biz.hk Sept 2012

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RE LO M CA OV TI IN ON G

Journal of The American Chamber of Commerce in Hong Kong

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www.amcham.org.hk September 2012

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September 2012

Contents

Vol 44 No 09 Richard R Vuylsteke

Editor-in-Chief Daniel Kwan

Managing Editor Kenny Lau

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Publisher

COVER STORY

TRADE & INVESTMENT

REAL ESTATE

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and Mainland China is now nine years old and covers almost every business sector. Further adjustments have recently been made to make it even more useful for Hong Kong-based businesses

Tony Lam of Hong Kong Productivity Council explains how a HK$1-billion government program called Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD) can help business owners who have set their eyes on the Mainland market

Chinese tourists’ insatiable desire for shopping are pushing Hong Kong retail rents to dizzying heights while international brands seek to expand into even the far-flung corners of the city

Advertising Sales Manager

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24 CORPORATE SOCIAL RESPONSIBILITY

The story about Hotmeal Canteen, a community project launched about a year ago to bring help to the financially strapped living in the Sham Shui Po district of northwest Kowloon by serving more than hotmeals

Regina Leung

biz.hk is a monthly magazine of news and views for management executives and members of the American Chamber of Commerce in Hong Kong.

Its contents are independent and do not necessarily reflect the views of officers, governors or members of the Chamber.

Advertising office 1904 Bank of America Tower, 12 Harcourt Rd, Central Hong Kong Tel: (852) 2530 6900 Fax: (852) 2537 1682 Email: amcham@amcham.org.hk Website: www.amcham.org.hk Printed by Ease Max Ltd 2A Sum Lung Industrial Building, 11 Sun Yip St, Chai Wan, Hong Kong (Green Production Overseas Group) Designed by Overa Creative Co Unit 1613 16/F, Workingbond Commercial Centre, 162 Prince Edward Road West, Kowloon ©The American Chamber of Commerce in Hong Kong, 2012 Library of Congress: LC 98-645652

AMCHAM NEWS AND VIEWS 04 Chairman’s Memo James Sun highlights a number of recent developments: a government incentive scheme on ocean-going vessels to switch to low sulphur fuel while at berth in Hong Kong, progress made concerning the issuance of the APEC Business Travel Card, and constructive dialogue at the China Overseas Investment Summit

07 New Business Contacts 60 executives joined AmCham’s business network last month

16 Can BUD and CEPA Work Together?

The Trade and Industry Department describes in detail the process of applying for a new government funding scheme called BUD and if a locally registered business can apply for both BUD and CEPA simultaneously

Honorary Secretary of the Hong Kong Institute of Architects Daniel Chi Wuh-Cherng speaks about the recent amendments to CEPA allowing Hong Kong-based architects to enter the Mainland market freely

CHINA BUSINESS 20 China Advice from a Successful Parachutist

08 Is CEPA Good for Your Business?

Further adjustments have recently been made to make the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and Mainland China useful for almost every business sector

13 A Shot in the Arm for Sellers to China Market Tony Lam of Hong Kong Productivity Council explains how a HK$1billion government program called Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD) can help businesses looking to the Mainland market

24 The Sky Is The Limit Chinese tourists’ insatiable desire for shopping are pushing Hong Kong retail rents to dizzying heights while international brands seek to expand into even the far-flung corners of the city

18 Breakthroughs for Architects under CEPA

40 Mark Your Calendar

COVER STORY

REAL ESTATE

Memorabilia of young China-hand Kristina Koehler who set foot in Shanghai eight years ago to expand scopes of business opportunity for Klako Group, a family business founded in Hong Kong in 1979 by her father

21 FAQs about Mainland Market Useful and practical advice to day-to-day questions commonly raised by different businesses and companies but all looking to enter Mainland China and set up domestic operation

TRADE & INVESTMENT 28 Queries to American Investment Explained A keynote speaker for the Invest-in-USA forum at the China Overseas Investment Summit 2012, Executive Director of SelectUSA Steven Olson in a conversation tells of historic and current Chinese FDI into the US

32 Excellent Partners

Director of the California State Trade and Export Promotion program Jeffrey Williamson speaks on the important trade relations between Hong Kong and the Golden State as well as the vital role Hong Kong plays in the regional economic zone

CORPORATE SOCIAL RESPONSIBILITY 34 A Canteen That Serves More Than Just Hotmeals The story about Hotmeal Canteen, a community project launched about a year ago to bring help to the financially strapped living in the Sham Shui Po district of northwest Kowloon

For comments, please send to biz.hk@amcham.org.hk Single copy price HK$50 Annual subscription HK$600/US$90

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Chairman’s Memo

Board of Governors Chairman James Sun Vice Chairman Richard Weisman Treasurer Peter Levesque Executive Committee Janet De Silva, Frank Lavin, Anita Leung Philip Leung, Belinda Lui, Alan Turley Governors Evan Auyang, Sara Yang Bosco, Brian Brenner, Tom Burns, Walter Dias, Rob Glucksman, Toby Marion, Thomas Nelson, Andrea Richey, Colin Tam, Elizabeth L Thomson, Frank Wong, Shengman Zhang Ex-Officio Governor President

Robert Chipman Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear Business Briefing China Business Communications & Marketing Corporate Responsibility

Rex Engelking Andre Leroy Donald Meyer Frank Wong Susan Reingold Robert Grieves

Energy Dominic Yin Entrepreneurs/SME Donald Austin Environment Bradley Punu Financial Services Catherine Simmons Brock Wilson Food & Beverage Hospitality & Tourism Human Capital Information & Communications Technology Insurance & Healthcare

Veronica Sze Damien Lee Janet De Silva Peter Liu

Rex Engelking Owen Belman Hanif Kanji Intellectual Property Gabriela Kennedy Amy Lee Law Clara Ingen-Housz Pharmaceutical Stephen Leung Real Estate Alan Seigrist Senior Financial Forum Alvin Miyasato Senior HR Forum Jacqueline Algar Sports & Entertainment Raymond Roessel Taxation Evan Blanco Trade & Investment Patrick Wu Transportation & Logistics Brian Miller Women of Influence Jennifer Van Dale Young Professionals Sherry Lin

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Dear Fellow Members: As a finance person, I always feel cheerful when I learn that an investment finally pays dividends. This month, I should say I am “double” excited. Two of our lobbying efforts have finally paid off.

To all of you who have contributed to our success, a heartfelt thank you. Good job.

First, we were informed by the Environment Protection Department early this month that the Government has formally launched an incentive scheme to encourage ocean going vessels to switch to low sulphur fuel while berthing in Hong Kong. Modeled on the Fair Winds Charter initiated by trade in 2010, the scheme allows 50 percent reduction in port facilities and light dues for vessels which make the switch and the reduction will last for three years.

Along with other trade bodies and non-profits, AmCham supported the Fair Winds Charter from day one. We have urged the Government to adopt such “carrot” approach to incentivize the use of greener fuels. While we recognize the urgency of issues such as roadside pollution, we should not lose sight of the fact that the use of high sulphur content fuel by Ocean Going Vessels is also a major source of pollutants. We are glad that the new scheme applies to anyone who voluntarily opts for low sulphur fuel.

It is a “triple-win” for Hong Kong: cleaner air for everybody, a modest financial incentive for business, and

further advances in the government’s goal for better air quality.

Second, we recently received a delegation led by Deputy Secretary of Homeland Security Jane Holl Lute.

Although I wasn’t able to personally play host to Secretary Lute and her team while they were here due to a prior travel arrangement, I was later updated that progress has been made concerning the issuance of the APEC Business Travel Card or ABTC. President Barack Obama signed the legislation for the US to issue the ABTC in November 2011 just ahead of the APEC summit in Hawaii, but since then little has been announced about implementation. Therefore it was music to our ears when Secretary Lute indicated to us that the card is expected to be available to US citizens in the spring of 2013.

We’ve pressed for the ABTC card for an obvious reason – convenience for business travel is paramount. Being in Hong Kong, we enjoy the natural advantage of easy travel to any destination in Asia. It was therefore a shame that our members have to rely on issuance channels other than the US for the ABTC card. Of course, we fully recognize that the ABTC card does not replace visas and it’s not a travel document.

Moreover, concern over security is of equal importance. But if we want to be taken seriously as an investment and tourist friendly country, lagging behind in the area of travel convenience is the last thing we want. This is a step in the right direction. We will keep you posted about the travel card. Please stay tuned.

This brings me to another issue close to my heart. In late August, I attended the China Overseas Investment Summit held in Hong Kong on behalf of the Chamber. Steve Olson, Executive Director of SelectUSA, flew in from Washington to be the keynote speaker of the Invest-in-USA forum. With over 100 attendants, the event was well received and we’ve got good responses from the participants.

Listening to speaker after speaker, I was struck by the vast potential of the US market to Chinese investors. According to Olson, the total stock of Chinese FDI to the US now amounts to about US$10 billion – representing roughly 20 percent

biz.hk 9• 2012

COVER SPONSOR of Chinese investment worldwide. We’ve lagged behind countries like Canada, the UK and Australia as far as attracting Chinese investment is concerned. While we may have the best “products,” we haven’t done so well in promotion and our investment environment is often being portrayed in the media as “hostile.” This means we have a great deal to do to bring not just Chinese investors but also jobs to America.

Finally, I would like to repeat my appeal for opinions and suggestions as we begin drafting our submission to the Chief Executive for his Policy Address.

We will soon send in the submission.

Please share with us your views and we will carefully review them to make sure that your voices will be heard by the Government. Thank you.

James Sun Chairman

Letter to the editor Dear Editor, Thank you for the excellent article about the late Lyn Edinger. It summarized his leadership, which became a model for Amcham for years to come.

Lyn chose early retirement and then returned to what Chinese might term his "ancestral village." He bought a 400 acre farm near Cooperstown, NY within walking distance of land his grandfather had once farmed. He renovated a home built circa 1840, providing it with all the modern conveniences yet retaining the charm of that age. Lyn was very active in Cooperstown, but his heart was on that farm, with his wife Corinne, his two horses and a big dog. Such an environment may not be everyone's ideal, but it is definitely idyllic. And therein lies the model for us all, particularly baby boomers: Lyn retired on his timing, and his terms, and did so his way.

