When is a Hong Kong manufacturer not a Hong Kong manufacturer?
You would think the answer was “when it is a China manufacturer”, but when it comes to trade and Hong Kong’s slice of it, the area starts to get decidedly grey.
The Hong Kong Toys Manufacturers Association was this week complaining that falling orders from the European Union and the US will leave factory owners facing a bleak Christmas.
The expectation is that toy exports will be down about 25 percent this year, which is a big deal considering the narrow profit margins in the business.
There are an estimated 3,000 factories producing toys in the mainland that are owned by Hong Kong businessmen. But is it right to call them Hong Kong toy exporters, or should they be China toy exporters?
Nine out of every toy in the US is produced in China. Mainland China, and not Hong Kong. Does the fact that the factory making the toys is payrolled by someone in Hong Kong make its products Hong Kong exports?
It shouldn’t, but the peculiarities of the system mean that goods produced in the mainland are exported through Hong Kong where a label or some other small bit is added and off they go.
They are called “re-exports” and the value of these re-exports between January and August was US$277 billion. The total value of actual Hong Kong domestic exports in that period was US$5.8 billion, just two percent,
In a survey conducted by the HKTDC, 88 percent out of 500 responding Hong Kong companies said they expected higher labour costs on the mainland during the third quarter of 2011. Among exporters surveyed, 87 percent said mainland’s inflation worried them; among them, 97 percent said they were concerned about higher costs of production on the mainland.
You will notice that not once were Hong Kong related problems mentioned. No complaint about sharply rising property rentals, increasing costs of Hong Kong labour, pension issues and rising inflation in the territory.
That’s because it doesn’t make any difference what happens in Hong Kong. Almost everything has been made in the mainland since the “Made in Hong Kong” stamp jumped over the fence and hung out its shingle in Guangdong way back in the 1980s.
Manufacturers are Hong Kong-based in terms of where their boss lives, but manufacturing blew town decades ago and to call them Hong Kong exporters is stretching things a bit.