GBA-ASEAN: Bridging the Gap

HKTDC Research, in collaboration with United Overseas Bank Hong Kong, conducted a questionnaire survey and in-depth interviews with enterprises in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) in the third quarter of 2021 to gather their views and opinions on trading with and investing in the ASEAN, as well as the opportunities, difficulties and challenges facing them in that market. The survey aimed at gaining an understanding of the role played by Hong Kong in promoting trade and investment between the GBA and ASEAN, as well as to identify GBA enterprises’ demand for Hong Kong services.

Hong Kong is the most popular offshore service platform for mainland enterprises seeking to “go out”, according to the findings of a questionnaire survey conducted earlier by HKTDC Research with mainland enterprises. In respect of trade and investment between the GBA and the ASEAN region, respondents were asked to rate, on a scale of 1 to 10, the importance of Hong Kong in facilitating their current trading and investment activities in ASEAN. The average was 7.33, with nearly half (47.2%) giving a score of 8 to 10.

Overall, the larger the enterprise, the greater the importance it attached to the role played by Hong Kong as the platform facilitating the investment of GBA-based enterprises in ASEAN. Enterprises with business revenue of more than US$10 million rated the importance of Hong Kong at 7.48, while those with business revenue of US$10 million or below gave a score of 7.24. The score given by enterprises employing over 100 staff was 7.41, and that given by those employing 100 staff or less was 7.29.

Two strengths of Hong Kong were evaluated: (1) Hong Kong’s connectivity with the GBA and ASEAN; (2) Hong Kong’s role as a business hub. The findings are shown below.

Hong Kong’s connectivity

Respondents to the survey were asked to rate (1) Hong Kong’s connectivity with other GBA cities; and (2) Hong Kong’s connectivity with ASEAN countries, on a scale of 1 to 10, with 1 representing ‘very weak’ and 10 representing ‘very strong’. All factors were grouped under three main categories, namely business environment, financial infrastructure, and cross-border flow of resources.

Connectivity with other GBA cities

GBA-based enterprises in general found Hong Kong’s business environment favourable (especially its transparent regulatory regime), securing an average score of 7.23, with 48.1% of respondents giving a score of 8 to 10. Respondents found there is good availability of services providers in Hong Kong serving GBA-based firms (7.16) and also good availability of talents understanding the GBA market (7.14).

With regard to Hong Kong’s financial infrastructure, the scores given by GBA-based enterprises to each factor were more or less the same. The respondents in general agreed that Hong Kong has in place a good variety of financial products and banking services (7.18), with 45.8% of them giving a score of 8 to 10. They were also impressed by the convenient capital flow between Hong Kong and other GBA cities (7.16), the sufficient cross-border financial infrastructure in the city (7.14), and the ease of raising funds in Hong Kong for GBA-based firms (7.12).

Where cross-border flow of resources is concerned, the respondents agreed that Hong Kong has a comprehensive logistics network and connections with other GBA cities. The average score given to this was 7.31, the highest among all factors. Securing the secondhighest score was the efficient flow of products between Hong Kong and other GBA cities (7.28). Compared with products flow, the score given by respondents to the efficient flow of human resources between Hong Kong and other GBA cities was slightly lower (7.14).

Overall, mainland GBA enterprises were more satisfied than Hong Kong enterprises with the city’s connectivity with other GBA cities. The scores given by mainland GBA enterprises to various items of Hong Kong’s strengths were higher than those given by their Hong Kong counterparts. This shows that Hong Kong’s “southward” connectivity is stronger than that of its “northward”.

Connectivity with ASEAN Countries

On Hong Kong’s connectivity with ASEAN countries, the respondents reckoned that Hong Kong has a wide business network in ASEAN (7.18), with 45.2% of them giving a score of 8 to 10. The respondents pointed out that GBA-based enterprises operating in the ASEAN region found that Hong Kong has good availability of services providers (7.16), good information about the ASEAN market (7.14), good availability of talents understanding the ASEAN market (7.10), and that Hong Kong’s business practices and norms are similar to those of the ASEAN market (7.10).

