches Shama Lite, a new approach to serviced apartments that cater specifically for the mid-market. •

Shama will be launching new properties in four China cities including Hangzhou (opening in 2014 Q1), Guangzhou, Beijing, and Chengdu.

(opening in 2014 Q1), Guangzhou, Beijing, and Chengdu. Shama’s portfolio is stronger than before, with properties stretching across Asia’s most popular cities: • Bangkok

in residential districts and appeal to business travelers and families looking for affordable and stylish homes away from homes. The Shama model of serviced apartments is undoubtedly one that works. It’s become a brand which tenants trust and can rely on for quality, comfort and great service. And as various cities across China continue attract expat professionals, the demand for serviced apartments like the Shama Luxe, Shama and Shama Lite is also on the raise. Seeing this need, Shama will be launching new properties in four China cities including Hangzhou

Shama Sukhumvit Bangkok • Dalian Shama Luxe Grand Central • HONG KONG Shama Causeway Bay Shama Central Shama Fortress Hill Shama Hollywood Shama Tsim Sha Tsui • SHANGHAI Shama Luxe Huashan Shama Luxe at Xintiandi Shama Century Park Shama Xujiahui • HANGZHOU Shama Heda (opening soon) HONG KONG BUSINESS ANNUAL 2014 109

SOUND CONCEPTS

PHILOSOPHY

Our two main goals are to keep up with all the technical changes in the world of highquality audio systems and to provide our customers with the best system designs for home and commercial property entertainment systems. We believe in our products, which are the finest loudspeakers, amplifiers, home theatre systems, cables and tuning devices, IP-based network systems, smart control and automation systems, CD, Blu Ray players and D/A converters available on the market today. We work very hard to solve the challenges of each, unique installation and guarantee our systems for one year after completion.

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Sound Concepts soars beyond sound philosophy

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appy customers and honesty coupled with quality and top-notch sound equipment is the Sound Concepts’ success equation. Sound Concepts was established in January 1990 in Hong Kong by Sherry Chung, who has been working in the audio industry since 1978. The company’s goal is to import premium quality audio and home theatre products with incredible performance but reasonable prices into Hong Kong and China and to provide excellent after-sales-service to all their valued customers. The company specializes in whole-house entertainment systems, with full automation and smart controls. Their sound systems are actually used during the Cannes Movie Awards Ceremonies in France, the Oscar Awards in USA, the Disney Hall in Los Angeles, USA, and the New World Symphony Hall in Miami, Florida. They also have their equipment installed in multi-billion dollar homes as well as large music and movie production companies. Humble beginnings But all success stories stem from humble beginnings. “When we set up the company in 1990, there were only 4 people and today, we have totally 15 people working together. The goal of Sound Concepts has always been to bring in the high end, high quality audio products at reasonable prices into our market,” shares

Chung. In the beginning, they were purely a distribution company and sold the products only through dealers. In the last few months of 1993, they had set up their own showroom to provide a good demo of the products under their exclusive distribution. They have also been selling the high end models directly to customers. “In 1998, we started to provide customers with high quality home entertainment AV solutions. In 2001, we worked together with interior designers to design and install the luxury Integrated Home Entertainment Systems with a custom home cinema including the easy to use luxury home automation system for a luxury smart home,” says Chung. Overcoming challenges Like all businesses, the company also faced a fair share of challenges. “During all these years, many of our vendors changed. They either sold to a big investment company due to retirement, or the big corporates have to consolidate due to the economy problem in the U.S. and Europe. We found the products are never the same as before,” Chung recalls. According to her, it came to a point where it seemed that the products lost its soul – its value as well as its selling point. She shares that it hurts to see those things happen but over the years, they learned to let go and move on. Currently, Sound Concepts is working together

AV CONSULTANCY This page clock-wise: Playback Designs IPS-3, SCM-100SE, ATC-7-speaker, SIACD Opposite page: Bricasti M1

FAST FACTS • Sound Concepts Limited was established in January 1990 in Hong Kong, by Ms Sherry Chung, who has been working in the audio industry since 1978.

