Hong Kong Business High Flyers 2022

HK$40

HONG KONG BUSINESS ANNUAL 2022 HIGH FLYERS

ANNUAL ISSUE

THE REGION’S ECONOMIC OUTLOOK FOR 2022

HONG KONG EDGES OUT THE FRANCHISE COMPETITION IN ASIA HONG KONG UNVEILS ROADMAP TO A CLEAN AND GREEN 2035

10 OUTSTANDING HIGH FLYERS MAKE THEIR MARK IN 2021

THE HIGH FLYERS AWARDS

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Contents Annual 2022

2022 OUTLOOK 6

Hong Kong property market ‘on the cusp of full recovery’ in 2022: JLL

10

Should Hong Kong’s brick-and-mortar retailers ride the e-commerce wave?

12

HKSAR joins the Global Powers of Luxury Goods Top 100

MOST READ IN 2021 16

A month-by-month review of Hong Kong’s top stories in 2021

6 10

COMPANIES AND INDUSTRIES 20

9 in 10 construction companies are SMEs

22

Ageing population escalates healthcare expenditure

24

How HK becomes a transport hub for Asian urban centres

26

Foreign licensors prefer HK licensing agents as partners

28

‘Trade disintermediation’ poses threat to HK trading

30

HK spectacles makers vs ASEAN neighbours

32

Trends shaping Hong Kong’s electronics industry growth

34

Foreign policies trouble HK packaging manufacturers

36

Hong Kong edges out the franchise competition in Asia

38

Digital printing takes centre stage in Hong Kong

40 Hong Kong unveils roadmap to a clean and green 2035

12

Contents Annual 21

2022

High-Flyers 2021 44

Archikris Design Group

46

Elite Concepts Ltd

48

FEED HK

50

Fidelity International

52

Hang Seng Bank

54

Mayer & Associés

56

PrimeCredit Limited

58

Soteria Trust

60

Standard Chartered Bank

62

UMP Healthcare Holdings Ltd

46 48

50

52

60

62

ANNUAL 2022

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PROPERTY OUTLOOK

Hong Kong property market ‘on the cusp of full recovery’ in 2022: JLL

Thanks to the strengthened demand in the retail and industrial property sectors, since 2021.

The office market of Hong Kong has entered the last phase of the current down cycle

P

roperty analysts all have the same general outlook—the Hong Kong property market will see recovery in 2022, following the sustained economic growth in 2021; and despite the threats of the COVID-19 Omicron variant.

CBRE Executive Director Marcos Chan said that the higher chance of partial resumption of cross-border travel with Mainland China would boost the retail and business activities in the city, whilst business spending will remain “largely prudent despite increasing levels of corporate activity.

“The positive business outlook will see leasing demand strengthen in the retail and industrial property sectors and result in moderate rental and capital value growth, but the office sector is bounded by the upcoming supply boom, with rents poised to only stabilise in 2022 after a sharp decline from 2019 to 2021,” Chan said.

JLL, meanwhile, said that the residential and industrial centres have overcome capital value corrections in 2020.

It added that the whole property market of Hong Kong is “on the cusp of full recovery in 2022,” but only at a moderate level.

Office rents enter recovery The office market of Hong Kong has entered the last phase of the “current down cycle and is on the cusp of recovery in the near future,” Alex Barnes, head of Agency Leasing at JLL Hong Kong said, adding that overall it is 6 HONG KONG BUSINESS ANNUAL 2022

The office sector is bounded by the upcoming supply boom, with rents poised to stabilise in 2022

expected to rise 0% to 5% next year.

Gross leasing volume is seen to improve next year, supported by the resumption of travel with mainland China, he said, but “the vacancy rate will edge higher as there will be a considerable amount of new office supply slated for completion in 2022.”

In the first 11 months of 2021, net absorption in the overall Grade A office market of Hong Kong was at -643,400 square feet (sq. ft.) but there was more expansion in the recent month and some tenants retract surrendering of their office which shows improving sentiment, JLL said. The overall vacancy rate was at 9.6% by end-November from the peak of 9.8% in September.

Amongst the submarkets, JLL expected rent in Central is the strongest, rising by 5% to 10%, following a 1.2% rebound after a 3.2% dip in the first half of the year. Rent in the Tsimshatsui submarket is also seen to increase up to 5% in 2022, whilst Wanchai/Causeway Bay, Hong Kong East, and Kowloon East were seen to decline by around 5%.

Wendy Lau, executive director and head of Hong Kong Office Services at Knight Frank, said in a report that they also expect Grade-A office rents to increase 5% to 10%, especially in Central, Admiralty, and Wan Chai districts. Lau also said that there will be a new supply of over 2.8 million sq. ft. of office space in the next two years, most of which will be in Central and Quarry Bay. Knight Frank also said that whilst the pandemic and work-from-home arrangements will affect the office rents, its global (Y)our Space Report showed that around 70% of Hong Kong enterprises plan to increase their office footprint in the next three years.

Cushman and Wakefield Executive Director and Head of Office Services Hong Kong Keith Hemshall said that overall availability of Grade A office space is expected to increase to 16% to 17% by year-end and average rents to drop by 1% to 3%, with the completion of over 2 million sq. ft. of office space Two Taikoo Place in Hong Kong East, 98 How Ming Street in Kowloon East, and Airside atop Kai Tak MTR Station.

“That said, we expect that anticipated border reopening will drive an improvement in the economy and the demand for office space will increase with an estimated net take-up of 300,000 – 500,000 (net floor area) for 2022. We expect banking & finance, insurance and business centre/co-working to continue to be active,” he said.

Alan Yau, partner and head of Real Estate Hong Kong at KPMG China, said leasing demands will continue to improve for Hong Kong next year. Despite the continuing adoption of a hybrid model of work set up in some companies, Yau said that small and medium-sized organisations are still relying on physical setup.

For the office sector, leasing momentum is expected to improve if cross-border travel with Mainland China

PROPERTY OUTLOOK partially resumes, despite the uncertainties posed by the spread of Omicron, said Ada Fung, executive director, head of Advisory & Transaction Services–Office Services at CBRE. Grade A office rents are expected to remain “largely stable” through the year.

Overall rents in Hong Kong will remain flat, following a decline of 7.3% in 2021. Greater Central and Kowloon East were the only submarkets expected to see an up to 5% increase in rental change, whilst Wanchai, Causeway Bay, Hong Kong East, and Tsim Sha Tsui were seen to decline up to 5%.

‘Fairly resilient’ industrial sector Samuel Lai, senior director for Advisory & Transaction Services–Industrial & Logistics at CBRE, said there were more expansion requirements in the industrial sector in 2021 compared to the previous year, driven by thirdparty logistics (3PL) operators that accounted for over 50% of the leasing activity.

“With a possible demand recovery from retail-related trades, leasing demand from 3PLs is expected to pick up. We also see a sustained and growing leasing demand from the tech and healthcare sectors,” Lai said, adding that industrial property is set to be the best performing commercial sector with limited space available for rental growth this year.

The warehouse sector rents rose 3.9% in 2021 and were expected to increase by 5% to 10% this year. Flatted factories and industrial or office sector rents rose by 1.3% and 0.2%, respectively, last year. New supply for the warehouse sector is seen to reach about 1.4 million sq. ft. in 2022, compared to 90,000 sq. ft. in the previous year.

Yau also noted that industrial property and logistic warehouses “continue to be fairly resilient” because of e-commerce.

“I think high-end warehouse space in Hong Kong is fairly limited,” he said. “The quality, convenient locations for logistic warehouses [are] highly sought after. That also implies the rent for these logistic warehouse spaces will be going up.”

He also noted that in recent months, old logistic

With a possible demand recovery from retail-related trades, leasing demand from third-party logistics is expected to pick up

Investors are reallocating their capital to income-resilient assets or properties that have the potential to be repurposed

warehouses are being converted into data centres and cold chain storage space, noting that data centres would be a “very hot property” in the next few years.

JLL noted that total investment volumes in Hong Kong rose 52% YoY to $96.8b in 2021, with investors reallocating their capital to “income-resilient assets or properties that have the potential to be repurposed.

This boosted investment volume into industrial properties by 217% YoY to $33.6b, accounting for 35% of total investment volumes and the highest across all property sectors.

Improving rents for retail Vacancy rates of High Street shops and Prime shopping centres are expected to improve next year, forecast to rise 5% to 10% and 0% to 5%, respectively, according to JLL. This is following a decline in preliminary rent value for High Street shops in 2021 at 6.9%, and 2.1% for Prime Shopping Centres.

“We believe the overall rental correction has reached the cyclical bottom, though some adjustments will likely continue in some areas of major shopping districts to accommodate the structural change of the market,” Jeannette Chan, Senior Director of Retail at JLL in Hong Kong, said.

JLL noted that the improved leasing sentiment in Hong Kong has led retailers to commit to longer lease terms and more brick-and-mortar shops at affordable rents.

Whilst luxury brands had been the “most aggressive tenants over the decade, there has been a structural change in the retail dynamics in the market switching to mid-to-mass market retailing from luxury, it said. JLL added that luxury fashion and accessories brands are reducing their flagship stores and some are looking at opportunities through pop-up stores.

Cushman & Wakefield’s Executive Director, Head of Retail Services Hong Kong Kevin Lam said the consumer market is expected to improve further in 2022 following the gradual recovery of the domestic economy and employment rate, with vacancy seen declining. He added that overall high-street rents will “likely recover” more in the first half of the year between 2% to 5%, with the Central district recovering by 5% to 8%.

The reopening of borders will also support major brands’ expansion plans, he said. “​​However, a net population outflow is expected at the initial stage of the border reopening, bringing short-term pressure on retail sales, and particularly impacting food and beverage (F&B) businesses during weekends. Accordingly, the return of tourists and their related consumption activities will drive recovery in the longer term. The wellness and athleisure trends we saw driven by the pandemic are expected to continue in 2022.”

CBRE also expected retail rents to increase by about 5% if there will be no major outbreaks that will lead to tightening of social distancing which could pull back leasing demand, according to Lawrence Wan, senior director for Advisory & Transaction Services–Retail. He added that F&B, particularly Japanese cuisine, is still the most active sector in the leasing market last year.

“Mass market brands and necessity item retailers

HONG KONG BUSINESS ANNUAL 2022 7

PROPERTY OUTLOOK have been relatively more positive. Improved market sentiment has seen some landlords holding a firmer stance in terms of rental asking. Therefore, vacancy might stay high as the expectation gap between landlords and tenants widens,” he said.

New supply in prime shopping malls was expected to reach 1 million sq. ft. in 2022 from 184,200 sq. ft. in 2021, it said.

KPMG’s Yau said that the retail market is “fluid at the moment,” with malls in prime locations filled compared to 12 to 18 months ago. However, for the luxury retail sector space, there is still significant pressure to try to downsize operations unless international travel restrictions are lifted. “​​The projections of the restriction from international travelling and the uncertainty arising from when the border will be open creates a lot of unfavourable factors for these retailers to continue to expand their footprint especially in a very expensive retail environment in Hong Kong,” he said.

For Knight Frank’s Helen Mak, senior director and head of retail services, rents for the retail market are seen to stabilise in 2022, adding that it expects experiential retail to become the “next biggest trend” as retailers can not rely on products alone to steer sales.

Rise in residential rents, price With the economic recovery, preliminary data showed that capital values of mass residential rose by 4.4% in 2021, whilst luxury residential increased by 7.2%. The luxury residential rents also increased by 3.2% during the period due to upgrading because of the work-fromhome arrangement.

JLL said residential sale transactions rose about 28% at a monthly average of 6,374 deals from January to October, from the monthly average of 4,990 deals in the previous year. “If the trend continues, the average monthly transaction volume will reach the highest since 2013.” JLL Hong Kong Chairman Joseph Tsang said that for 2022 mortgage rates are expected to remain low despite the possible rise of interest rate.

“New private housing supply will remain low in the medium term, with private residential units that have commenced construction dropping noticeably since 2020 after the government changed the public to private housing supply ratio to 70:30 in 2018. It will support the capital values of mass residential to stay firm and grow 0% to 5% next year, whilst luxury residential prices and rents will also climb 0% to 5%,” he said.

For Knight Frank, the residential market in Hong Kong is expected to grow 3% in prices in 2022, following the recorded largest increase in 2021 since 2019. Martin Wong, director and head of Research and Consultancy in Greater China also said that the anticipated opening of the border to mainland China will also allow room to boost the luxury housing prices, increasing by 3% to 5% next year.

“Hong Kong will continue to maintain a low-interest rate environment in the next 12 months, encouraging more buyers to enter the market, with some secondhand purchasers moving into the primary market,” Wong said.

8 HONG KONG BUSINESS ANNUAL 2022

The retail market is “fluid at the moment,” with malls in prime locations filled compared to 12-18 months ago

Rents for the retail market will stabilise in 2022, and experiential retail will become the “next biggest trend”

Knight Frank expected mass residential prices to increase 0% to 3% and rents to climb 2% to 3%, whilst luxury residential prices will increase 3% to 5% and rent by 2% to 3%. Wong also said that total transactions volume in 2022 may fall back to 60,000 to 65,000, with the primary market making up 30% of it.

JLL’s Tsang also said that with the Northern Metropolis development plan, there is a need to develop an additional gross residential floor area of 400 million sq. ft. to meet the government’s vision of housing 1.54 million people.

Cushman & Wakefield Director in Hong Kong Keith Chan said they expect the residential market to continue to prosper in 2022, following an active market in 2021, reaching nine-year high transaction volumes. They expect around 18,500 private units available.

“The high base number of 2021, combined with a shrinking stock of small-value units, will likely diminish the 2022 transaction volume by around 10% YoY. However, an improved economic environment will likely drive a further rise in home prices. We anticipate home prices to climb by around 5% to 10% next year. Luxury homes in urban areas will likely benefit more,” he said.

KPMG’s Yau also said that Hong Kong remains to be one of the most expensive residential markets globally.

There is still demand in New Territories where presale is very active.

Investments Antonio Wu, Knight Frank’s head of Capital Markets, Greater China, said that the overall investment climate “picked up” in 2021 with a total of 136 deals made, compared to 97 in 2020, adding that en bloc industrial and retail properties accounted for the biggest percentage of the $70b transactions. Hotel property also saw strong sales activity in the second half of the year, he said.

“Moving forward to 2022, we believe there will be growing investment interest in funds/private equity

PROPERTY OUTLOOK funds, residential, data centres and hotels. We foresee Chinese mainland developers selling properties due to their financing positions, which will increase supply in the market,” he said.

Meanwhile, Oscar Chan, JLL Hong Kong’s head of Capital Market stated that they expect hotel assets to remain as the focus of investors in 2022 and aged assets for compulsory sales. Sales of hotels, particularly mid-low end hotels with easy access to MTR station were active in 2021, with investment considerations for en bloc hotels skyrocketing by 198% YoY in 2021 as investors mull converting them into rental housing, according to JLL. Chan said the sales momentum of industrial properties will be moderate “as the capital values have been lifted considerably by strong capital inflows this year.” Its capital values for 2022 are expected to increase from 0% to 5%.

Grade A offices capital values, meanwhile, are also seen to rise 0% to 5%, whilst High Street shops will rise 5-10% in 2022 due to rental recovery.

Cushman & Wakefield’s Head of Capital Markets Hong Kong Tom Ko said that total major transactions volume in 2022 to surpass 2021 levels and reach 200 deals worth $100b, with industrial buildings, residential development sites and multi-family conversions to be the “three key pillars” of the investment market in 2022.

He also said that the demand for industrial buildings, which reached a historic high last year will continue in 2021. He noted that investors worldwide were attracted to multi-family conversions, such as serviced apartments and hotel properties, which were expected to benefit from the revival of tourism, adding that the proposed lower threshold for compulsory sales will “trigger to more development site transactions in 2022.

Challenges There were a number of international funds that have completed new rounds of fundraising of their investment cycle in the next few years, following a muted activity of over a year. Property firms, however, will be competing in securing limited stock of assets in the city, Cushman & Wakefield’s Chan said.

The spread of Omicron would have a significant impact for office and retail leasing as tightened social distancing measures may lead to lower retail sales prospects

Hotel assets will remain the focus of investors in 2022 and aged assets for compulsory sales

“The challenges, therefore, come from the ability to make competitive offers, and timely decisions,” he said.

“It is advised that property firms should form a clear investment objective and target beforehand, and structure deals in their most comfortable way, with the right balance of equity and debt.”

Yau, meanwhile, said that liquidity is of “paramount importance” for property firms. He said that they should make sure to have enough liquidity to service various demands like capital expenditure, interest, and loan repayment burden. Creating flexibility in leases is also a key in managing assets for landlords, he said.

“I think developers will try to use different strategies to offload these inventories. For instance, they allow buyers to lease for the first maybe two to three years before the actual property is handed over. So these create a lot of flexible arrangements to buy or to commit to acquiring properties from developers. And that sort of flexibility will continue in the next year,” Yau said.

Maintained positive outlook The coronavirus situation may also come into play and remain to be amongst the key risks for 2022 for the sector especially the Omicron variant, he said.

Despite the threats of the spread of the highly transmissible Omicron variant, property analysts maintained their projection of improving rents across the property sectors.

Martin Wong, director and head of research and consultancy for Greater China at Knight Frank said the spread of Omicron would lead to a reduction in residential transaction volume in the short term due to reduced viewing/inspection activities and slowed down launch of new sales project, but the impact on price will be limited as seen in previous increase in cases.

However, there would be a more significant impact for office and retail leasing as some companies may delay their new leasing or expansion and tightened social distancing measures may lead to lower retail sales prospects. But the impact on office and retail rents would be limited, Wong said, as a reduction in rent “would not help those businesses to take up space if they have concern on their business prospects.”

“Based on the above reasons and given Omicron is not widely impacting the Hong Kong community as in the other cities, we maintain our previous forecasts,” he said.

Nelson Wong, head of research at JLL in Greater China, also said that they maintain their projections, but noted that the property market in general “will likely bump along the bottom longer instead of edging up,” depending on the longevity of the fifth wave.

He said that the retail sector may be hit harder because of the “disproportionate disruptions” it may face, whilst the residential sector will be less active due to stricter distancing measures affecting developers’ sales campaigns.

The office sector, meanwhile, would be the least effective, Wong said, noting that the positive momentum especially in the Central “will likely continue unless this fifth wave is considerably prolonged.

Cushman & Wakefield’s Chan also believes that “the directions remain largely unchanged” but the Omicron breakout would prolong the recovery process.

HONG KONG BUSINESS ANNUAL 2022 9

RETAIL OUTLOOK

Should Hong Kong’s brick-and-mortar retailers ride the e-commerce wave?

Retailers will need to cater more to the 62.1% of Hong Kongers who prefer to shop in-store, expert says.

O

nline sales accounted for 6.3% of total retail sales in 2020, according to PwC, which saw a “very modest” increase to 7.4% as of September 2021. Analysing this, a PwC executive said that Hong Kong retailers may have fallen short.

“If you look at the actual amount of online sales, we’re talking about only 7% of retail sales overall. Hong Kong retailers are still not doing that much of moving their business models into online-to-offline (O2O),” Michael Cheng, Asia Pacific, Mainland China and Hong Kong Consumer Markets Leader for PwC, told Hong Kong Business in an interview.

Although online sales in the city have the potential to reach over 10% in the next two to three years, this is still behind China’s retail industry that now has a target of over 25%. Cheng added that businesses will still rely more on brick-and-mortar stores to generate revenues more instantly even as retailers change their business models to improve their online operations.

“As the city returns to more of a business-as-usual, Hong Kong retailers will still continue to see their physical stores as the main generator of business, at the expense of online expansion,” he said.

Data from Centaline Commercial, as cited by PwC, showed that volume transactions in the industrial and commercial store market have risen by 56% and 83% year on year, respectively.

“To some extent, you cannot blame them because this is how they used to make money in the past and

62.1% of consumers in Hong Kong either strongly agree or agree that they would shop in-store to create experiences

10 HONG KONG BUSINESS ANNUAL 2022

Hong Kong retailers are still not doing that much of moving their business models into online-to-offline

they believe this is the most efficient and effective way in a very short time period,” Cheng said, adding that in the long run, this will call for retailers to make a “very drastic and very determined way to change the habit of making both online and offline practical and feasible to the customers.”

Pop-up retail scene The declining cases of infections have encouraged retailers to set up shop in physical spaces after a challenging 2020 and 2021 when the vacancy rate of street shops recorded a rate of over 10%.

“They are playing around with more pop-up stores.

And they’re also looking at how they can work with the shopping malls and the retail property players in creating those new experiences, so that, I think, is definitely something we will continue to see in 2022,” Bailey said.

Herbert Yum Research Manager at Euromonitor International added that as Hong Kong continues to return to normal, retailers will likely allocate more budget on both experience and pop-up stores.

In its Voice of Consumer Survey: Lifestyle 2021 report, Euromonitor found that 62.1% of consumers in Hong Kong either strongly agree or agree that they would shop in-store to create experiences. Some 46.4% have also agreed that it is important to spend money on in-store shopping experiences.

“It is expected such consumer sentiment will continue in 2022, hence retailers would need to rethink how they could enhance both online and offline shopping experience to better capture the consumer spendings,” Yum noted.

PwC’s Cheng, meanwhile, said that pop-up stores in Hong Kong have emerged as retailers have responded not just to the pandemic, but also to the impact of social unrest in the city back in 2019.

“We definitely see the risk in having very large stores concentrated in major shopping centres. That’s why you will see a lot of brands moving out of the main shopping hubs,” Cheng said, adding that retailers will likely move towards smaller stores, like pop-ups, where rents are lower and leases are relatively short.

Consider omnichannel KPMG, likewise, projects the Hong Kong retail industry will see an uptick in 2022 as travel expectations remain despite the emergence of new COVID-19 variants.

But for KPMG Head of Consumer & Retail for Asia Pacific Anson Bailey, said traditional retailers that are looking at setting up their online platforms will particularly become 2022’s “big winner.”

His retail clients in Asia, for instance, have seen the share of online sales double or even triple from what used to be only around 5% to-10%. And in this light,

RETAIL OUTLOOK the next two years to capture Gen Z, 27% have already adopted a strategy, whilst another 27% of businesses remain uncertain.

Amongst these strategies include optimising the mobile experience, providing personalised and interactive experiences, leveraging microinfluencers and user-generated content, using video communication, promoting corporate social values and sustainability, and prioritising authenticity.

Retailers need to keep their eyes on Millennials and Gen-Zs because of their willingness to spend

he expects that retailers will manage to sustain their e-commerce momentum.

“We’re going to continue to see the new norm; and as I said, it’s also going to come down to convenience as consumers now realise that online can be very quick and convenient,” he said.

“Of course, people still want deep, immersive in-store experience. And I, absolutely, think that is going to be very, very important. But they’re going to want to have this omnichannel solution where potentially it is offline, but significantly, it is going to be online as well.”

Rise of the Gen Zs On the consumer side, the two age groups that retailers need to keep their eyes on are the Millennials and the Generation-Zs, not just because they are more techsavvy, but also because of their higher-income coupled with their willingness to spend. Euromonitor noted brands need to develop agile and user-friendly online marketing and retailing channels to better tap into these consumer groups.

Based on KMPG China’s estimates there are around 300 million millennial consumers in China and roughly the same number of Gen Z, who could be more active online as well.

“They’re really into social media, they love live streaming. And equally, they are also looking at you through a new lens as they strongly believe in everything around purpose areas, such as ESG (Environmental, Social, and Governance),” Bailey said.

Retailers, he advised, need to be ready to deal with this consumer group, particularly Gen Z, who have a far greater focus on the health and wellness of consumers and the planet in terms of selecting their products.

“These new Gen Z consumers are very digitally minded, tech-savvy, and very media savvy. And they’re also far more socially aware. So, they’re now asking a lot of questions about brands, and challenging the brands as well,” he said.

“I don’t think they have any issue with calling out those brands.”