Sincerely, Donald Meyer

biz.hk 9 • 2012

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New

Business Contacts The following people are new AmCham members: Alpha Institute Asia Ltd Rachael Jay Coach Director Lydia Mitchell Program Director

w w w. a m c h a m . o r g . h k

Asia Society Hong Kong Center Martina Ing Deputy Director

Associates in Leadership Development Wendy Zhang Partner

LC 98-645651

Hamilton Advisors Limited Haley Meng Associate

Hong Kong University of Science & Technology

Maggie Wang Senior Human Resources Manager - Asia Pacific Stanley Wan Finance & Administrative Director Paul Voets Vice President & General Manager - Bissell Asia

Carter's

ICS TRUST (ASIA) LIMITED

Claire's Stores, Inc

Ignite Media Group

Leon Gu Director, Asia Operations

ISBN 978-962-7422-03-7

Jason Lawrence Associate Director, School Services

Roger Levermore Interim Director, MBA Programs and Visiting Associate Professor of Management HKUST Business School Veronique Lafon-Vinais Adjunct Associate Professor Eva Wong Assistant Director, Kellogg-HKUST Executive MBA Program

BISSELL Homecare Inc

Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists nearly 1,900 members from over 700 companies and organizations.

Graduate Management Admission Council (GMAC)

Catherine Kang Managing Director, China Bobo Wong Director of Operations and Quality Assurance, Hong Kong Chona Ponce SVP, Managing Director, Hong Kong

Conference Board Inc, The Wing Yin Salome Woo Director Associate Service

CST Tax Advisors (HK) Limited Peter Harper Director - North America

Deloitte Touche Tohmatsu Ivan Strunin Managing Director

Emerson Electric Asia-Pacific Ram Krishnan President, Asia & Middle East, Emerson Climate Technologies

Equinix HK Ltd

Travis Jones Business Development Executive Reginald Macdonald Director

Insigniam

Ross Pollack Managing Director

Jefferies

Dandan Zhu Equity Sales - Asia Pacific Bruce Salzer Managing Director, Head of Equity Corporate Access- Asia Pacific Conor O'Mara Equity Sales - Asia Pacific

JPMorgan Chase Bank

Mark Evans Managing Director - Private Bank

K&L Gates

Christopher Tung Partner

Laserfiche International Limited

Eric Hui Director Cloud, IT, Content & Digital Media, Asia-Pacific Michele Felder Chief Marketing Officer, VP Marketing & Strategy, Asia-Pacific

Peter Wayman Senior Consultant

Ernst & Young

Lockton Companies (Hong Kong) Limited

John MacArthur Partner

Lexicon Relocation

Avrom Goldberg Senior Vice President/Managing Director APAC & EMEA

Fuji Xerox (Hong Kong) Ltd Herbert Hui Managing Director

Keith Wallace Head of Marketing Stefan Homer Assistant Vice President Iain Finch Chief Operation Officer

Goldsmith Organization Limited

MeadWestvaco Hong Kong Ltd

DavidGoldsmith Director

Ron Stover Vice President, Asia Pacific

Nature Conservancy, The

Louisa Ho Corporate Marketing Director, Asia Pacific Region

Nielsen Company (HK) Ltd, The Eva Leung Vice President, Retail Measurement, Hong Kong & Southern China

Paul, Weiss, Rifkind, Wharton & Garrison Samantha Jayawardane Practice Development Manager - Asia

PepsiCo Hong Kong LLC

Simon Wong General Manager, Foods and Beverages, Hong Kong Franchise Director, Taiwan Beverages Vinod Rao Chief Financial Officer, Asia Pacific Region

Sandler Training Hong Kong Bei Zhou General Manager Ken Tashima General Manager Joel Lin President

Shattuck-St. Mary's School Nicholas Stoneman President

SNR Denton Julianne Doe Partner Michael Kan Associate Edward Smith Partner

St James' Settlement Cynthia Luk Chief Executive Officer

Telstra International Group

Amanda Duggan Global Lead, Business Development

University of Hong Kong, The Cecilia Fabrizio Research Officer

Verizon Business

Francis Yip Area Vice President, North Asia

W L Gore & Associates (HK) Ltd Caryn Lee Asia Pacific Finance Leader

Wells Fargo Bank NA

Sandra Sutter Senior Vice President, HR Manager

Zurich Insurance Group (HK)

Damian Reid Head of Human Resources, Asia-Pacific General Insurance Vincent Vandendael Chief Executive Officer, Global Corporate, Asia Pacific Jack O Keefe Regional General Counsel and Head of Compliance, Asia-Pacific

View our other members at:

http://www.amcham.org.hk/index.php/AmChamMembers.html

biz.hk 9 • 2012

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COVER STORY

A Is CEPA Good for Your Business?

Many foreign businesses know very little about the Closer Economic Partnership Arrangement (CEPA), but this free trade agreement between Hong Kong and the Mainland is now nine years old and covers almost every business sector. For those seriously planning to enter the China market, but don’t know how to take advantage of Hong Kong’s unique position vis-à-vis Mainland China, it’s time to check out CEPA. Further adjustments have been made to make it even more useful to Hong Kong-based businesses

By Daniel Kwan

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biz.hk 9 • 2012

s far as free trade agreements go, the Closer Economic Partnership Arrangement (CEPA) between Mainland China and Hong Kong is one of a kind.

Nowhere in the world has a sovereign state signed a FTA with one of its own jurisdictions. Because of the “onecountry-two-systems” arrangement between the Mainland and Hong Kong SAR, CEPA offers businesses and individuals in Hong Kong special advantages in the China market, which is still an attractive alternative to so many stagnating investment climates elsewhere.

CEPA is one of the many FTAs Hong Kong signed in recent years.

The latest one was signed with Chile during the just concluded Asia-Pacific Economic Cooperation summit held in Vladivostok, Russia. Hong Kong has also expressed an interest in joining the existing China-ASEAN FTA. Of all the FTAs signed by Hong Kong, CEPA stands out because of its scope and scale, but it has largely been below the radar for most foreign companies which have set up in Hong Kong. Every year, AmCham asks its membership in an annual survey if CEPA has been of use to their business and the feedback has always been negative. While a very small number of companies have reported making use of the agreement, the majority were either unaware of it, dismissed it as of little practical use, or found it too complicated to be worth the time and effort to explore further.

Some even complained that they had tried it, but were rejected and hence concluded it was a waste of time.

Nevertheless, CEPA is having a significant impact in some areas of Hong Kong’s economy – tourism in particular. The number of solo Mainland tourists to Hong Kong as a result of the travel facilitation measures

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Signing of CEPA Supplement IX in Hong Kong in June.

Photo Courtesy: Information Services Department

under CEPA is simply staggering. The solo traveler scheme now covers 49 Mainland cities and is expanding. The total number of Mainland tourists who have come through the scheme has grown three-fold since 2003. In 2011, Mainland visitors under CEPA accounted for more than 40 percent of the total travelers to Hong Kong.

Raison d’être When CEPA was signed nine years ago, it was more a morale booster to Hong Kong, which was emerging slowly from the shadow of the SARS epidemic. That’s why CEPA in 2003 and 2004 focused heavily on issues such as zero-tariffs for exports and bringing in solo travelers from the Mainland to Hong Kong. These were more unilateral opening by the Mainland side to give Hong Kong’s flagging economy a push. That’s the historic root of CEPA, and it partially explains why the pact has over the years earned the reputation of a “gift” or “largesse” by the Central government to Hong Kong.

But Du Zijun of the Liaison Office of the Central government in Hong Kong says that there is another reason behind the signing of CEPA. “Although CEPA was born out of SARS, that wasn’t the core factor behind it,” he says. “The most important reason of why CEPA was signed was to promote economic integration between Mainland China and Hong Kong, and mutual development on both sides.”

“This is the raison d’être of CEPA and this direction will not change,” Du adds. “I am certain that CEPA will take on new measures as long as they are good for the economic integration between Mainland China and Hong Kong and contribute to the living standards of the people on both sides.”

Du believes the Mainland benefits as much from CEPA as Hong Kong does, and that the SAR will continue to be a “window to the world” for China. This is especially important for China as it seeks to move up the value chain and develop its service sector.

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Du Zijun

“Hong Kong will always be the window through which China learns about the outside world,” Du says.

“More often than not that our policymakers come to Hong Kong to research about international practices and this is especially true in the service sector.”

Scale and scope Today, CEPA has grown to become an all-encompassing FTA. Supplement IX to the agreement, signed in June 2012, is supposed to promote “basic liberalization of trade in services” between Mainland China and Hong Kong by the end of 2015.

“Generally speaking, CEPA is the most favorable free trade agreement signed by the Mainland,” says Winsome Au, Assistant DirectorGeneral of the Trade and Industry Department (TID) of the Hong Kong SAR Government.

Generally speaking, CEPA covers

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three broad areas: trade in goods, services, and investment facilitation.

Depending on which sector they target, companies must satisfy various criteria in order to qualify for CEPA treatment. For example, a certified Service Supplier (HKSS) must have “substantive business operations” in Hong Kong. And to qualify for zerotariffs, exporters of goods to China must satisfy the Rules of Origin, which in most cases require part of the manufacturing, processing, or assembling be done in Hong Kong. In other words, there are strings attached.

Supplement agreements signed in recent years focused more on market access measures that are meant to give Hong Kong companies a head start in the Mainland market. Including the latest Supplement IX, the two sides have so far announced 338 liberalization measures in 48 service sectors.

The number of Mainland service departments open for Hong Kong’s access has reached 149. That involves

93 percent of the 160 categories by classification criteria of the World Trade Organization (WTO) trade in services sector.

Normally to enjoy CEPA benefits, a company can apply to the TID for a service provider qualification certificate. By the end of April 2012, some 1,400 enterprises had been given HKSS status, with over 2,500 certificates issued. Key service sectors include transport and logistics, distribution, air transport, intermediary for job placement or referral, and advertising services.