with their key vendor, ATC UK, to supply and install the sound reinforcement system for the Shanghai Symphony Hall, which will be completed in early 2014. “It is a bit challenging for us as it is the first time we are doing such a big project. We are learning a lot from the guidance, assistance, and expertise of ATC,” says Chung. Excellence in workmanship Chung shares that after they have completed the installation of their first big project, new customers came to them. Both happy and satisfied clients as well as the designers who worked with them referred them outside the company. Their excellence in workmanship was spread through word-of-mouth. Furthermore, they are continuously bringing in the new high tech good quality products into their market exclusively for their own distribution. “‘Happy customers’ & ‘Honesty’ are the key words for our success, and this set us apart from our competitors,” notes Chung. This year has been a good one for Sound Concepts. “ATC has recently launched a new series of loudspeakers with their own new tweeter and it sounds great. You won’t be able to imagine how good the sound can be from a compact bookshelf speaker,” Chung shares.

Additionally, Bricasti has also launched the state-of-the-art D/A converter, the M1, which allows users to playback their music collections via different built-in filters to meet with their own taste in music. Furthermore, they may opt connect their HD music collection to their computer in for playback through the D/A Converter which is capable of decoding DSD music files via USB. Their new home entertainment systems also provide high quality audio and video distribution throughout the house. “You can access your entire CD collection in every room via our music server with the actual album cover art displayed on your touch panel. High quality video distribution allows DVD's or BluRay’s to be accessed from a hard drive film server (ReQuest) at high definition quality,” says Chung. “Our systems will even upscale your old DVD's to a quality that rivals Blue Ray!” she adds.

• Our goal is to import into Hong Kong and China premium quality audio and home theatre products with first class highend performance but reasonable prices, and to provide an excellent after-salesservice to all our valued customers.

A stable vision Chung’s vision for Sound Concepts in three to five years is a constant and stable one. “We’ll keep growing slowly and steadily. We’ll be more focused in the Chinese market as it is a growing potential market for us.” Recently, Sound Concepts has set up a branch office in Shanghai which is managed by around 3 employees. HONG KONG BUSINESS ANNUAL 2014 111

THE MERCER

PHILOSOPHY

The hotel business is all about passion and enthusiasm. These are even more vital for boutique hotels. You also need to be creative, flexible and able to multitask. Therefore it is always important to explore, to experience, to think out of the box. We also encourage our staff to participate and experience, to develop a positive attitude when facing challenges. “Don’t believe what you see. When you believe it, you’ll see it. This has always been my philosophy” General Manager Rebecca Kwan said.

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A trendy sanctuary at the heart of Hong Kong

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ounded by Dorsett Hospitality International, The Mercer is an award winning boutique hotel located in Sheung Wan, Hong Kong. Decorated with exquisitely tasteful contemporary design, guests can relax in the spacious and luxuriously furnished rooms that provide unparalleled comfort and privacy as well as a generous workspace away from the office. Surrounding the area are financial offices, banks, art galleries, PR firms, auction houses, wine companies, model agencies, publications, antique shops, jewelry shops and the like, which make the hotel perfect for business visits. Like many successful business establishments today, The Mercer had humble beginnings. Rebecca Kwan, The Mercer’s General Manager, says that the hotel two years ago is different from its current grandiose today. “When we first started the hotel in Sheung Wan two years ago, the area was unknown to even local people. It is difficult for taxis to find, and guests is yet to know the area is a gem,” Kwan shares. Therefore we showcase the unique art and culture neighbourhood with antique shops, art galleries and designer boutiques around; also the close proximity to Central and Sheung Wan premier offices, luxury shopping area, which is a perfect accommodation for both business and leisure stay. “Moreover, The Mercer is a completely new