In its Retail’s Realignment report, conducted with GS1 HK and HSBC, KPMG found that 46% of businesses are looking at developing a new strategy in

The 2022 retail sales outlook will depend largely on the reopening of the border between mainland China and Hong Kong

Retail in the year ahead The 2022 retail sales outlook will depend largely on the reopening of the border between mainland China and Hong Kong. PwC’s Cheng noted that if the border reopens in the third quarter of the year onward, retail could increase by at least 10% to 15%, compared to 2021. But, if the border remains closed, Cheng noted, that retail will likely see a “very limited increase” between 2021 and 2022.

Hong Kong’s retail sector was supported by the improved sentiment of local consumers as well as the easing of restrictions imposed on restaurants and food and beverage retailers. The government’s $5,000 consumption voucher scheme also stimulated consumer spending. Using the baseline population of about 7 million, Cheng estimates the vouchers cost the government some $35b, which is almost equivalent to 10% of annual retail sales.

However, Cheng said the entire amount may not have gone to Hong Kong’s retail market, as the HK$5,000 voucher was likely used to purchase daily consumer goods. “It will only partly contribute to additional spending, as most consumers are treating this as a separate payment option, rather than an incentive to increase spending on high-value items like a luxury,” he said, noting that by his rough estimates only half of the HK$35b fell to Hong Kong’s retail market.

In a report, Euromonitor International forecast that retail sales in Hong Kong could reach $518b in 2022.

According to its Retailing 2022 report, the doubledigit growth will be driven by the expected recovery of tourists in the second half of the year as well as the strong advertising and marketing campaigns of retailers to stimulate domestic consumption.

Moreover, retail sales growth will also benefit from the rapidly growing e-commerce and online marketing campaign that will likely continue in 2022.

Euromonitor International’s Yum expects the retail sector will continue to rethink its retail focus in terms of online or offline, as borders are expected to reopen and bring in more tourists.

“Once the tourism flow returns, the investment would need to, once again, flow back to store-based retailing,” Yum said.

“This does not necessarily mean that the pre-COVID style of store-based retailing would return, instead, how retailers and brand owners could add additional functions or experiences through physical and digital enhancement in physical space, combined with the e-shops and online retail strategy, would be the key challenge to them in 2022.”

HONG KONG BUSINESS ANNUAL 2022 11

INDUSTRY BRIEFING: LUXURY GOODS

The Chinese companies in the Top 100 that saw a double-digit decline in luxury goods sales for 2020 included Chow Tai Fook Jewelry Group Limited

HKSAR joins the Global Powers of Luxury Goods Top 100 Chow Tai Fook Jewelry Group from China/Hong Kong SAR was amongst the top 10 luxury goods companies on Deloitte’s list.

T

he share of China and Hong Kong in the top 100 luxury goods sales increased by 1.8 percentage points to 8.9% in the financial year 2020, according to Deloitte’s Global Powers of Luxury Goods 2021 report.

With the entry of China National Gold Group Gold Jewellery Co. and the Guangdong CHJ Industry Co., a total of nine China (including Hong Kong Special Administrative Region [SAR])-based vertically integrated jewellers joined Deloitte’s list for 2021.

However, the nine companies reported a 12.3% year-on-year composite decline in 2020 luxury goods sales revenue, with only Lao Feng Xiang achieving growth, Deloitte data showed.

“Seven of the nine Chinese companies experienced doubledigit percentage falls, due not only to the COVID-19 pandemic, but also to a surge in the international gold price that dampened the retail demand for gold products, and

12 HONG KONG BUSINESS ANNUAL 2022

The clothing and footwear sector accounted for the largest percentage of sales in the Top 100

weak performance in Hong Kong SAR as a result of social unrest and a contraction in the local economy affecting tourism and local sales,” it said, but noted that the seven largest companies remained profitable.

The Chinese companies in the Top 100 which saw a double-digit decline in luxury goods sales for 2020 were Chow Tai Fook Jewelry Group Limited (China/HK SAR), China National Gold Group Jewelry Co. Ltd. (China), Chow Sang Sang Holdings International Limited (China HK/SAR), Luk Fook Holdings (International) Limited (China/HK SAR), Chow Tai Seng Jewelry Co., Ltd. (China), Tse Sui Luen Jewelry (International) Limited (China/HK SAR), and Zhejiang Ming Jewelry Co., Ltd. (China).

Guangdong CHJ Industry Co., Ltd (China), meanwhile, saw a single-digit decline of 7.7% in luxury goods sales.

The composite net profit margin

for the China-based companies was at 4.2%, 1.7 percentage points lower than last year.

According to Deloitte, the top 100 companies have an aggregate luxury goods sales of $1.96t (US$252b) in 2020, lower than the about $2.2t (US$281b) in the previous year following the, reflecting the impact of the pandemic which lead to the closure of stores, shifts in consumer demand, and supply chain disruption, amongst other factors.

France accounted for the largest share in the Top 100’s percentage of luxury good sales at 28.1%, followed by the US at 18.8%, Switzerland at 12.6%, Italy at 11.3%, the UK at 9%, Japan at 4.2%, Germany at 1.2%, Spain at 1%, and other countries at 4.9%.

The nine markets were included in the geographical analysis given the “high concentration” of luxury goods companies headquartered in Europe, the US, and the largest markets in Asia, Deloitte said.

Whilst sales for many companies come from outside their country of origin, it said that all of the companies’ sales will be attributed to the company’s domicile country.

Luxury goods in the report referred to goods for personal use such as designer clothing and footwear, bags and accessories including eyewear, jewellery and watches, and prestige cosmetics and fragrances. The top 100 were included according to their consolidated sales of luxury goods in 2020.

The clothing and footwear sector accounted for the largest percentage of sales in the Top 100 at 33.6%, followed by jewellery and watches at 28.4%, cosmetics and fragrances at 17.4%, multiple luxury goods at 15.7%, and bags and accessories at 4.8%.

In the top 10 Chow Tai Fook Jewelry Group Limited from China/Hong Kong SAR fell to Top 10, dropping two places from the 2019 list as its luxury goods net sales declined by 14.7%, reaching about $56b (US$7.2b).

“The group had a stable performance in the first half of

INDUSTRY BRIEFING: LUXURY GOODS Luxury goods companies are putting more emphasis on adopting digitalisation and sustainability goals, which are driving fashiontech investments

Top 100 share by country, FY2020

Source: Deloitte

FY2020, supported by steady growth in mainland China, but sales fell in the second half, due to a surge in the international gold price that dampened the retail demand for gold products, a weak performance in Hong Kong SAR, and the impact of the COVID-19 pandemic in [the fourth quarter] (Chow Tai Fook’s financial year-end was end-March 2020),” according to Deloitte.

Deloitte added that the company shut about one in five of its Hong Kong stores, the majority of which are in the prime tourist areas because of the ongoing demonstrations and protests, and the declining number of visitors from Mainland China.

Chow Tai Fook Jewelry Group revenue also declined in all product categories, with platinum/karat gold products delivering the best performance due to the launches of more contemporary collections and fixed-price gold jewellery.

Meanwhile, its gold products slipped 16.3% mainly due to gold price volatility and gem-set jewellery declined 17.5% “in the challenging macroeconomic environment.”

Deloitte also noted that the group continued expanding its owned and franchised retail network, opening over 700 new points of sale in Mainland China, bringing its total number of stores by end-2020 to 3,850 and another 1,139 shop-in-

shop/store corners. It also saw its e-commerce retail sales grow by 3.4%.

The group completed its acquisition of Enzo Jewelry in January 2020. Enzo Jewelry has 59 points of sale in Mainland China and is also present across e-commerce platforms there including Tmall, JD.com, and VIP. com.

France-based LVMH Moët Hennessy-Louis Vuitton SE topped the Top 100 list of luxury goods companies with $264.6b (US$33.98b) luxury goods sales in 2020, followed by another France-based company Kering SA with $116.3 (US$14.9b), and USbased company The Estée Lauder Companies Inc. with $111.3b (US$14.3b).

Swiss company Compagnie Financière Richemont SA ranked fourth with $102.66b (US$13.18b) sales, France-based L’Oréal Luxe came fifth with $90.35b (US$11.6b) sales, and the UK-based Chanel Limited ranked sixth with $78.7b (US$10.1b) sales.

Italy’s Essilor Luxottica placed sixth with about $68.5b (US$8.8b) sales, whilst US’ PVH Corp. climbed a place to rank eighth with around $65.3b (US$8.4b), and France’s Hermès International SCA rose two places to ninth place with about $56.7 (US$7.3b) sales, according to Deloitte.

‘Breakthrough’ luxury Deloitte said luxury goods companies are also undergoing changes in their operations and are putting more emphasis on adopting digitalisation and sustainability goals in the industry, which “are driving fashion-tech investments.”

“Increasingly, luxury goods companies are changing their approach and mindset, incorporating sustainability and digitalisation into their long-term strategies, to align with consumers’ demands and new regulatory requirements,” it said.

“They are focusing more on sustainability in the design and production of luxury goods, and at the same time are accelerating the adoption of digital solutions to engage with consumers and deliver luxury shopping experiences using technology,” it added.

Deloitte said luxury goods companies are setting environmental targets for the future, prioritising the offsetting of carbon emissions, noting that ways to go about this are by being more sustainable in design, production, distribution, and communication.

They are also looking at using technology to develop environmentally-new products.

“Luxury companies are exploring the use of biomaterials, not only for apparel or shoes, but also for cosmetics and beauty products. The use of biotech could give a boost to sustainable production methods, reducing the negative impacts of sourcing raw materials (intensive farming, extraction, and fishing),” it said.

The companies collaborate mostly with startups that are specialising in biotech, it said.

Deloitte noted that biomaterials, natural material, or synthetic material created through interaction with biological systems, are already being used in other industries for different uses. It noted that technology is used to create new material with minimal environmental impact but has great material output and design.

It also added that the growing market for pre-owned “vintage” watches is one way for the companies to engage with new

HONG KONG BUSINESS ANNUAL 2022 13

INDUSTRY BRIEFING: LUXURY GOODS Luxury brands are sold online to consumers through different business models

Gen Alphas are expected to become a generation of consumers with large spending power and the key to future success for luxury goods brands

Source: Pudae eatumque sunt

customer segments and foster circularity or reuse. It will also provide consumers with a sustainable and accessible way of buying luxury watches.

Luxury goods companies are also delving into the market for non-fungible tokens (NFTs) which represent a digital item or asset through blockchain technology, Deloitte said, noting that this endeavor presents several opportunities for luxury companies.

NFT serves as a tool to verify the authenticity of an item as blockchain helps trace the origin

of an item including its history and previous owners, allowing a product to be easily transferred, traced, and resold. It can also be used to sell digital collectibles such as limited edition or “one-of-akind” pieces of art, it said.

The tokens were also being used to create digital skins for avatars in video games, a popular activity for Gen Zs. Deloitte said that an important aspect of “virtual luxury” is its viability and accessibility.”

“Entering the gaming world is a way for luxury houses to speak to the younger generations, who will

programs which could help deliver “high quality, flexible, reliable, eloitte said that 2021 was brand-centric e-commerce business a disruptive year that has models,” were also amongst the “driven luxury e-commerce key factors. past the tipping point” for it to become Deloitte said the reluctance of a vital part of the omnichannel luxury brands to sell online and distribution strategy of global players. rely on physical boutiques and The key factors that have driven multi-brand third-party retailers e-commerce strategies in the sector was due to their desire to “desire include the growing consumer to retain control over the defining demand for luxury e-commerce due elements of the luxury identity to the pandemic and the increasing of their brands, and their lack of importance of younger consumers capability to deliver the defining such as Millennials and Gen Z for elements online. luxury goods sales.

Farfetch and YOOX NET-AIt also cited China’s rapidly growing PORTER Group were the leading share of global luxury sales and other e-commerce players in Western new geographic opportunities and markets, whilst Alibaba’s Tmall Luxury Pavilion is the leading the partnerships with major luxury e-commerce players and social media player in China and other Asian markets. providers such as WeChat mini-

LUXURY E-COMMERCE

D

14 HONG KONG BUSINESS ANNUAL 2022

be their most important customers in the coming decades and creating appeal by modernising their brands,” it said. “Collaborations between luxury goods firms and gaming companies offer the opportunity to create parallel streams of revenues thanks to capsule collections that can be found first in a game and are then sold in real life.”

Luxury industry players are now gearing up for their next steps by studying Gen Alpha or those born since 2010, as Gen Z has already entered the market and brands are already accustomed to dealing with them and the Millennials.

Deloitte said the generation is composed mostly of children of Millennials and are raised according to their parents’ values, noting that they are living in a “digitalised economy and a globalised world.”

“Gen Alphas are expected to become a generation of consumers with large spending power and the key to future success for luxury goods brands may lie in gaining their loyalty from an early age,” Deloitte said.

“As the consumers of the future who were born in a digital age, Gen Alpha will be exposed to luxury brands from a very young age through social media, through their peers, and through the habits of their millennial parents,” it added.

Top 10 luxury goods companies by sales, FY2020

Source: Deloitte

HONG KONG BUSINESS ANNUAL 2022 15

TOP NEWS IN 2021

MOST READ

Daily news: www.hongkongbusiness.hk Also amongst the top 10, in this particular order, are Swire Properties, LVMH, HK Electric, Richemont, Morgan Stanley, UBS Bank and J.P. Morgan.

Moreover, the 2021 research found drivers for employee value proposition are the company’s financial health, job security, and a good reputation.

Hong Kong poised to become ‘Nasdaq of the East’ Hong Kong’s equity market is expected to turn itself into the “Nasdaq of the East,” HSBC Global Research said in a report.

This comes as Hong Kong’s stock market is supported by ADR “homecomings” and the primary listing of “unicorns,” leading to a rise in transaction volumes.

HSBC said Hong Kong continues to dominate the market in terms of IPO, ranking as the top market seven times in the last 12 years.

10 of HK’s most attractive companies The Hong Kong Jockey Club emerged as the most attractive company amongst workers in 2021, leaping from fourth place in 2020, Randstad reported.

Following The Hong Kong Jockey Club are Cushman & Wakefield and Towngas (The Hong Kong & China Gas Company) in second and third place, respectively.

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How vocational training shapes Hong Kong workforce The PwC Hong Kong found that vocational and professional education and training (PVET) plays an important role in helping the employability of the youth and in closing the existing skills gap.

For one, the study found that VPET providers have significantly enhanced youth employability in the past 20 years. The unemployment rate amongst the younger workers, those aged 1519, declined to 10% in 2019 from 31% in 2002.

“The study found out that employees with sub-degree qualifications earned some 30% higher than secondary school leavers, whereas holders of a bachelor’s degree or above qualification had an over 100% salary uplift compared to those with upper secondary qualifications,” PwC reported.

New round of ‘Staycation Delights’ kicks off The Hong Kong Tourism Board (HKTB) has launched the new round of “Staycation Delights,” which grants eligible individuals to redeem discounts in exchange for receipts worth at least $800.

The Spend-to-Redeem “Staycation Delights” programme allows individuals, aged 18 or above, to present receipts from local retail or dining outlets to redeem a $500 discount at a local hotel.

“The first round of the Spendto-Redeem ‘Staycation Delights’ programme in March successfully stimulated local spending,” HKTB Executive Director Dane Cheng said, noting the average of participants’ actual spending exceeded the minimum required amount by 70%.

Nearly 80% of Hong Kong execs experience mental health issues: survey A total of 78% of Hong Kong executives have admitted to experiencing mental health symptoms over the past 12 months. Around 58% of executives in the city said they experienced anxiety, higher than 29% in China.

Some 45.5% in Hong Kong suffered from disturbed sleep and 39% lacked energy or felt fatigued. This is also higher than 37.5% in both issues, recorded in China.

Tech event RISE returns to Hong Kong in 2022 Tech conference RISE will be returning to Hong Kong in 2022 as an in-person event, the Hong Kong Tourism Board (HKTB) and Web Summit announced.

“This is a testimony of Hong Kong’s success in containing the pandemic and keeping infection rate amongst the lowest in the world, thereby giving international event organisers confidence that they can stage their events here safely,” Secretary for Commerce and Economic Development Edward Yau said.

The event was first launched in 2015 and has since hosted five events. It has attracted major tech firms, such as Alibaba, Stripe, Magic Leap, and Sequoia Capital China.

Hong Kong signs MoU on overseas economic, trade cooperation zones The Hong Kong government and the Ministry of Commerce signed a memorandum of understanding that will enhance overseas Economic and Trade Cooperation Zones (ETCZs).

Under the MoU, the Hong Kong government and the Ministry of Commerce will leverage their respective strengths to promote the high-quality development of the ETCZs, as well as encourage enterprises of both places to invest and set up businesses at the ETCZs.

TOP NEWS IN 2021

MOST READ

Daily news: www.hongkongbusiness.hk according to the Census and Statistics Department.

Could Hong Kong investors’ optimism be dangerous?

Hong Kong investors have become more optimistic as they expect returns of their future investments to average more than 11% every year, Schroders Investment Management (Hong Kong) reported.

This is even as the pandemic continues to disrupt economies across the globe, which Schroders raised might be a concern.

Hong Kong remains attractive to talents amidst population drop: CE Lam Hong Kong remains an attractive destination for talents, Chief Executive Carrie Lam, assured amidst reports that the population dropped by nearly 90,000. The city’s population dropped by 87,100, or 1.2%, to 7.39 million in mid-2021 from 7.48 million in the same period last year,

Practitioners optimistic over HK’s finance industry in next three years In a report, the Hong Kong Financial Services Development Council found that 56% of industry practitioners are “extremely optimistic” (5.5%) or “optimistic” (50.5%) over the prospect of the industry between 2022 and 2024. The majority of tertiary institution students (58%) also share this sentiment.

4 in 10 employees inclined to contribute to sustainability agenda Four in 10 employees in Hong Kong are inclined to help reduce carbon emissions in their respective workplaces, a survey from JLL showed. However, out of the 200 employees surveyed,

68% said their companies do not involve them in green initiatives and 57% are not aware of their workplace’s carbon reduction goals. Unawareness of companies’ carbon reduction goals amongst employees (60%) and noninvolvement of employees in green initiatives (65%) was also seen all over Asia-Pacific (65%). Given the results of the survey, JLL urged business leaders in Hong Kong “to engage with employees and achieve carbon reduction in the workplace.”

How much do Hong Kongers need to save to immigrate?

About 71% of Hong Kongers planning to leave the city for good say they would need to save at least HK$2.5m to be able to do so, a survey from a digital life insurer, Blue, showed. Based on the survey, it will take 41 years for locals to achieve their immigration budget given their current average monthly savings of HK$5,000.

60% of GBA companies are eyeing ASEAN expansion in 3 years About 60% of companies in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) are eyeing to expand into the Association of Southeast Asian Nations (ASEAN) countries in the next three years,

a study by UOB Hong Kong and ​​ Hong Kong Trade Development Council (HKTDC) revealed.

The key factors cited by companies for diving into ASEAN countries were cost-effectiveness, abundant resources, and huge markets.

How evolving digital economy transforms HK’s ‘most exciting’ industries Invest Hong Kong (InvestHK) and PricewaterhouseCoopers (PwC), in their joint report titled “Explore Opportunities in Hong Kong’s Digital Ecosystem,” showed that digital trends have dominated almost every business. This digital emphasis, according to InvestHK’s Director-General of Investment Promotion Stephen Phillips, “permeates Hong Kong’s lifestyle cluster including vibrant areas like e-commerce, food services, and creative industries.”

Long-term strategies needed to resolve HK’s housing crisis: report Consistent long-term strategies are needed for Hong Kong to resolve its housing crisis. OCBC Investment Research said Hong Kong’s total housing supply target for 2022 to 2031—public and private combined—is at 430,000.

Analysts said the latest figure is the same when compared to the 2019 target. This is despite the government’s higher 10-year goal of building 330,000 units from last year’s 316,000.

HONG KONG BUSINESS ANNUAL 2022 17

TOP NEWS IN 2021

MOST READ

Kong-Korea Ecosystem webinar last 8 September. Financial technology professionals and investors from Hong Kong, Korea, and other countries were in attendance.

and benefits still rank as the most important employee value propositions (EVP) factor that organisations can offer at 62%, the work-life balance came second at 60%.

Daily news: www.hongkongbusiness.hk upon fulfilment of all specified conditions under Return2hk, could be exempted from the 14-day compulsory quarantine requirement when returning to Hong Kong.

Flexible office space offsets corporate downsizing: JLL JLL’s latest Hong Kong Property Market Monitor released 23 September reveals corporate downsizing activities due to the pandemic were offset by the upgrading demand and expansion of the flexible office space sector.

For instance, Compass Offices expanded in-house at Lee Garden One in Causeway Bay and Infinitus Plaza in Sheung Wan, whilst Regus leased another floor at The Gateway Tower 5 in Tsim Sha Tsui.

HK resumes Return2hk scheme The Hong Kong government has announced the resumption of the Return2hk scheme for people returning from Mainland areas other than Guangdong Province and Macau from 8 September.

Hong Kong residents staying in Chinese provinces and municipalities other than Guangdong and Macau,

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Hong Kong boosts tourism with staycation discounts, promo codes The Hong Kong Tourism Board has launched another round of the spend-to-redeem Staycation Delights programme. Eligible members of the public can make a staycation booking starting 7 September. On top of this, there is a HK$500 discount with the promo code HKSTAY, rendering some packages technically free of charge.

Fintech can boost HK competitiveness as global financial services centre: Chan Hong Kong Financial Secretary Paul Chan addressed the Global Fintech Market Updates: Hong

Banks welcome launch of WM Connect in Guangdong-Hong Kong-GBA Banks have welcomed the launch of Wealth Management Connect in the Guangdong-Hong KongMacao Greater Bay Area (GBA), which enables cross-boundary wealth management investments more easily.

Under the scheme, residents in Hong Kong, Macau, and nine cities in Guangdong Province will be able to carry out crossboundary investment in wealth management products distributed by banks in the GBA. With the launch of the WM Connect, the bank plans to further provide north-bound customers access to high-yield RMB assets on the Mainland, and give south-bound customers access to offshore investments, enabling them to diversify their portfolios.

What do Hong Kong employees want from their organisations?

Employees are now prioritising work-life balance during the pandemic compared to the period before the COVID-19 hits, according to Randstad. Randstad said that whilst attractive salary

HK to limit retail investor access to SPACs Hong Kong will propose limiting access to retail investors to buy and trade companies as the city prepares to roll out a framework this month.

An anonymous source said that Hong Kong will only allow professional investors with assets of more than $1m to participate in both the primary and secondary market of special purpose acquisition companies.

HK retains rank as 3rd most competitive wealth management centre Hong Kong has retained its seat as the third most competitive wealth management centre around the world, the fourth edition of the International Wealth Management Centre Ranking showed.

Deloitte, which does the rankings, said HK’s is highly competitive, citing its domestic banks’ “strong position’’ in both high-net-worth and mass affluent space, and its regional arms of global wealth management firms focus on the ultra-high-net-worth investors.

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Science and Technology Parks Corporation, was participated by over 1,250 local and nonlocal innovators who developed I&T solutions on environmental sustainability and social connectivity.

Daily news: www.hongkongbusiness.hk

Gov’t, BritCham HK discuss plans for commerce and trade Secretary for Commerce and Economic Development Edward Yau discussed support measures for commerce and trade under the 2021 policy address with Members of the British Chamber of Commerce in Hong Kong.

Yau told business leaders that the government will continue to seek more trade opportunities through active participation in affairs of the World Trade Organization and the Asia-Pacific Economic Cooperation, and pursuing early accession to ASEAN’s Regional Comprehensive Economic Partnership. More economic and trade offices will also be established overseas to improve the city’s network, Yau added.

Transport and logistics industry to see varying recovery levels The transport and logistics industry has managed to keep

up with the economy, gradually resuming operations and incorporating different strategies to adapt to the new normal.