With regard to financial infrastructure, the minimal exchange and capital controls between Hong Kong and ASEAN (7.17) facilitates the trading and investment activities of GBA-based enterprises in ASEAN through Hong Kong. Moreover, Hong Kong offers comprehensive financial solutions for trade and investments (7.13) and sufficient cross-border financial infrastructure (7.09).

Where cross-border flow of resources is concerned, the respondents agreed there is an efficient flow of products between Hong Kong and ASEAN, giving it an average score of 7.23, the highest among all other factors. Compared with products flow, the score given by the respondents to the efficient flow of human resources between Hong Kong and ASEAN was slightly lower (7.16). They agreed that Hong Kong has a comprehensive logistics network and connections with ASEAN countries (7.13).

Overall, for GBA-based enterprises trading, investing or operating in ASEAN, Hong Kong’s connectivity with other GBA cities is stronger than its connectivity with ASEAN countries. With regard to the three main categories mentioned above, the strength of Hong Kong’s cross-border flow of resources is the most outstanding, whereas the strengths of its business environment and financial infrastructure are about the same.

In respect of business environment, the respondents agreed that Hong Kong has in place good availability of services providers (44.7%) and talents (45.2%) serving GBA-based enterprises, giving both factors a score of 8 to 10. By comparison, the percentages of respondents agreeing that Hong Kong has in place good availability of services providers (43.5%) and talents (41.3%) serving their investments in ASEAN were lower.

As for financial infrastructure, the respondents agreed that there is sufficient cross-border financial infrastructure between Hong Kong and other GBA cities, giving an average score of 7.14, slightly higher than that given to crossborder financial infrastructure between Hong Kong and ASEAN (7.09).

On cross-border flow of resources, Hong Kong is apparently strong at the outward flow of products. The scores given by the respondents to the flow of resources between Hong Kong and other GBA cities and that between Hong Kong and ASEAN were 7.31 and 7.23, respectively, both being the highest among all factors. Comparing the flow of products and the flow of human resources, the score given by GBA-based enterprises to Hong Kong’s crossborder flow of human resources was lower. Since this questionnaire survey was conducted during the Covid-19 pandemic, the results reflect that the various border-control measures taken in response may have made quite an impact on Hong Kong’s cross-border flow of human resources.

With regard to the strength of Hong Kong’s connectivity, the scores to various factors given by enterprises currently operating in the ASEAN region were slightly higher than those given by enterprises that have not yet entered the ASEAN market. The greatest difference in opinion between these two groups of enterprises was found in the capital flow between Hong Kong and other GBA cities, with enterprises currently operating in ASEAN giving an average score of 7.26, 0.26 points higher than that given by those yet to enter the ASEAN market.

Moreover, the larger the enterprise, the more satisfied it was with Hong Kong’s connectivity with other GBA cities and with ASEAN. The only exception was Hong Kong’s business network in ASEAN, with enterprises with business revenue of US$10 million or below giving an average score of 7.24, 0.2 points higher than the score given by enterprises with business revenue of more than US$10 million. This reflects that smaller enterprises may rely more on Hong Kong’s business network to find overseas buyers and business partners.

Hong Kong’s Role as a Business Hub

As Hong Kong is a leading business hub in Asia, this survey hoped to find out whether the services it provides can meet the needs of GBA-based enterprises in trading with, and investing in, ASEAN countries. According to the survey findings, the Hong Kong services most often used by GBA-based enterprises are MICE (i.e. meetings, incentives, conferences and exhibitions), with 45.4% of respondents saying they often or sometimes used these services, followed by sales and marketing services (41.4%). Several respondents mentioned the importance of brand-building in business expansion.

The fact that Hong Kong and mainland brands are not well-known in overseas markets has made it difficult for them to attract new clients. GBA-based enterprises could make use of Hong Kong’s MICE services as well as sales and marketing services to promote business overseas and build up the confidence of ASEAN consumers in their brands. Among the many services, raising funds through Hong Kong and dispute resolution in Hong Kong were seldom used by GBA-based enterprises, with 32.3% and 29.7% of them saying they have never used these respective services, and just 9.1% and 7.6% indicating they would use these services more often in the next three years.