name which name after the street we located in (which is only 100m). So basically, no one knows about it. We started from scratch, building trust and confidence with our guests by providing excellent service and reasonable rates to attract them,” she adds. These best practices have become channels by which they promoted the business. Word of mouth as well as referrals from guests eventually popularized the boutique hotel. Since then, business has improved significantly. “It has developed as an alternative for customers who do not want to stay in traditional 5-star, big chain hotel with standard service and design. They can enjoy the same luxury, spaciousness, and convenience in a more personalized and trendy boutique hotel with its own character,” says Kwan. When asked what makes The Mercer different from all other similar establishments in the industry, Kwan shares that its perfect location, well-thought amenities on a spacious layout, as well as the hotel’s experienced and welltrained staff provide guests value for money accommodation. Hotel guests can fully enjoy complimentary Wi-Fi, buffet breakfast, minibar, and local calls, fresh fruits as well as freshly brewed coffee and tea are served free throughout the day. The hotel equipped with an outdoor swimming pool, a 24-hour gym, and the famous Sushi Shikon. This Japanese restaurant was awarded the Michelin 2-Star on its second month

Boutique Hotel This page clock-wise: Rebecca Kwan, General Manager of The Mercer; Exterior view of The Mercer; Swimming pool at The Mercer; One bedroom Suite. Opposite page: Deluxe Room

FAST FACTS • Dorsett Hospitality International (HKEx Stock Code 2266) currently owns and manages 18 hotels in Mainland China, Hong Kong, Singapore and Malaysia; with 11 more opening within the next 2 years in Mainland China, Hong Kong and United Kingdom. • There are three brands under Dorsett Hospitality International including d.Collection featuring a series of boutique hotels, e.g. The Mercer; Dorsett Hotels & Resorts comprising upscale Dorsett Grand and mid-scale Dorsett; and value-led Silka Hotels.

since opening and just recognized as 3-Star recently. Its mysterious Omekase menu, where the chef serves the best of his creations for the day, is continuously creating a buzz among dining enthusiasts in the city. Bright, vibrant, and fully-functional, the airconditioned guestrooms are surrounded with glass panes. Each room is equipped with an iPod dock and a flat-screen TV with cable channels. Provided in personal kitchenettes are nespresso coffee machines and a selection of Ridgeway tea bags. In order to make their service more personal, Kwan shares that they try to get more details about their guests before their arrival, such as their purpose of stay and the company or business they’re associated with. The hotel guests are also encouraged to communicate their concerns directly to Kwan.

She emphasizes the customer experience and comment is important to the hotel. Both positive and negative reviews are proactively taken into account in order to build top-notch customer service. In fact, these customer suggestions are the basis of all constructive changes done in the hotel. Not only is The Mercer striving to achieve utmost customer satisfaction, they are also striving to be socially responsible. In order to reduce their carbon footing and help alleviate global warming, the hotel is an active participant in the Friends of the Earth’s Tree Planting Challenge. Furthermore, they have also been supporters of the green lifestyle by recycling plastic bottles as well as changing all forms of hotel lighting into LED. Apart from that, hotel is also supporting Unicef’s Change for Children. All these are part of a continued effort to make a meaningful contribution to the society and the environment. The hotel business is a healthy mix of passion and enthusiasm. These qualities are even more important in running boutique hotels. “We try to be more interactive and provide more area information to the guests, so that they can discover something new every time when they stay with us,” says Kwan. HONG KONG BUSINESS ANNUAL 2014 113

THOMAS, MAYER & ASSOCIES

PHILOSOPHY

Our approach is to focus on making a valuable contribution to the progress of our client’s business in a potentially complicated international environment. We develop long term relationships built on mutual understanding and trust.

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CLOSING GAPS BETWEEN EUROPE AND ASIA

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homas, Mayer & Associés (“TMA”) is a French law firm established in Hong Kong in 1995. It has steadily developed its presence in the territory and is today recognized as a major actor in the structuring of business relationships of French and continental European entrepreneurs looking to explore the Asian market. Conversely TMA assists Asian clients in their European ventures. TMA’s expertise in using Hong Kong as a platform for structuring international investments enables its clients to benefit comfortably from the legal security Hong Kong offers in the region. As the vast majority of foreign investments in mainland China are structured in Hong Kong, Eric Mayer, partner at TMA explains, there’s simply no need for a project manager to go to China in order to structure an investment. Hong Kong will always be the stepping stone into the Chinese market. Mayer explains that Hong Kong will unlikely be replaced by China as a top international business hub because of the rule of law and flexibility of the business environment if offers. “Many of our clients wish to establish in China. But legal aspects of setting up a business such as holdings agreements and the actual signing of deals are often done in Hong Kong because clients understand the legal security and