However, as a downstream industry that is dependent on the activities of other industries, transport and logistics’ recovery is expected to be at varying degrees due to the pandemic.

For the remainder of the year, the industry will be facing a tough road ahead. Sub-sectors would have to make sure that their businesses are stable, that they respond effectively to new mobility habits, and that their core logistics operations are entering digitalisation.

Why Lam is confident that HK will become an innovation and technology hub Chief Executive Carrie Lam expressed confidence that Hong Kong will eventually become an international innovation and technology (I&T) hub, as she bared anew the government’s past and future plans on developing the sector. Amongst these efforts was the launching of the first-ever City I&T Grand Challenge, whose award presentation ceremony was attended by Lam. The challenge, ​​organised by the Innovation and Technology Commission with the Hong Kong

Office market witnesses first positive take-up since Q3 2019 The office market recorded positive net absorption of 327,700 square feet in the third quarter (Q3) of 2021—a first since 2019 of the same quarter.

Cushman & Wakefield reported a “resurgence” of leasing activity in Q3 with office space availability dipping to 13.9%.

What are the best platforms for influencer marketing in Hong Kong?

Instagram, YouTube, and Facebook are the top three social media platforms that are best to invest in for influencer marketing based on a report by end-to-end commerce platform, AnyMind Group. Of the three platforms, Instagram is the most popular amongst 4,500 influencers surveyed, with 53.77% total users. It is also the majorityused platform amongst the top three most popular influencer verticals in Hong Kong namely travel (57.19%), fashion and beauty (50.11%), and entertainment (47.27%). In terms of median engagement rates, Instagram also snapped the most audiences.

Cathay Pacific forms Aviation Climate Task Force Cathay Pacific has formed the Aviation Climate Task Force together with Boston Consulting Group and other airline leaders in its bid to decarbonise the aviation sector.

The aviation sector contributed less than 3% of global carbon dioxide emissions annually before the pandemic. The airline said ACT, which is a non-profit organisation, will take a “portfolio approach,” and focus on creating near-term, medium-term, and long-term solutions to eliminate carbon emissions in aviation.

Hong Kong, through the HKTB, InvestHK, and AsiaWorld-Expo, will be hosting the event in the next five years. RISE will take place from 14 to 17 March 2022.

What are the four traits of digitally mature organisations?

A study conducted by Deloitte Southeast Asia and the Singapore Management University said there are four traits that could identify digitally mature organisations based on how they manage the governance, risk, and compliance aspects of digital transformation.

Based on their respective names, ‘leaders’ are organisations that consider themselves as quite or very advanced in terms of digital transformation. Meanwhile, ‘chasers’ are those with moderate progress, and ‘explorers’ are those with “not very advanced” progress.

HONG KONG BUSINESS ANNUAL 2022 19

company and industry - building and construction

9 in 10 construction companies are SMEs

“Companies that carry out construction work worth less than $10m in terms of annual gross value account for as much as 86% of the industry”

The majority of Hong Kong’s construction companies act as subcontractors for large construction firms.

HKIE has become a key qualifying body for a wide range of engineering disciplines.

ong Kong’s construction industry is characterised by a small number of large local contractors, a large number of overseas contractors, and a high level of sub‑contracting, with a substantial proportion of companies being both developers and contractors.

Most of Hong Kong’s construction companies are small in size. Companies that carry out construction work worth less than $10m (US$1.3m) in terms of annual gross value account for as much as 86% of the industry. The majority of the small companies act as subcontractors for the large ones, which tend to be main contractors. There are also a number of big construction companies capable of handling projects requiring sophisticated technology and strong financial backing, which are expanding their business across the region.

Hong Kong contractors tend to be experienced and highly skilled. There are no formal restrictions on entry to the contracting business in Hong Kong. Foreign and local contractors are treated alike, and all are allowed to tender local public sector projects. Due to

Surveying The number of surveyors practising in Hong Kong has been growing as a result of increasing demand and opportunities in the local and surrounding markets. A number of leading international surveying firms have established their regional offices in Hong Kong. Three divisions of Hong Kong’s surveying industry have gained mutual recognition of professional qualification with Mainland China, namely general practice, quantity surveying, and building surveying.

The Hong Kong Institute of Surveyors (HKIS) is a professional body established in 1984. As of December 2020, HKIS has over 7,000 corporate members.

Hong Kong is internationally renowned for its expertise in the construction of quality high‑rise residential and commercial buildings, and its services are in great demand in overseas markets, particularly in Asia. Mainland China is the largest export market for Hong Kong’s architectural, engineering and surveying services. A number of Hong Kong companies in the engineering sector are also exporting their services via working for multinational companies in Southeast Asia, North America, and Western Europe, covering a wide range of industries including information technology, telecommunications, chemicals and fast‑moving consumer goods.

H

the growing size and complexity of building projects, it is now common to award large and complex building contracts as a single package to multi‑disciplined contractors.

Architecture All practitioners have to register with the Hong Kong Institute of Architects, which has more than 4,000 members. Most of the architectural firms in Hong Kong are locally owned.

Attracted by the business opportunities in the region, a number of foreign architects have come to work in Hong Kong.

Engineering Many engineers are members of the Hong Kong Institution of Engineers (HKIE), a local professional body for engineers. First established as the Engineering Society of Hong Kong in 1947, the HKIE was incorporated by government ordinance in 1975 to set professional standards and to encourage professional development for local engineers.

In 1992, the HKIE qualification was recognised for government services appointments. The

Industry development and market outlook

The West Kowloon Cultural District has launched The Xiqu Centre, its first landmark performing arts venue

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Investment in local public infrastructure To achieve the objective of promoting economic growth through infrastructural development, the Hong Kong government has been increasing its infrastructure investment over the past few years. Hong Kong’s 10 mega infrastructure projects, first announced in the 2007 Policy Address, are being rolled out in phases and several transport projects are being carried forward in tandem.

The Hong Kong-Zhuhai-Macao Bridge and Guangzhou-Shenzhen-Hong Kong Express Rail Link were opened in 2018, improving logistics and transport efficiency between Hong Kong and mainland cities. The West Kowloon Cultural District, an important cultural infrastructure investment of Hong Kong, has launched The Xiqu Centre, its first

building and construction - company and industry Major Indicators of the Construction Sector 2018 Establishments

2019

YOY %

26,418

24,822

-6.0

Employment

192,042

164,651

-14.3

Gross value of construction works performed (HK$ million)

409,778

385,177

-6.0

SOURCE: Key Statistics on Business Performance and Operating Characteristics of the Building, Construction and Real Estate Sectors (2019 Edition), Census and Statistics Department

landmark performing arts venue, in January 2019. Progress has also been made on the Rail Gen 2.0 project, with full Tuen Ma Line commenced services in June this year together with two new MTR stations, namely To Kwa Wan and Sung Wong Toi. Other major projects underway include MTR’s East Rail Line extension to Admiralty, Kai Tak Development, and development areas in the northern New Territories.

The 14th Five-Year Plan and the Greater Bay Area The National 14th Five‑Year Plan promulgates “expedition of the construction of inter‑city railways, co‑ordinated planning for the positioning of ports and airports, and optimisation of the allocation of maritime and aviation resources” to strengthen connectivity in the Greater Bay Area, which calls for faster growth in infrastructure construction in the region. The Plan also raises support for Hong Kong to enhance its status as an international aviation hub, underscoring the importance of the ongoing Three‑runway System (3RS) Project at the Hong Kong International Airport. The pavement of the third runway was completed in September this year, and the entire 3RS Project is expected to complete by 2024.

Belt and road opportunities In March 2015, China’s National Development and Reform Commission issued The Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road, outlining the framework of the Belt and Road Initiative (BRI), co‑operation priorities and mechanisms. As of 2020, it is estimated that mainland China has invested about US$770b into

projects along the BRI routes, with over one‑third of the investments going to transport infrastructure projects such as ports, railways, roads, and real estate projects.

Hong Kong is renowned for its excellent professional services and it is expected that the industry can benefit from the ample opportunities ahead.

Developing Asia’s infrastructure needs Many developing Asian countries, such as India and Indonesia, have recognised the urgent need to upgrade their basic infrastructure, road networks, port facilities, housing and city planning to keep up with rapid economic growth. According to the Asia Development Bank, the region is estimated to require US$26t from 2016 to 2030 to meet its infrastructure requirements, meaning US$1.7t will be needed for each intervening year.

Green building boom The growing awareness of the need for environmental protection is creating an increasing demand for green buildings. Hong Kong’s Urban Renewal Authority has announced its environmental sustainability policy for future urban renewal projects.

According to the Hong Kong Green Building Council, more than 2,300 buildings are certified

by BEAM Plus, a leading initiative in Hong Kong to offer independent assessments of building sustainability performance. One example is the Hong Kong’s Children Hospital, which has installed a district cooling system, solar hot water system, and photovoltaic panels on rooftops to reduce energy consumption.

Hong Kong is outstanding

“The growing awareness of the need for environmental protection is creating an increasing demand for green buildings”

in terms of integration and application of technologies and know-how in designing and constructing green buildings.

A prime example is Hong Kong’s K11 Atelier King’s Road, which is the first building in the world to achieve all platinum levels pre‑certifications of the WELL Building Standard, Hong Kong BEAM Plus and the US’ LEED. The building has incorporated a number of green technologies such as the use of low e‑glazing, sensor‑linked LED lighting systems to enhance its sustainability features. It is also equipped with Asia’s largest solar photovoltaic thermal installation on the rooftop to achieve higher energy savings and efficiency.

Technology adoption In order to strive under the competitive global environment, it is critical for the construction industry in Hong Kong to promote efficiency and innovation by adopting modern construction methods and techniques, information technology (IT) and automation technology.

The use of IT technologies such as Building Information Modelling (BIM) has increased across the industry, including large‑scale project owners such as MTR Corp and Airport Authority. The introduction of Construction Industry Council BIM Standards allows industry participants to manage and assess BIM deliverables by architects, engineers, surveyors, and contractors.

To encourage innovative technologies in the construction sector, the Hong Kong government has set up a $1b Construction Innovation and Technology Fund (CITF) to help boost technology adoption.

HONG KONG BUSINESS ANNUAL 2022 21

company and industry - biotechnology, medical, and healthcare

Ageing population escalates healthcare expenditure By 2039, over 2.5 million elderly in Hong Kong are expected to increase the demand for medical services.

T

he medical and healthcare equipment sector in Hong Kong has two distinct markets, the household consumer market and the professional or institutional buyers (hospitals and clinics) market. Most companies in this sector are original equipment manufacturers (OEMs), producing for example massagers and blood pressure monitors for household consumer use, or rubber, plastic and resin mouldings for institutional use. Many Hong Kong‑based companies also provide engineering design services to enhance their competitive edge.

To lower production costs, many Hong Kong manufacturers have relocated to mainland China. However, quality control, marketing, research and development, design, and materials and equipment procurement continue to be carried out in Hong Kong.

Growing sectors for Hong Kong manufacturers include home‑based equipment, hygienically sterilised supplies, equipment for less invasive procedures, orthopaedic tools and devices, telemedicine

products, and supplies for high health‑risk diseases and injuries.

In 2020, Hong Kong’s total exports of medical and healthcare equipment increased significantly, by 17.5%. On the other hand, exports to the mainland, the largest market for Hong Kong, decreased slightly by 3.7%.

Exports to the EU and US increased by 38.5% and 18.5% respectively.

Hong Kong’s exports of electro‑diagnostic apparatus (including apparatus for functional exploratory examination or for checking physiological parameters) increased by 4.2%. Meanwhile, exports of miscellaneous medical instruments and appliances rose by 3.6%.

Medical equipment is mainly sold directly to hospitals and clinics, whilst healthcare equipment is mostly sold at department stores, chain stores, and supermarkets and distributed by local or overseas trading companies.

Many of Hong Kong’s medical and healthcare goods are manufactured to meet supplied product specifications and designs and exported under OEM arrangements.

Hong Kong manufacturers are highly regarded for their handling of customers’ intellectual property and sensitive technology

22 HONG KONG BUSINESS ANNUAL 2022

“In 2020, Hong Kong’s total exports of medical and healthcare equipment increased significantly, while exports to the mainland decreased slightly" Hong Kong manufacturers are highly regarded for their handling of customers’ intellectual property (IP) and sensitive technology. Consequently, they have become increasingly involved in product design and development, including engineering, modelling, tooling, and quality control.

Some Hong Kong manufacturers also apply for international certifications.

In addition to producing for OEM customers, some Hong Kong manufacturers have in‑house research and development (R&D) departments to develop products marketed under their own brand names.

For these original brand products, Hong Kong manufacturers may sell to overseas importers and distributors, who also act as agents to provide after‑sales services.

Range of services Medical services There are 43 public hospitals and institutions, 49 specialist out‑patient clinics, 73 general out‑patient clinics which are managed by the Hospital Authority and 13 private hospitals in Hong Kong. These hospitals offer a wide range of medical treatment and rehabilitation services.

Demographic trends have an important impact on the medical services sector.

According to the Census and Statistics Department, the population in Hong Kong is expected to age considerably in the coming years. The number of elderly people aged 65 or above is projected to increase from 18.4% of the total population in 2019 to 33.3% in 2039. As we head towards over 2.5 million elderly in Hong Kong, there will be a sustained increase in healthcare expenditure and the demand for medical services.

According to the Food and Health Bureau, Hong Kong’s health expenditure (the total of public and private health expenditure) is around $189.6b (US$24.3b) in 2019‑2020.

The health expenditure as a percentage of gross domestic product has been increasing steadily, with the percentage going up from 5.1% in 2010‑2011 to 6.8% in 2019‑2020.

In recent years, the Hospital Authority has made ongoing efforts in developing information technology‑based solutions to support clinical works. One example is the “Smart Hospital Project,” which includes a Queue Management System to streamline

biotechnology, medical, and healthcare - company and industry Performance of Hong Kong’s Exports of Medical and Healthcare Equipment 2019 HK$ Mn Growth % Domestic Exports Re-exports

Jan – Sep 2021 HK$ Mn Growth %

29

+162.4

19

-33.1

12

12,745

-2.1

14,984

+17.6

11,937

+5.0

7,532

-2.5

10,067

+33.7

8,257

+8.0

12,774

-2.0

15,003

+17.5

11,949

+4.9

of mainland China Origin Total Exports

2020 HK$ Mn Growth %

-22.8

SOURCE: Census and Statistics Department of HKSAR

the arrangement of outpatient consultations in clinics and hospitals. Mobile app “HA Go” was launched in December 2019, allowing patients to manage appointments on their mobile phones. To provide the best surgical services, Tseung Kwan O Hospital built a 5G network to instantly share endoscopic images using 5G smart glasses during an operation. These advancements further improve the efficiency of Hong Kong’s public healthcare system.

The CUHK Medical Centre (CUHKMC), Hong Kong’s first fully digitalised smart hospital, has been in operation since January 2021. It has introduced a number of innovations in healthcare procedures and hospital operations, for example implementing a fully electronic and paperless medical record system, and a mobile ICT and real‑time data system to facilitate seamless patient treatment.

Biotechnology There are more than 250 biotechnology‑related companies in Hong Kong, most being healthcare companies working in pharmaceuticals, traditional Chinese medicinal or healthcare products, or medical devices and diagnostics.

The Hong Kong Science and Technology Parks Corporation (HKSTP) is a major player in promoting technological innovation in the city. It has identified biomedical technology (BMT) as one of its five key technology clusters and aims to support biomedical research from innovation to commercialisation. In 2020‑2021, the biomedical technology sector grew

rapidly. As of 31 March 2021, 156 biomedical technology companies and start‑ups had established their R&D hubs at the Biomedical Technology (BMT) Cluster at HKSTP. The presence of worldclass biomedical companies in HKSTP demonstrates Hong Kong’s uniqie position as a strategic biomedical research base in the region.

For example, OrbusNeich has brought to the market a range of innovative stent and angioplasty balloon catheters for the treatment of coronary and peripheral vascular diseases. Its proprietary vessel pro healing drug eluting stent has received the CE Mark and regulatory approval in China and Japan.

In February 2021, the HKSTPAstraZenecaCo-incubation Programme was launched to support biomedical start-ups in developing integrated oncology solutions.

The Government plays a key role in promoting the development of biotechnology in Hong Kong. In the 2018‑19 Budget, the Government identified biotechnology as one of the four key areas where it would encourage innovation and technology.

Healthcare innovations The Government is actively promoting the development of medical and healthcare innovations in Hong Kong, and has identified health technology as one of the focuses in setting up research clusters at HKSTP. Hong Kong’s advantages Market connections with Mainland China According to the Global

Innovation Index 2021, the Shenzhen‑Hong Kong‑ Guangzhou S&T (Science and Technology) clusters ranked second globally in terms of the number of patents and scientific and tech publications.

To further facilitate R&D and the flow of I&T talent within the GBA, Hong Kong and Shenzhen plan to jointly develop a Hong Kong‑Shenzhen Innovation and Technology Park (HSITP), and one of its priority development areas will be healthcare technologies.

The park will be strategically located at the Lok Ma Chau Loop area (the Loop) near the Hong Kong‑Shenzhen border.

Upon completion, the park will be the largest ever I&T platform in Hong Kong. In the long run, the HSITP and the areas around Lok Ma Chau/San Tin will be consolidated to form the San Tin Technopole. This, together with the Shenzhen I&T zone, will form the Shenzhen‑Hong Kong I&T Co‑operation Zone, which will become an essential propeller for the development of an international I&T hub in the GBA. Hong Kong is an important gateway for foreign manufacturers of proprietary Chinese medicine products, medical devices or drugs to tap into the GBA market. Hong Kong‑registered drugs with urgent clinical use and medical devices used in Hong Kong public hospitals are permitted in designated medical and healthcare institutions operating in the nine Mainland cities of the GBA. In terms of clinical applications, clinical trial data from Hong Kong is simultaneously recognised for drug registration purposes

by various drug regulatory bodies such as the FDA, the European Medicines Agency (EMA) and China’s National Medical Products Administration (NMPA). A total of 32 specialties from Queen Mary Hospital, Prince of Wales Hospital, Hong Kong Eye Hospital and Hong Kong Sanatorium & Hospital have gained accreditation of the clinical trial sites from the National Medical Products Administration; clinical trial data generated from these sites will be for the purpose of drug registration in the Mainland.

This enables Hong Kong to serve as an important platform for local and multinational pharmaceutical companies to venture into the vast Chinese market.

Market potential in Asia In the ASEAN 61, it is expected that the increasingly elderly population will put further pressure on healthcare spending. According to the international consulting firm Solidiance, the over‑65s group will account for being the key financial and capital market in Asia, Hong Kong is a popular IPO destination in the region.

Hong Kong was APAC’s largest IPO centre for biotech companies, and the second largest in the world. Since the launch of a new listing regime in 2018, 67 healthcare companies completed their IPOs in Hong Kong, raising a total of $209 billion (US$26.8 billion) as of June 2021. According to HKEX, Hong Kong has the potential to become the world’s largest biotech IPO fundraising centre within the next five to 10 years.

HONG KONG BUSINESS ANNUAL 2022 23

company and industry - logistics

How HK becomes a transport hub for Asian urban centres HKIA links 120 airlines to 220 global destinations.

I

n terms of both value-added and employment, the trading and logistics industry is the largest amongst the four main economic pillars in Hong Kong.

Trading and logistics accounted for 19.8% of the city’s gross domestic product (GDP) and provided some 673,700 jobs in 2019. The logistics industry alone contributed 2.9% of Hong Kong’s GDP and 176,200 jobs in that year. Transport services made up 30.9% of Hong Kong’s service exports in 2019. ​​​​​​​Hong Kong International Airport (HKIA) is one of the world’s busiest airports for international cargo. In 2020, the total cargo throughput (including airmail) of HKIA reached 4.5 million tonnes.

Hong Kong’s port was ranked the ninth busiest container port in the world in 2020, trailing Shanghai, Singapore, NingboZhoushan, Shenzhen, Guangzhou, Qingdao, Busan, and Tianjin.

In DHL’s Global Connectedness Index (GCI) released in 2020, Hong Kong’s ranking in terms of the depth of global connectedness in 2019 was second-best in the world, after Singapore.

Strategic location and world-class infrastructure As one of the regional hubs for Asia, Hong Kong has good connections with most Asian urban centres and half of the world’s population is within five hours’ flight time.

Currently, around 120 airlines link the Hong Kong International Airport (HKIA) to about 220 destinations worldwide including about 40 destinations in mainland China.

HKIA has five first-tier air cargo handling facilities, with over 7 million tonnes of annual handling capacity.

With the Hong Kong government’s affirmation, the construction of the Third Runway System (3RS) began in 2016 and is expected to be completed by 2024. The 3RS project will allow HKIA to handle future traffic demand of as much as 102 million passengers, 8.9 million tonnes of cargo and 607,000 aircraft movements annually by 2030, according to IATA Consulting.

Intermodal connectivity Hong Kong-Zhuhai-Macao Bridge (HKZMB), the world’s longest sea-crossing,

24 HONG KONG BUSINESS ANNUAL 2022

“Hong Kong has good connections with most Asian urban centres and half of the world’s population is within five hours’ flight time”

Range of services

import market for items carried by air.

Simple customs clearance procedures and 24‑hour operation of HKIA make it convenient for goods destined for mainland China to go through Hong Kong.

Besides air cargo handling services, Hong Kong also provides airport management services, especially in air cargo terminal operations. This involves either investing directly in overseas air cargo terminals or providing consultant services. Hong Kong is well-positioned to tap into this market, as more and more airports around the world, particularly on mainland China, are either privatised or run as a commercial operation.

A success story is a joint venture between Airport Authority Hong Kong (AAHK) and Hangzhou Xiaoshan International Airport, under which AAHK has an equity share of 35% while the rest of ownership is retained

by Hangzhou government.

Air transport Air transport has become more important for Hong Kong’s trade over the last few decades. 37% of Hong Kong’s total exports and 48% of its total imports were transported by air in 2020, compared with 26% of its exports and 19% of its imports in 1980. Hong Kong’s efficiency in customs clearance and its status as a free port are amongst the main reasons for this increase.

Mainland China is the largest export and

Freight forwarding Large freight forwarders offer a wide range of transportation and logistics services whilst small ones tend to provide more basic and economical services with higher flexibility and more personalised services.

Services related to trade, including the preparation of shipping documents, customs clearance and logistics, may be undertaken by the import and export companies or their agents.

officially opened to traffic on 24 October 2018. Built to facilitate passenger and freight transport over land between Hong Kong, mainland China, and Macau, the bridge greatly reduces journey times between cities and forms a new passageway to connect the east and west banks of Pearl River Delta.

Prior to the COVID-19 pandemic, there were about 21,700 inward vehicle crossings and 180 arrivals of river cargo vessels from the Pearl River Delta (PRD) to Hong Kong on a daily basis.

Lok Ma Chau, Man Kam To, Sha Tau Kok, Shenzhen Bay, Hong Kong-ZhuhaiMacao Bridge and Heung Yuen Wai are the six land boundary crossing points in Hong Kong, with about 43,000 vehicles crossing daily, prior to the pandemic.

Hong Kong International Airport is one of the world’s busiest airports for international cargo

logistics - company and industry Number of Establishments in the Industry As at December 2020 Air transport services

161

Air cargo forwarding services

1,303

Sea cargo forwarding services

2,337

SOURCE: Quarterly Report of Employment and Vacancies Statistics (Fourth Quarter 2020), Census and Statistics Department

Sea transport The sea transport sector is vitally important in supporting Hong Kong’s status as the world’s eighth-largest trading entity. Mainland China is the biggest source of and destination for Hong Kong’s transhipment cargo.

Liner shipping Sea cargo to and from Hong Kong is carried both by liners and bulk vessels. Hong Kong is a major hub with about 280 container vessel sailings per week, connecting to over 600 destinations worldwide.