According to Au of the TID, the number does not fully reflect the interests of businesses because some CEPA benefits can be enjoyed without obtaining a HKSS Certificate. For example, Hong Kong professionals can enjoy CEPA benefits as individuals if they participate in qualification examinations in the Mainland and mutual recognition of professional qualifications arrangements. The same applies in the case of solo clinics for medical and dental services, where waiver of residency requirements for practicing in the Mainland is possible.

Evolution Over the years, representatives from professional bodies and Chambers of Commerce have expressed general concerns and specific complaints to the governments in Hong Kong and China about CEPA implementation. Through various rounds of negotiations and consultations, amendments have been added in subsequent CEPA supplements to allow greater flexibility and opening of new opportunities for Hong Kong businesses. (see story on page 18) For example, companies that have been granted HKSS qualification can now apply and enjoy CEPA preferential treatment outside their original

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business. “With effect from April this year, holders of valid HKSS Certificates can apply to the Mainland authorities to enjoy CEPA benefits available in service sectors not limited to the sector they are currently engaged in Hong Kong,” Au says.

“Using the cinema business as an example, a holder of HKSS Certificate in ‘cinema theatre services’ may apply to the Mainland authorities to enjoy CEPA benefits in different service sectors if the applicant can meet the CEPA (and its Supplements) requirements as well as the Mainland rules and regulations that may apply to the nature and scope of services for which the applicant intends to apply.”

“In addition, when applying to the Mainland authorities for preferential treatment under CEPA, holders of HKSS Certificates are subject to the verifications by the Mainland examining authorities.”

New market opening opportunities are made available under Supplement VIII and Supplement IX, but very often the new opportunities are limited to Guangdong Province on an incremental or experimental basis.

For example, under Supplement IX, educational services have been added as a new area of liberalization for Hong Kong operators. The new provision allows Hong Kong service suppliers to set up international schools on a wholly-owned basis in Qianhai of Shenzhen and Hengqin of Zhuhai. In addition to children from expatriate families, these schools are allowed to recruit children of Chinese nationals who live abroad and Chinese returnees who have studied abroad but are working in Qianhai and Hengqin.

Another “pilot” program benefits the tourism sector. On a pilot basis, Supplement IX allows one qualified Mainland-Hong Kong joint venture travel agent to operate outbound group tours for Mainland residents to

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destinations beyond Hong Kong and Macau – not including Taiwan (which has its own trade agreement with Mainland China called ECFA, the Economic Cooperation Framework Agreement). Considering the rapid growth of China’s outbound travel market, the opening can become a bonanza for Hong Kong tour operators if the measure is extended in the future.

“This pilot measure will provide unprecedented opportunities for the Mainland-Hong Kong joint venture travel agent to develop business in the Mainland,” Au says. “We hope that the chosen joint venture travel agent will seize the opportunity to develop its business, on the basis of which we hope to seek further opportunities for more such joint ventures to benefit under the same CEPA framework.”

Road blocks According to Au, the Central government and Hong Kong are also working hard to improve the mutual recognition of professional qualifications in future CEPA supplement agreements.

“The Mainland and Hong Kong are committed to encourage mutual recognition of professional qualifications and promote the exchange of professional talents between each other under CEPA,” Au says. “So far, both sides have reached agreements or arrangements on mutual recognition of professional qualifications in various sectors such as the securities and futures, accounting, real estate and construction sectors.”

“We have been in communication with the trades to reflect their views on mutual recognition of professional qualifications to the Mainland as appropriate. We will continue to do so with a view to broadening the scope in the future,” she adds.

Winsome Au

But the opening of Mainland service sectors has not been all smooth sailing. Reports of obstacles and hidden roadblocks faced by Hong Kong businesses and professionals as they tried to take advantage of their CEPA qualifications in entering the Mainland market are distressingly common. Companies often found that while permission was granted under the overall policy, in practice market entry remained difficult if not impossible.

Du says the Central government recognizes that there have been “issues” faced by businesses in the execution of CEPA. He stresses that the Central Government is “sincere” in honoring all CEPA preferences, but admits that there can be differences in interpretation at the local government level. He advises businesses to furnish their cases with full details and seek help from the authorities if they have problems in making use of CEPA. “In Hong Kong, the Trade and Industry Department is the responsible department,” he says. “In China, it is the Ministry of Commerce that is in charge and we will definitely help.”

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Tony Lam

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A Shot in the Arm for Sellers to China Market Last October, the Government announced a HK$1 billion dedicated fund to help businesses who have set their eyes on the Mainland market. Called the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD), the funding scheme is made up of the Enterprise Support Program and the Organization Support Program. The Hong Kong Productivity Council is the ESP Program Secretariat. Tony Lam, Director, Corporate Services of HKPC, explains how the program works biz.hk: What’s the background of the Enterprise Support Program of the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD)?

Lam: As we all know, the western market including the US and Europe has been softening for quite a long time. Our manufacturers and exporters have all along been thinking how they can expand in other markets and the Mainland is an obvious target for them. In view of that, we had discussions with the Government and suggested that they consider supporting Hong Kong enterprises in terms of upgrading, developing brands

biz.hk 9 • 2012

and domestic sales in the [Mainland] market as it would be a golden opportunity for Hong Kong enterprises to go into the Mainland and try to develop their business.

We are pleased that in the Chief Executive’s Policy Address last October, the Government announced the setting up of the HK$1 billion dedicated BUD fund to assist enterprises in exploring and developing the Mainland market. biz.hk: Can you explain the branding and upgrading parts under this program?

Lam: The Mainland market is vast and competitive.

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to multiple markets apply?

Lam: The program looks for projects from applicants who want to develop and break into the Mainland market. It is however permissible if some companies want to build up their brands in Hong Kong first and enter the Mainland market later. This is also covered under the program. biz.hk: Say I am a SME registered in Hong Kong and I make handbags under my own brand. My plan is to test the market in Hong Kong first and then explore the Mainland market later. Am I eligible?

Lam: Basically, yes. In essence, you will have to come up with a proposal that can convince the vetting panel there is actually a possibility for your business to develop and grow in the Mainland.

This is essential because entering the Mainland market can be costly and challenging. We want the applicants to be forward-thinking and haveactually done a holistic business plan. We want to see if there are elements within the business plan that the program can support and that will help to lower the applicant’s risks in entering the Mainland market.

Hong Kong enterprises need a good branding strategy to position their products and services if they are to compete in this market. They will need to communicate with their customers what’s the kind of value, life style or images their products and services represent if they are to create their own niches.

In terms of branding, it can be an existing brand or a new brand. If enterprises need consultants to help them to map out their branding strategy, they could make applications under the BUD fund. The BUD fund also entertains applications for brand implementation. These sorts of projects are allowed under the scheme.

The upgrading part is related to the fact that a lot of Hong Kong entrepreneurs operate in the Mainland – in toys, metals, watches and clocks, or electronics industries, and others. The program is meant to encourage them to upgrade their products and processes, adopt automation, and carry out process re-engineering or by other means to increase their competitiveness. biz.hk: Is the program only applicable to companies which sell to China? Can companies that sell

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biz.hk: Is the program industry or sector specific?

Is it nationality neutral?

Lam: It covers all sectors. We do not distinguish between manufacturing and service sectors. We don’t have any restrictions as far as business sectors are concerned. Also, there is no nationality requirement.

The eligibility criteria are very simple. So long the applicant is a Hong Kong registered company which is not listed and has substantive operations in Hong Kong he will be eligible. For “substantive operations”, the applicant has to demonstrate by means like employing people here or having filed tax returns. We don’t want what people called “shell companies” with no business operation here to apply. And we don’t have restrictions on the number of employees for the applicants. biz.hk: Let’s say I am a California wine company.

I’ve come to Hong Kong and set up my business. It is registered in Hong Kong and it is not listed. My company sells California wines to Hong Kong and I have plans to expand into Mainland China. So what I need to apply for BUD funding is a good business plan on how to establish my brand and to sell in China?

Lam: Certainly. It’s as simple as that. The duration of a project should not exceed 24 months. biz.hk: The maximum amount of funding is

biz.hk 9 • 2012

HK$500,000 for each applicant?

Lam: Each applicant can have a maximum of three successful applications under ESP. Together, the cumulative amount [of funds] available for an enterprise is $500,000. For each project, the program will provide matching amounting to no more than half of the approved total project expenditure, capped at $500,000.

Some companies may want to make only one application for one single project. If the project costs $1 million or more, a successful applicant will only receive the $500,000 ceiling amount. biz.hk: If the total investment of my project is $10

Lam: If they’ve tried their best and they somehow failed and were unable to do what they’ve originally committed to do, they of course will have to explain to the Government and justify their case. Funding support under this Enterprise Support program is not a loan. We use this fund to encourage enterprises to engage in branding, upgrading and domestic sales. biz.hk: Can you tell us about the applications received so far?

Lam: This program will open for applications for five years, subject to funding balance. It started on 25th June 2012 and submission of the first batch of

In the Chief Executive’s Policy Address last October, the Government announced the setting up of the HK$1 billion dedicated BUD fund to assist enterprises in exploring and developing the Mainland market.

BUD million, can I still apply and use the funding provided for part of the project?

Lam: If it’s a big plan, we won’t be able to fund the whole project anyway. You may carve out a portion and we will be able to fund that portion as an individual project. For instance, you may use the funding provided to hire people, purchase equipment, or do advertising within the context of a well-defined project. You may use the funding to engage consultants to help you with your business strategy. But the funding should not be used for normal operating expenses. biz.hk: What will be the consequence if the business fails at the end? Will the applicant be held financially liable?

biz.hk 9 • 2012

applications ended in July. We’ve received over 100 applications and the results of the first batch will be available around October. The second batch of application closed in September. biz.hk: Who sit on the vetting panel?

Lam: There is a two-tier vetting mechanism.

First is an inter-departmental committee which comprises of government officials from the Commercial and Economic Development Bureau, Trade and Industry Department, CreateHK (an agency under CEDB), Innovation and Technology Commission, Environmental Protection Department and Information Services Department.