advantages that the city has to offer”, explains Mayer. In China, the firm has advised clients in Guangzhou, Dongguan, Shenzhen, Shanghai, Ningbo, Hangzhou, Suzhou, Beijing, Tianjin, Harbin, Wuhan, and many other second-tier cities. “Being well connected to firms and professionals in mainland China is necessary in order to understand and control the important and complex legal documents needed in an investment project in China, and we will rely on local professionals to ensure that what needs to be done locally is done smoothly,” he says. In the Europe towards Asia investment flow, most clients of TMA are French or Spanish speaking. TMA is in fact one of the few, if not the only firm in Asia with a team of twelve French lawyers. “French firms in China will only have a few French lawyers heading a Chinese team. But our advantage is that we have a very good understanding of the French culture and that enables us to gain the complete trust of our clients.” And the European clients that are trusting Thomas, Mayer & Associés for legal advices operate in sectors such as retail, medical, pharmaceutical, stones and other construction material, telecom, energy, industrial, plastic engineering, manufacturing crowns for dentists,

LAW FIRM This page: Main Entrance; Eric-Jean Thomas and Eric Mayer celebrating the 15th anniversary of TMA in 2011 Opposite page: Main Entrance

FAST FACTS • The practice was established in Hong Kong 18 years ago • Paris office, a subsidiary, opened in September 2010 •

humidors, musical instruments, food and beverage, textiles, accessories, and even lingerie, just to name a few. “We are very familiar with the market in Hong Kong and we have good relationships with different firms,” Mayer explains. If a client needs to file bankruptcy or hire help for expanding in other parts of Asia, the firm has the right connection to make things work. “We know how to help our clients get the best help there is out there and to use our connections to their advantage.” TMA clients are also Chinese entrepreneurs seeking a foothold in France through acquisitions or joint-ventures. Regulations and rules in Europe are many and complying with many laws is tough. EricJean Thomas says Chinese clients are attracted by French brands, just as much as the French business people are eager to go into China. “They look for relatively unknown brands that have gone into decline, but have a glorious past,’’ he says. There are other entrepreneurs from China who are eager to develop their own brands and

Practice areas: International business law, mergers and acquisitions, joint ventures, company and commercial law, international tax law, international arbitration, private international law, and immigration law, are its practice areas.

desire the added value of French design that will in itself be a selling point for their products among the mainland’s consumers who are attracted to all things French. Chinese business people who prefer French design have the capital and the manufacturing capability but not the style, Eric-Jean Thomas points out. Mayer attributes part of the firm’s success to its group of loyal staff, which is what client loyalty is built upon. “We have a very low staff turnover rate. Our clients are comfortable working always with the same lawyers they are familiar with and this is one of the reasons why they keep coming back to us; they’ve trusted us over the years and they continue to do so”. The firm’s reputation is something Mayer takes very seriously; and he’s not about to change client’s perception of his team and himself. “We don’t want to expand too quickly; we can comfortably deal with all our clients on a personal level now and that’s one of the reasons why they like working with us.” HONG KONG BUSINESS ANNUAL 2014 115

RHOMBUS INTERNATIONAL HOTELS GROUP

PHILOSOPHY

To be one of the premier hospitality services providers, operating properties in major international cities and key destinations within Asia and Europe. The Rhombus portfolio consists of quality products which exceed the expectations and needs of its three key stakeholders: Owners/Investors, Guests and Employees. Rhombus cares and is committed to continuously delivering excellence combined with versatile services and products to its Owners/ Investors and Guests while providing vast opportunities to its Employees.