The larger container lines have invested in advanced systems to provide cargo tracking information and improve efficiency. They often form alliances or merge with other transport providers to develop door‑to‑door multi‑modal services. Many liners are also forming alliances amongst themselves to increase efficiency and reduce cost in a very competitive environment.

Vessel sharing has enabled the liners to offer a more flexible service in terms of global coverage, higher frequency of departures and a greater choice of routes.

Port facilities Hong Kong’s port facilities are financed, built, owned and operated by private firms.

Hong Kong has nine existing container terminals with a total of 24 berths at Kwai Chung and Tsing Yi Island, operated by several private consortia.

Through various productivity enhancement measures, their combined throughput capacity is more than 20 million TEUs per year.

River Trade Terminal The Pearl River links Hong Kong with many manufacturing centres in Southern China, with the PRD being the main cargo base for the territory. River trade has grown exponentially over the past three decades, rising from 9.3 million tonnes in 1990 to 100 million tonnes in 2020. To cater for this increasing river trade, a dedicated terminal, the River Trade Terminal (RTT), was established in 1996 and became operational in November 1998.

The RTT is currently located in the west of Tuen Mun.

“Hong Kong is a major hub with about 280 container vessel sailings per week, connecting to over 600 destinations worldwide”

Service providers Air transport About 120 international airlines provide passenger and all‑cargo flights between Hong Kong and about 220 destinations worldwide, including about 40 mainland cities. Currently, Hong Kong has Air Services Agreements or International Air Services Transit Agreements with 67 aviation partners.

Freight forwarding Hong Kong has a pool of international and highly experienced logistics companies that enables smooth logistic flows. Many of them are represented in the Hong Kong Association of Freight Forwarding and Logistics (HAFFA). HAFFA, whose 300 members include DHL, UPS, Expeditors, Panalpina, Kerry Logistics and DB Schenker, aims to promote standardisation and professional conduct among industry players.

Sea transport As more countries seek to privatise their port operations and/or develop new ports run on a commercial basis, demand for exportable sea transport services is increasing.In 2020, 2,603 vessels were listed on the Hong Kong Shipping Register (HKSR), boasting a total of 130 million gross tonnes, making Hong Kong the fourth largest shipping register in the world, behind only Panama, Liberia and the Marshall Islands.

River trade has grown from 9.3 million tonnes in 1990 to 100 million tonnes in 2020

HONG KONG BUSINESS ANNUAL 2022 25

company and industry - licensing

Foreign licensors prefer HK licensing agents as partners Thanks to the agents’ strong networks in mainland China.

H

ong Kong’s licensing market began to take shape in the early 1990s.

Despite its relatively short history of development, the Hong Kong market has become highly developed in Asia. Main categories of licensed products in Hong Kong include apparel and accessories, food and beverages, toys, gift items, stationery, computer supplies and sales promotions for fast food chains and banks.

Hong Kong local fashion label, :CHOCOOLATE, has been actively exploring licensing opportunities with international brands and companies. For example, it has featured Japanese character Kumamon, Disney’s Tsum Tsum, and South Korea’s LINE FRIENDS in a variety of its apparel and accessories collections. YGM Trading, a Hong Kong apparel retail and wholesale company, is a licensee of European and American designer brands to handle their sales and distribution in mainland China and other Asian markets. In the food and beverages sector, Maxim’s Group

is a licensee of renowned brands such as The Cheesecake Factory and Shake Shack.

As face masks are becoming essential to minimise the spread of COVID-19, retailers are turning to launch them with licensed characters to attract customers. 2 Degree Studio, a local face‑mask retailer, differentiates itself by selling various face masks with licensed characters such as Snoopy, Le Petit Prince, Kakao Friends, Moomin and Pokemon. Daniel & Co. (Gifts) Limited, the official licensee of Sanrio since 2008, has also launched face masks with Sanrio characters.

Hong Kong has relatively few home‑grown brands and properties for licensing. Some examples include Din Dong, SHIBAinc characters, Hong Kong cartoon character McDull and Ocean Park’s Whiskers & Friends.

Nevertheless, many international licensors and licensing agents, such as Iconix Brand Group and Mattel have chosen to set up offices in Hong Kong, which often function as the regional headquarters in Asia. Moreover,

“The significance of Hong Kong’s licensing business lies in its status as a hub for licensing activities in Asia” many famous foreign licensors have entrusted their exclusive property rights to Hong Kong licensing agents to develop the business in Asia.

Best known as a shoppers’ paradise, many international licensors choose to partner with Hong Kong shopping malls for promotional campaigns for their licensed characters or products. For example, LEGO has collaborated with Tuen Mun Town Plaza to set up interactive game zones to offer hands‑on experience and promote its brand.

The Asian Licensing Association was established by Hong Kong industry leaders in 2011 to promote Hong Kong as an international licensing hub. The Innovative Entrepreneur Association launched the Design Licensing and Business Support Scheme (D‑LAB) in 2019, which aims to provide licensing and design‑related training courses and mentorship programmes for design start‑ups or SMEs. The Hong Kong International Licensing Show (HKILS) held since 2002 is well‑known in Asia and has helped promote Hong Kong as the regional licensing hub. The 18th edition of HKILS held in January 2020 attracted more than 20,000 visitors, including manufacturers, licensees, retailers, and distributors.

The Asian Licensing Conference 2020, held concurrently with HKILS, brought together 30 expert speakers from various international brands and different sectors in the licensing industry, focusing on new opportunities and strategies for licensing business in Asia. The event also served as a networking platform for international licensing executives and business people to gather industry intelligence and explore new opportunities.

Trade-in services The significance of Hong Kong’s licensing business lies in its status as a hub for licensing activities in Asia. Local business usually accounts for a small proportion of the overall business of licensors and licensing agents, who are more active in other Asian countries.

Licensing activities between Hong Kong and the rest of the world can be partly reflected in the cross‑border payments for the use of intellectual properties.

Licensing activities between Hong Kong and the rest of the world can be partly reflected in the cross‑border payments for the use of intellectual properties

26 HONG KONG BUSINESS ANNUAL 2022

Licensing trending globally According to Licensing International, the global retail sales of licensed merchandise and services amounted to US$292.8b in

licensing - company and industry Charges for the Use of Intellectual Properties* Export

Import

HK$ million

Growth (%)

Share in total services exports (%)

HK$ million

Growth (%)

2017

5,605

7.3

0.7

15,001

2.6

2.5

2018

5,821

3.9

0.7

15,622

4.1

2.5

2019

5,911

1.5

0.7

15,511

-0.7

2.4

Share in total services exports (%)

*Includes: 1) Franchises and trademarks licensing fees. 2) Receipts/payments on authorised use of patents, copyrights and other non‑financial proprietary rights and receipts/payments for licences to reproduce and/or distribute intellectual property embodied in products not included elsewhere.

SOURCE: Report on Hong Kong Trade in Services Statistics for 2019, Census & Statistics Department

2019. North America remains the largest market for licensed merchandise and services, with revenue accounting for 58% of the global market. Meanwhile, Asia recorded the strongest growth, increasing by more than 5% for the year. ‘Character and entertainment’ was the largest group of licensing property in terms of global licensed merchandise sales in 2019, accounting for 43.8% of the global licensing market. ‘Corporate trademark and brand’ was the second-largest property type, generating US$60.1b of retail sales (21% of the total).

E-commerce and licensing E‑commerce is facilitating the international licensing business.

Characters, fads, brands and fashion trends now travel at high speed across the markets, cutting short the time needed to get a product from licensed concepts to retail shelves. Medialink Group, a leading distributor of third‑party owned media content headquartered in Hong Kong, launched its e‑commerce site Ani‑Mall in August 2020.

The platform sells a variety of authentic merchandise ranging from anime accessories, collectible items, stationery and plush toys from world‑known character brands licensed by the company, such as My Hero Academia and The Promised Neverland. The internet and social media, such as Instagram and Facebook, is also an important channel for marketing new properties.

Gaming and e-sports licensing Gaming and e‑sports have become mainstream entertainment in recent years.

According to Newzoo, the global

gaming market is expected to generate revenues of US$176b in 2021. Spinning off from the gaming industry, global revenue from e‑sports – largely from media rights and sponsorships – will grow by 15% and reach US$1.1b in the same year, with China being the largest market (33% of global share).

E‑sports merchandise is making its way into the apparel market. For example, Champion Athleticwear has partnered with HyperX, a gaming gear brand, to launch several apparel lines including hoodies, t‑shirts and face masks. Global luxury fashion brand Ralph Lauren has also joined the European esports organisation G2 Esports as their exclusive fashion outfitter.

China’s licensing market According to a report released by China Toy and Juvenile Products Association, China saw US$17b of licensed merchandise sales in 2020, up 11.5% from the previous year. ‘Character and entertainment’ continues to dominate the Chinese licensing market, with home‑grown licensing properties, such as Deer Squad, gaining popularity in recent years.

Attracted by the large consumer base, many foreign companies are scouting the Chinese market to seize licensing opportunities. Canadian multinational entertainment company Entertainment One, Care Bears brand‑owner CloudCo Entertainment, Japanese company Sanrio (Hello Kitty) and Korean brand Kakao Friends have all established a presence in China for brand licensing and retail distribution of licensed products.

“Hong Kong licensing agents with strong networks in mainland China are the preferred partners for many foreign licensors to exploit emerging opportunities there”

In China, e‑commerce has become one of the top trends in the licensing industry. Many brands and properties use B2C online platforms to promote brand awareness and extend their customer base. Tmall, JD.com, and Taobao are the three major online platforms used to promote licensed merchandise in China, while social media platforms such as Douyin and Xiaohongshu are also gaining popularity as marketing and sales channels.

Hong Kong licensing agents with strong networks in mainland China are the preferred partners for many foreign licensors to exploit emerging opportunities there. One example is Medialink Group, which has been appointed as the licensing agent of Sesame Street’s products and merchandise and manages licensing business in mainland China.

In addition, Hong Kong is the preferred gateway for mainland‑based enterprises to promote their brand names and trademarks overseas due to the city’s remarkable international network, as well as resourceful licensing players providing quality services, including public relations support and personnel training.

CEPA provisions The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) further opens up the mainland market for Hong Kong products and the distribution business to Hong Kong companies. Under the Agreement on Trade in Services (ATIS), Hong Kong service suppliers are granted national treatment to conduct retailing and wholesale services in mainland China.

HONG KONG BUSINESS ANNUAL 2022 27

company and industry - import and export trade

‘Trade disintermediation’ poses threat to HK trading

Thus, exporting firms turn to sophisticated value-added services such as coordinating production for overseas buyers.

H

ong Kong’s import and export trading firms are active in sourcing various industrial goods, including raw materials, machinery and parts, and a wide range of consumer goods. There are three main types of sourcing activities: (1) sourcing goods produced in Hong Kong; (2) sourcing goods from around the region for re‑export; and (3) sourcing goods from one country to be shipped directly to a third country without touching Hong Kong territory.

The import business of Hong Kong trading firms is mainly managed by distribution through agents or dealers. These trading firms usually specialise in one product area and represent one or more foreign brands. Their trading map usually encompasses Hong Kong, mainland China (or certain parts of it) and/or other Asian countries.

With the development of trade support services in mainland China, trading firms increasingly source goods offshore for sale to international markets. Some of these goods are either transhipped via Hong Kong or shipped directly without touching Hong Kong territory. Such offshore trade is not reflected in Hong Kong’s trade statistics. According to official statistics, Hong Kong’s offshore trade

in 2019 (including both “merchanting” and “merchandising for offshore transactions”) was estimated to be $4,709b (US$604b), a decrease of 2.5% over 2018. In comparison, re‑exports totalled $3,941b (US$505b) in 2018, down 4.2% over 2018, representing 83.7% of total offshore trade.

Service providers Hong Kong’s import and export trading firms are typically small, employing less than 10 persons on average. There were 105,675 import and export trading firms in Hong Kong as of December 2020, with the majority of them being SMEs. There are three broad categories of import and export trading firms: Left hand-right hand traders: these refer to trading firms that match sellers and buyers without adding any significant value to the process. These firms conduct a straight-forward sourcing operation, usually identifying goods produced on the mainland or Hong Kong and shipping them to overseas markets. They rely on their specialist knowledge of the sources of products in the region and the low costs of their supplies as their main competitive advantages.

With the development of trade support services in mainland China, trading firms increasingly source goods offshore for sale to international markets

28 HONG KONG BUSINESS ANNUAL 2022

“Hong Kong’s offshore trade in 2019 was estimated to be $4,709b, a decrease of 2.5% in 2018” Traders with some value-added services: many firms now source raw materials for their suppliers and provide finance for these materials. They often use letters of credit from their customers as a guarantee for raising finance for their purchase orders. Other firms develop a sub-contractor relationship with a number of factories in which they exert significant control over the management of production, including quality control.

Traders with sophisticated value-added services: in certain cases exporting firms have added value to their traditional activity to such an extent that it may be difficult to retain the label of being exporters. For example, some firms design and manufacture components for their supplier factories to produce finished goods, which the firms subsequently export.

These firms add value mostly from their design team, and their competitive edge comes from their ability to design products which sell well in the target markets. In 2019, the rate of gross margin of merchanting fell slightly to 6.3% from 6.4% in 2018. This means that the export market is relatively stable, though margins remain below the 6.9% recorded in 2009. In the same year, the commission rate of merchandising for offshore transactions stood at 6.2% (2018:6.7%; 2017: 6.9%).

Trade disintermediation The business environment for Hong Kong’s trading firms is becoming more challenging amidst the growing trend toward direct dealing between customers and manufacturers, known as “trade disintermediation”. In response to this, Hong Kong traders are adapting to provide more value-added services, in addition to finding more competitive sources of supplies. For example, Hong Kong traders help their overseas clients to inspect the goods produced by the manufacturers to ensure they meet the procurement standard, and monitor production schedules to meet delivery. Hong Kong traders can also help overseas buyers coordinate production when the buyers have a sudden surge in orders and quick turnaround is needed.

The operations of small and big trading firms are quite different. Smaller firms are usually strong in introducing foreign products to the mainland market. In most cases, they specialise in one area, such as medical equipment, and represent some foreign brands as their agents or distributors.

import and export trade - company and industry Exports of Merchanting and Trade-related Services (US$ billion) 2015

2016

2017

2018

36.4

36.6

38.7

40.6

39.7

Year-on-year growth

-3.0%

+0.6%

+5.8%

+5.4%

-2.2%

Contribution to Services Exports

27.0%

28.3%

28.1%

27.4%

29.3%

Exports of Merchanting and Trade-related Services

2019

SOURCE: Gross Domestic Product (Quarterly), Census and Statistics Department

Bigger trading firms are usually strong in sourcing products from the region. They usually have regional or global sourcing networks and do not specialise in just one type of product.

Exports Hong Kong’s import and export trading sector provides services mainly in the form of offshore buying and selling of goods.

Given Hong Kong’s location and the relocation of Hong Kong’s manufacturing bases to the mainland, particularly the Pearl River Delta, mainland China is a major source of offshore trading activities. Hong Kong manufacturers are diversifying their production activities to other low‑cost countries, and the offshore trading pattern is expected to reflect this move.

In 2019, Hong Kong earned US$39.7b from exporting merchanting and trade‑related services, accounting for 29.3% of total services exports.

Industry development and market outlook Impacted by the COVID-19 pandemic and the softening of global demand, Hong Kong’s total merchandise trade decreased by 2.5% to $8,197b (US$1,051b) in 2020, after dropping by 5.4% in 2019. In the same period, Hong Kong’s merchandise exports saw a year-on-year decrease of 1.5%, after a fall of 4.1% in the previous year. In 2020, Hong Kong’s major export markets were mainland China (59.2% of total), the ASEAN (7.2%), and the EU (7.1%).

In recent years, Asia has become a more integrated market, thanks to the various free trade agreements (FTAs) signed in the region. In particular, the product trade arrangements under the China-ASEAN Free

Trade Area (CAFTA) pact, which commenced in 2005 with scheduled tariff elimination completed in 2010, have contributed to higher intraAsian trade. In November 2015, China and ASEAN concluded an upgraded FTA that covers further liberalisation of trade as well as economic, investment and regulatory co-operation. The upgraded protocol of the CAFTA took effect on 22 October 2019.

Trading in Asia Over the past few years, there has been an increase in companies in developed economies treating Asia as a market instead of a pure production base. During 20152020, North America’s exports to Asia expanded by a compound annual growth rate (CAGR) of 1.1%, surpassing the CAGR of 1.0% in respect of its exports to Europe in the same period.

ASEAN as a group is the second-largest export market and second-largest trading partner of Hong Kong, with Singapore, Vietnam, and Thailand being the top three markets for Hong Kong products in 2020. To foster stronger economic ties between Hong Kong and ASEAN, the two sides signed the Hong KongASEAN Free Trade Agreement (HAFTA) in November 2017.

In addition to the reduction and/or elimination of import tariffs, other key elements covered by the HAFTA include rules of origin, liberalisation of trade in services, promotion and protection of investment, and intellectual property cooperation. Part of the HAFTA entered into force in June 2019.

The 14th Five‑Year Plan was announced in March 2021, with an emphasis on expanding domestic demand, accelerating the domestic circulation and “dual circulation” development strategy, improving the business

“In 2020, Hong Kong’s major export markets were mainland China (59.2% of total), the ASEAN (7.2%), and the EU (7.1%).”

environment, and promoting further economic growth. As an international trade center, Hong Kong companies can actively expand the mainland domestic market under the internal circulation, whilst playing an important role in the crossborder trade under the external circulation, bringing new business opportunities for Hong Kong’s trade sector.

CEPA Provisions Under The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff‑free. In the services sector, Hong Kong service suppliers (HKSS) can provide, in the form of wholly owned operations, commission agents’ services and wholesale trade services, and can set up wholly owned external trading companies in the mainland area.

After 10 annual supplements signed between 2004 and 2013 to keep widening and broadening the liberalisation measures in favour of HKSS, Hong Kong and the mainland entered into a subsidiary agreement under CEPA in 2014 to achieve basic liberalisation of trade in services in Guangdong (Guangdong Agreement). This was followed by the Agreement on Trade in Services (ATIS) to extend the coverage of the 2014 agreement from Guangdong to the rest of the mainland from June 2016.

Unlike the previous supplements that adopted a positive‑list approach to introducing liberalisation measures, the two latest CEPA agreements adopt a hybrid approach to granting preferential access to Hong Kong using both positive and negative lists.

HONG KONG BUSINESS ANNUAL 2022 29

company and industry - spectacles

HK spectacles makers vs ASEAN neighbours

Hong Kong’s spectacles exports grew 28% YoY to $14.3b in 2021.

H

ong Kong’s spectacles manufacturers specialise in making medium to high‑end frames. They are able to cope with small orders and offer an extensive range of frame designs. Hong Kong companies are traditionally strong in making plastic spectacle frames, which include those handmade from cellulose acetate, rimless nylon styles, and injection‑moulded types.

They also produce metal frames made from aluminium alloy, brass, stainless steel, silver, titanium, and mixtures of metals, and some with rolled gold. The majority of Hong Kong’s spectacles companies produce for overseas buyers and international brands, or trade on an OEM/ODM basis.

The industry is labour‑intensive, and characterised by a short life cycle, rapidly changing designs, and small order sizes. A small number of Hong Kong companies have diversified their business, from manufacturing to distribution and retail of their original brands and designs on the mainland as well as overseas.

Hong Kong’s spectacles companies are facing keen competition from counterparts in nearby regions, particularly Shenzhen, Wenzhou, and Danyang on the mainland.

Nonetheless, competition is confined to the lower end of the market. The leading Italian companies still prefer to engage with Hong Kong sub‑contractors because of their quality, business integrity, and long‑established corporate relationships.

To reduce operating costs and diversify production from the mainland, some spectacles makers are setting up production lines in the ASEAN region, yet high value‑added activities, including marketing, management, finance and accounts, are still carried out in Hong Kong.

Large‑scale manufacturers make substantial investments in advanced machinery and information technology.

They may use 3D CAD/CAM technologies and computer numerically controlled production lines to enhance their design and streamline the production process.

Another introduction is the 3D Head Mould and design database, which can customise spectacles specific to Asian faces.

The sector is well supported by ancillary industries, producing cellulose acetate sheets for plastic frame production, optical parts including spring hinges, nose bridges, and temples – the side arms – and other

Hong Kong’s spectacles companies are facing keen competition from counterparts in nearby regions

30 HONG KONG BUSINESS ANNUAL 2022

“Hong Kong was the world’s third‑largest exporter of spectacles and frames in 2019, after mainland China and Italy” industrial supports such as electroplating and mould‑making.

Hong Kong was the world’s third‑largest exporter of spectacles and frames in 2019, after mainland China and Italy. In 2020, Hong Kong’s total exports of spectacles, lenses, and frames contracted by 22% year‑on‑year to $16b. In the period of January to September 2021, the exports reached $14.3b, with a growth of 28% compared to the same period in 2020.

Exports to the EU27 and the US, the two largest markets sharing more than 50% of total exports, increased by 41% and 50%, respectively. Hong Kong’s exports to mainland China, the third‑largest export destination, dropped by 3% compared to the same period in last year.

Frames and mountings, and spectacles and goggles, which together accounted for 76% of the total exports, contracted by 21% and 32%, respectively, in 2020. Lenses and parts for frames and mountings, slid 6% and rose 7%, respectively, in the same period.

Sales channels On the retail side, most sales are carried out by chain stores and wholesalers worldwide.

Many manufacturers deal directly with overseas buyers, including large retail chains.

A growing number of Hong Kong exporters produce house or international designer brands under a licensing agreement. Some Hong Kong exporters have formed strategic alliances with overseas companies and brand license to consolidate long‑term relationships and explore overseas market opportunities.

Hong Kong manufacturers are also engaged in OBM, developing their own brands for other markets, particularly in mainland China, Asia, and Europe. Major Hong Kong optical retail brands such as eGG Optical Boutique and Optical 88 have diversified into the distribution business by setting up chains of retail stores on the mainland and in Southeast Asia, whilst some have established distributors throughout Europe and North America.

Industry trends Online retailing: Some local optical retail brands have launched e‑commerce sites as a response to the COVID-19 crisis. As people spend more time at home complying with containment measures, customers of all ages are becoming accustomed to shopping for

spectacles - company and industry Performance of Hong Kong Spectacles Exports (HK$ million)

Value Domestic Exports Re-exports of mainland China origin Total Exports

2019 Growth %

Value

2020 Growth %

Jan-Sep 2021 Value Growth %

26

+11

9

-65

11

+37

20,547

*

16,027

-22

14,357

+28

16,135

-3

12,640

-22

11,502

+29

20,573

*

16,036

-22

14,367

+28

* insignificant SOURCE: Hong Kong Trade Statistics, Census and Statistics Department

spectacles and lenses online, helped by technologies such as 3D facial scanning and online vision tests. SmartBuyGlasses offers virtual try‑on feature in which customers can try different eyewear online to find the frames that fit their face shapes. Some local designer brands – such as Big Horn, HACHiLL, UNSUIKYO, and 22° Eyewear – are leveraging online channels to sell and connect with both their local and overseas customers.

Emphasis on design and quality: Capitalising on the city’s strength in high‑end optical manufacturing, the latest generation of Hong Kong designers has brought new materials and modern elements to spectacle design. Some local brands such as P+US Eyewear and Big Horn are not only popular amongst celebrities, but are also award‑winning (for example, the iF Award, the Red Dot Design Award, the A’ Design Award & Competition and the International Design Awards USA) and internationally recognised. Some of Hong Kong’s local brands also acquired patents for their designs.

Domestic sales: The mainland optical market is likely to drive growth in the aftermath of the pandemic. This is a highly fragmented market with the top 10 companies accounting for a market share of just 16.5%.

Hong Kong is therefore a handy and effective springboard for new‑to‑the‑market eyewear companies exploring the mainland. Marchon Eyewear, a US‑based eyewear manufacturer and distributor, and one of the top three optical companies in the mainland market, is

headquartered in Hong Kong.