That’s an internal government machinery to examine the applications.

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The committee will make a recommendation to the Program Management Committee which is chaired by the Permanent Secretary for Commerce and Economic Development (Commerce, Industry and Tourism) for further consideration. The Permanent Secretary chairs that committee and its members comprise ex-officio members and non-official members who have industry background. These non-official members are drawn from various industries.

Their list is available publicly. biz.hk: The Hong Kong Government offers a variety of funding to businesses. Can you briefly describe some of these programs?

Lam: The Government certainly provides a lot of assistance. For example, we have recently set up a one-stop support centre, SME One, here at the Productivity Council.

It provides direct access to information of 27 funding schemes and support programs for SMEs provided by the Hong Kong and Mainland governments and other government-related organizations, as well as those offered by the private sector. Here, we provide an advisory service for enterprises.

Whatever business you are in, we will be able to offer something that may suit you.

It is important to note that you cannot use the same project to apply [for funding] through different channels. For example, there is a SME Export Marketing Fund which helps businesses to participate in exhibitions and fairs. You cannot use the same project to apply for both the SME Exporting Marketing Fund and our Enterprise Support Program. If the applications come from the same company but they are for different projects, then that’s not a problem. biz.hk: There is another component of this program which is run by the TID. Can you briefly tell us about it?

Lam: The Organization Support Program is for industry sector as a whole. They are for non-profit distributing organizations such as industry or professional associations so that they come up with projects which are beneficial to their sectors or industry as a whole. The ESP is for individual companies.

So let’s say a professional body wants to organize some platform projects for their members about the Mainland market, they should apply under OSP.

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Can BUD and CEPA Work Together?

Both CEPA and BUD target the Mainland market. biz.hk asks the Trade and Industry Department if a locally registered business can apply for both CEPA and BUD at the same time, and to describe the conditions TID: In general terms, the answer is yes. CEPA is a free trade agreement signed between the Mainland and Hong Kong, under which service suppliers in Hong Kong enjoy preferential treatment when setting up business in various service sectors in the Mainland. Both "natural persons" and "juridical persons" of Hong Kong can enjoy preferential treatment offered by the Mainland if they fulfill the definition of HKSS under CEPA. Whereas for BUD, it is a funding scheme that aims to assist Hong Kong enterprises in exploring and developing the Mainland market through developing brands, upgrading and restructuring their operation and promoting domestic sales in the Mainland. The BUD Fund comprises two programs. The Enterprise Support Program aims to provide funding support for individual enterprises. The Hong Kong Productivity Council acts as the Secretariat to assist in implementing the program. The Organization Support Program provides funding support for non-profitdistributing organizations and it is implemented by the TID. Subject to funding balance, the BUD Fund will be open for applications for five years starting from June 2012. In other words, any enterprise, including a holder of HKSS certificate, can apply for the BUD fund (ESP) provided it could meet the requisite eligibility criteria.

As far as the ESP is concerned, all non-listed enterprises registered in Hong Kong with substantive business operations in Hong Kong are eligible to apply for funding support. However, projects which have received or would receive other sources of funding support provided by the HKSAR Government or the Mainland authorities, or other sources of sponsorships/donations will not be eligible for funding support under the program.

biz.hk 9 • 2012

BREAKTHROUGHS FOR ARCHITECTS

By Daniel Kwan

J

ust a little over a year ago, Daniel Chi Wuhcherng, honorary secretary of the Hong Kong Institute of Architects, in a biz.hk interview, spoke about the hurdles Hong Kong architects faced in practicing in the Mainland. For five years, none of the over 400 Hong Kong architects who have obtained their Mainland qualifications through the Closer Economic Partnership Arrangement (CEPA) has been able to establish their business making use of their CEPA advantages.

Their dilemma was summarized in a paper published by the Hong Kong General Chamber of Commerce in April last year: “So far, CEPA has been in place for over eight years, but for the Hong Kong architects, they only managed to attain PRC Class 1 Registered Architect qualification through mutual recognition arrangement.

However this qualification remains only a paper qualification that cannot be put into practice, which means Hong Kong architects are still not allowed to ‘enter the Mainland market’ freely and the co-operation model for Hong Kong architects and Mainland counterparts remains the same as 20 years ago.”

Since the interview, two CEPA Supplements (VIII and IX) have been signed. biz.hk caught up with Mr Chi recently for an update on the issue. According to him, a significant breakthrough has been achieved and he expected three to five Hong Kong architectural firms to be up and running in Guangdong Province by the end of this year.

Long journey The admission of Hong Kong architects to the Mainland market was first addressed by CEPA in as early as 2004. From 2004 to 2008, a total of 412 Hong Kong architects who have more than 10 years of experience have obtained their Mainland Class 1 qualifications by taking part in national examinations through the mutual recognition arrangement under CEPA. In theory, their Mainland qualifications should have allowed them to practice in China just like their Chinese counterparts. However, their efforts to break into the Mainland market through CEPA had not been

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successful.

Not only they were not able to practice in China as promised under CEPA, new restrictions were added.

Under new guidelines introduced by Guangdong Province, Hong Kong architects can apply to set up their practice and undertake architectural projects only in Guangdong Province instead of anywhere in China. That was a setback to Hong Kong architects who have been doing advising and consulting jobs throughout China through indirect or grey channels.

In addition, the “qualified” Hong Kong architects are required to sit in an examination on rules and regulations run by Guangdong Province in order to be eligible. The first round of the examination was held last year and a total of 169 of the 412 “qualified” Hong Kong architects took part. “All 169 of our members passed the Guangdong examination,” Chi said.

Guangdong rules However, more entry barriers were introduced to keep these 169 Hong Kong “qualified and eligible” architects out of the Guangdong market. Instead of welcoming them with open arms, Guangdong ruled that in order to be able to set up an architectural firm in the province, each application must have at least three architects with Mainland professional architectural qualifications and these three members exclude the “qualified and eligible” ones from Hong Kong. In other words, a Hong Kong firm must hire at least three Mainland architects even if they have their own architects who have already obtained the same professional qualification as their Mainland counterparts.

Moreover, the Guangdong guidelines also stipulated that the Guangdong approval only covers the establishment of a business office. Hong Kong applicants must go through another round of bureaucratic exercise in Beijing in order to obtain the permission to practice.

Chi said these restrictions, especially the one on hiring Mainland architects, effectively barred Hong Kong architects from practicing in China using the CEPA channel. “Most Hong Kong architects are small and medium-sized firms,” he said. “We can hardly

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afford to spend millions to hire Mainland architects, not to mention the additional office rents and many other expenses.”

The restrictions were lifted with the signing of Supplement VIII and IX. Now, a Hong Kong firm can apply to practice in Guangdong if it can nominate three architects who are equipped with Mainland professional architectural qualifications and have passed the eligibility examination in Guangdong Province. The hiring of Mainland architects is no longer required. In addition, approval by Guangdong will now be taken as green light for an architectural license, although the applicant will still have to complete the paperwork with Beijing.

“The only restriction remains is that we can only undertake projects in Guangdong,” Chi said. “But we understand that and we will push for changes one step at a time.”

Market entry The HKIA spokesman expressed hope that future CEPA supplements would address two other issues so that more Hong Kong architects would have access to the China market. First, they are pushing China to re-start the mutual recognition arrangement that was suspended in 2008, so that several hundreds of its senior members who did not take advantage of the

mechanism five years ago can apply.

“It should be pointed out that this arrangement is not limited to Hong Kong people,” Chi said.

“Foreign architects can also apply as long as they fulfill the other requirements.”

Second, the association is lobbying the Mainland authori- Daniel Chi ties to allow exemption for young Hong Kong architects who want to sit for the national architect qualification examinations.

“Some of the professional papers between the national examination and our own examination are quite similar,” Chi said. “We hope that the Mainland side can grant us exemption.”

According to Chi, more than a dozen Hong Kong architects have submitted their applications to Guangdong since the signing of Supplement VIII. “They have received their industrial and commercial license numbers and we are going to see three to five Hong Kong architectural firms set up in Guangdong Province by the end of this year,” he said.

CHINA BUSINESS

China Advice from a Successful Parachutist Parachuted into Shanghai eight years ago by her father Klaus and brother Sven, Kristina Koehler has learned how to do business in China the hard way. Literally planted there with no help from family and friends, Kristina recalls Shanghai was a brave new world to her. “It was an adventure for me,” she tells biz.hk in an interview. “And it still is.”

By Daniel Kwan

E

ight years have passed and Kristina Koehler is now a China consultant with real combat experience. Klako Group was founded in Hong Kong in 1979 by her father. She was sent to Shanghai in 2004 to build the China business from scratch. Kristina admits that she was naïve then to believe that breaking into the China market would be easy, but she trusted her father and brother.

“Mine is a family business, so quitting is not an option,” she says.

On-the-job learning Handling the local staff was a headache from the beginning. Although the company had had no business in the early months, employees demanded higher salaries and more vacation time.

As a new start-up, Kristina’s office was a windowless room in a business centre. That humble setup not only meant tight budget, but also landed Kristina in blackmail.

“One of the employees alleged that the office made her sick and therefore I owed her money,” she recalls. “But there is no regulation in any law book that says I can’t have a windowless office.”

Back then, Kristina wasn’t yet a legal expert and she relied on her Chinese staff for information because she could not read or write Chinese. “I

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wasn’t so familiar with Chinese regulations at the time so I learned everything by doing,” she says. Today, she is fluent enough that her Chinese negotiation partners often switch to the local Shanghai dialect when they find out she understands their Mandarin.

The first few years were frustrating, especially when “never getting a black-and-white answer” in dealing with the government was the norm, she says. “Back then, I did need to leave frequently [to take a break] because the level of frustration – businesswise – in Shanghai was much greater than in Hong Kong,” she says.

The first six years were still “pioneer” years although the last two years have seen greater success.

Today, the Klako brand has gained more recognition especially among family-owned businesses.

Klako currently has offices in Beijing, Chengdu, Dalian, Guangzhou, Hangzhou, Hong Kong, Shanghai, Shenzhen and Tianjin, and Singapore. “We are now at a stage where we are doing quite well,” she says.