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Rhombus thrives on delivering profitable hospitality ventures

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s a premier, owner-operated hospitality and consulting company, Rhombus International Hotels Group focuses on delivering a healthy return on investment, regardless of what type of hotel it operates and where the property is located in the world. Calvin Mak, the Founder and CEO of Rhombus, directs his energies on turning a hotel project into a financially viable business for the owners or investors, and a rewarding experience for his employees. He is not overly concerned with how many hotels can be taken under the group’s purview, and he is not obsessed with star ratings either, although many Rhombus properties have been publicly recognised and rewarded by the industry. A veteran in the hospitality industry with a track record of over 35 years, Hong Kong-born Mak points out that the group and its people must be able to have faith in any hotel venture they undertake to nurture and nourish from the beginning. He believes there must be a meeting of minds between investors or owners, and the group and its employees. “We make sure the chemistry is right. That is important,’’ Mak emphasises. Rhombus Group’s track record overseas as well as in Hong Kong and mainland China, stands as a testimonial in itself. The group’s portfolio includes five properties in Hong Kong, including Hotel Pennington by Rhombus in Causeway Bay,

added in October 2013. It also manages Rhombus Fantasia Chengdu Hotel in Chengdu, China and Hotel Verta by Rhombus in London. In addition to the track record, Mak brings to a hospitality project experience in market segmentation analysis, targeted sales and marketing strategies, geographical analysis of customer services, and managing hospitality operations. He has shared his diverse knowledge and decades-long experience with more than 35 hotel projects worldwide from concept and design, to building and opening, and everything in between. Mak and Rhombus Group brings to the table a whole range of services including technical assistance and consulting, advisory and representation, management contract services, building and development analysis, branding, quality assurance, and sales and marketing. The services offered depends on the needs of individual customers who engage the group for their hospitality ventures. Such depth of insight and expertise allows the group to earn the confidence and trust of hospitality venture investors and owners. “Some hotel owners want us to be the owner’s representatives,’’ Mak says. He adds that some “big hotel chains in China want to bring us in as their partners, especially over the last two years.’’ And yet, Mak exercises prudence in considering mainland China hotel ventures. He notes the

Leading Hotel Management This page clock-wise: Hotel Bonaparte by Rhombus' Deluxe Premium Room, Hotel LKF by Rhombus' G500 LKF Superior Room, Hotel Pennington by Rhombus' Deluxe Room, Hotel de EDGE by Rhombus' Executive Harbour View Room, Rhombus Fantasia Chengdu Hotel's Concierge Lobby, Spa Verta at Hotel Verta by Rhombus, Sky Garden at Hotel Panorama by Rhombus Opposite page: Calvin Mak, Founder & CEO of Rhombus International Hotels Group

FAST FACTS • Founded in North America, Rhombus International Hotels Group has more than 27 years experience in Canada, Europe, and Asia • Regardless of the size or scope of a project, Rhombus makes a commitment to service excellence, while maximising profits and asset values

profusion of 5-star and even 6-star hotels in China – many which showcase projects in second and third-tier cities suffer from deficient transport infrastructure in the early stages. They are built largely because the land had been offered by city governments at reasonable rates and are meant to elevate the stature of those cities. Such projects, Mak says, will not work, adding that location, transport infrastructure, and the type of hotel are critical to the success of hotels in any city. In steering a hospitality project towards achieving a healthy bottom line, Mak says Rhombus is also mindful of challenges. Citing Hong Kong as an example, he says that since returning to the city from Canada, over the past nine-and-a-half years Rhombus has experienced the deadly SARS virus epidemic and the financial crisis. Through it all, Rhombus steered a steady course. “We have never asked our employees to take unpaid leave, never laid anyone off, and never cut any positions. We froze hiring instead. We multitasked and generated a healthy bottom line for our owners,’’ Mak recalls. Rhombus, he says, is committed to excellence in delivering a healthy return on investment. “Our job is to increase the yield.’’ To deliver top class services to guests, Mak