Eco‑friendliness and sustainability: With the rise of ESG, to stay compliant and competitive in today’s marketplace, some Hong Kong eyewear brands such as Okia Optical have launched sustainable glasses featuring recycled materials such as plastic water bottles used for the frame, and biodegradable materials used for the lenses.

Fashion and designer labels: An increasing number of fashion and designer labels promote their own collections of spectacles and frames as fashion accessories, and grant licences to spectacles manufacturers. For example, eyewear conglomerate Luxottica Group has been producing and distributing the branded eyewear frames for Chanel, Burberry, D&G and Prada.

CEPA provisions Under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III), the mainland agreed to give all products of Hong Kong origin, including spectacles, tariff‑free treatment from 1 January 2006.

According to the stipulated procedures, products that have no existing CEPA rules of origin can enjoy tariff‑free treatment upon application by local manufacturers and upon the CEPA rules of origin being agreed and met. Non‑Hong Kong‑made spectacles remain subject to tariff rates of 6‑7% when entering the mainland.

The rules of origin for contact lenses and spectacle lenses are the same as the current ones governing exports to other

“To stay compliant and competitive in today’s marketplace, some Hong Kong eyewear brands have launched sustainable glasses featuring recycled and biodegradable materials”

markets to benefit from the CEPA’s tariff preference. That is, the principal processes must be carried out in Hong Kong for the purpose of delineating their origin. For contact lenses manufactured from polymer, the principal processes are lathe‑cutting and polishing. For lenses of glass, an additional principal process is the application of an ultraviolet protection coating. If laminating or cutting of lenses are required, such processes must also be done in Hong Kong. For spectacle lenses manufactured from lens blanks, the principal process is grinding and polishing to shape.

To further facilitate the importation of Hong Kong goods into the mainland with zero tariffs, the mainland and Hong Kong signed the Agreement on Trade in Goods under CEPA in 2018. This provides exporters with the flexibility to choose between the existing Build‑up method and the new Build‑down method when calculating the value added to the products in Hong Kong.

General trade measures affecting spectacles exports Spectacles exports are required to comply with certain safety and quality requirements. The EU PPE Regulation (2016/425), which replaced EU Directive (89/686/EEC) from 21 April 2018, stipulates that personal protective equipment must meet specified health and safety requirements and bear a CE mark when being sold in the EU market. In addition, the EU standard (16128:2015) provides a reference method for testing of nickel release in spectacle frames and sunglasses.

HONG KONG BUSINESS ANNUAL 2022 31

company and industry - electronics

Trends shaping Hong Kong’s electronics industry growth

“Hong Kong’s electronics exports rose by 3.4% in 2020. Exports to mainland China increased by 6.7% in tandem with the sustained revival of the global economy”

H

set up offices in Hong Kong, engaging in sales, distribution, and sourcing activities in the region.

Regarding finished items, Hong Kong companies mostly produce on an ODM basis for reputable brand names in overseas markets. Some of these major buyers have set up offices in Hong Kong for direct sourcing.

Hong Kong companies also sell to specialised importers and traders in North America and Europe, who distribute the merchandise under their own channels or re‑sell to their clients for further distribution.

There are also a number of Hong Kong companies marketing electronic products under their own brand names, including Truly, V-Tech, Group Sense, Venturer, GP, and ACL. Their sales network covers not only the advanced countries but also economies like Latin America, Eastern Europe, and various parts of Asia.

Promotion via participation in trade fairs is an effective way for Hong Kong’s electronics companies to explore market opportunities.

Important trade fairs include the CES Show held in the US, CeBIT Fair, and Electronica in Germany, Taipei International Electronics Show in Taiwan, CommunicAsia in Singapore, and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.

Air purifiers and infrared thermometers drove strong demand due to the rising awareness of health and hygiene amongst Hong Kongers.

ong Kong’s electronics industry is the territory’s largest merchandise export earner, accounting for 71.8% of total exports in 2020. A substantial portion of these exports is regarded as high‑tech products, especially those related to telecommunications equipment, semiconductors and computer items. Mainland China is both the major source of and the major destination for Hong Kong’s electronic products trade.

According to the latest available statistics, Hong Kong was the world’s largest exporter of electronic integrated circuits; the second largest exporter of computer parts/accessories and video cameras; and the world’s thirdlargest exporter of video recording apparatus and telephones/mobile phones in value terms in 2019. This is thanks to the huge re‑export business handled through the territory, as Hong Kong is amongst the major global trading hubs.

Parts and components constitute about three-quarters of Hong Kong’s electronics exports, of which the majority are re‑exported to mainland China for outward processing production. Finished goods constitute about one-quarter of the exports, of which the majority are consumer electronics for domestic use, including a wide range of audio‑visual equipment, computer products and telecommunications equipment.

Industry features Most Hong Kong manufacturers have relocated their production facilities to mainland China to reduce costs. Their Hong Kong offices now focus mainly on research and development activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non‑manufacturing establishments statistically, despite the fact that they have manufacturing activities across the border.

Against fast-changing markets and advancing technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 – an internationally recognised

32 HONG KONG BUSINESS ANNUAL 2022

standard for a quality management system, ISO 14000 – a standard for an environmental management system, etc.

Hong Kong’s electronics exports rose by 3.4% in 2020. The major export markets were mainland China (accounting for 64.6% of the total exports in 2020), the EU (6.9%), the ASEAN (6.5%), and the US (5.1%). Exports to mainland China increased by 6.7% in tandem with the sustained revival of the global economy after the past two years.

Distribution channels Hong Kong companies engaging in parts and components business are capable of producing on a custom‑made basis and offering total solutions for famous US, European, and Japanese companies, e.g. parts and accessories of computers, RF modules for telecommunication purposes, chip‑sets for LCD modules, etc. Meanwhile, standard components are usually exported directly to distributors and manufacturers in overseas markets, whilst some Hong Kong companies also have their own sales offices and/or representative offices in mainland China and other overseas markets.

Notably, Hong Kong is an important trading hub for electronic parts and components in Asia‑Pacific. Many items from the US, Europe, Japan, Taiwan, and South Korea are re‑exported via Hong Kong to the mainland, and vice versa. A number of multinational parts and components manufacturers have

The rising awareness on personal hygiene and health has driven strong demand for health‑related electronic products, such as air purifiers and infrared thermometers

electronics - company and industry Performance of Hong Kong’s Exports of Electronics 2019 HK$ bn Growth % Domestic Exports Re-exports of mainland China origin Total Exports

2020 HK$ bn Growth %

Jan-Jun 2021 HK$ bn Growth %

2.0

-3.2

2.6

+25.3

1.4

+20.7

2,723.8

-4.1

2,817.2

+3.4

1,645

+31.4

1,599.5

-7.4

1,582.0

-1.1

889

+26.7

2,725.8

-4.1

2,819.8

+3.4

1,647

+31.4

SOURCE: Census and Statistics Department

Product trends On the back of technological advancement and falling prices amidst keen competition, conventional IT products like notebook computers have become mass products. Now, the industry is focusing on further technological enhancement to sustain the business. Notably, mobile devices with enhanced smart features are in demand around the globe.

Meanwhile, mobile communication has become part of the daily lives of consumers in most countries. In particular, sales of high‑end smartphones are rising rapidly. Many models are now compatible with certain wearable electronics and other smart devices. This has attracted demand especially from the younger generation and high‑income consumers.

In consumer electronics, one key development is digital imaging, in particular, large‑screen digital TVs with connectivity. This enables internet surfing with the so‑called “smart TV” features and the ability to communicate with mobile devices, as well as the ultrahigh-definition TVs (UHDTVs) with a display resolution of 4K or higher.

In addition, some players are keen to promote 3D printers in view of the falling printing and other material costs. Also, the industry is keeping an eye on the development of certain niche items, such as action camcorders and drones, as well as products related to the Internet of Things (IoT), which are taken by some players as means to inspire the market and create new business.

Smart homes will be one of the major IoT application areas that could elicit huge demand for related IT systems, hardware

and devices.

The COVID-19 pandemic has affected daily life in unprecedented ways. The rising awareness on personal hygiene and health has driven strong demand for health‑related electronic products, such as air purifiers and infrared thermometers etc. As for businesses, the pandemic has accelerated the adoption of digital technologies. Many enterprises have introduced smart devices to their offices, such as interactive whiteboards and smart meeting rooms to make remote conferences more productive and engaging for employees, thereby driving the demand for electronic products.

CEPA provisions Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs.

In December 2018, the mainland and Hong Kong signed the Agreement on Trade in Goods, which further enhanced the arrangement for rules of origin (ROOs). Starting from 1 January 2019, goods of Hong Kong origin fully enjoy zero tariff when imported into the mainland. In addition to the product‑specific ROOs (PSRs), Hong Kong and the mainland introduced a general rule of origin (General Rule) based on a calculation of the value added to the products in Hong Kong.

Products without PSRs would instantly enjoy zero tariff upon importation into the mainland, subject to the fulfilment of General Rule.

“Many enterprises have introduced smart devices to their offices to make remote conferences more productive and engaging for employees, thereby driving the demand for electronic products”

The CEPA origin criteria for Hong Kong items largely include (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; or (3) fulfilment of the regional value content (RVC) requirement, under which the value of originating raw materials and component parts, labour costs, as well as the product development costs, should account for at least 30% of the FOB value of the products when calculated by the build‑up method, or the value of non‑originating materials accounting for not more than 60% of the FOB value when calculated by the build‑down method.

Overseas markets and green consumerism Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets.

These include the safety requirements of UL/ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. With regard to electromagnetic compatibility (EMC), Hong Kong companies should note that products sold to the US require compliance with FCC standards, whilst EU’s CE‑mark also requires compliance with relevant EMC directives. Most electronic products for sale in the Chinese market have to be in compliance with the safety and other requirements of a unified compulsory product certification system known as 3C (China Compulsory Certification).

Hong Kong companies should also be attentive to the growing popularity of green consumerism.

Consumers are generally conscious of environmental protection, especially in Europe.

HONG KONG BUSINESS ANNUAL 2022 33

company and industry - packaging materials

Foreign policies trouble HK packaging manufacturers As a result, more sustainable materials, like biopolymers, are increasingly being used by Hong Kong firms.

H

ong Kong manufacturers produce a wide range of packaging materials, including paper containers, polyethylene (PE) packages, and polyvinyl chloride (PVC) packages, with mainland China being Hong Kong’s largest market.

Laws and regulations restricting the use of packaging materials have become more stringent worldwide. Packaging manufacturers are expected to meet higher environmental and sustainability standards, in order to help their customers fulfil the requirements in the countries where their products are sold. ​​​​​​​As online shopping has accelerated, there has been a visible increase in demand for e-commerce packaging solutions. Packaging is expected to become more personalised for the purpose of marketing and brand differentiation. However, brands are also increasingly more aware of sustainable e-commerce packaging and are looking for ways to reduce packaging waste.

Industry features The packaging materials industry can be

divided into consumer packaging and industrial packaging. The former refers to the packaging of goods sold to consumers, primarily involving shopping bags, packaging bags, padded mailers, boxes, and gift wraps, etc. Food and beverage packages, such as PET bottles, laminated paper packages and flexible packaging, also fall within this category. Industrial packaging is mainly used for protection and transportation purposes.

It includes vacuum packs, heat seals, shrink wrap, cartons, paperboard boxes, PS foam, air‑bubble blister stuffing, and foam sheets.

Hong Kong manufacturers produce a wide range of packaging materials, including paper containers (such as corrugated carton boxes, paper carrier bags, paperboard boxes and pulp moulds out of newsprint and corrugated paper), polyethylene (PE) packages (such as bags for food and garment packaging, stretch film for wrapping and shrink film for packaging multiple items), PVC packages (such as films/tubings for wrapping consumer items and plates for blister cards) and metal containers for beverages and edible oils.

The local packaging materials industry is

Mainland China is the largest export market for Hong Kong’s packaging materials industry, accounting for 65% of total exports in 2020

34 HONG KONG BUSINESS ANNUAL 2022

“Items under SITC 582 (plastic plates, sheets, film, foil and strips) make up the majority of Hong Kong’s exports of packaging materials” also supported by a strong printing industry.

Some Hong Kong companies can offer value‑added services, such as developing the packaging design along with the customer’s product development. For example, in the toy industry, the packing can be part of the playset to reduce wastage in packaging materials.

Mainland China is the largest export market for Hong Kong’s packaging materials industry, accounting for 65% of total exports in 2020. Demand for packaging materials on the mainland has been mainly driven by local production activities.

Items under SITC 582, which include plastic plates, sheets, film, foil and strips, make up the majority of Hong Kong’s exports of packaging materials, accounting for 64% of the total in 2020. It is also the leading category amongst packaging materials exported to the mainland and ASEAN, accounting for almost 80% of total exports of packaging materials to the mainland and about 50% to ASEAN. Sales channels Hong Kong’s exporters of consumer goods, such as garments, electronics products, toys, shoes, timepieces, jewellery, housewares and giftware, are the major customers of local packaging materials suppliers. Bag and container makers usually export their products directly to manufacturers or distributors overseas. These products include consumer packs, such as gift boxes, packaging bags, as well as cans and bottles.

Industry trends Mainland China is a major consumer goods production centre that generates a mammoth demand for packaging materials.

The growth in other businesses on the mainland has also boosted the demand for advertising, packaging, and printing. In the meantime, growing numbers of consumer goods manufacturers are outsourcing their packaging production to specialised packagers. These developments have created business opportunities for packaging subcontractors.

As online shopping has accelerated, there has been a visible increase in demand for e‑commerce packaging solutions. Demand for paper boxes and labels is expected to grow the fastest, boosted by the increase in package volume. Packaging is expected to become more personalised to help

packaging materials - company and industry Performance of Hong Kong’s Exports of Packaging Materials 2019 HK$ million Growth % Domestic Exports Re-exports of Chinese mainland origin Total Exports

2020 HK$ million Growth %

Jan-Jun 2021 HK$ million Growth %

240

-19.4

261

8.8

206

101.4

21,480

-7.2

18,588

-13.5

9,683

11.4

10,658

-11.2

8,554

-19.7

4,776

20.4

21,720

-7.4

18,849

-13.2

9,889

12.4

SOURCE: Hong Kong Census and Statistics Department

with marketing and brand differentiation. However, brands are also becoming increasingly aware of sustainable e‑commerce packaging and are looking for ways to reduce packaging waste.

For example, leading online fashion retailer Zalora has started using recyclable packaging and has adopted reusable packaging bags for returned products from customers.

Flexible packaging has been gaining popularity in recent years, and it is likely to be increasingly used to replace or complement the packaging of product assortments that have traditionally been packaged in cans and bottles. One example of this trend is stand‑up pouches, which are increasingly used in food and beverages packaging, especially for liquids. They are easy to store and highly practical to close or reseal. They also use fewer materials, which reduces shipping and logistics costs.

CEPA The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and has subsequently been expanded in the following years. All products made in Hong Kong, subject to CEPA’s rules of origin, enjoy duty‑free access to mainland China. Overall, the CEPA origin criteria for packaging materials mainly include the principal manufacturing or processing operations being carried out in Hong Kong, which confers essential characteristics to the final product.

General trade measures affecting exports Many countries have imposed laws to regulate the responsibility

of the producer for packaging materials. The trend is for a continued increase in recycling and recovery targets, in order to further reduce the impact of packaging waste on the environment. In 2018, the EU updated its rules on wood packaging materials used in the transport of certain commodities.

In early 2020, China announced regulatory initiatives to reduce the volume of plastic waste, in particular those resulting from online food delivery, logistics, and e‑commerce. Single‑use plastic bags and tableware are now banned in major cities and will be banned in all cities and towns by 2022. Postal delivery outlets in areas such as Beijing, Shanghai, Jiangsu and Guangdong will ban the use of non‑degradable plastic packaging and disposable woven bags by the end of 2022.

In Singapore, producers of packaged products, such as brand owners, manufacturers, importers and retailers are now required to submit packaging data (including materials, weight and form of packaging imported or used) and provide a packaging improvement plan (3R plan) under the Resource Sustainability (Packaging Reporting) Regulations 2020.

Product trends Sustainable packaging The growing interest in environmental issues and the spread of more stringent legislations on the use of packaging materials worldwide are influencing the choice of materials used in packaging. Manufacturers are working towards eliminating

“Brands are becoming increasingly aware of sustainable e‑commerce packaging and are looking for ways to reduce packaging waste”

unnecessary packaging and increasing the use of recycled content in their production.

Bio‑based renewable materials such as biopolymers are increasingly being used in packaging as they are often biodegradable and not toxic to produce. The growing concern amongst consumers about plastic pollution is also creating new opportunities in the market, such as plastic‑free aisles in supermarkets and packaging‑free refill retail stores.

Design with hygiene and safety features Consumer awareness of hygiene has increased dramatically due to the COVID-19 pandemic and is likely to persist even after the pandemic subsides. These concerns can be addressed through new and improved packaging designs, especially for food and beverages. For example, the choice of packaging material substrate can affect the viability of virus, whilst using tamper‑proof packaging can ensure protection against contamination.

Convenient packaging As well as improved safety, additional functionality and added convenience are the general trends in the food and beverage packaging market.

One example of this are pouches which feature handles and pouring spouts. These pouches can be heated in boiling water and stored under refrigeration and are especially ideal for soup and sauces packaging.

There is also a trend for “retail ready” packaging which refers to packaged retail goods which are ready to be displayed to consumers immediately or with little set up.

HONG KONG BUSINESS ANNUAL 2022 35

company and industry - franchising

Hong Kong edges out the franchise competition in Asia

Around 56% of the franchise operations in Hong Kong are local.

H

ong Kong’s franchising market has been developing steadily, with many well-known international franchise brands. According to Hong Kong Franchise Association’s estimates, around 43% of franchises in Hong Kong are in the catering business, 20% in retailing, and 37% in other services.

Franchising is an established model of business expansion, which is especially common for the food and beverage, retail and other services sectors, such as laundry and mini storage. In Hong Kong, a number of home-grown brands, including Store Friendly, Fitboxx, Kung Wo Tong and Quality Dry-clean, have adopted the franchise model targeting the local market to utilise franchisees’ financial resources and personal networks.

Many international franchise brands prefer well-established local companies with strong retail and management experience to be their master franchisees in Hong Kong.

These master franchisees run the operations with their own teams and/or subcontract the operations to individual franchisees.

Developing Asian countries have begun to embrace franchising in recent years, as their rising middle-income class becomes more affluent and gravitates towards international

brands. Many international brands have started to look for franchising opportunities in emerging markets.

Hong Kong has the edge in serving the growing franchising business in Asia, including its showcase role, track record of organising exhibitions, world-class supporting services, access to quality franchisees, the availability of industry talent, market sensitivity and extensive business connections in Asia.

Market characteristics Since the 1970s, when McDonald’s and KFC started opening franchised restaurants in Hong Kong, the city’s franchising market has been developing steadily. Most of the well‑known international franchise brands, including Pizza Hut, 7-Eleven, Subway, Starbucks, Five Guys and QB House, have a presence in Hong Kong. According to Hong Kong Franchise Association’s estimates, about 56% of the franchise operations in Hong Kong are local franchises. By industry, around 43% of the franchises in Hong Kong are in the catering business, 20% in retailing and 37% in other services, such as learning centre, laundry and dry cleaning.

Many international franchise brands prefer well‑established local companies with

“There is no specific franchise law in Hong Kong. Disputes arising from franchise agreements will be subject to the common law” strong retail and management experience to be their master franchisees in Hong Kong.

These master franchisees run operations with their own teams and/or subcontract operations to individual franchisees. For example, Dairy Farm Group and Maxim’s Group are Hong Kong‑based conglomerates that operate some big brands, such as Ikea, 7-Eleven, and Starbucks.

In Hong Kong, home‑grown brands using the franchising model for local expansion is less common than in big economies with significant regional disparities. Still, there are a number of home‑grown brands, including Store Friendly Self Storage, Fitboxx, Kung Wo Tong, and Quality Dry-clean that adopt the franchise model targeting the local market, to utilise the franchisees’ financial resources and personal networks.

Some others have even adopted the franchise model across the border. For instance, Chow Tai Fook Jewellery has about 2,650 jewellery points of sale in China operated by franchisees as of end‑March 2021; AS Watson Group reached an exclusive franchise agreement with Dubai‑based Al-Futtaim last year to venture into the Middle East market, with plans to open 100 stores in the region by 2025; and Houseware retail chain Japan Home has a total of seven stores in Malaysia, Cambodia, Vietnam, and Australia.

There is no specific franchise law in Hong Kong. Disputes arising from franchise agreements will be subject to the common law, especially the principles of contract law, and other applicable legislation, such as the Misrepresentation Ordinance, Trade Marks Ordinance, Copyright Ordinance, Registered Designs Ordinance, and Patents Ordinance.

Industry development

About 56% of the franchise operations in Hong Kong are local franchises

36 HONG KONG BUSINESS ANNUAL 2022

International franchising in Asia International franchising facilitated by the increasing ease of global communications and technological development, is becoming a key trend in Asia, as its rising middle‑income class becomes more affluent while gravitating towards international brands. As Asian consumers earn more, they increasingly crave the quality, convenience and service associated

franchising - company and industry with foreign brands. Sectors such as food and beverages, education, as well as personal and commercial services that cater to the needs and lifestyles of the middle‑income class, offer high potential for franchising in the region. Taking Vietnam as an example, about 145 foreign brands have registered franchising businesses in the country, such as the American fast food chain Popeyes and Japanese convenience store Family Mart.

Fast-growing fitness franchises Fitness is one of the fastest growing industry in the franchising world. As people become more health‑conscious, demand for fitness centres is increasingly apparent. Besides the standard large‑format gyms, consumers are also more interested in boutique fitness brands specialised in exercises such as boxing, pilates, and spinning. F45 Training, an Australian fitness franchise specialising in high intensity group workouts, has about 140 franchised gyms in Asia, including Hong Kong, mainland China, South Korea, ASEAN countries and India. Other examples of fitness franchises with presences in Asia include Anytime Fitness, Snap Fitness, and Orangetheory Fitness.

HK as a franchising hub Hong Kong has the edge in serving the growing franchising business in Asia, including its showcase role, track record of organising exhibitions, world‑class supporting services, access to quality franchisees, the availability of industry talent, market sensitivity and extensive business connections in Asia. Hong Kong could serve as a two‑way springboard for international franchisors looking to gain access to the Asian markets, and for Asian brands to venture into the global marketplace.

To help expand the franchise business and connections

Fitness is one of the fastest growing industry in the franchising world

amongst Hong Kong companies, the Hong Kong Trade Development Council or HKTDC launched the Hong Kong International Franchising Show in 2015. The event is a one‑stop platform for companies and entrepreneurs to look for franchising brands, identify business partners and get franchising advice. Held online in December 2020, the sixth edition of the Show featured a series of webinars hosted by industry experts to share the latest market trends and business tips.

Franchising opportunities in Mainland China According to the China Chain Store & Franchise Association, the total sales of the country’s top 100 franchises reached RMB2,407b in 2020, with the total number of stores of the top 100 franchises rising 8% to approximately 177,800. With its expanding middle‑class consumer base and urban population, mainland China is one of the top potential franchise markets in Asia.

One of the difficulties encountered by international franchisors in mainland China is finding qualified franchisees. Moreover, registering trademarks and IP,

“With its expanding middle‑class consumer base and urban population, mainland China is one of the top potential franchise markets in Asia”

applying for the right licences, and setting up legal entities can be formidable challenges.

Hong Kong companies may act as the master franchisees or area developers to help international franchisors deal with the challenges in mainland China. With decades of experience doing business in the mainland, Hong Kong companies are trusted partners for international franchisors, helping to manage the mainland franchisees, deal with bureaucracy, handle licence applications, fulfil import requirements, manage supply chains, and adapt to local needs and tastes. At the same time, Hong Kong businesses familiar with the international market, business practices and culture, can also serve as agents to help mainland companies expand overseas through franchising.