The adventurous Today, most of Kristina’s clients are western companies who have little or no experience of the China market. Among them, she sees a difference between the older and younger generation business

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owners. “The younger generation definitely sees the opportunities of China – or more accurately Asia, because there are markets like Vietnam picking up too – and they want to be here,” she says. But the “gettingeveryone-on-board” stage can be long and painful. Achieving buy-in from the company’s board and family members can take months if not years.

“It’s usually two years from the day I get the enquiry until the day they’ve decided to come to China,” she says.

The convincing part isn’t the final hurdle. Kristina has had clients who have done little market research and knew nothing about China, but have already decided to take the plunge. And other clients thought they would never have to do much themselves, but could just rely on local distributors and Chinese staff. Hand-holding is also a critical skill, she adds.

Her advice: “If you set up an entity, go visit it and supervise. Make sure your General Manager is doing the right job.

If you don’t want to go to China, then send the GM to you and make sure everything is OK. Once in a while, send the Chief Financial Officer. All multinationals do that, why shouldn’t you consider these costs in your budget – at least for the first year? Meet the customers – that’s also very important.”

Over the past eight years, Kristina

Kristina Koehler

has observed significant social and economic changes that western brand owners can benefit from. In addition to a rapidly growing Chinese middle class, the expatriate community, especially in cities like Shanghai, is also a highly lucrative target market.

“I would say attack the expat market first. Usually, once you’ve hit the expats, the wealthy Chinese will follow. It’s obviously a slow approach and not a boom approach because the expat market is a niche market.”

FAQs Kristina Koehler’s client companies come in all sizes, but they often share similar problems and questions. The following are some of the most common enquires she receives:

Should I use a distributor?

There are pros and cons about working with a distributor. If you want to go with a local distributor, you should find one who is familiar with your products so that you don’t have to give so much sales training. Do a background check before you sign with a distributor.

biz.hk 9 • 2012

Do a financial analysis and don’t rely on one agent alone. If you have a distributor in southern China, have another one for northern China so that there is no exclusivity and you can spread out the risk.

And the contract should be of limited period and not open-ended.

The risk of a distributor is that he will

21

know what the product looks like and he might manufacture it himself under another brand name in China. You are handing over the entire product to someone you’ve just signed a distribution agreement.

The positive aspect of having a distributor is that he has the network and range within the market to sell your products. You may have less hassle in the beginning but you may have more hassle later on which will keep you awake at night. It’s because usually the distributor makes his own margins on products, and you don’t always know the final price.

When you do want to come to the market by yourself, you’ll need to compete with him at that point. It’s a bit of a Catch-22.

How to choose between a Representative Office and Limited Company?

I don’t recommend a Representative Office. The Chinese Government is trying to make them obsolete by putting more restrictions on them so that people don’t use them. For example, you are only allowed to have four foreigners on staff. If you have more than six or seven people, they consider you to be operational so that you are not really a liaison office anymore. You can’t invoice or sign contracts. In theory, you are not supposed to be handling any negotiations.

When my clients tell me they want to have a Representative Office, I ask them if they are committed to the China market or not. If they are ready to commit and have done their research, then they shouldn’t waste time setting up a Representative Office because that doesn’t get them anywhere. They can set up a limited company and structure it to make it more tax efficient than a Representative Office as well as having greater flexibility to do whatever they want to do.

When you’re just an operational entity, you can have better tax saving using a limited company versus a Representative Office, especially for the first five years of operation. A limited company has registered capital, but this registered capital has no tax liability. With a Representative Office, you’ll have to pay tax,

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which is between 12 to 15 percent, on your expenses from day one of your operation.

How to choose my bankers?

That depends on whether you need financing or not. If you don’t need financing in China, my suggestion is to use one of the local Mainland banks. If you need financing in China, first be aware that the interest rate is very high, and that you probably can only get financing from the foreign banks and only as long as you are using that foreign bank overseas. From my experience with foreign banks in China, you need to have a certain level of investment or they won’t be interested.

Foreign banks don’t open Representative Office accounts anymore.

Setting up in Hong Kong?

If you are a company that’s looking to coming to Asia and not just China, I would recommend setting up in Hong Kong and hire the sales people here. It’s much easier for a Hong Kong Chinese to travel throughout China and elsewhere in Asia. If you set up in China, your Mainland staff will have to apply for visas to travel in Asia.

Hong Kong now also has the advantage to receive payments in Renminbi from customers in China. Since early this year, the Chinese government eliminated all regulations so that companies in China – whether foreign-owned or domestic-owned – don’t have to obtain any types of certificates to do Renminbi remittances. Before, they needed to apply to be a designated Mainland enterprise.

Now, everyone can do it. The downside – I’ve only heard from a couple of customers – is that if you are exporting from China, the supplier can’t get the VAT refund if the payment is in RMB. With the whole theory of VAT refund, I don’t understand why this is the case. I’ve checked and there is no reason I can find that says you can’t have the VAT refund. I am confused by that, but this has happened to a client.

The whole Renminbi concept in Hong Kong is still new. People are still learning about it and they are hesitant to

use it. You’ll have to weigh out all those issues.

What to do with VAT?

Make sure you talk to a tax adviserand understand exactly how the complicated VAT works. For example, when you buy the VAT invoices from the tax bureau, each invoice is only RMB10,000 and you can only purchase a certain number per month. If you have a big value transaction, you may only be able to issue part of the VAT invoices to your customer and then the second half the following month. If you have a high-value transaction, you can go to the second level of VAT invoices. This is important for sales because your customers might want to receive the invoices all in one go and not to wait. You’ll then need to make people be aware that you’re a start-up and you only have this value of VAT invoices in the beginning and ask them to be patient.

What about e-commerce?

No question, e-commerce is very complicated in China. If you want to have a .cn domain name, you need to have a registered Chinese entity to apply for that domain name. It means in theory that if you want to do e-commerce, you will need to have a company in China before you can have a .cn domain name. Most companies get around this by having their domain names in Hong Kong and then working with the banks to have the online payment system to be able to do it in Renminbi.

If you have a limited company in China, you can register for the domain name .cn. You can then talk to Alipay (a Chinese version of PayPal) and put Alipay on your website and it all goes from there.

You do need to apply for the e-commerce license – but to be honest, most people don’t do that because they already have their trading licenses. The downside is that the government keeps track of all websites. So the government can shut down your site very easily. But obviously if you are selling normal goods, your pricing is OK and your products have no defects, they are not going to close you down.

biz.hk 9 • 2012

REAL ESTATE

From Central to Yuen Long

“We are seeing a lot of demand from foreign retailers wanting to open up stores in Hong Kong. The reason for that is they want to use Hong Kong as a launchpad into China, According to Gaffney, the lack of where they will expand at significant supply in prime areas has rates,” Gaffney tells biz.hk in an prompted many brands to interview. expand into locations such as In the past 18 months, the S A L E Kowloon Bay and Shatin, which number of new brands entering are further away from the core the Hong Kong market surged shopping areas but have a and they comprised more than 10 critical mass of local residents. percent of all major transactions They are also looking into the at stores with monthly rents of border towns of Sheung Shui, more than HK$500,000. Total Tuen Mun and Yuen Long, as retail sales in the first five months more and more Mainland reached HK$185 million, up 13.5 Chinese tourists are coming percent from a year earlier, into Hong Kong via those areas although growth slowed in the shopping for clothes, cameras, second quarter, particularly for smartphones and other the jewelry and watch sector.

Mainland Chinese consumer durable goods.

Foreign retailers are not The number of Mainland thwarted by the temporary visitors came Chinese day-trippers grew 31.7 slowdown though. US fashion to Hong Kong percent year-on-year to 14.5 brands such as Abercrombie & million in 2011. To capture Fitch and Hollister, and Finnish last year these customers, many clothing retailer Marimekko have landlords are offering coach all recently launched in Hong pick-ups and returns from the Kong. Marimekko, which opened border to their shopping malls, its first store in Causeway Bay in which also attract Mainland May, plans to open another 13 business owners that snap up goods from Hong Kong stores in China by 2016, while US lifestyle apparel for the retail stores they run in their hometowns, brand Tommy Bahama plans to open its first store Gaffney says. in Hong Kong in November.

“International retailers are looking at the Gaffney says international retailers that are landscape, going, ‘Okay. So where’s next? We’ve got already in Hong Kong are also planning to expand Central, we’ve got Tsim Sha Tsui, we’ve got Causetheir brands by introducing their second or third way Bay. Where else do we go?’ They are looking at lines in different districts to cater for customers new opportunities and new customers [whom] they with varying spending power. Ralph Lauren, for wouldn’t usually tap into. That’s where Yuen Long example, reportedly plans to open 15 stores in Hong and Shatin pose very good options for retailers,” he Kong, Shanghai and Beijing by 2013. says. “We are actually doing a lot of studies and These developments have driven up rents and spending a lot of time in those locations at the intensified competition among retailers vying for a moment because there is just so much demand from limited supply of retail spaces in prime locations a lot of our retail clients.” where vacancy rates are at a mere 0.7 percent, he Over the past 18 months, Zara, H&M and says. Across Hong Kong, overall vacancy rates are Burberry Black & Blue were some of the international still less than three percent, he adds. brands that have opened shops in these decentralized “This trend will likely continue because there locations. Rents are growing in these locations and isn’t a lot of supply coming onto the market in the Gaffney expects to see a further 8 to 10 percent growth next four to five years,” Gaffney says. “In terms of for the rest of the year, particularly in Shatin. retail supply, we have about 2.4 million square feet coming online between now and 2016, and a majority of that, besides Hysan Place, is going to be built in decentralized locations and in the New Territories.

It won’t really help a lot of these foreign retailers While the border towns have been enjoying a who are looking in the very core districts – Central, boom thanks to an increase in the number of Tsim Sha Tsui, Causeway Bay and Mongkok.”