MICE Services

Hong Kong’s MICE services are very important to GBA-based enterprises, with 60.1% of Hong Kong enterprises and 41.2% of mainland GBA enterprises saying they often or sometimes used them. For enterprises that were already operating in ASEAN (45.3%) and those that have not yet entered ASEAN but planned to expand into that market in the next three years (45.5%), MICE were the most often used services among all other services. As to expected changes in the usage of services in the next three years, 16.3% of the respondents indicated they would use these services more often, the highest growth among all other services. It also reflected that after the pandemic has eased off, GBA-based enterprises would need Hong Kong to reconnect more with buyers and business partners from ASEAN.

Sales and Marketing Services

The second-most often used services were sales and marketing, with 61.5% of Hong Kong enterprises and 35.8% of mainland GBA enterprises saying they often or sometimes used such services. Enterprises that have not yet entered the ASEAN market tended to use Hong Kong’s sales and marketing services more often (43.4%), 3.2 percentage points higher than those that were already operating in ASEAN. As to expected changes in using such services in the next three years, 12.5% of the respondents remarked that they would use these services more often, while just 4.6% said they would use them less often.

Logistics and Supply Chain

The approval of GBA-based enterprises of Hong Kong’s cross-border flow of resources has boosted demand in the region for logistics and supply chain management services. Some 55.9% of Hong Kong enterprises and 34.2% of mainland GBA enterprises indicated that they often or sometimes used these services. The frequencies of using these services by enterprises already operating in ASEAN (38.8%) and those that have not yet entered the ASEAN market (39.3%) were more or less the same. This shows that Hong Kong’s logistics and supply chain management services can meet the needs of different enterprises. Some 13.5% of the respondents said they would use these services more often in the next three years, a growth rate second only to MICE services.

Financial Services

Where financial services are concerned, 56.6% of Hong Kong enterprises and 32.5% of mainland GBA enterprises indicated that they often or sometimes used these services. However, the frequency of using its fundraising service is lower than that of using general financial services, with just 38.5% of Hong Kong enterprises and 28.6% of mainland GBA enterprises saying they often or sometimes used this service. The frequency of using Hong Kong’s fundraising service by enterprises that were already operating in ASEAN (34%) was 8.8 percentage points higher than that by enterprises that have not yet entered the ASEAN market. With regard to expected changes in using financial services in the next three years, 12.6% of the respondents said they would use Hong Kong’s financial services more often, while 9.1% said they would use its fundraising service more often.

Respondents were asked to rate the strengths of Hong Kong services in terms of variety, quality and price performance on a scale of 1-10, with 1 representing ‘least satisfied’ and 10 representing ‘most satisfied’. The results showed that the respondents were most satisfied with the quality of Hong Kong services, followed by variety and price performance. Larger enterprises were more satisfied with the overall strengths of Hong Kong services. Among the many services, GBA-based enterprises were particularly satisfied with business and professional services, the quality of which secured an average score of 7.42, followed closely by financial services (7.38) and e-commerce (7.25).

For financial services, variety and price performance took the lead by scoring 7.31 and 7.21, respectively. It was found during the survey’s in-depth interviews that the majority of respondents have more or less used Hong Kong’s financial services in the course of expanding into overseas markets. Song Yang, Vice President of Pongo (Shenzhen) Technology Co Ltd, a company in Shenzhen providing content marketing services to mainland brands, commended Hong Kong for its highly efficient trading activities and low foreign exchange risks, and said the company uses the cross-border clearing services available in Hong Kong to conduct transactions with foreign business partners. Meanwhile, Guangdong Haid Group, an enterprise in Guangzhou manufacturing feedstuffs and agricultural and animal husbandry products, uses Hong Kong as its corporate treasury centre to handle the funds and financing of the group.

However, the respondents’ rating of Hong Kong’s services relating to innovation and technology was less favourable. Service quality scored an average of just 7.05 while service variety and price performance scored 6.9 and 6.86, respectively, slightly lower than other services.

Note: This article forms part of a joint study conducted by HKTDC Research and UOB: “Trade and Investment Between GBA and ASEAN and the Roles of Hong Kong”.

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