CEPA Amongst other provisions, CEPA further opens up the mainland market for Hong Kong products and the distribution business to Hong Kong companies.

Under the Agreement on Trade in Services, Hong Kong service suppliers are granted national treatment to establish commercial presence for franchising in mainland China.

HONG KONG BUSINESS ANNUAL 2022 37

company and industry - printing

Digital printing takes centre stage in Hong Kong Direct imaging from computer to printer saves time and costs.

M

ost printing companies in Hong Kong are small and medium enterprises (SMEs). They produce a wide range of printing materials, such as brochures, paper and paperboard labels, and children’s books.

Major printers have relocated production to mainland China to reduce operation costs, but many still maintain offices in Hong Kong to receive overseas orders and provide design, editing, and electronic publishing services. ​​​​​​​Many emerging trends in printing pertain to the advent of new technology or production techniques. 3D printing has caught significant attention within the print industries and more utilisation is expected in the future. 3D printing technology will become increasingly low cost and support rapid prototyping processes and manufacture of end-use parts.

Industry features Printing is a support industry for publishing and advertising, and also for various light consumer goods industries (toys, food, cosmetics, etc). Most printing companies in Hong Kong are SMEs. They produce a wide range of printing materials, including books,

booklets, brochures and leaflets, and paper and paperboard labels, advertising materials, commercial catalogues, calendars, postcards and greeting cards. Some specialise in the production of higher value‑added/hi‑tech printing products, such as children’s novelty books with pop‑ups and additional objects, cheque books, passports, bills and statements, securities, and prospectuses. Creating these products requires considerable specialist skill, substantial capital investment, and confidentiality.

Major printers have relocated production to mainland China with purpose‑built plants to reduce operation costs. Such development has changed the workflow and logistics and greatly improved efficiency and output quality.

However, they still maintain their offices in Hong Kong to receive overseas orders. The ability to meet high-quality requirements has allowed Hong Kong to become a major global printing and publication centre, despite the increasing price competition from mainland printers. Rising labour costs on the mainland are encouraging greater automation and mechanisation. Automation can also reduce human errors whilst increasing efficiency,

3D printing has caught significant attention within the print industries and more utilisation is expected in the future

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“Rising labour costs on the mainland are encouraging greater automation and mechanisation” productivity, and quality.

Overseas customers are increasingly looking for faster turnaround and shorter delivery times in order to maximise return through smaller but more frequent orders.

Hong Kong printers are known for quality, quick delivery, competitive pricing, and the ability to cope with short‑notice printing jobs.

Their quality is comparable to that of printing businesses in the US, Germany, and Japan, the pioneers in printing technology. Hong Kong printers are also known for their inventiveness and willingness to find solutions to production problems.

Sales channels A large share of the export business is attributable to orders received directly from overseas countries. This also includes orders from major international publishers in Hong Kong. Export orders are mainly handled by larger printers or dealers, who have established business relationships with overseas customers. In an effort to capture overseas business, large Hong Kong printing companies have established offices overseas.

In order to expand business networks, explore market opportunities, and promote their company image abroad, Hong Kong manufacturers and distributors participate in trade fairs and study missions organised by the Hong Kong Trade Development Council (HKTDC), such as the Hong Kong International Printing and Packaging Fair.

Another important international trade fair is Germany’s Drupa.

Industry trends Many emerging trends in printing pertain to the advent of new technology or production techniques. Digital printing has gradually developed and applied in a wide range of fields within the printing industry. Inkjet has become a preferred choice for most magazine/ book printers with the improvements of inks which are able to stick to gloss coated paper without the need for pre‑treatment.

3D printing has caught significant attention within the print industries and more utilisation is expected in the future. 3D printing technology will become increasingly low cost and support rapid prototyping processes and manufacture of end‑use parts.

E‑commerce will continue to be an important channel for procurement in printing. The clumsy processes of specifying

printing - company and industry Performance of Hong Kong’s Exports of Printed Matter 2019 HK$ million Growth %

2020 HK$ million Growth %

Jan-Jun 2021 HK$ million Growth %

Domestic Exports

1,374

+31.0

1,053

-23.4

473

-0.8

Re-exports

15,735

+0.8

12,805

-18.6

6,808

+14.9

13,254

-5.3

11,148

-15.9

5,772

+13.2

17,110

+2.7

13,858

-19.0

7,281

+13.8

of Mainland China origin Total Exports SOURCE: Hong Kong Census and Statistics Department

requirements, enquiries, checking the sample draft, amending information, confirming the order and so on, can all be done online. Besides, through the online portal, consumers can receive quotations with greater ease and speed, and products such as banners and brochures can be ordered and shipped more quickly.

Automation is another trend.

This helps cut costs, improve quality and speeds up the production process. For example, a printer can set up pre‑designed templates for frequent print orders such as business name cards so that they will be readily available to print on demand.

The automated function of bulk uploading allows business name cards for multiple people to be ordered at the same time with a single digital file, saving time and effort and ensuring consistency.

With the rise of on‑demand printing production in smaller quantities, automation also allows printers to make adjustments and changes quickly with guaranteed precision and productivity.

Advertising and marketing Advertising and marketing materials would remain one of the largest sectors of the printing industry, despite the rise of online advertising. Posters, flyers, brochures, and other promotional materials are now printed mainly using digital technology. Digital printing enables direct imaging – sending texts and graphics directly from the computer to the printing machine without the use of plates. This shortens production time and cost and improves speed and accuracy. It is easy to operate and is suitable for printing small quantities where flexibility, short lead time, and customisation are important.

Digital printing also enables personalisation in packaging.

Some printers are also offering the “total solution” service, which includes auxiliary services like design, data‑processing, translation and editing, and electronic publishing. A number of large printers have developed vertically, such as manufacturing or trading paper, or forming strategic partnerships with suppliers, in order to minimise the effects of paper price fluctuations and allow the company to have better control over material supplies.

Product trends Interactive design and new substrates Traditional printed products need more interactive designs to meet the emerging demands of various market segments.

Children books, for example, are becoming more sophisticated as children now expect to interact with them. They may listen and talk to them, use them to build models or solve puzzles, or even play with soft toys that are housed inside the book.

C&C Joint Printing, a leading printer with almost 40 years of operations in Hong Kong, incorporated augmented reality (AR) in the production of The Story of Gingerbread Man children book to create a more fun reading experience. The ability to print on non‑paper materials such as glass, textiles, and metal has also become more important for printing companies to enhance offerings and attract more customers.

Personalisation With the rising adoption of inkjet technology in commercial printing, printers can create

“Print facilities are using more eco-friendly supplies such as recycled paper and synthetic paper, polyester‑based fabrics, UV ink, and vegetable‑based ink”

more personalised books such as planners and notebooks. It allows personalisation in all aspects, including the cover, back and spine design, font and colour as well as the interior design and format.

Sustainability As publishers pledged to be more environmentally friendly, the focus on sustainable printing practices will inevitably continue. Print facilities are using more environmentally friendly supplies such as recycled paper and synthetic paper, polyester‑based fabrics, UV ink, and soy/vegetable‑based ink.

The chemical‑free plate system has also been introduced. Some printers are also embracing technologies such as on‑demand printing and variable data printing as well as implementing in‑house recycling facilities in order to reduce wasteful production practices caused by overprinting.

CEPA CEPA was concluded in June 2003 and subsequently expanded in the following years. All products made in Hong Kong, subject to CEPA’s rules of origin, enjoy duty‑free access to the mainland. Detailed information is available from this website.

General trade measures affecting exports of printed matters The US Consumer Product Safety Improvement Act of 2008 requires manufacturers and importers to show that products intended for children under 12 do not contain harmful levels of lead and phthalates. This applies to art materials, crafts, books, and magazines marketed to children under 12 years old.

HONG KONG BUSINESS ANNUAL 2022 39

company and industry - green technology and environment services

Hong Kong unveils roadmap to a clean and green 2035

Amongst the measures include the halt of fuel-propelled private cars’ registration and legislation of EV schemes.

H

ong Kong’s environmental industry focuses on six key business areas, namely (1) water conservation and pollution control, (2) air and oadour pollution control, (3) energy conservation, (4) waste treatment, disposal and recycling, (5) noise control and mitigation, and (6) environmental consulting services.

The value added of Hong Kong’s environmental industry amounted to $9.9b in 2019 (or 0.4% of GDP). Employment by the industry reached 44,670 in the same year, accounting for 1.2% of Hong Kong’s total.

Leveraging Hong Kong’s unique strengths in the global technology revolution, green technology is one of the Hong Kong Science Park’s five core technology clusters.

Phase 3 of the Hong Kong Science Park was completed in April 2016. O·PARK1, Phase 1 of the organic resources recovery centre, locating at Siu Ho Wan in North Lantau commenced operation in July 2018.

The government provides funding supports to environmental tech related

research and development (R&D) projects under the Innovation and Technology Fund (ITF), which has approved 179 projects since its establishment, with total funding exceeding $375m.

Hong Kong and mainland China have further strengthened cooperation in the environmental industry, after the Agreement on Economic and Technical Cooperation was signed on 28 June 2017.

Industry features The environmental industry is widely recognised as a new growth sector. According to the latest available figures, the value added of Hong Kong’s environmental industry grew by 5.8% year on year to $9.9b in 2018 (or 0.4% of GDP). Employment by the industry reached 44,130, accounting for 1.1% of Hong Kong’s total.

The environmental industry in Hong Kong consists of mainly small and medium‑sized enterprises, which largely focus on six business areas, including (1) water conservation and

The Hong Kong Roadmap on Popularisation of Electric Vehicles introduced a series of measures, such as stopping new registration of fuel‑propelled private cars in 2035 or earlier

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“Hong Kong and mainland China have further strengthened cooperation in the environmental industry after the Agreement on Economic and Technical Cooperation was signed in 2017” pollution control, (2) air and odour pollution control, (3) energy conservation, (4) waste treatment, disposal and recycling, (5) noise control and mitigation, and (6) environmental consulting services. Some companies are also engaged in waste and scrap import/export and wholesale trading.

Mainland China is one of the fastest growing and most important environmental technology and related services markets for Hong Kong companies. According to the World Energy Investment Report 2021 by the International Energy Agency (IEA), mainland China is an important world destination for energy investment. The Chinese government aims to achieve carbon peak by 2030 and carbon neutrality by 2060. In the latest 14th Five-Year Plan (2021-2025), the Chinese government will actively develop green‑related industries, such as energy conservation and environmental protection, clean manufacturing, clean energy, ecological environment, green infrastructure, and green services, etc. Furthermore, Beijing will also promote the development of wind and solar energy, implement green building policies, and encourage the use of green building materials. These measures are expected to further boost environmental industry development in mainland China, creating opportunities for HK companies.

Low carbon and emission reduction Hong Kong has long been active in overcoming the challenges brought by global warming. In June 2021, the government announced the Clean Air Plan for Hong Kong 2035, setting out the vision under the slogan “Healthy Living · Low‑carbon Transformation · World Class”.

The Clean Air Plan covers six major areas of action, namely green transport, liveable environment, comprehensive emissions reduction, clean energy, scientific management and regional collaboration.

With regard to green transport, the government issued the Hong Kong Roadmap on Popularisation of Electric Vehicles in March 2021. The Roadmap introduced a series of measures, such as stopping new registration of fuel‑propelled private cars in 2035 or earlier; promoting trials for electric public transport and commercial vehicles including buses, public light buses, taxis and goods vehicles, and striving to legislate a producer responsibility scheme for retired EV batteries in the next few years.

green technology and environment services - company and industry Industry Features 2018

2019

Value added (HK$ Mn)

9,867

9,868

Employment (Number)

44,130

44,670

SOURCE: Census & Statistics Department, HKSAR

In the clean energy sector, the government is urging power companies to phase out existing coal‑fired units with natural gas progressively from now to 2030.

Green building In recent years, many countries have introduced green building certification systems to provide indicators for building performance and encourage the adoption of low‑carbon construction methods for structures that are newly built, undergoing renovation, or already occupied. Common green building certification systems in Hong Kong include the Leadership in Energy and Environmental Design by the US Green Building Council and BEAM Plus New Buildings by the Hong Kong Green Building Council.

Hong Kong’s first zero‑carbon footprint building, the Zero Carbon Building, opened in Kowloon Bay in 2012, featuring over 80 types of green technology to reduce greenhouse gas emissions. The Building has won recognition and various awards for its innovation environmental performance, including the National Energy Globe Award 2015 by the Energy Globe Foundation.

In 2019, the government introduced Green Schools 2.0 to enhance energy efficiency in schools. Solar Harvest, a Government programme under Green Schools 2.0, installs solar energy generation systems for eligible schools and welfare NGOs for free. In the 2021-2022 Budget, the Government earmarked $1b to install small‑scale renewable energy systems at government buildings and infrastructure, $150m to conduct energy audits and install energy‑saving appliances, free of charge, for NGOs subvented by the Social Welfare Department, and inject

$1b into the Recycling Fund.

Development of green tech Leveraging Hong Kong’s unique strengths in the global technology revolution, green tech is one of the Hong Kong Science Park’s five core technology clusters. The Science Park provides a full range of facilities and equipment to support the development of green tech in areas of building energy efficiency, environmental solutions, alternative energy, waste disposal and recycling, electric vehicles, and green electronics for infrastructure projects and carbon audits (carbon footprint).

Phase 3 of the Science Park completed construction in April 2016. This project was one of the government’s initiatives to boost the development of green tech in Hong Kong and to attract high‑tech investment by private companies. It can accommodate about 150 green tech companies and create 4,000 green tech research and development job positions.

In 2019, the China Everbright Green Technology Innovation Research Institute set up its global R&D headquarters in the Science Park. As one of Asia’s largest waste‑to‑energy project investors and operators, Everbright International is actively looking for collaborations with other innovators at the Science Park to drive green innovations.

Examples of successful green tech enterprises in Hong Kong include Dunwell Enviro-Tech (Holdings) Ltd at Yuen Long Industrial Estate. Dunwell provides used oil and wastewater treatment, recycling, reuse services and turns waste lubricating oil into cost‑effective finished oil using its patented vibrating membrane advanced treatment (VMAT) technology. Besides, the ASB Biodiesel plant, a foreign

“The gov’t is urging power companies to phase out existing coal‑fired units with natural gas progressively from now to 2030”

investment project established in Tseung Kwan O Industrial Estate, uses Austrian technology to process waste oil, such as waste cooking oil and grease trap oil, with the capacity to produce 100,000 tonnes of low‑carbon transport fuel per year.

Located at Siu Ho Wan in North Lantau, O·PARK1 commenced operation in July 2018. Using anaerobic digestion technology, O·PARK1 can convert 200 tonnes of food waste into electricity each day. O·PARK2 and O·PARK3 located at Sha Ling of North District and Shek Kong of Yuen Long respectively, are designed to convert 300 tonnes of organic waste per day. Currently under construction, O·PARK2 is scheduled to commence operation by 2023.

The government also provides funding support to environmental technology‑related R&D projects under the ITF managed by the Innovation and Technology Commission. As of March 2021, the ITF has approved over 190 environmental technology‑related projects, with the total funding exceeding $388m.

Hong Kong-Guangdong crossboundary cooperation In April 2008, the government launched a Cleaner Production Partnership Programme to encourage Hong Kong‑invested enterprises in Guangdong to actively participate in improving the quality of the environment in the region. In light of the environmental benefits and positive feedback from industry, the Programme has been extended until 31 March 2025 according to 2020-2021 Budget.

Under the Programme, assistance is given to Hong Kong factories in the Pearl River delta (PRD) to use cleaner production technologies and operation mode so that concerted efforts are made to create a cleaner environment.

HONG KONG BUSINESS ANNUAL 2022 41

21

High-Flyers 2021 Profiles of Hong Kong’s Outstanding Enterprises and Business Leaders

Archikris Design Group 44 | Elite Concepts Ltd 46 | FEED HK 48 | Fidelity International 50 Hang Seng Bank 52 | Mayer & Associés 54 | PrimeCredit Limited 56 | Soteria Trust 58 Standard Chartered Bank 60 | UMP Healthcare Holdings Ltd 62

CONTRIBUTING WRITERS: Angel Tang, Erma Edera, Joana Bagano, Jefferson Losito, Arianna Danganan HONG KONG BUSINESS ANNUAL 2022 43

21

ARCHIKRIS DESIGN GROUP

PREMIUM DESIGN SERVICES TO COMBINE AESTHETIC WITH FUNCTIONALITY

W

ith Nison Chan, the interior veteran and creative spirit behind many of Hong Kong’s most enchanting and modern places at the helm, Archikris Design is bound to yet another successful year, retaining its throne for the Interior Design award. Chan’s achievement holds great significance considering that this was the 15-consecutive year for him to stay on top of the game.

Archikris Design - the mother company of residential practice Zchron Design and commercial arm Krisveman Design - is known for its exquisite craftsmanship and well through-out details that never lose sight of a client’s character. Chan said the firm focuses on bringing professionalism to luxury interior design, specialising mainly in high-end residences, office premises and retail shops. He believes a top level of design service and professionalism bolstered by refined materials, are elements that have distinguished the firm as a leader in the industry.

“An interior project usually involves several parties, including design firm and contractor, but we offer a two-in-one integrated team that includes designers, architects and contractors to deliver a streamlined process. From design brief to completion and handover, our clients enjoy a one-stop, care-free service. The team

44 HONG KONG BUSINESS ANNUAL 2022

has a shared desire to embrace projects and to redefine the designbuild concept along the way.”

Chan’s glamourous and prestigious design, exemplified in a handful of stunning luxury residential and commercial projects for the likes of Escada, Max Mara, Carlsberg, Leica and the Hong Kong Institute of Bankers, contribute to an unerring and thoughtful sense of art and unique interpretation of space that feels open and timeless, and it earns him the respect of interior designers from around the world, including Max Mara, which invited Chan to attended a one-week visit at the headquarter of the leading Italian fashion house. These idea exchange activities he participates in Paris, Italy and all of the world, his hunger in absorbing the latest trends from around the world, together with his 25 years of solid experiences and extensive network in the interior field, may be the secret to Archikris’ distinct premium designs in striking perfect balance between aesthetic and functionality, Chan admits.

“Clients in Hong Kong are increasingly looking for quality craftsmanship, subtle luxury, design innovation and modern elegance, and it takes a lot of coordination and attention to details to achieve the perfect work. To stay ahead in the interior design market, we have to make sure that we are responding in our work

INTERIOR DESIGNER PHILOSOPHY

FAST FACTS

Quality and punctuality underpin the company’s ethos and premium service that every client is guaranteed.

•

Archikris Design Group predominantly focuses on sizeable luxury residences with an average size of more than 2,000 square feet. Its work signifies the essence of opulence.

•

The practice adheres to its core values of integrity, punctuality and budgetary control which contribute to keeping its list of heavyweight clients coming back.

•

The Archikris team is straight with using high-quality materials from around the globe whilst maintaining price transparency.

This page: MaxMara, Mr Yim’s Kowloon Tong house, Carlsberg, and Leica projects Opposite Page: Hong Kong Parkview by putting together the latest material and interior trends.”

“But that is not enough. We believe that our professional knowledge and experience are here to combine with what the clients’ needs. Our dedication to satisfy our clients and our endless creativity enable us to deliver designs that are exclusive in their own way. Our previous designs show how we deliver the ultimate in style and luxury, and in the exact way that the clients desire.”

Chan further notes.

Earning reputation from impressive finishes With predominant focus on high-end houses and condominiums, Archikris has completed more than 100 projects from across Asia over the past three years. Its luxury residential and commercial projects could range from 1,000 to 50,000 square feet, and among them are artfully crafted residentials in the prestigious Middle Gap Road, the Southern District and Kowloon Tong, as well as luxury duplex apartments and adjacent units in May Road, Hong Kong

Parkview and Residence Bel-Air. The high-end residential project in Kowloon Tong, a single house of around 7,000 square feet, was one of the many referrals from his previous client and friend, Chan notes. “Mrs Kwok’s 400 square meter house in Double Bay was a pleasure to work at, and I am glad to know that she was delighted of the finishes. She introduced me to Mr Yim for his single house in Kowloon Tong, which I am deeply thankful for.”

Chan takes pride in his strong bond with clients who keep coming back time and again, with returning clients and referrals making up most of the company’s businesses. “Referrals are rare as designing for luxury interiors can be very challenging, but this is never the case here. We aim to impress our heavyweight clients with our premium design, high quality finishes with acute attention to detail, and ability to deliver on time.” Chan concludes, “We will continue to approach every project with the utmost enthusiasm and professionalism.”

HONG KONG BUSINESS ANNUAL 2022 45

21

ELITE CONCEPTS LTD

ELITE CONCEPTS’ SUCCESSFULLY BUILT THREE ELITE BARS IN HONGKONG SKYLINE

H

ong Kong is renowned throughout the world for its excellent restaurants and fine dining. Established in 1991, Elite Concepts aims to fill a market niche for high quality independent dining and entertainment venues catering to a younger, more sophisticated clientele.

Its founder, Paul Hsu, devoted his time to learn all aspects of the hospitality industry and to absorb each country’s unique culture for him to create an authentic and luxurious experience for every guest. Hsu with Elite Concepts’ Executive Director Bernard Lam has pursued this vision, building Elite Concepts into one of Asia’s leading hospitality management and consulting firms in the country.

For these efforts, Elite Concepts has won an award under Innovative F&B Concepts in the Hong Kong Business Magazine’s High Flyers Awards 2021. Now on its 18th year, the awards programme has hailed businesses representing a wide range of industries, including banking and finance, insurance, legal services, interior design, F&B, ICT services, that have exemplified how a remarkable commitment to innovation, strong focus on customer service, and adherence to social responsibility make a business successful.

Elite Concepts has created a number of innovative and timely dining concepts including American Country, French Provençal, Rustic Italian, Slick Japanese, and Retro-Vietnamese, which has revitalized Hong

46 HONG KONG BUSINESS ANNUAL 2022

Kong’s favourite dining and entertainment districts such as Lan Kwai Fong and Knutsford Terrace during the 90’s.

In a business known for intense competition, the ability to adapt to changing market needs and trends is vital. In order to find new markets, expand clientele base, and achieve new successes, Elite Concepts has taken a step further to work with synergy partners and strike out into a new direction. Unique as it is, the “yè shanghai” concept has proven itself capable for expansion to other lifestyle capitals of the world. Over the years, Elite Concepts has developed a diverse portfolio of restaurants as well as bars and clubs in Beijing, Hong Kong and Jakarta while other cities are being considered that include Shenzhen and Ho Chi Minh City.

Renowned as one of Asia’s most innovating, leading hospitality groups based on its portfolio of restaurants in Asia, Elite Concepts has established three uniquely different bars that are attached to their restaurants. Each bar has its own spectacular view across Victoria Harbour, each offering a different mood to suit their customers on any given day of the week.

Situated on the 30th floor of i-Square within Nanhai No.1 restaurant, Eyebar can boast to be the longest established of these bars, opening in 2009. This is without a doubt the most spectacular venue from which to take in an unrivalled view of the Hong Kong island city skyline, while enjoying a relaxing drink.

INNOVATIVE F&B CONCEPTS PHILOSOPHY

FAST FACTS

Inside the minds of Elite Concepts staff are a wealth of ideas which will grow into tomorrow’s hospitality trends. We are experts at seeing the potential in new ideas, and making the most of that potential.

• Since its inception in 1991 with the aim to fill a market niche for highquality free-standing restaurants, Elite Concepts has evolved into a dynamic enterprise with the capability to transform visionary ideas into commercial successes.

• Over the years, it has developed a diverse portfolio of restaurants, bars & clubs in Hong Kong, China and Vietnam.

• Elite Concepts restaurants including yè shanghai, nanhai no.1, eyebar, Deng G and SHU K are all widely acclaimed for cutting-edge interior design, and famous city panoramas, each with a story of its own.