• Rhombus offers consolidated, realistic and practical turn-key packages for various development projects

selects the best people capable for the job, sometimes casting aside established conventions. He recalls one such instance when he opted for a female general manager despite the initial scepticism of others. He also identifies the best attributes in individuals. “My philosophy is to pick everyone’s strong points and upgrade them. That becomes your strength.’’ Regardless of hotel ratings, Rhombus promises exceptional service to guests. At a 4-star property, Mak says, “we provide 5-star service’’. But to be able to consistently deliver service excellence, staff are encouraged to learn more and learn continuously. The career path is mapped out for those at management level, while others get the chance to learn, including cross-training at different hotels in the group. HONG KONG BUSINESS ANNUAL 2014 117

Wharf T&T Limited

PHILOSOPHY

Wharf T&T strictly focuses on enabling customers' businesses using best-ofbreed technologies via topclass service. Backed by the state-of-the-art "Fibre-tothe-Desk" (FTTD) ultra-high speed broadband network, Wharf T&T possesses strong system integration capabilities and offers a full suite of subscription-based Fibre Cloud solutions to cope with the evolving business demand of ICT adoption.

Outstanding ICT services provider delivers fibre, cloud and talent to business

T

ime-tested Chinese wisdom has for years provided sound principles that illuminate the pathways for successful enterprises in Hong Kong. The leading ICT company Wharf T&T is one such business that is guided by the principles of harmony and unity of Heaven, Earth and People, a trinity that interconnects and intertwines to create synergy and pave the way for success. Wharf T&T’s success is based on this same formula: Heaven (Cloud) x Earth (Fibre) x People (Talent). Trinity underpins success Earth represents the ‘Fibre-to-the-Desk’ (FTTD) broadband network covering 90% of business customers. This lays the foundation for sustainable growth at Wharf T&T. Heaven represents comprehensive fibre cloud services, the driver of accelerated growth. People represents talent and is the core valuable asset that enables, fuels and sustains business growth and ensures service excellence While technology forms the foundation, it is people and service quality that are crucial elements for success. “Technology, domain know-how, and sales are crucial to our success, but all these are powered by talent. By integrating the best-ofbreed technology and the best talent, we have excelled against our competitors and become the leading ICT company in Hong Kong,” Vincent Ma,

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President of Wharf T&T said.

Alchemy of fibre business broadband The launch of Wharf T&T’s “+EN” project makes ultra-high-speed business fibre broadband accessible and affordable to all Hong Kong businesses. The FTTD broadband network now covers 5,000 commercial buildings, providing secure, reliable and high-speed broadband internet to 90% of local business customers. With only approximately 60% technology penetration in the business sector, this city-wide broadband coverage raises the broadband penetration rate in Hong Kong and serves as the bedrock for cloud deployment which will help enhance ICT adoption. Growth of cloud applications Wharf T&T has developed a complete suite of subscription-based Fibre Cloud solutions backed by the fibre network, to cope with the ever evolving demand by business to adopt ICT, such as Cloud Voice. Cloud Voice is an integrated and highly scalable unified business communications solution that embraces a collaboration of scalable voice, video and fixed-mobile convergence using a “cloudbased” platform. In the two-and-a-half years to June 2013, Cloud Voice has grown strongly and recorded high market penetration in Hong Kong. The number of lines as of June 2013 has

Fixed Network and Broadband - Telecommunications This page clock-wise: Leadership Development Program (LDP) teams in Hong Kong Management Game 2013; Cloud Voice service Opposite page: Vincent Ma, President of Wharf T&T

increased 4-fold since its launch. In addition to the robust growth, it has shown a high adoption rate in Hong Kong. From December 2012 to June 2013, the growth of Hong Kong IP telephony lines amounted to 2,871 and Cloud Voice contributed 63% to this growth. “Given its success, cloud development is well underway and we are ready to bring more new cloud applications to enable your businesses” Vincent Ma said. Cloud Voice offers a wide range of innovative features that realize fixed-mobile convergence. It extends business voice to cell phone and unified communications platforms in which a smartphone, PC, or tablet becomes a virtual desktop phone anytime, anywhere. Developed under a “device independent” environment, it supports iPhone, smart phone, any 2G or 3G mobile handset and can interoperate with any local mobile operator. The fact that large and small industries across sectors have embraced Cloud Voice has contributed to the strong growth. Companies such as office furniture and design firm POSH, textile and apparel company Esquel Group, and Bridal Tea House Hotels have vastly improved customer service, customer satisfaction and upgraded the efficiency of internal communications by adopting Cloud Voice. Power of talent Wharf T&T upholds a strong commitment to talent management and makes available ICT-related professional training programmes (such as. CCIE, CCMC) for technical staff, while self-effectiveness

