Profiles of Hong Kong Major Service Industries

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Last updated: 27 March, 2009

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Import and Export Trade



  • Hong Kong is the world's 13th largest trading economy. In 2008, Hong Kong's total merchandise trade amounted to US$750 billion, up 5.3% from 2007.

  • Hong Kong is also handling an increasing amount of offshore trade. The Hong Kong government estimates that the sales value of offshore trade in 2007 amounted to US$265.7 billion, up 16.3% over 2006. In comparison, the value of re-exports was US$330.6 billion in 2007, up 10.8% over 2006. The amount of offshore trade was equivalent to 80% of the value of Hong Kong's re-exports for 2007.

  • As of September 2008, 518,079 people were employed in the import and export trade sector, which had 96,488 establishments. In 2007, the sector recorded a value-added of US$40.7 billion. As in the third quarter of 2008, the sector accounted for 22.6% of Hong Kong's GDP in real terms.

  • Hong Kong has been handling a significant portion of the Chinese mainland's expanding external trade. In 2008, about 17% of the mainland's foreign trade was handled via Hong Kong and 62.5% of Hong Kong's total re-exports were originated from the Chinese mainland.

Industry Data

Import and Export Trade

September 2008

Number of Establishments




Source: Quarterly Report of Employment and Vacancies Statistics, Census and Statistics Department

(US$ billion)









Export of Merchanting and Trade-related Services








Year-on-year (YoY) growth








Contribution to Services Exports








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

Major Export Markets of Merchanting and Trade-related Services (US$ million)



Share %

YoY growth


Share %

YoY growth




































Sources: Report on Hong Kong Trade in Services Statistics , Census and Statistics Department

Range of Services

Hong Kong's import and export trading firms are active in sourcing various types of 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-exports; and (3) sourcing goods from one country to be shipped directly to a third country without touching Hong Kong ground.

The import business of Hong Kong trading firms is mainly generated by the distributing capabilities under the identity of agents or dealers. These trading firms usually specialise in one area of products and represent one or more foreign brands. Their trading map usually encompasses Hong Kong, the Chinese mainland (or certain parts of it) or other Asian countries.

Due to the development of trade supporting services on the Chinese mainland, trading firms increasingly source goods offshore for sales in international markets. Some of these goods are transhipped via Hong Kong, or shipped directly without touching Hong Kong ground. Such trade, known as offshore trade, is not reflected in Hong Kong's trade statistics. According to the Census and Statistics Department, Hong Kong's sales value of offshore trade in 2007 amounted to US$265.7 billion, up 16.3% over 2006. In comparison, the value of re-exports was US$330.6 billion in 2007, up 10.8% over 2006.

Service Providers

Hong Kong's import and export trading firms are typically small, employing around 5 persons on average. There are around 96,488 import and export trading firms in Hong Kong, with less than 300 of these firms having more than 100 employees. There are three broad categories of import and export trading firms:

  • Left hand - right hand traders: these refer to trading firms which match sellers and buyers without adding any significant value to the process. These firms are characterised by the conduct of a straight-forward sourcing operation, usually identifying goods produced on the mainland or Hong Kong and shipping them to overseas markets. These firms 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.

  • 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 have become designer and manufacturer of 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.

The business environment for Hong Kong's trading firms is becoming more challenging amid the growing trend toward direct dealing between customers and manufacturers, known as "trade disintermediation". In 2007, the rate of gross margin1 of merchanting was 7.8%, down from 8.6% in 2004, illustrating the squeeze in margin. In response to trade disintermediation, Hong Kong traders now provide more value-added service in addition to finding more competitive sources of supplies. For example, Hong Kong traders help their overseas clients inspect the goods produced by the manufacturers to ensure they are up to 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.

In the same period, the commission rate of merchandising2 for offshore transactions was 4.2% (2004: 3.6%), while the rate of re-export margin was 17.1% in 2007 (2004: 17.3%). Both remained stable.

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


Hong Kong's import and export trading sector exports its services mainly in the form of offshore buying and selling of goods. Given Hong Kong's proximity and the relocation of Hong Kong's manufacturing bases to the mainland, particularly the Pearl River Delta, the Chinese mainland is a major source of offshore trading activities. As Hong Kong manufacturers are diversifying their production activities to other low-cost countries, the offshore trading pattern is expected to reflect the move.

In 2008, Hong Kong earned US$28 billion from exporting trade-related services, accounting for 30.1% of total services exports. The Chinese mainland accounted for 25.3% of Hong Kong's exports of merchanting and trade-related services as of 2007.

Industry Development and Market Outlook

  • The financial tsunami is taking its toll on the world economy and Asia is not spared from its effects. As an open economy, with total trade equivalent to more than 300% of its GDP, Hong Kong suffered a decline in trading activities. In January 2009, export and import values fell by 21.8% and 27.1% respectively. However, it is performing better than many of its peers in Asia, some of which suffered declines of over 30% in exports and imports in the same period.

  • The G20 pledged to fight against protectionist measures in November 2008, and the World Bank reported in March 2009 that 17 of the 20 economies had put up 47 measures to restrict trade at the cost of other countries.

  • In response to slowing exports, China has raised VAT rebate rates a number of times since August 2008. China has also removed 77% of the items from the "restricted" category of processing trade.

  • The Chinese government also announced in November 2008 a RMB4-trillion (US$585 billion) stimulus package to encourage domestic demand. A successful boost in private consumption is likely to lead to a rise in imports, offering many opportunities for Hong Kong traders.

  • In recent years, Asia has become a more integrated market, thanks also to the various free trade agreements (FTAs) signed in the region. In particular, the China-ASEAN Free Trade Agreement (CAFTA), which commenced in 2005 with scheduled tariff elimination to be completed in 2010, has contributed to higher intra-Asian trade.

The Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

According to the "Measures for the Administration on Foreign investment in Commercial Fields", which became effective in December 2004, foreign-owned enterprises are allowed to enter the mainland's market to engage in trading business, not being subject to any minimum annual trading value. However, foreign-owned enterprises need to meet the regulations on the minimum registered capital (as stipulated in the related rules of Company Law3), registered capital and investment value.

Under CEPA, Hong Kong service suppliers (HKSS) can provide commission agents' services in respect of chemical fertilisers, processed oil and crude oil, and wholesale trade services and retailing services in respect of chemical fertilisers.

In addition, for the same HKSS which opens more than 30 stores accumulatively on the mainland, if the commodities for sale include pharmaceutical products, pesticides, mulching films, chemical fertilisers, vegetable oil, edible sugar and cotton, and the above commodities are of different brands and come from different suppliers, the Hong Kong service supplier is allowed to operate on a wholly-owned basis. Currently, a single foreign enterprise under the same condition can only hold a maximum 49% share in the business.


1 "Rate of gross margin" refers to the gross margin from merchanting expressed as a percentage of the sales value of goods involved, while "commission rate" is the commission from merchandising for offshore transactions expressed as a percentage of the sales value of goods involved. "Rate of re-export margin" is defined as the re-export margin expressed as a percentage of the value of re-exports.

2  The difference between "merchanting" and "merchandising" is that, an establishment engaged in "merchanting" takes ownership of the goods involved, whereas one engaged in merchandising transactions does not take ownership of the goods involved.

3  According to Company Law, the minimum registered capital is RMB 30,000.

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