ADDING VALUE TO TRADE A MUST
Written on the 24 October 2011
AUSTRADE senior trade commissioner in Hong Kong (HK) Phil Ingram (pictured), argues that Australian companies wanting to trade in the city state must offer more than just value for money.
HK has become very competitive for Australian entrepreneurs to operate in because it is a very open market. There are no barriers to entry, tariffs or strict regulatory pressures.
About 5000 Australian companies exported to HK in 2009, giving Australia the third largest market share behind New Zealand and Singapore. Many of them have realised that unless products or services are competitive in pricing, it is very difficult to enter and stay in HK. They not only need to offer better pricing but also superior quality and customer service.
There is little difference in exchange rates between the HK dollar and the US, Canadian or Australian currencies. The high dollar has made it very difficult for food products traders wanting to secure orders from HK.
The amount of Australian-made products stocked in HK supermarkets has declined in favour of American and European foods that used to be harder to sell. It has also made it less affordable for international students to pay tuition fees in Australia and caused the number of HK students in Australia to decline.
Mainland China is still a developing economy and very restrictive in what businesses can and cannot do. The Chinese Communist system can make it quite difficult for foreign companies to set up due to several tariffs and market barriers. Setting up a consumer bank in China would not work as there is a highly restricted banking sector.
To this end, HK’s history as a trading centre continues to provide perfect conditions for on-selling to China and Taiwan. A predicted influx of 35 million Mainland Chinese tourists to HK will provide a welcome boost for retail sales, particularly in shopping and food. Cashed up Chinese will spend on products from Cotton On, Oroton, Paspaley Pearls, Aesop, Jurlique and the Dymocks Bookstore because taxes are lower
Australian companies operating in niche areas tend to perform better. Investor services provider Computershare has secured a lot of business from the HK stock market since many companies are waiting to be listed. Research firm RepuTex has established a sustainability index, AConneX produces software for the HK building and construction industry and Hong Kong CSL is the largest mobile carrier owned by Telstra.
The HK Government has also stimulated the economy by investing in new railway lines, sewage infrastructure and public buildings, providing building and construction opportunities for Australian developers.
The Australian Trade Commission (Austrade) has online resources to help educate companies how to build a larger presence in China, HK and Macau. Businesses can alternatively contact one of the agency’s 14 offices for printed information to be mailed out.
Companies should study every market carefully and find the best long-term strategy to enter. The road to success requires patience and commitment to achieving goals.