MILLION

Photo: Thinkstock

THE SKY IS THE LIMIT

Chinese tourists’ insatiable desire for shopping are pushing Hong Kong retail rents to dizzying heights while international brands seek to expand into even the far-flung corners of the city

By Helen Luk

W

ith the recent opening of Hysan Place, the army of Mainland Chinese tourists flooding into Hong Kong’s glitzy shopping malls shows no signs of abating.

Last year, 28 million Mainland Chinese visitors came to Hong Kong, making up 67 percent of the city’s total number of tourists. Just for the first five months this year, the number of Chinese visitors has already increased by 21.3 percent.

Shopping for everything from luxury watches, jewelry, Louis Vuitton and Gucci handbags, to

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cameras and infant formula, these Chinese consumers have become a magnet for international brands seeking to diversify from their sluggish home markets in the United States and Europe.

Tom Gaffney, Hong Kong-based head of retail at property consultancy firm Jones Lang LaSalle, says retail rents for high-street shops rose 8.5 percent in the first quarter and are expected to grow up to 15 percent for the whole year, despite having already increased about 48 percent over the last three years.

The capital values of the shops also surged 20.4 percent in the first quarter.

biz.hk 9 • 2012

Rebounding Retail Growth

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day-trippers and Mainland tourists visiting Hong Kong on packaged tours, Gaffney says the prime shopping districts of Central and Tsim Sha Tsui nonetheless recorded slower growth in the second quarter.

This is mainly because the slowdown in the Chinese economy has led to a drop in Mainland Chinese tourists – typically the bigger spenders – coming to Hong Kong on the individual visit scheme, reducing the demand for luxury items, he says. Sales of jewelry and watches recorded an 8.8 percent growth in the second quarter, slower than the 16.8 percent in the first quarter.

However, Gaffney predicts that sales will pick up again in the fourth quarter, and retail Tom Gaffney sub-sectors such as watch and jewelry, fashion and accessories, electronic goods, and consumer durable goods will continue to flourish.

“We foresee the change in government in China will provide new and improved stimulus measures to the Chinese economy… Hopefully that will increase confidence in people to consume and travel more,” he says. “Toward the end of the year, there’s usually a fairly good run into Christmas and then Chinese New Year. That’s usually the best time of the year for retailers. We are hoping that off the back of these stimulus measures, we will see a rebound in spending.”

Causeway Bay stands out Looking ahead, Gaffney says demand for Hong Kong retail space remains strong next year, but he expects to see slower percentage growth in rent levels – up to five percent for prime shopping centers and up to 10 percent for main shopping streets.

“Where the rents will grow at a more rapid rate is in the decentralized locations – the reason being they are coming off a lower base. Those rents will catch up more quickly than those at the core locations,” he says.

Among the prime areas, Gaffney expects Causeway Bay to outshine Central and Tsim Sha Tsui and record close to 10 percent growth next year because of the heavy traffic brought by the opening of Hysan Place in August.

“A lot of retailers already have premises in those two locations [Central and Tsim Sha Tsui], so they

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are now looking for their third in Causeway Bay. That, coupled with new developments and developers spending a lot of money on refurbishing their buildings and creating more opportunities for retail, has increased an emphasis for brands to look at Causeway Bay as a viable retail location,” he says. “In terms of rental growth, we will see Causeway Bay probably grow the most out of all the different districts in the coming months.”

Golden Triangle Becomes Golden Circle Gaffney also notices a new trend of expanding traditional shopping districts, where streets near the shopping landmarks are merging to form even bigger clusters.

“If you look at Causeway Bay, we have always talked about the ‘golden triangle’ – that’s now become the ‘golden circle,’” he says. “It’s pushed out a lot more… into areas along Leighton Road, off to Hysan Avenue, along Yun Ping Road, down through Kai Chiu Road, even further out on Lockhart Road and Jaffe Road. So the area is expanding,” he says.

According to Gaffney, retail rents on Kai Chiu Road, for example, have shot up to HK$1,000 to HK$1,200 per square foot from several hundred dollars per square foot two years ago.

“The lines between the various districts are not as clear anymore. You are starting to see the merging of Wan Chai and Causeway Bay. You will see the merging of Admiralty all the way through to Central… And that’s just because of demand and the retail landscape growing. I think that is a trend that will continue in the coming years,” he says.

One of the up-and-coming districts, he says, is Kowloon East because of the government’s plan to build a new central business district known as CBD2 in the area. Jones Lang LaSalle estimates that the CBD2 area of Kwun Tong, Kowloon Bay and Kai Tak will potentially offer around 14 million square feet of office space toward the end of the next decade.

“Off the back of CBD2 and the government’s push to increase a lot of development in that area, you will start to see a lot of retailers migrating and looking over there,” Gaffney says.

biz.hk 9 • 2012

TRADE & INVESTMENT

Steven Olson

Executive Director of SelectUSA Steven Olson speaks on FDI into the US at the Invest-in-USA Forum.

Queries to American Investment Explained

S

teven Olson, Executive Director of SelectUSA, was the keynote speaker of the Invest in USA Forum at the China Overseas Investment Summit 2012 held last month in Hong Kong. It was the second COIS held here after its successful launch in 2011. It was jointly hosted by the Hong Kong China Chamber of Commerce and China Central Television (CCTV). This year’s theme was Global Economic Transformation and New Approaches to China Overseas

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Investment. More than 1,500 government and business leaders attended the two-day summit.

The enthusiastic response was expected as Chinese investment in foreign countries has grown rapidly in recent years. Chinese companies have set their footprints across the globe investing billions of dollars in areas such as resources, real estate and manufacturing. Although China is still “small” compared with other major players, its foreign investment has grown significantly. In 2011, it ranked

as the ninth largest source of global FDI, according to the United Nations.

Despite a slow and sluggish economy, the US remains a favorite among Chinese investors going global. The total stock of Chinese FDI in the US reached almost US$10 billion by the end of last year.

SelectUSA was created in 2011 as a federal government’s program to attract foreign investment to the US and create American jobs. It has two functions – investment promotion which is geographically neutral with

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respect to locations within the US, and an ombudsman service to help resolve issues involving federal regulations and programs.

The creation of SelectUSA is therefore of particular significance to Chinese investors interested in the US market. Although many Chinese investors find the US attractive, they also complain about the complexity associated with investment in the US. To facilitate and assist Chinese companies better understand the American business and investment environment, AmCham together with the US Consulate General in Hong Kong and Macau hosted the Invest in USA Forum during the COIS conference in August. Olson who flew in from Washington especially for the summit took time out of his busy schedule to answer some of common questions Chinese investors face.

of many other attractive aspects of the US business climate.

biz.hk: Chinese FDI into the US has registered impressive growth from 2006 to 2011. What are main reasons behind the increase?

Olson: Between 2006 and 2011, China was among the fastest-growing sources of FDI stock in the US – albeit with a relatively low base – with a compound annual growth rate of 71 percent. The total stock of Chinese FDI in the United States now equals almost US$10 billion. According to the database fDiMarkets.com, Chinese firms announced plans to invest in 190 green field projects in the United States between 2003 and September 2012 (see graph).

In 2008, there were 21 announced green field projects from China into the United States. The number grew in 2011 to 43 projects. The increasing amount of new FDI projects demonstrates growing Chinese interest in the US market, a trend SelectUSA predicts will continue. These interests are likely driven by the attractive investment opportunities that the United States has to offer. These include a skilled and innovative workforce, a stable and transparent legal system, and a lucrative and open consumer market, which are but a few

biz.hk: Why Should Chinese investors invest in the US? Olson: The US is the premier location

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biz.hk: What are the most popular sectors and areas in the US for Chinese FDI? Olson: Chinese companies are actively investing in numerous US industries.

Electronic Components, Industrial Machinery and Equipment, and Communications account for the top three sectors based on the number of announced green field projects between 2003 to September 2012, according to fDiMarkets.com. However, there has also been substantial investment activity, both green field and acquisitions, in the Business, Software & IT, and Financial Services sectors. This showcases how Chinese investment in the US is not necessarily confined to certain sectors, but continues to grow throughout many areas (see chart).

for new business investment. With the world’s largest and most diversified economy, the US offers investors extraordinary attractions and many possible locations. It has a lucrative and open consumer market of more than 310 million Americans, as well as access via free trade agreements to about 415 million more customers for goods and services that are produced in the US. The American economy has robust supply chains for manufacturing. The infrastructure spanning this large country works well and is also poised for new investment for further expansion and modernization.

The US also has the world’s best university system, one that hosts and spins off research and development (R&D) programs that contribute to the country’s strong R&D activities.

Innovation is part of America’s DNA. Creating intellectual property is encouraged and intellectual property is well-protected. The American political system is a stable democracy and the legal system is transparent and

Chinese Stock FDI in the United States 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2006

2007

2008

2009

2010

2011

Source: US Bureau of Economic Analysis

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Composition of Announced Chinese Greenfield Projects in the United States (2003 - Present) Textiles, 7

Metals, 7

Alternative/Rene wable energy, 6

Financial Services, 7

Electronic Components, 31

Automotive Components, 7 Business Services, 11 Software & IT services, 12

Communications, 18 Industrial Machinery, Equipment and Tools, 17

Source: fDi Markets

predictable, all of which helps ensure that business investments are safe. biz.hk: What services can SelectUSA representatives provide to Chinese investors who are interested in the US market?

Olson: Housed at the International Trade Administration of the US Department of Commerce, SelectUSA leverages functions and resources from across US Government agencies to promote business investment in the United States.

SelectUSA’s Washington, DC headquarters staff, in coordination with US & Foreign Commercial Service Officers on the ground, offers SelectUSA services to companies in more than 70 countries around the world.

In Mainland China, there are representatives located in Beijing, Chengdu, Guangzhou, Shanghai, and Shenyang. We also have representatives based in Hong Kong.

Specifically, SelectUSA can help Chinese businesses by responding to questions about the logistical process of making an investment in the US; helping investors navigate the federal regulatory process; connecting investors with local and state economic development organizations to explore

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opportunities; and, in general, serving as a bridge that helps foreign investors understand how to access investment opportunities in the US. SelectUSA’s ombudsman support is an important component, especially for Chinese investors, in that it provides clarity and insight into perceived or real questions or concerns about a federal government regulatory process. biz.hk: Can you briefly describe the ombudsman function of SelectUSA? Olson: SelectUSA indeed has an ombudsman function. While we cannot provide specific examples because of business confidentiality, we have engaged a number of firms on a range of issues, and have provided clarity and guidance on regulations that have hindered or slowed an investment.

