1 August 2013 – The robust trade between Hong Kong and France has potential for further growth as the city is well positioned to help French companies expand onto the Chinese mainland, according to a leader of a bilateral-trade promotion body.

Tom Tang, Chairman of the Hong Kong Committee of the Hong Kong-France Business Partnership, told its eighth Plenary Session there were significant opportunities to further expand the city’s trade with France after its three per cent growth in 2012 to more than US$10.7 billion despite challenging global economic conditions.

In the first half of 2013, Hong Kong’s total trade with France surged 18 per cent year-on-year to US$5.8 billion.

Mr Tang said the opportunities arose from Hong Kong’s role as the gateway to the mainland, of which the 2011-2015 Five-Year Programme aimed to increase domestic consumption, urbanisation and industry upgrading continued to be implemented by the country’s new leaders.

Hong Kong is often used by overseas enterprises as a platform to expand into Asia, especially the mainland, because of its business advantages, including the rule of law and a low-tax regime, as well as world-class support infrastructure and services such as finance, accounting and logistics.

Mainland’s Foreign Investment
At the Plenary Session, held 27 March 2013 in Paris, Mr Tang said the trend of mainlanders making investments overseas was also creating opportunities for French firms seeking worldwide expansion through foreign partnerships.

Margaret Fong, Deputy Executive Director of the Hong Kong Trade Development Council (HKTDC), advised that the mainland’s direct outbound investment was expected to rise an average 17 per cent annually from 2011 to 2015, to US$150 billion. Mainland enterprises were particularly keen to invest in technology, distribution networks and brand building businesses overseas, she added.

Ms Fong said France was the number-four destination for the mainland's outward foreign direct investment (FDI) in 2011, receiving US$3.5 billion, with main beneficiaries including the mining, agriculture, manufacturing, hotel and catering sectors.

Mergers and Acquisitions
She also pointed to the growing popularity of mergers and acquisitions (M&A) among mainland investors, adding that such activities accounted for 36 per cent of China’s outward FDI in 2011 and took place mainly in the mining, manufacturing and power industries. Quoting a PricewaterhouseCoopers report, she said China’s outbound M&A deals grew 54 per cent to a record US$65.2 billion in 2012, with many of these transactions aimed to bring advanced Western technology, know-how, intellectual property and brands to the mainland market.

Ms Fong observed that Hong Kong was increasingly becoming the destination for mainland funds that sought to go international. The city accounted for almost 62 per cent of the mainland’s total cumulative outward FDI up to 2011, and was its number-one outward FDI destination for that year, receiving US$36 billion or 48 per cent of the total.

Hong Kong the Matchmaker
Ms Fong noted increasing numbers of mainland firms were using Hong Kong as regional headquarters – 106 last year versus 97 in 2011, according to local government data -- due to the breadth and depth of the services available here. Local service professionals, such as lawyers and accountants, could help mainland enterprises understand the complexities of international business practices and customise global strategies, she said.

Ms Fong highlighted the HKTDC endeavour to bring French companies, Chinese investors and Hong Kong service professionals together for potential partnerships. She invited the French members to take part in HKTDC-organised events, including the Deal Flow Matchmaking Session at the Asian Financial Forum 2014 (13-14 January) and investment missions.

Guest speaker Serge Boscher, Director General of the French agency for International Investments, noted that France was open to foreign investments and holding the world’s fourth largest FDI stock and an FDI-to-GDP ratio of 39 per cent, higher than the United States’ 23 per cent and Germany’s 20 per cent. He advised that there were more than 20,000 foreign companies in France, including 127 Hong Kong enterprises employing 6,100 people in the hotel, transport, storage and garment sectors.

Love for Luxuries
Members also noted that mainland consumers were an important driving force for French luxury goods sales. Raphael le Masne de Chermont, Executive Chairman of Hong Kong fashion retailer Shanghai Tang, said Chinese consumers were enthusiastic about French branded products and accounted for some 60 per cent of luxury goods sold in France.

Shirley Chan, Chief Executive Officer of Hong Kong apparel company YGM Trading Ltd, reported that of the luxury goods sold on the mainland, French products made up 31 per cent of the bags, 37 per cent of the clothing and 62 per cent of the cosmetics and perfume. She added Chinese consumers were also interested in French food.

Technological Cooperation
John Mok, Chairman of Hong Kong design and manufacturing services provider Automatic Manufacturing Ltd, highlighted the potential for China-France technological collaboration in robotics, citing Chinese manufacturers’ interest in acquiring technology through foreign joint ventures. He advised French companies eyeing mainland operations to start by working with Hong Kong partners, whose legal, fiscal, and cultural knowledge could help overcome the challenges of operating on the mainland.

The HKTDC serves as the Partnership’s Hong Kong Secretariat.