programs such as the Seven Habits of Highly Effective People Signature Program, are available for all 200 managers and above. A Leadership Development Program (LDP) further nurtures high-potential staff into future leaders by enhancing their competencies and potential. Since 2010, more than 100 talents have benefited. At Wharf T&T, employees advance on the career ladder through a dual track. The Dual Career Ladder is a system of promotion that represents two hierarchical parallel developments in management or specialist field. Under this system, employees with technical knowledge are not restricted from taking a general management role, they can choose to grow hierarchically in their profession. Strong commitment to CSR CSR is deeply embedded in Wharf T&T. By investing money, manpower and resources, Wharf T&T is actively engaged in The Wharf’s Project WeCan, a pioneer 360o school improvement program targeting under-privileged students with high potential. The partnership with CCC Kei Heep Secondary School through teaching, extracurriculum development, conduct and behaviour as well as counselling develops all-round students and brings significant improvement in student’s HKDSE results in 2013.

FAST FACTS • Wharf T&T is the first and only comprehensive ICT service provider in Hong Kong focusing on the business sector. • Licensed in 1995, Wharf T&T is a core member of the Wharf Group with over HK$6 billion invested in its own telecommunications network infrastructure in Hong Kong. • Wharf T&T’s ultra-high speed ‘Fibre- to-the-Desk’ network covers 5,000 commercial building, serving 90% of local business customers. •

Wharf T&T is the entrusted partner of listed financial institutes in Hang Seng Index Finance Constituents, local university and tertiary institutions, Global Investment Banks, licensed banks incorporated in Hong Kong and financial institutes, as well as the HKSAR Government departments providing them missioncritical ICT services.

A year of triumphs Industry peers have publicly recognised Wharf T&T for its outstanding service, excellent talent management and leadership skills development in 2013. This June, in recognition of its prominent performance in technology development and excellence in business execution, Wharf T&T was presented with the ‘Technology Company of the Year 2013’ Award by Computerworld Hong Kong magazine. Wharf T&T’s LDP team became the Champion of the Hong Kong Management Game in August demonstrating focus, determination, strong teamwork and sound management capabilities, while two more teams also from Wharf T&T emerged as second runner-up and third runner-up. HONG KONG BUSINESS ANNUAL 2014 119

Zchron Design

PHILOSOPHY

Our ‘design and build’ concept aims to provide onestop shopping for interior building work, from the design brief to completion and handover for a set price, delivered at a set time, based on professional standards. We cater to the residential, retail and corporate markets. By being designer, project manager and main contractor, we are able to manage each project effectively and efficiently by coordinating with all the suppliers and sub-contractors.

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DESIGNER DIALOGUE

A

prime property, be it residential or commercial, is undoubtedly something that is highly soughed after. Luxury homes and commercial office spaces are not only status symbols of an individual’s success, but a great resting or working atmosphere can seriously contribute to the overall well-being of those who live and work in the space. But acquiring the property is only half of what it takes to build these wonderful spaces. Flawless interior design that combines utility and beauty is what turns a house into a home, an office into a haven for success. But when you’ve invested so much into acquiring these luxury spaces, who you entrust the task of interior design to is a crucial and important decision. According to the founder of Zchron and Krishom Interior Design and Architecture Nison Chan, who runs both the Residential and Commercial branches of his design empire, this decision is made even harder when the reputation of most interior design firms on the market leans towards the negative spectrum. “Our industry relies heavily on word of mouth recommendations for repeat business,” he explains, “unfortunately, there are many interior designers and contractors who are irresponsible and as a result, it gives a bad name to our industry overall.” Working hard to change this image for the interior design industry, Chan and his team are driven to deliver not only quality designs, but also great service and a final result that will leave the clients happy, but also most importantly returning for help