Often times perceived roadblocks to investment at the federal regulatory level are the result of a lack of understanding, making the role SelectUSA plays all the more vital role in providing insight to both the investor and federal regulatory agencies. biz.hk: The Committee on Foreign Investment in the United States (CFIUS) is sometimes cited as a major worry for Chinese investors. What is

the true function of the committee?

Olson: The US investment regime is open to foreign investment and is based on the principle of national treatment (giving foreigners no less favorable treatment than one’s own nationals). Foreign investors benefit from an open, transparent, and nondiscriminatory investment climate.

Transactions that could result in control of a US business by a foreign person (“covered transactions”) may be reviewed by CFIUS in order to determine the effect of such transactions on the national security of the US. To initiate a review, parties generally submit voluntary notices of transactions to CFIUS, but CFIUS has the authority to initiate a review as well.

CFIUS focuses exclusively on national security concerns, not broader economic or national interests. The vast majority of foreign investments do not raise national security concerns, and the vast majority of transactions notified to CFIUS are cleared without any mitigation or conditions. Additionally, the overwhelming majority of FDI in the US does not undergo a CFIUS review.

Between 2008 and 2010, there have been 16 transactions involving Chinese acquirers filed under CFIUS.

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Excellent Partners

By Daniel Kwan

Photo: Thinkstock

I

n the old days, cross-border trade used to be visible, heavy and bulky. A good example is the delicious and juicy orange from California – perhaps one of the most successful and iconic American brands for the Baby Boomers around the world. Today, the true value of an export item is more likely to be measured by kilobytes instead of kilograms.

In many ways, that phrase can be used to describe how trade between California and Hong Kong has changed over the years. These days, the top two export items from the Golden State to Hong Kong are computer and electronic products, and a grab-bag category called “miscellaneous manufactured commodities.” The later refers to mostly manufactured items exported to Hong Kong for value-add before they are shipped elsewhere. Agricultural products – excluding food products – now rank third on the California’s

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export chart totaling US$892 million in 2011.

Jeffrey Williamson, Director of the California State Trade and Export Promotion program, says Hong Kong is now California’s sixth largest trading partner, withexports totaling US$7.66 billion in 2011. To put things in perspective, California is the world’s ninth largest economy (2011 ranking), and Hong Kong is the 10th largest trading economy in the world.

localization, I mean a product that requires greater understanding of the customers. In other words, a localized product appeals to specific customers and their taste.”

“The ‘miscellaneous manufactured articles’ is a grab-bag of all sorts of different things that may be required some degree of localization

Localization The fact that Hong Kong is now one of California’s key trading partners underscores the changing economic role of the city. While Hong Kong no longer manufactures much, it helps exporter like California to “localize” their goods and services for markets such as China.

“In terms of products that need to be localized, we’re not selling too much in China,” says Williamson. “By

Jeffrey Williamson

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and integration. That’s what we think Hong Kong is really one of our great marketing partners because you make the products suitable for these markets.”

“There still is a big cultural gap [for Californian companies] in terms of working with Mainland China.

Especially for smaller companies, Hong Kong can take the marketing infrastructure you have here, take the product, integrate the services and provide the whole package to China,” he adds.

To promote export (and hence create American jobs), Williamson says California further looks to Hong Kong for growth and new market opportunities through partners such as the Trade Development Council. California exporters are again participating in the TDC’s Wine and Spirit Fair to be held in November following the success of the Vinexpo Asia-Pacific 2012 in July. According to Williamson, Hong Kong’s abolition of wine duties in 2008 has given Californian wines a significant boost although the increase has leveled off in recent years.

STEP Domestically, Williamson’s office is helping SMEs to tap the foreign markets. The State Trade and Export Promotion (STEP) program supports small businesses to export or up their orders. The pilot program has three elements. It selects trade shows and assists companies to participate in them. The Wine and Spirit Fair in November is one example. Second, it provides inbound opportunities for foreign buyers to come to California to meet with local companies.

“We will access readiness of these companies to export. We’ll work with them and prepare them, get them involved in our inbound events, and arrange the match-making services,” says Williamson. “And then we’ll integrate them with our partners like the Export and Import Bank, Small Business Administration and Export Working Capital Program so that after they return back, then they can get the

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financing that they need to conduct the business.”

The third element is a customized program through which STEP helps individual companies to explore foreign market opportunities. “A company may come to us and say, ‘I like to go to Dubai and market my products and there is a good trade opportunity there. Can I get some assistance to offset some of the costs?’

We will then assess them and if all is cleared, then we can help the company.”

STEP is a three-year trade and export initiative funded by federal grants and matching funds from the states. Of all states, California has so far received the largest amount of funding – US$2.54 million – since it was launched in 2011.

Changing world Williamson who has years of experience in export promotion and global marketing says the world of business is changing rapidly and manufacturers are relocating their production – manufacturing, design, research and development – closer to the consumers. “We see a global trend where products are being produced much closer to where they are being consumed,” he says. “The demand has gotten so large that in fact people are producing more locally – everywhere around the world.”

In addition, Williamson believes that consumption in China will continue to rise as economists have forecasted that China would overtake the US as the world’s largest consumption market in 15 years.

This rebalancing will have a significant impact on every party on the global supply chain and especially for economies such as California and Hong Kong, according to Williamson.

“Automation is everywhere in the world now, and the price for qualified labor in Shanghai and Shenzhen is the same as that in Los Angeles,” he says.

That’s a new emerging trend. The director is confident that California will win in the global competition. “In

California’s exports to Hong Kong (US$bn) 2006: $4.8 2007: $4.9 2008: $5.7 2009: $5.8 2010: $6.7 2011: $7.6 Source: International Trade Administration/ US Department of Commerce

California, we have a very flexible labor market, a multi-cultural environment, and we have some very strong clusters that draw in the expertise from all over the world.”

“These clusters are able to form very quickly. We have clusters that people didn’t even think about. The health and beauty cluster for example – in the Los Angeles Basin alone: we have skin cream, sun lotion and spa products. Then you have the educational institutions creating and designing programs to support these clusters and you have entrepreneurs who put together small factories to design products specifically for that.”

In short, Williamson says it’s time to say goodbye to the old mode of thinking. California which has a wealth of talents in the realm of innovation, IT, royalty and licensing, entertainment, and design would be an excellent partner in the new age of goods and services.

“We have to change the mindset that products are produced in the lowest cost location. Actually, the US may become price competitive and we will be making consumer goods – or at least a big chunk of it – once again because the trade is all driven by consumption,” he says.

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CORPORATE SOCIAL RESPONSIBILITY

Raymond Chiu

A Canteen That Serves More Than Just Hotmeals

Poverty in Hong Kong is – by some measures – widespread. For some families, a daily hotmeal is sadly a luxury.

Launched about a year ago, the Hotmeal Canteen is a community project that aims to bring help to the financially strapped in the Sham Shui Po district of northwest Kowloon. Shirley Lau talks to its “customers”, volunteers and sponsors about how it works and finds out how lives are changed because of it

O

n a sweltering early evening in August in Sham Shui Po District, food shoppers surge out of a wet market carrying bags of fresh food and heading home for just another homemade dinner.

One street away, a group of people have a different meal plan for the evening. Sweating profusely, they wait patiently in a long queue outside a community center while chatting with familiar faces. They are a diverse group, consisting of elderly people,

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young and middle-aged adults, primary school children and wheelchair-bound persons. Yet they come for the same reason: to enjoy an affordable, healthy two-course dinner that costs HK$10.

“I come here five days a week with my wife. It’s nice here. It’s almost like a different world,” says a 70-year-old man who identifies himself as Leung.

“For $10, you get a meal with a soup, a hot dish and rice. Where else in Hong Kong can you get a deal like this?”

It is indeed a unique deal, offered

by the Hong Kong Council of Social Service (HKCSS) and CLP Power Hong Kong under the “Hotmeal Canteen” community project.

Launched just about a year ago, the second-floor canteen targets financially strapped residents in Sham Shui Po, a district with one of the lowest median monthly household incomes in Hong Kong. Since its inception, the 500-square-feet eatery has become a popular dining option for a growing number of locals who struggle to make ends meet.

biz.hk 9 • 2012

Photo: Create Images

Big help Every evening at around 6pm, the canteen, operated by HKCSS member Baptist Oi Kwan Social Service, opens its door to a long line of diners who have registered with the center declaring they are either jobless or on low income, and are not on social welfare.

By paying $10 at the reception desk, they get a dinner set prepared by Lily House Restaurant, a social enterprise affiliated with Oi Kwan. Those with financial difficulties can enjoy the

biz.hk 9 • 2012

dinner for free. Apart from hot meals, the center also provides computer facilities, job counseling service for those looking for employment, as well as traditional Chinese medical treatment.

While enjoying a fish filet and melon soup, Leung says the canteen has helped him cut down on living expenses by about 20 percent. A former bus driver who retired more than a decade ago, Leung and his wife live on a monthly allowance of $3,000 from their daughter. This allows the couple to spend an average of $100 per

day.

“That’s not a lot of money for two persons. We rely on it to pay for everything from bills to food to a piece of soap. But everything in Hong Kong is getting so expensive nowadays. A bowl of rice from a fast food shop near my home costs at least $6. Where do you find enough money to survive? This canteen is a big help to the community,” he says.

Leung’s home is a few minutes’ walk from Shun Ning Road, the northern part of Sham Shui Po where Hotmeal Canteen is located. The area

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is lined with public housing estates and low-rise buildings, many of which contain crowded, partitioned flats inhabited by low-income families or elderly people. There are plenty of fast food shops and small restaurants around, and an ordinary meal generally costs about $30, which is three times the price at Hotmeal Canteen. A $20 difference may sound a paltry amount, but not for many residents in Sham Shui Po. Official figures in 2010 indicated that the poverty ratio of Sham Shui Po was 22.4 percent, compared with the overall average of 17.9 percent in Hong Kong.

