Hong Kong has undergone a significant shift in the last 20 years.  They have gone from having 75% of their Gross Domestic Product (GDP) based upon the service industry in 1990 to having 92% of their GDP based on services now.

Two important dates in Chinese history led to this shift:

• Late 1979 – Deng Xiaoping opened up the Chinese economy to foreign investment.
• 1 July 1997 – Hong Kong was returned to China by the British and began to exist under the “One Country, Two Systems” rule (HK maintains strict autonomy in economic matters).

The significance of these dates are that after 1979, Hong Kong was able to directly invest in China.  And after 1997, Hong Kong developed much closer ties with China, especially in the Pearl Delta Region (consisting of over 50 million people & a GDP of US$560 Billion.  Hong Kong was thus able to move most of their remaining manufacturing positions from Hong Kong to the Pearl Delta Region where labor costs were much lower.  It also set Hong Kong up with a great deal of accessible natural resources not available in tiny Hong Kong (6 miles by 6 miles).  This enabled Hong Kong to concentrate more on the service side of business.

As a result, Hong Kong’s service sector now accounts for an astonishing 92% of GDP!  The major service industries are trade, real estate, financial services, retail, and tourism.

An additional shift is that with this current global recession, Hong Kong’s service sector will be moving more towards the Chinese market.  As demand for services from Hong Kong decline in the USA, Hong Kong companies will further move their investments to China.

So, what does this mean for you?  If you are wanting to enter the Chinese market, Hong Kong would be a great place to start.  The Hong Kong service industry understands doing business internationally and it understands China.  It would be a great bridge

Also, keep an eye on Hong Kong to be the gateway for Chinese companies to enter the rest of the world market.  The same reasons that make Hong Kong a great starting place for foreigners to enter China make it a great place for Chinese companies to target the rest of the world with their products.

Other fun facts:

• Hong Kong removed duties/taxes on wine imports.  As a result, they are now the #2 wine importer in the world
• Hong Kong is the largest investor into China
• Hong Kong has 6,460 persons per km2
• HK has the #1 busiest airport for international cargo in the world
• HK has the 3rd busiest container port in the world (2008)
• China is predicting 8.5 – 9% growth for this year, better than the targeted 8%
• Chongqing, a Chinese city in Sichan province has a population of over 31 million people

 

 The Hong Kong Shift [3:18m]: Play Now | Play in Popup | Download