• With market sensitivity, attention to details, sound management, and solid expertise, Elite Concepts will continue Defining Asian Hospitality in the years to come.

This page: Eyebar, Penthouse, K Bar Opposite page: Paul Hsu, founder and executive director of Elite Concepts, and Bernard Lam, Executive Director of Elite Concepts It has long been popular with the Tsim Sha Tsui after-hours chillout crowd and overseas visitors alike, who enjoy its wide open terrace space, with high ceiling and huge windows overlooking a gobsmacking panoramic view of the harbour and all that surrounds it, especially scenic as the evening begins and the lights come alive while sipping on a glass or two of happy hour offerings. Eyebar is also home of their special signature cocktail called the ‘Suzie Wrong’. The bar has also been the hottest spot for some mellow tunes with a view for quite a while, unrivalled on this side of the pond for its stylish setting.

For centuries, with a history of immigration and culture of inclusion, culinary influences in Sichuan fused and mingled. Elite Concepts celebrates this evolution and unique curiosity at K Bar, located at than K11 Musea on the 4th floor inside the Deng G Sichuan restaurant with an evocative list that marries exotic tastes from historic cities, near and far.

Enjoying in good company, music, and merriment, K Bar itself is somewhat cozier than Eyebar, with its plush sofa corners and sensuous mood lighting, and the terrace itself is longer and narrower looking out across the harbour. It’s more of a chill place, perfect for a quiet tete a tete, or to just sit alone and marvel at that magnificent expanse of everbustling waterway after a hard day. K Bar has its ‘Lamei Hour’ (Sichuan style happy hour) offerings, including some uniquely concocted chilled Baiju cocktails, a perfect combination before or after catching a movie.

Another well-kept secret this side of TST, inside its most stylish and happening mall address is the Penthouse. For a different view in more

ways than one, up on the 7th floor and situated within the premises of the long established Ye Shanghai Kowloon restaurant, wander into the elegant lounge vibe that is Penthouse. Its sense of ambiance comes from its host restaurant, which for over 20 years has offered an alluring taste of the golden age of Shanghai past to its loyal patrons.

Step outside and yet again you’ll be confronted in the outdoor terrace with a dramatic and scenic presentation towards the west of the harbour and beyond, boasting equally as stunning sunsets, as well as a menu that offers yet a different set of innovative cocktail temptations.

The terrace here is wider, yet comfortable and equally as private as that of K Bar. Apart from these bars, Elite Concepts have established dining restaurants including Yè Shanghai, Deng G, 1949, and Duck de Chine that are all widely acclaimed for cutting-edge interior design, and famous city panoramas, each with a story of its own.

Looking to the future with the goal of delivering the ultimate guest experience, the fast-growing hospitality group also revealed that they will be launching Elite Access, their 1st loyalty mobile app in this month for its customers to enjoy exclusive perks and offerings from their restaurants and bars.

With market sensitivity, attention to details, sound management, and solid expertise, Elite Concepts will surely continue to be a dynamic enterprise with the capability to transform visionary ideas into commercial successes in the years to come.

HONG KONG BUSINESS ANNUAL 2022 47

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LOREM FEED HKIPSUM DOLOR SIT AMET

EXPANDING HORIZONS THROUGH MULTI-MARKETING CURATION

S

triving to be one of the market innovators is not an easy task, especially competition is inevitable in this market and continues to be the pioneer in this game. Fortunately, multi-marketing curator FEED HK co-founders’ diverse expertise in the field, coupled with their solid experiences, allows the effortless operation and execution of the company.

Company co-founders Kim Yuen and Max Cheung always aim to feed new ideas and creative solutions to maximise businesses, catalysing for growth and reform. Kim has quite a reputable background in Luxury Media Industry and integrated experience in marketing campaigns and customer relationship management events; Max is a brand development guru who has worked with global and local brands on business development and marketing events.

FEED HK founded in 2016, consolidated expertise and gathered industry partners to join forces together and expand to Project 108, in addition to developing “phygital”—a combination of physical and digital—projects and campaigns, to respond to the pandemic difficulties faced by the marketing industry. Project 108 is a team comprising talented and passionate gurus from diverse backgrounds who share a common ambition to exceed expectations and help boost clients’ opportunities and value.

They also go beyond client events by curating events and organising their own marketing campaigns. FEED HK’s Concrete Event experience allows them to propose ideas before its time and be the first in the market to explore new concepts. At the same time, they are also one of the pioneers of B2C hybrid events in Hong Kong.

“Your conversation to maximise value starts here,” the company

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said about their brand.

FEED HK would simply begin a chat with its clients, then they will take it from there. The company notes all the clients’ needs and allocates respective teams of expertise from Project 108 to provide dedicated strategic and creative marketing support to clients, allowing them to discover, create, and share original stories. Project 108, on the other hand, works with brands to deliver compelling content, experiences and bring partnerships to life.

Like most agencies, FEED HK’s main business was focused on offline events before the pandemic, even having its own teams of Creative & Design, Event Management, Production and Public Relations. Since 2019, it has expanded its team with professional video production.

The pandemic, which has disrupted business operations for all sectors has become an opportunity for FEED HK. During its onset, the company has further expanded the team to Project 108, consolidating expertise in digital marketing solutions, including website development, SEO/SEM, online marketing placement, and hybrid events.

“In 2022, we are looking into the Metaverse and have planned a series of Metaverse events in upcoming months,” FEED HK said.

The company is also exploring in this area, with a few projects under development and about to be introduced to everyone very soon.

The company saw that people’s behaviours and habits have changed since the pandemic. “We are now used to doing most of our social and day-to-day events online, including office work, shopping, watching movies & performances, visiting an exhibition, investing,

INTEGRATED MARKETING CURATOR PHILOSOPHY

FAST FACTS

YOUR CONVERSATION TO MAXIMISE VALUE STARTS HERE

• Content Marketing Agency in Hong Kong – Group 108 offers multi-dimensional marketing service to clients • Award winning agency to deliver hybrid event – Mart in Hong Kong (FEED’s Own IP – phygital event ), Run into 2021 (FEED’s own IP for virtual run event), Muse Fest 2020 (Virtual Tour organised

by LCSD).

• In 2022, FEED is entering the world of Metaverse, blockchain and NFT business.

• Business expansion to Milan, Shenzhen & Singapore with cross-countries support.

This page: (Top) FEED team, (Middle left) FEED, (Middle right) Mart in Hong Kong 2021, (Bottom) Run into 2021 Opposite page: FEED Cofounders - Kim Yuen and Max Cheung and gaming. We do not just wait [until] offline events to be resumed, or just focus on what we have now, we strive to go beyond and think out of the box,” they said.

Having established its credibility and showed its capabilities to everyone, FEED HK has worked on some of the most memorable virtual events in Hong Kong.

Amongst these events is Run Into 2021, a virtual racing event that had no restricted limit on location and time. The virtual event offered a refreshing perspective to the local running scene, bringing together sports enthusiasts eager to commence the new year with an energetic spirit.

Participants of Run Into 2021 also received a runner’s pack valued at HK$800, which included MaskOn masks and promotional items from supporting brands such as CASETiFY and LANE-EIGHT. A portion of the proceeds went to the Early Psychosis Foundation, in support of its high-quality early psychosis intervention services, professional training, and public awareness programmes.

The company also organised Mart in Hong Kong 2021, the first online Chinese New Year market conducted in collaboration with the Hong Kong Tourism Board. In order to act on social distancing, an online concept store was set up selling festive products.

Over 300 festive gifts and delicacies were presented by more than 70 popular local brands, with many being offered at exclusive offers

and packages on the online store. Customers can shop for HK-style festive gifts and delicacies at home, enjoying a one-stop shopping experience.

Meanwhile, the offline store was held at PMQ. Customers were able to see the products from the online concept store in real life.

Customers could also pick up their online orders at this offline store.

Special booths such as fortune-telling booths were also set up for customers to get into the festive spirit.

In speaking about employee support during the pandemic, FEED HK expressed that they are “very lucky” to have managed to pass the tough times together with its employees.

“Our strength is that our company does not have a complicated structure, we act fast to fit the market trend. When offline events were on hold, we managed to act fast and pivoted our strategies to hybrid events. We are one of the pioneers in B2C events in which we have accumulated expertise and experiences quicker than others, which also allow us to move on to “phygital” events in 2021,” the company said.

Since the establishment of FEED HK, it has always tried to break through the traditional concept and support local cultures and brands.

“We have been working continuously to revitalise the Hong Kong traditional brands by lining them up with young talents and new brands in Hong Kong, creating crossover products and marketing campaigns to grow their brand awareness and business,” it said.

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21

FIDELITY INTERNATIONAL

FIDELITY COMMITS TO SUSTAINABLE AND BETTER FINANCIAL FUTURES

F

idelity International, a world-class investment management solutions provider and retirement expert, was recognised at the 2021 High Flyers Awards, presented by Hong Kong Business Magazine, bagging the top prize for Financial Services category. The company was awarded for its positive contribution to both the financial and societal outcomes of its business through the responsible and sustainable practices. The company not only helps its clients achieve individual financial success, but also helps them build better futures for generations to come in a responsible and effective manner.

In an interview with Charlotte Chan, Head of Distribution of Hong Kong Workplace and Personal Investing at Fidelity International, she elaborated the business philosophy the company employed that enabled them to achieve such feats.

“As a sustainable corporate and investor, we recognise the responsibility and the impact we have on shaping the future of our society and the environment. While we set high standards for the companies in which we invest, our clients also expect us to uphold the same standards within our own business,” Chan said.

According to Chan, putting emphasis on these matters was vital to the company’s core ethos. She explained that in order to fully deliver what their clients need, the company had to dig deep into what is really essential to society at large, that they needed to determine how such individual actions may contribute to the bigger picture of the whole financial landscape.

“This means that in order for us to generate and deliver positive financial

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and societal outcomes, we need to run our business in a responsible and sustainable way, by taking into account the long-term real impact of environmental, social and governance (ESG) issues on our firm, our people, our supply chains, the communities and the environment in which we and our clients live and work,” Chan explained.

According to the company, what made them successful in this field was their sense of purpose to work together to build better financial futures for their clients and their commitment to helping people achieve and stay in great financial health throughout every stage of their lives.

“Retirement planning takes time and ideally should be done throughout the entire working life. Fidelity supports clients and their employees with holistic retirement planning and achieving financial wellness. At the most basic this could be providing their pension schemes. But we are driven and committed to be a partner on the retirement planning journey, hence supporting employees with comprehensive information to help guide their thinking is a vital part,” Chan noted.

With the acceleration in digital transformation and innovation over the past year, Fidelity International embraced the need to adapt and change, investing heavily in the mobile app, SmartRetire which acts as an online portal that enables the company to deepen its digital capability and uplift user experience through technology. Also, in view of an increasing population set to retire in Hong Kong, the industry is exploring solutions for retirement products and services via digital channels, Fidelity International also aims to provide holistic retirement products to help clients with their financial

FINANCIAL SERVICES FAST FACTS • More than 50 years of global investment management experience, with our services reaching customers in over 25 locations worldwide • Active in Hong Kong since 1981, offering retail, institutional and wholesale clients a wide range of products and services, including MPF and ORSO schemes, personal investing and mutual funds • One of the largest retirement asset management firms in Hong Kong, servicing to both MPF and ORSO schemes • Awarded the ‘Best MPF Scheme of the Year’ in five of the past eight years by an independent third-party rating agency

This page: (Top left) Fidelity Financial Wellness Tool in SmartRetire Mobile App, (Top right) Fidelity MPF Flexible Retirement Solution Advertising Campaign, (Middle) Fidelity Global Market Outlook Media Event in 2021, (Bottom) Fidelity Quarterly Regional ESG Media Briefing Opposite page: Charlotte Chan, Head of Distribution, Hong Kong Workplace and Personal Investing at Fidelity International needs after retirement, together with all-round education and digitalised client engagement that serves their different needs. In November 2021, the company launched the innovative MPF Flexible Retirement Solution with a post-retirement fund which aims to tackle long-term inflation risk, assisting MPF members to stay invested for continued investment growth potential during their retirement years. It also introduced the market’s first MPF e-withdrawal platform that blends the traditional MPF withdrawal process with a digital experience to cater to the retirement needs of MPF members.

The company’s successful foray in the digital financial market has also opened more possibilities for the company to further expand their services in allied fields. The positive impact of the digitalisation effort of the company not only benefited its clients, but also their workforce. In June 2021, Fidelity International introduced a ‘dynamic working’ policy, which offered its employees the opportunity to work in a flexible scheme. “This new way of working will allow the majority of employees across more than 25 locations worldwide the opportunity to balance their work patterns, combining both home and office, working in a way that suits their roles and meets the needs of their colleagues and our clients,” said the firm. “Our aim is to offer our people a working environment which they enjoy and where they feel supported and valued, and this is the latest addition to a suite of recently added employee benefits including Family Care leave and Enhanced Parental leave.”

Another milestone worth mentioning is the company’s successful green initiative stemming from its digital transformation. The company not only cared for its clients through serving and ensuring their financial wellbeing but also through the quality of life they experienced, which also included the environment they live in. With this, Fidelity International extended its effort in building their business processes that follow sustainable work practices.

“Climate change has been an important agenda for many businesses and governments, especially after COP26. It should lead to incremental improvements to reduce global CO2 emissions in the coming decades.

Fidelity is committed to reduce company-wide operational carbon emissions to net zero to 2030. Fidelity’s path to net zero will prioritise the avoidance and reduction of emissions through operational improvements in the energy efficiency of its offices, responsible business travel and the use of renewable energy,” Chan said.

To continue helping clients build better financial futures, Fidelity International also devoted effort in investor education to equip and empower scheme members in managing their investments, increasing their retirement reserves, and achieving wealth creation through streamlined means. Through a wide range of global and local thought-leadership contents, it offers clients insights and perspectives on various popular financial and investment topics, e.g., financial wellness, retirement readiness, women & investing, sustainable investing and much more. Its focus and dedication to investor education is well-recognised by the industry.

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21

HANG SENG BANK

HANG SENG BANK BLAZES A TRAIL IN COMMERCIAL BANKING

P

rioritising customer-centricity, digitalisation, sustainability, and partnerships, Hang Seng Bank has maintained as a top and leading performer in Hong Kong’s commercial banking space.

Founded in 1933, the bank has continuously innovated to serve individuals and businesses by providing best-in-class financial services, customer-centric banking, investments, and wealth management.

With more than 3.5 million customers and about 290 service outlets in Hong Kong, Hang Seng Bank is widely recognised as the leading domestic bank in Hong Kong.

Going digital to better serve businesses As a close partner of small and medium-sized enterprises (SMEs), Hang Seng Bank understands well their need to have a more convenient and swift banking service anytime, anywhere. With this in mind, the bank has put its focus on digitalising business banking services from account opening to daily operation.

One big step last year is the expansion and enhancement of the Remote Account Opening service which support sole proprietors, partnerships and limited companies with up to five HKID-holding connected parties. With the introduction of an ‘e-Sign’ function, business customers can enjoy a remote service and seamless journey to apply for a chequebook at the same time. The service has taken the whole process online so business partners can save the trouble to make way for a common schedule for identity verification and providing signatures at Business Banking Centres.

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To strengthen the support to newly-established companies, a start-up friendly ‘Biz Virtual+ Account has also been launched to provide a wide range of digital commercial banking services and preferential service fees, making it easier to get new enterprises off the ground and for local entrepreneurs to focus on their core business at a low operating cost. Biz Virtual+ accounts can be opened in as few as three working days after completing the Remote Account Opening Process.

From payroll, remittance, payment trackers, to time deposit and payment collection solutions, the essential business needs have all been well taken care of at Hang Seng’s Business e-Banking. “Our goal is to simplify the way businesses manage their finance. Every feature in our digital banking solutions is designed based on the business needs of our customers. We aim to make their business management easier and more efficient,” said Donald Lam, Head of Commercial Banking at Hang Seng Bank.

Omnichannel customer experience To offer a top-notch customer experience to their customers, Hang Seng Bank did the imperative: creating a robust omnichannel banking platform.

Whilst the Bank’s primary focus is to enhance its digital customer experience, it never ceases to improve other customer touchpoints to deliver a desirable omnichannel experience. One of the bank’s key initiatives is to improve the services offered at its Business Banking Centres.

COMMERCIAL BANK PHILOSOPHY

FAST FACTS

Strive for service excellence and maintain long-term relationship with customers.

• Founded in 1933, Hang Seng is one of Hong Kong’s largest listed companies.

Our market capitalisation as at 30 June 2020 was HK$248.7 billion.

• The Bank serves over half the adult residents of Hong Kong – more than 3.5 million people – through over 290 service outlets.

We also maintain branches in Macau and Singapore and a representative office in Taipei.

This page: The new Head Office Business Banking Centre in Central Hang Seng, Hang Seng Bank Limited and its subsidiary Hang Seng Bank (China) Limited will support business in the Greater Bay Area.

Opposite page: Donald Lam, Head of Commercial Banking, Hang Seng Bank Limited

The Centres in prime commercial districts including Central Head Office, Tsim Sha Tsui and Kwun Tong are now ready to offer a onestop-shop service, from daily operations such as counter transactions to a full spectrum of professional services to save businessmen’s time and resources. The new counters will be exclusively serving commercial customers whilst branches nearby can be more focused on serving personal customers.

Sustainability efforts In light of sustainability’s growing importance as a global trend, Hang Seng Bank has created a green team dedicated to providing a range of green and sustainable financial solutions and services, such as the Greenness Assessment Programme with the Hong Kong Quality Assurance Agency and the Sustainability-linked Loan Programme. In 2021, Hang Seng Bank has approved 23 green loans with loan amounts of HK$7.3b, exceeding that of 2020 by over 15 times.

Lam remarked, “Hang Seng is committed to promoting the environmental, social and governance (ESG) development of the banking industry and supporting the transition to a low-carbon economy. In addition to setting ourselves challenging internal targets, including being carbon-neutral in our operations by 2030, we are also actively expanding our support for customers that are seeking to operate and grow their businesses in line with good ESG principles.”

Strategic partnerships to promote innovation According to Lam, Hang Seng Bank is committed to supporting innovation development in the Greater Bay Area (GBA). Thus, the bank is actively making strategic partnerships with different companies to drive greater innovation in the region, help local enterprises capture more

business opportunities, and contribute to the greater digitalisation of businesses across all industry sectors.

Hang Seng Bank and Hong Kong Trade Development Council announced their strategic partnership to empower SMEs in Hong Kong and the GBA through the co-creation of a one-stop platform, ‘InnoClub’, that combines both parties’ respective businesses networks, digital and financing solutions, advisory expertise, and research capabilities.

The platform is expected to help local and GBA SMEs in all sectors to digitalise their operations and adopt innovative business solutions.

Hang Seng Bank also partnered with Hong Kong Cyberport Management Company Limited (Cyberport) to drive Hong Kong entrepreneurship in five key areas – GBA market opportunities; cultivation of innovators; smart banking development; access to corporate venture capital; and banking services with cross-boundary financial features.

The partnership will benefit companies with a business presence in Cyberport to scale up their business models, enabling them to access more GBA market opportunities including innovative solution trials and adoption in the financial services sector. Hang Seng will also participate in GBA-themed programmes arranged by Cyberport to share experience and market knowledge with a wider group of companies.

Its 88 years of working in close partnerships with Hong Kong businesses have earned the Bank lasting relationships with enterprises whilst its endless effort last year in digitalisation, omnichannel service enhancement and promoting innovation and sustainability, has won the Hong Kong Business High Flyers Award in the Commercial Bank category.

To borrow or not to borrow? Borrow only if you can repay!

Terms and Conditions apply to the products and services.

HONG KONG BUSINESS ANNUAL 2022 53

21

MAYER & ASSOCIÉS

Eric Mayer, Principal

MAYER & ASSOCIÉS

OPTIMISTIC FOR 2022 AND HONG KONG

M

ayer & Associés (MA) is a French and International Law Firm founded in Hong Kong in 2001. The firm specializes in the economic migration of companies from Europe to Asia Pacific, particularly China, and from Asia Pacific to Europe, particularly France. Our firm also provides expert legal advice to both corporations and individuals across a variety of dedicated practice areas.

2021 was an excellent year

A new start in 2020

The link between Hong Kong and mainland China is stronger than ever. The City’s legal system and taxes, which remain unchanged, attract Chinese investors doing cross-border transactions.

In 2021, MA has completed complex acquisitions and equity partnerships between large French groups and Chinese investors.

More information on these deals can be found on the news page of MA’s website.

MA is very optimistic about HK’s future as the place where Chinese investors will conclude their international deals.

MA’s new logo adopted in September 2020 reflects the Firm’s values: integrity, good governance, a responsible attitude, and a relationship with clients built on trust without compromising our independence.

Our clients’ trust in us requires great attention that cannot be exemplary without a commitment to these values. We implement tactfully our KYC (Know Your Client) due diligence obligations, ensuring that our clients and their files are legitimate and deserve our dedicated attention.

Constant monitoring of new legislation MA monitors closely any new legislation having an impact on its clients and takes any appropriate action in relation thereto. New legislation protecting directors’ personal information came into force in 2021. MA promptly informed all its concerned clients and subsequently provided tailor-made assistance to protect their interests in accordance with their instructions.

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LAW FIRM

PHILOSOPHY Integrity, good governance, a responsible attitude, and a relationship with clients built on trust without compromising our independence are the values that guide us in all our actions.

Creativity without compromising compliance MA’s experience and values allow us to provide quality independent legal advice in cases that are sometimes complex and require inventiveness. We are resourceful in finding legal solutions for our clients involved in cross-border transactions. Contributing to our client’s success stories is our reward. Our management style unleashes creativity and fosters healthy competition and collaboration within the legal team making up our firm.

FAST FACTS • MA has strong expertise in Hong Kong corporate matters with a solid team of company secretaries.

• Mr. Mayer is the Legal Adviser to the Consulate General of France in Hong Kong

Hi-tech IT tools serving clients’ interests

• MA is situated in the heart of the bustling district in Central (Kinwick Centre, 32 Hollywood Road)

In 2021, MA has safely implemented electronic signatures by the directors of the companies which are the firm’s clients.

MA has invested in modern and comprehensive hi-tech tools to communicate with clients and manage their files: we protect our client’s legitimate privileged information.

Each member of the Firm’s Legal Team benefits from the hi-tech IT solutions installed in their mobile, laptop, and PC to communicate safely with clients and store safely client information.

www.mayer.hk

Social Responsibility Additionally to pro bono work made from time to time for individuals in distress, Eric Mayer is involved in two charities: the French Solidarity Fund “Fonds d’Entraide des Français de Hong Kong (The FEF Trust)” and ANU Mongolia Charity, which are both recognized by the Hong Kong government as being charitable trusts of a public character.

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21

PRIMECREDIT LIMITED

REDIFINING CUSTOMER-CENTRIC DIGITAL TRANSFORMATION

F

ounded in 1977, PrimeCredit is the largest non-bank consumer finance group in Hong Kong. With 18 branches across Hong Kong, it specializes in loans and credit cards. PrimeCredit has over 40 years of experience in offering financial products and services, with high-quality customer service, professional consultation, and tailor-made solutions.

Beril Shen, PrimeCredit CEO, shares the company’s commitment to its clients, “Whether the role involves creating new products or services to customers, collaborating with business partners to offer customized products to meet customers’ financial need, or working directly with individuals to help them solve financial problems or meet their financial goals, we stand side by side with our customers and impact their lives in ways large and small.”

Digital transformation It was the implementation of digital transformation that enabled PrimeCredit to remain competitive and maintain its market leader position. The company implemented massive digitalisation in different dimensions to empower customers with convenient and hassle-free digitalised experiences through leveraging Fintech development.

PrimeCredit further enhanced customer experience with various functions via their mobile app. With a few clicks, customers can operate their revolving loan accounts and receive money instantly, anytime, and anywhere without time or location boundaries. It is also one of the early adopters of the FPS, the Fast Payment System in Hong Kong, enabling customers to

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enjoy instant cash disbursement. The company is also the pioneer to adopt eKYC (Electronic Know Your Customer) through AI-based technology on ID authentication and facial recognition, making loan applications convenient, fast, and hassle-free.