Meanwhile, a growing number of people across Hong Kong are struggling to eke out a living amid rising inflation and a yawning poverty gap.

The city’s Gini coefficient, an income inequality measure, has increased from 0.43 in 1971 to 0.537 in 2011.

According to HKCSS, 181 out of every 1,000 Hong Kong citizens fell below the poverty line in 2010, and the number of people with difficulty securing three meals a day has continued to soar.

prices rising, many are struggling to meet their basic nutritional needs.

The canteen project was launched with the aim of offering more than 30,000 nourishing hot meals to the needy in the space of 12 months.

Dietitians provided by CLP supervise the rotating menu. The idea of imposing a charge of $10, says Chiu, is meant to enable diners to “keep their dignity” knowing that they are consumers rather than free-riders.

As at July, some 18,300 meals had been served.

Of the some 140 people who come to the canteen on an average evening, more than 40 percent are aged 60 or more. Another 40 percent are younger people such as Sandra Yu, a single woman in her 30s. Since losing her office assistant job months ago, Yu has been skimping on food in order to save money. A typical meal for her was noodles at a fast food shop, and she often postponed lunch until tea-time just to further cut down on food expenses. Gradually she developed anemia from the unhealthy eating habit and fainted from time to time.

Nevertheless, since she started eating at Hotmeal Canteen, her health has shown remarkable improvement.

“Now I don’t faint anymore. I don’t have to spend money seeing the doctor and I can use the money to get more fruits. And because the food at the canteen is much healthier, I have a rosier complexion,” says Yu, who lives at a singles hostel run by the government.

But it’s not just the food that has changed things for the better. A sense of community at the canteen has also given Yu a more positive outlook on her future.

“One evening I got in too late and the $10 meal was sold out. I was a bit down. A friend I met at the canteen then dug into her pocket to buy me a dinner with roasted pork and rice. I said I would pay her back but she insisted it was her treat. That was a nice moment. You do get a sense of belonging here,” she said.

Dignity and strangers It was against this backdrop that the Hotmeal Canteen was born.

According to Oi Kwan’s program operator Raymond Chiu, the idea has evolved from a Wan Chai canteen project launched by Oi Kwan in 2009, with a view to providing an inexpensive dining option to working people hit by the global financial crisis.

“As the Wan Chai project proceeded, we were increasingly aware that many people who lived under the poverty line needed help on a continuous basis,” Chiu says. “Those affected by the financial crisis would emerge from it at some point. But some people seem to stay below the poverty line no matter what they do. They are in great need of help.”

According to Chiu, many grassroots families spend up to 40 percent of their income on food. With food

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A former wood carpenter who dines at the canteen five days a week with his 10-year-old daughter concurs. “It’s not just about physical health but also mental well being.

Many people in Hong Kong are a bit lonely. You go to work and then go home to eat alone. If you dine out, you don’t talk to the strangers sitting next to you,” says the unemployed man in his 50s, who identifies himself as Chan. “This canteen is different. It’s a community with a friendly atmosphere. You say ‘hi’ and talk to other people. It lifts your spirit.”

Chan’s daughter says she likes going to the canteen, not least because she can meet other school children and play computer games with them prior to dinner. Adults diners like Yu, on the other hand, use the internet facilities at the canteen to look for jobs. A job counseling team is on standby to provide job-searching support, which includes mock job interview, CV writing and job referral.

Another service involves healthcare, whereby two CLP employees who have been trained in traditional Chinese medicine offer basic health check and Chinese massage.

Two-way street Chow Lap-man, director of marketing and customer services of

CLP, says the benefits of the whole program are a two-way street. While the diners can enjoy an affordable meal and various add-on services, CLP’s employees who volunteer to help also have something to gain.

“There’s a notable improvement in their team spirit. Sometimes we may think work is a drag and making a living is not easy. But when you reach out to the community, you realize many people live a much harder life.

This helps you keep things in perspective,” Chow says. “As for CLP, a project like this helps improve our bond with the local community.”

But it’s not as if the canteen project has been without challenge. For one thing, it is not always easy to lure people on low income to come to the canteen as they may shy away from socializing or are secluded from the community. To promote the program, CLP’s volunteers have been paying door-to-door visits at residential buildings where there is a concentration of grassroots households.

“People who live alone tend to be more reluctant to talk to us. It takes time to open them up,” says Venus Tam, a CLP graduate trainee and one of the voluntary workers. “And we have to be careful not to appear condescending. They may be poor but they don’t want to be pitied. We have to stress that the hot meal has a price.”

Looking forward Another challenge has to do with inflation. According to Chiu of Oi Kwan, food prices have soared by about 30 percent since the canteen’s establishment a year ago, thus eating into the program budget. Fortunately, though, public donations have been growing in recent months and CLP has been matching the public donations dollar-for-dollar.

“In Hong Kong, poverty relief used to be something that involved poor people outside Hong Kong. But today we realize many people within Hong Kong need help, too,” Chiu says.

“When it comes to making donations, one tends to help those closer to home.

This partly explains the growth in public donations.”

Now with more funds, the project, originally scheduled to run for one year, is set to extend into next year at least. Chiu says there is a possibility of introducing the canteen to other districts in Hong Kong, but it depends on funding.

Meanwhile, diners like Leung at the Sham Shui Po canteen are enjoying their hot meal while it lasts. “I hope it will continue. If it has to end, it’ll end.

But it’ll mean we have to spend more money on food and cook in our hot, cubbyhole kitchen. I don’t look forward to that,” he says with a wry smile.

How you can help You can make a difference with your donation to the Hotmeal Canteen.

More details are available at www.clp.com.hk/hotmeal or the enquiry hotline (2864 2929).

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biz.hk 9 • 2012

2012 Oct

Mark Your Calendar Staying on the right track – What MTR needs to do

Oct to stay on course and take on future challenges

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Jay H Walder, Chief Executive Officer, MTR Corporation Jay Walder will reflect on the key factors that have helped make Hong Kong's rail network one of the best in the world and will explain what MTR needs to do to stay on the right track and take on future challenges.

Jay H Walder was appointed as CEO and a member of the Board of Directors of the MTR Corporation on 1 January 2012. He has had a distinguished career in the public transportation sector, including the rail industry in England and the US for more than 20 years. He began his career in 1983 at the New York Metropolitan Transportation Authority (MTA), holding various positions up until 1995, and returned in 2009 to become Chairman and CEO, overseeing an agenda of change at MTA that included numerous customer improvements.

Between 2001 and 2007, Walder was Managing Director (Finance and Planning) of Transport for London, where he was credited with the introduction of the successful and popular “Oyster Card” and with leading the development of transportation plans for London’s successful bid for the 2012 London Olympics.

Walder is on the Board of Advisors of the Taubman Center at Harvard University’s John F Kennedy School of Government and a member of the Visiting Committee for the Department of Civil and Environmental Engineering at the Massachusetts Institute of Technology (MIT).

Levi Strauss & Co's Lifecycle

Oct Approach to Sustainability

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Michael Kobori, VP, Social and Environmental Sustainability, Levi Strauss & Co Levi Strauss & Co embarked several years ago on a scientific lifecycle assessment of the environmental impact of two iconic products: Levi’s® 501 jeans and Dockers® Original Khakis. The results have changed their way of doing business and helped guide the company’s sustainability strategy.

In this presentation, you will learn more about: - results from this life cycle research - opportunities to reduce footprint on the environment - cotton growing, consumer care and sustainable design as key focus areas - product innovations that lead to positive impacts - why Levi Strauss & Co joined the Better Cotton Initiative Michael Kobori leads the development of LS&Co’s environmental vision and strategy as well as the company’s efforts to collaborate with other brands on sustainability and extend their standards throughout the supply chain, including mills and sundry suppliers.

Pharmaceutical Forum -

Oct Building Hong Kong a Genuine Medicine City

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Samuel Hui, Vice Chairman, HK General Chamber of Pharmacy Ltd Andrew Ki, Head of IP Investigation Bureau, HK Customs & Excise Dept Connie Lau, JP, Chief Executive, HK Consumer Council Alex Lam, Vice Chairman (External Affairs), Alliance for Patients’ Mutual Help Organizations Anita Leung, Partner, Jones Day Chris Costigan, Regional Director, Communication & Public Affairs, Janseen AP Roee Shahar, GM, Eli Lilly Asia, Inc (HK & Macau) Counterfeit drugs in Hong Kong have expanded from life-style to traditional Chinese medicines, over-the-counter and even life-saving drugs in recent years. In order to deter the fraudulent trades from harming the public health, AmCham’s Pharmaceutical Committee will host an informative cross-sector discussion forum amongst relevant stakeholders, aiming to exchange ideas and experience in building Hong Kong a genuine medicine city, and determine how different sectors can work together for effective public education, collaborative measures and law enactment initiatives.

Venue: Conrad Hong Kong Granville Room (Lower Lobby) Pacific Place 88 Queensway, HK Time: 12:00-2:00pm Fee(s): Member Fee: HK$520 Non Member Fee: HK$620 Corporate Table Fee (10-12pax): HK$6,300

Venue: AmCham Office 1904 Bank of America Tower 12 Harcourt Road, Central Time: 8:00 - 9:30am (Light breakfast included) Fee(s): Member Fee: HK$150 Non Member Fee: HK$250

Venue: Club Lusitano 27/F, 16 Ice House Street Central, Hong Kong Time: 2:00-5:00pm (refreshment included) Fee(s): Member Fee: HK$450 Non Member Fee: HK$550

PROGRAM (more speakers to be announced): Opening Remarks - Stephen Leung, Country Manager, Pfizer Corp HK Ltd Panel Discussion 1 - Current Situation: Counterfeits in Hong Kong Panel Discussion 2 - Closing the Gaps and Way Forward

For information, see website: www.amcham.org.hk

Tel: (852) 2530 6900

Fax: (852) 2810 1289

Email: kalau@amcham.org.hk

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