when time comes to decorate a new project. Repeat business is extremely important in the mind of Chan, not only because it’s a great way for him to maintain a steady stream of projects, but it also represents the success and quality of his work. “Through Zcrhon and Krishom, we work on numerous luxury residential and commercial projects. And many of our customers not only return to us, but they also recommend us to friends and family,” he explains. Among his most recognisable commercial projects created Krishom brand are SaSa cosmetics retail shops, Carlsberg office, as well as the Escada boutique. “These brands continue to come to use whenever they have a new project. This is a testament to our quality of design, service and it proves that customers are satisfy with the end result we deliver.” Chan and his team have been awarded various accolades over the years for their residential projects under the Zchron brand, and this pass year is no different as he continues to create beautiful homes for his existing patrons as well as for new homeowners. “Over the years, many of my most loyal customers have come to us time and again for help. When they move from one luxury property to the next, they come to us for help to ensure they can create a new living environment that is as comfortable, luxurious and beautiful as the old home we’ve created for them,” Chan explains. Gaining the customer’s respect and trust is what drives Chan and his team to continue to create

Interior Design This page clock-wise: Nison Chan, Chairman and Chief Designer of Zchron; Carlsberg head office in HK; Luxury project in Kowloon Tong; Penthouse residential; Penthouse project in Happy Valley, HK; Escada head office in HK Opposite page: Prestigious house project in Kowloon Tong

FAST FACTS • 1994 -- Nison Chan starts Krishom Design Group to cater to clients in both the commercial and residential markets, providing design and project management to completion • 1994-2011 – Conceived and improved the ‘design and build’ concept for commercial clients, such as Hang Seng Bank, Sincere Deparment Store, Wellcome Supermarket and SaSa Cosmetics Company and others • 2006 – Started Zchron Design to cater strictly to the residential market

beautiful designs. It is also through this trust he’s built over the years with these clients that has lead him to score new projects. “A lot of my customers understand we take interior design very seriously. They know we are going to not only provide them with a great blueprint, but that we are able to deliver what we promised.” Because of this passion for perfection and a drive to achieve impeccable results, many of his customers happily recommend him to their friends. “Our clients come from the most soughed after addresses across the city, from Kowloon Tong to Beacon Hill, they are individuals that have a certain

level of sophistication and expectations. So when they want to ensure their homes will look the very best, they come to us.” As to future plans for expansion, Chan believes the key is to prefect each project, one at a time. “Our goal ultimately, is to deliver projects that exceed the expectations of our customers. As easy as this may sound, this is one of the biggest obstacles in the industry. We want our customers to be happy with what the beautiful designs we create for them. And if we can do this, I am confident that we will become leaders in the realm of interior design for those seeking only the best.” HONG KONG BUSINESS ANNUAL 2014 121

Index STATISTICAL TABLES AND CHARTS

Following an alphabetical listing of the statistical tables and the pages where they appear

Labour force, unemployment, and underemployment

62

Number of Establishments, Persons Engaged and Vacancies (Other than those in the Civil Service) by Industry Section

63

Wage Indices by Industry Section and Broad Occupational Group

68

Real Salary Indices for Middle-level Managerial and Professional Employees by Selected Industry Section

69

Consumer Price Indices and Year-on-year Rates of Change at Section Level for November 2012

70

HONG KONG’S HIGH FLYERS Outstanding Enterprises 2013 74 AIA Hong Kong

100 Noblesse Lifestyle Group

78 Ageas Insurance Co. (Asia) Ltd.

102 Ovolo Hotels

80 AIG

104 The Pacific Cigar Company

82 ALTRUIST

106 RICOH Hong Kong Limited

84 Arakaki Tsusho Corporation

108 Shama Management LTD.

86 Canadian International School

110 Sound Concepts

88 The Cityview

112 The Mercer

90 Freywille

114 Thomas, Mayer & Associes

92 Fujitsu

116 Rhombus International Hotels Group

94 Godiva

118 Wharf T&T Limited

96 Hästens

120 Zchron Design

98 Jebsen Marine

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