A strong recovery in the economy has boosted industrial machinery and parts demand. Capital investment in new machinery or machinery upgrades is taking place across southern China, a region in which tens of thousands of Hong Kong companies own factories, or act as sourcing agents for Mainland-based factories.
In 2006, Hong Kong imported US$31 billion worth of industrial machinery, mainly centered on electrical machinery, representing a 15 percent increase over the previous year. The United States is Hong Kong’s fourth largest supplier, after China, Japan and Taiwan. More than 85 percent (US$26 billion) of industrial machinery imports were re-exported out of Hong Kong. Mainland China absorbed about 55 percent of Hong Kong’s industrial machinery re-exports.
The industry is expected to grow even more strongly in the short-term as companies continue to build new factories or upgrade existing facilities (especially with the trends towards higher tech and green manufacturing) in southern China, Hong Kong’s primary customer base.
When evaluating the potential in the Hong Kong market, U.S. companies must take into account the three-way role that Hong Kong plays: as an end-user for Hong Kong-based facilities, as an end-user for Hong Kong-owned factories based in China, and as a sourcing agent or project manager for Mainland or foreign-owned factories in China.
The main competition comes from Mainland China in the low-to-mid end product range and from Japan, Taiwan, Germany and South Korea in the mid-to-upper end.
With the Hong Kong economy back in full health, the slowdown in the industrial machinery sector seen in the early 2000s has reversed. Hong Kong’s real GDP has been rising above trend for more than three years, up 8.6 percent in 2004, 7.3 percent in 2005 and 6.8 percent in 2006. Recently released full year GDP estimates put 2007 up 5 - 6 percent. In particular, the manufacturing sector has been booming, with exports up 9.4 percent in 2006 and a further 10.4 percent in the first half of 2007.
After a hiatus in capital investment on industrial machinery, spending has taken off again fuelled by increased demand for the range of light consumer goods manufactured by Hong Kong companies from their facilities in southern China. Tools and components relating to electrical appliances, textiles and clothing, jewelry, fashion accessories, watches and clocks, house-ware and toys & games are particularly popular with Hong Kong companies.
Major development in heavy industries in southern China, such as the auto and packaging sectors, has also boosted demand. Almost 50 percent of investment into China in recent years has been in the auto sector.
By Olevia Yim