For its credit card customers, PrimeCredit introduced instant rewards before or after card spending, as well as “buy now, pay later” installment options to help customers to manage their finances in a much more flexible way.

Understanding the customers Over the last five years, PrimeCredit carefully examined customer needs and experience to better understand them and utilised these observations as the key consideration for business development. Both customers’ behaviour change and industry trends gave the company directions on its digital transformation.

PrimeCredit noticed that while other finance companies have the same document requirements on loan approval regardless of the loan amount, many customers only need a temporary small amount of cash flow and feel hassled by the long loan processing time.

Therefore, PrimeCredit streamlined the process by adopting eKYC (electronic Know Your Customer) to allow a 24/7 easy online borrowing experience. Loan application to approval can be completed within 10 minutes and customers can receive the loan amount in their bank accounts right away.

OUTSTANDING FINANCE COMPANY PHILOSOPHY

FAST FACTS

With over 40 years experiences in offering financial products and services, PrimeCredit is committed to providing high-quality customer service, professional consultation and tailormade solutions. Whilst ensuring all their staff are well trained with a high standard of product knowledge, PrimeCredit also emphasizes its understanding of what the customers feel, think and wish, in order to provide them with a comprehensive range of all-round, customer-centric and value-added services.

• PrimeCredit Limited is a leading finance company in Hong Kong established in 1977 focusing on Personal Loan and Credit Card services.

• In August 2004, Standard Chartered PLC acquired PrimeCredit, and PrimeCredit became a wholly-owned subsidiary of Standard Chartered Bank (Hong Kong) Limited.

• In May 2015, PrimeCredit was acquired by PrimeCredit Holdings Limited which is a consortium formed by a collaboration of China Travel Financial Holdings Company Limited, Pepper Australia Pty Limited and York Capital Management Global Advisors, LLC. • In Mar 2021, China Travel Financial Holding Co. Limited became the sole shareholder of PrimeCredit Hong Kong and its subsidiaries in Shenzhen and Chongqing.

This page: (Left) PrimeCredit Loan Branding Campaign, (Top right) PrimeCredit Balance Transfer Campaign, (Bottom right) WeWa Credit Card Campaign Opposite page: Beril Shen, CEO at PrimeCredit Limited In 2021, PrimeCredit also introduced the online balance transfer consultation services based on its observation that many customers know “balance transfer loan” but have no idea how to do it. While PrimeCredit has been providing balance transfer consultations for over a decade, the online services eased the process.

Customers may call the designated hotline or simply click the widget on the PrimeCredit website or mobile app to contact PrimeCredit’s Balance Transfer Consultant. The consultant will analyse and consolidate the customer’s outstanding loans and credit card debt and devise a custom plan to help the customer settle the debts within phases based on the customer’s financial situation.

PrimeCredit strives to continuously offer new and exciting experiences to its customers, thereby contributing to the success of its WeWa credit card.

PrimeCredit leveraged the power of FinTech for its “WeWa Card is That Instant” campaign while sustaining the brand core proposition of “Fun, Interactive, and Exciting” through the enhancement in card usage journey.

Customers can get the card through partner merchants and enjoy discount offers from partner merchants that they can use right after application. As a result, virtual credit card spending doubled the spending of its traditional counterpart in the first month after the launch.

To further boost the WeWa card, PrimeCredit innovated a fun experience dubbed “Spot & Win” using FinTech solutions. When customers step into a shopping area, it will trigger the OmyCard mobile app to notify the

customers of instant lucky draws for a chance to win coveted prizes.

Stand side-by-side PrimeCredit attributed its market leadership not just to its digital transformation but to its consistent and deliberate efforts to fulfill its brand promise of standing side by side with the customers especially during uncertain times such as the pandemic.

PrimeCredit identifies customers who might have difficulties and proactively offer them personalized repayment plans so as to help them to get through the short-term difficulties due to the pandemic. PrimeCredits’ 14day flexible payment is a tailored payment plan aimed at helping customers in need.

As the company continuously adheres to its stand side-by-side promise, its customers can expect PrimeCredit to innovate more with a better digital experience, fast and convenient services, fun and exciting customer engagement, not only in good times but also in tough times.

As Beril Shen, PrimeCredit CEO, says, “I wish to share with Hong Kong people the spirit of PrimeCredit, ‘Continue to explore, innovate, support and believe everything is possible as we stand side by side’.”

Warning: You have to repay your loans.

Don’t pay any intermediaries.

Complaint Hotline: 2111 2999 Money Lender’s Licence Number: 754/2021 HONG KONG BUSINESS ANNUAL 2022 57

21

SOTERIA TRUST

ENABLING CLIENTS TO MANAGE, GROW AND PROTECT THEIR VALUABLE ASSETS

S

oteria Trusts has won an award under the Trust and Fiduciary Services category in the Hong Kong Business Magazine’s High Flyer Awards 2021. Now on its 18th year, the awards programme has hailed businesses representing a wide range of industries, including banking and finance, insurance, legal services, interior design, F&B, ICT services, that have exemplified how a remarkable commitment to innovation, strong focus on customer service, and adherence to social responsibility make a business successful.

By assisting clients to manage, grow, and protect their valuable assets within their lifetime and to create a tax-efficient legacy for their beneficiaries, Soteria Trusts proved that they are one of the top Trust and Fiduciary services in Hong Kong.

Soteria Trusts is one of nine brands that the Business Class Group operates throughout the region. Each has its unique offering, including Retirement and Tax Planning, Investment Planning, Hong Kong and UK Real Estate Investment, Mortgage broking, Insurance broking and Will Writing services.

Business Class Group has representatives in China, Bangkok, France and the United Kingdom, but their main operations are in Hong Kong with a substantial network of business introducers, including tax advisors, law firms, real estate agents and family offices.

Matthew Dorrell, Director of Business Development in Soteria Trusts, said that their fiduciary solutions can be tailored to cater to the specific needs of

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their clients. This may include international tax planning and asset protection from taxes, creditors or even just a family conflict, where they can advise on investment choices and platforms that will be the most beneficial to the individual.

“As part of a larger group of companies, advisors in Soteria Trusts understand the multiple challenges associated with wealth management and asset protection. Companies within Business Class Group help clients to manage and grow their wealth with investment solutions, including property investment and mortgages, as well as building investment portfolios and retirement funds. This creation of wealth can however lead to increased tax liabilities that also require further planning,” Dorrell said.

“By being a boutique consultancy in Hong Kong, we listen to our clients and provide the most appropriate solution based on their needs and requirements. Clients are not just a number, but a trusted relationship,” he added.

Dorrell also emphasized that Soteria Trusts focuses on education. Their clients, which include UK property owners - not only of British Nationality but also local Hong Kong citizens, are often unaware that they are liable to multiple UK taxes associated with UK property ownership. He said that changes can be made once the property is acquired, by getting the asset into a more tax-efficient structure but also believes that if clients are given the opportunity to find out about the Soteria IHT Planning Service prior to

TRUST AND FIDUCIARY SERVICES PHILOSOPHY

FAST FACTS

Deliver excellent service at an affordable cost through honesty and transparency

• Save hundreds of thousands and in many cases millions in future estate related taxes • Protect assets from Creditors • No Probate following death • Increase awareness - Income or Corporation Tax, Capital Gains Tax, Inheritance Tax, Annual Tax on Enveloped Dwellings & Stamp Duty • Receive thousands back in overpaid Stamp Duty

This page: Soteria Plan Guides Opposite page: Matthew Dorrell, Director of Business Development, Soteria Trusts any purchases, that it would lead to considerable savings in future taxes and structuring costs.

The most popular services for clients that have been successful in their catalogue are the IHT Planning Service, which mitigates UK taxes associated with owning UK property as well as their UK Stamp Duty Tax Reclaim Service.

Any UK national with property/assets anywhere in the world, or non-UK national with property/assets in the UK are subjected to several direct or indirect taxes, including IHT Inheritance Tax (40%) and CGT Capital Gains Tax (28%).

The IHT Planning Service allows clients to move property/assets into a unique, government-approved Pension structure, which eradicates both IHT and CGT completely, resulting in considerable savings. All asset classes can be placed into the pension and the client is still able to buy and sell property/ assets at any time.

Partnering with our Chartered Tax Advisor in the UK, we also provide a unique service to determine if you can reclaim overpaid Stamp Duty Tax and this has been extremely popular with clients as we can retrieve 40-70% of what they originally paid. Our service also extends to those who are looking to buy property in the UK, ensuring you are not overpaying in Stamp Duty Tax from the outset.

“We follow a process of education and explaining the service to groups of UK property owners in Hong Kong and across the world,” Dorrell said.

Recently, they managed to reclaim £120,000 from HMRC for one such client as he had overpaid the original SDLT on the purchase of an investment property in London. This client then used part of the claim to set up the “Property Pension” to hold his portfolio of UK investment properties, resulting in his 40% Inheritance Tax and 28% Capital Gains Tax liability becoming zero.

“This drastically increased the net worth of his property portfolio, as well as what he will eventually be leaving behind for his two children. Clients are always extremely grateful when we can reclaim Stamp Duty Tax (SDLT) for them from HMRC,” he added. This service is available for property purchases of up to four years ago.

The company’s philosophy to deliver excellent service at an affordable cost through honesty and transparency has not changed because of the pandemic. Soteria Trusts has been running regular webinars twice a month about UK taxes related to property ownership.

The “Stamp Duty Land Tax Webinar” has proved to be successful in explaining to people what they can do to potentially reclaim a substantial amount of overpaid SDLT. The “UK Property & Tax Seminar,” discusses in detail all property-related taxes, some of which the owners didn’t even know they are liable for, and of course, ways to minimize these taxes.

The company has also started a blog, called ”Insights”, where they regularly write about Inheritance Tax, changes in UK taxes, Stamp Duty Land Tax, estate planning to further educate their audience.

By being a part of a group that covers almost all aspects of financial planning that a person can have, Soteria Trusts believe that their unique service offers clients excellent value for money, often saving them and their loved ones hundreds of thousands of pounds in taxes.

“By putting a structure in place to create a legacy for our client’s families we ensure that their wealth is transferred to future generations to come, and importantly, in line with their wishes. That is the essence of our fiduciary services as we are the guardians and protectors of our client’s life’s work, all within the sanctuary of Soteria Trusts,” Dorrell said.

“At Soteria Trusts we are concerned not only about the here and now, but also about our client’s future and beyond their lifetime,” he added.

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21

LOREM IPSUM STANDARD CHARTERED DOLOR SIT BANK AMET

S

EXCELLENCE AND HARMONY IN SUPPORTING STAKEHOLDERS

tandard Chartered Bank cemented its foothold during the ‘new normal’, pushing out new initiatives and digital solutions for its clients, supporting its stakeholders and employees with multiple relief measures and recovery projects, and assisting the community with a growing number of corporate social responsibility (CSR) programmes.

“We continually refined and expanded our digital banking and retail banking services in the past years. The pandemic has brought unprecedented changes to client needs and expectations. We, therefore, accelerated our digital transformation to further enhance our clients’ propositions,” Mary Huen, CEO of Standard Chartered Bank Hong Kong, told Hong Kong Business.

For their efforts, the bank was lauded Bank of the Year for 2021 at the Hong Kong Business Magazine’s Annual High Flyers Awards. This marks the fourth consecutive year the bank has snagged the title for its resilient, quality service and continuous efforts to contribute towards social progress.

Pushing past the pandemic In its bid to become the go-to bank in the Greater Bay Area (GBA), Standard Chartered strengthened its foothold with positive growth and a very strong momentum amidst the pandemic.

The bank was one of the first to sell investment products under the Cross-boundary wealth management connect (WMC) scheme, providing clients with more than 100 investment product options since its launch in October 2021. The bank has also launched the first GBA-themed QDII global fund product to help Chinese investors seize the emerging investment opportunities in the GBA. Its newly set up GBA centre, which completed the first phase of development in August 2021, boasts over 250 employees

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- with plans to increase the number of people to 1,600 by 2023. It acts as a centre of excellence in deploying new technologies, transforming processes and expanding product capabilities in e-commerce, wealth management and financial markets.

Meanwhile, it has collaborated with the Hong Kong Trade Development Council to set up the Standard Chartered GBA Business Confidence Index.

According to Huen, it is the first forward-looking quarterly survey in the market that looks at the business sentiment and synergistic effects across GBA cities and industries.

Moreover, the bank wants to focus on the affluent, but underserved, segment through the introduction of Priority Private Centre, which offers wealth-led, digital solutions to meet the needs of an increasing number of high net worth individuals in Hong Kong and China.

Banking with a cause Despite all its digital transformative undertakings and pandemic safety measures, Standard Chartered Bank has not forgotten its commitment to reach net-zero carbon emissions from its operations by 2030, and from financing by 2050.

To further help its clients’ transition to net-zero, the bank offers a wide range of solutions and product suites such as a green mortgage, which was launched in October 2021, targeting clients who purchase first-hand, secondhand or government subsidised housing with either a “platinum” or “gold” rating under the Hong Kong Green Building Council (HKGBC) BEAM Plus scheme.

The product suite has also been strengthened: For instance, a brand new range of Standard Chartered Cathay Mastercard was introduced in

BANK OF THE YEAR PHILOSOPHY

FAST FACTS

“Standard Chartered Bank is committed to promoting economic and social development in the markets they serve, doing so sustainably and equitably in line with their purpose and three valued behaviours: ‘Never settle’, ‘Better together’ and ‘Do the right thing.”

• The bank provides a wide range of banking services to retail and corporate clients, and has over 70 branches and over 200 ATMs across Hong Kong • Standard Chartered PLC is listed on the London and Hong Kong stock exchanges

This page: (Top left) Standard Chartered Priority Private Centre, (Top right) Green Mortgage launched to make home financing a greener banking journey, (Bottom left) The Bank showcasing new digital banking capabilities at the Hong Kong FinTech Week 2021, (Bottom right) Arts in the Park returned last year to uplift the city Opposite page: Mary Huen, Chief Executive Director and Executive Officer, Hong Kong of Standard Chartered Bank (Hong Kong) Limited

2021 in the bank’s effort to meet the banking needs of different segments, whilst affluent and international clients were offered cross border intranet payments on Standard Chartered’s mobile platform across six corridors.

The bank also introduced its first green deposit savings account, the Sustainable Savings Account for retail clients in Hong Kong. It is the country’s first deposit account of its kind - available in HKD, RMB, and USD - linking clients to sustainability.

Meanwhile, the Smart Card is a new client value proposition (CVP) developed primarily to drive customer acquisitions and profitable engagement among the Millennials segment. “Based on our extensive client research, millennials prefer simple borrowing features available within their card. They want to be serviced digitally and expect to be rewarded for digital spending. Smart Card’s CVP is centred around convenient borrowing, digital rewards and self-service capabilities. It’s also Standard Chartered Bank’s first carbon-neutral card product,” Huen explained.

The bank’s partnership with AlipayHK allows customers to use the AlipayHK app to manage their digital Q Credit Card, and use the physical card at Visa-accepting merchants. AlipayHK’s 2.7 million-strong customer base speaks to its popularity and stability and further strengthens Standard Chartered Hong Kong’s position in the market.

Response to the ‘new normal’ As unemployment rose against a much-reduced level of economic activity, Standard Chartered Bank stepped up to provide relief measures and recovery programmes to address community and business needs.

The bank donated HK$20m to families living in subdivided units in Hong Kong, and rallied its corporate clients and partners to donate another HK$20m to benefit nearly 4,000 families. The bank also donated HK$3m to the Hong Kong Council of Social Service for the provision of epidemic prevention supplies to 100,000 underprivileged families.

The bank also supported around 100 struggling SMEs to provide 300 job opportunities to nearly 150 disadvantaged youths through its Futuremaker’s

First Job programme, with a total of HK$10m donations from Standard Chartered Foundation to charitable organisation, St. James’ Settlement.

Cultivating culture and success Standard Chartered Bank has made its mark within the communities it operates in, and aside from delivering quality financial services, the bank has committed to growing a number of signature corporate social responsibility (CSR) programmes in the city.

It continually supports the Hong Kong Marathon to promote healthier lifestyles and inject positive energy within the community and holds the Standard Chartered Arts in the Park, an annual youth programme first launched in 2001 that aims to provide the younger generation with a greater appreciation for the arts. Additionally, it co-created the University of Hong Kong - Standard Chartered Hong Kong 150th Anniversary Community Foundation Fintech Academy (HKU-SCF FinTech Academy) in 2020.

The partnership aims to cultivate 1,000 future-fit talents upskill bankers with disruptive technologies and make a sustainable impact on the financial services sectors of Hong Kong and the GBA within the next five years.

Standard Chartered launched its first FinTech Academy Women Mentorship Programme in collaboration with The University of Hong Kong (HKU) on 6 October 2021. Ten female senior executives from the Bank will be providing one-to-one mentorship to HKU’s female FinTech students and equipping them with industrial knowledge to cultivate future-fit talents and drive women empowerment in tech. The bank has also created SCVentures, a corporate platform that allows new ideas and models to be tested, whilst innovation lab eXellerator enables staff to use a test-bed for new ideas and train staff in new skills. To encourage inclusion, employee engagement, and an agile work environment, the Bank also launched flexible work arrangements in April 2021 as a way to support employees’ personal and professional well-being.

It also upgraded the medical plan to offer more comprehensive protection for employees and their families, followed by the increase in the number of annual leave days for regular employees of certain bands.

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21

UMP HEALTHCARE HOLDINGS LTD

TAKING CHARGE WITH ‘PEOPLECENTRIC’ HEALTHCARE SERVICES

A

s COVID-19 continues to present unprecedented challenges to businesses’ operations, the healthcare sector is now tasked with the responsibility of stepping into the front line and providing quality and accessible services to patients amidst the global crisis. Leading medical and healthcare platform UMP Healthcare Holdings Ltd does all these and more, whilst staying on the top of their game.

Driven by the vision of offering trusted and affordable medical and healthcare services and corporate medical solutions for over 31 years now, UMP strives to provide high-quality and all-inclusive services and products ranging from prevention to treatment. The company has also been working closely with corporates and insurance companies to customise and administer corporate healthcare benefit plans for their members.

The current UMP network has more than 1,100 self-owned and affiliated medical service points across Hong Kong, Macau, as well as major cities in China. Its medical professionals help address patients and business’ needs with a continuous enhancement to its services and operation efficiency.

“As one of the leading healthcare groups in Hong Kong, we keep our products and services diversified from time to time to cater for the needs of patients,” UMP said.

Technology transformation in the healthcare sector is moving rapidly now more than ever, with healthcare providers urged to maximise these developments and deliver innovative services to patients. For UMP, these entail strengthening their telemedicine services, healthcare management,

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and preventive medical services.

“The utilisation of our medical consultation experience in the process has been digitised through the use of e-shop, e-medical cards and eVoucher to provide a fully digitalised medical consultation experience,” the company said. eVoucher, its self-developed patented software and the first e-medical receipt system in the Hong Kong healthcare industry, together with a virtual insurance company have jointly launched O2O medical services with touchless registration procedures and comprehensive medical experience.

During the year, UMP also acquired 75% of the beneficial interests of an MRI centre. Following the acquisition, the company has become one of the largest private medical imaging and laboratory operators in Hong Kong with 10 service points, offering a broad service coverage including PET-CT, CT Scan, MRI, ultrasound, mammogram and other medical imaging and laboratory services.

UMP’s Diagnostic Imaging & Laboratory services business and health assessment have been the most outstanding areas in its business pipeline.

Its medical imaging and laboratory business delivered strong performance during the year, achieving significant revenue growth of over 50% YoY. Upholding its “people-centric” core values, UMP aims not just to provide comprehensive healthcare services, but to proactively contribute to the community as well through its expertise and resources.

“We strive to become the most valued and caring healthcare service provider in primary care sector. We are dedicated to providing convenient,

HEALTH, PRODUCTS & SERVICES PHILOSOPHY

FAST FACTS

To give everyone access to trusted and affordable care, so that everyone can freely pursue their dreams without worrying about their health.

• UMP has over 1,100 service points in Hong Kong, Macau and Mainland China, offering convenient and one-stop services.

• UMP offers corporate clients tailor-made medical plans in accordance with what they need, safeguarding the health of employees.

This page: (Top) UMP Wellness & Metabolic Centre, (Bottom) Central Specialist Medical Centre Opposite page: Jacquen Kwok, Managing Director, Executive Director and General Manager at UMP Healthcare Holdings

accessible, affordable and coordinated healthcare services to the Hong Kong community and beyond. By doing so, we actively share health education tips and timely medical knowledge on the Group’s website and its social media platforms during the year,” the company said.

UMP Chairman and CEO Sun Yiu Kwong also donated HK$5m to the UMP Charity Foundation as part of its efforts of giving back to the community. The first round of donation, which amounted to HK$600,000 was made to CUHK Jockey Club School of Public Health and Primary Care of the Faculty of Medicine at The Chinese University of Hong Kong.

The Group is also committed to continuing charity collaboration with the Child Development Initiative Alliance to activate youth development, enhance soft skills in youth, and help them find their passion by offering internship opportunities at UMP. In times of uncertainties, a company’s treatment of its employees shows how they are being valued. UMP’s “people-centric” values also apply to its employees, with the company extending support by implementing an income protection scheme to ensure that they will not be affected by the disruptions in business caused by the pandemic. The Group also provided flexibility to work allocations.

The company strongly believes that its employees are its strongest asset.

The Group has organised a series of staff engagement activities and town halls to promote UMP’s core values throughout the workplace.

In an attempt to provide a more spacious and comfortable working

environment for employees, UMP also relocated its Customer Service Hub and Information Technology Team to a bigger premises in Central. The relocation enhanced employees’ work efficiency and sense of belonging.

Meanwhile, the company would also be making an effort to address the needs of a rapidly aging population by launching its UMP Wellness & Metabolic Centre and UMP Preventive Healthcare & Assessment Centre. They would also be providing a more spacious and comfortable environment for patients through the revamping of its ProCare Physiotherapy and Rehabilitation Centre.

During the onset of the pandemic, healthcare providers were forced to operate online and ride on the trend of telemedicine services for patient care. As a socially responsible healthcare group, UMP expanded its online product offerings in a timely manner to help individuals and enterprises overcome the barriers of social distancing.

The Group’s Virtual Care services in Hong Kong cover various specialties, traditional Chinese medicine and physiotherapy diagnosis, providing patients with diverse choices and maximising its technology application. Its services enable patients to communicate with doctors anytime, anywhere, obtain safe and effective healthcare guidance, as well as foster a closer doctor-patient relationship.

Moreover, UMP also provided a 24-hour customer service hotline for customers when social distancing measures became the norm in Hong Kong. They are now able to seek medical services at their own convenience.

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Index

COMPANIES AND INDUSTRIES 9 in 10 construction companies are SMEs

20

Ageing population escalates healthcare expenditure

22

How HK becomes a transport hub for Asian urban centres

24

Foreign licensors prefer HK licensing agents as partners

26

‘Trade disintermediation’ poses threat to HK trading

28

HK spectacles makers vs ASEAN neighbours

30

Trends shaping Hong Kong’s electronics industry growth

32

Foreign policies trouble HK packaging manufacturers

34

Hong Kong edges out the franchise competition in Asia

36

Digital printing takes centre stage in Hong Kong

38

Hong Kong unveils roadmap to a clean and green 2035

40

HONG KONG’S HIGH FLYERS Outstanding Enterprises 2021 44 Archikris Design Group 46 Elite Concepts Ltd 48 FEED HK 50 Fidelity International 52 Hang Seng Bank 54 Mayer & Associés 56 PrimeCredit Limited 58 Soteria Trust 60 Standard Chartered Bank 62 UMP Healthcare Holdings Ltd

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