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An interesting trend has been gathering momentum recently: the emergence of Hong Kong-based transnational companies.
"Within Asia, Hong Kong is no exception with regards to the globalisation of its firms," says Hans-Jurgen Richter, co-author of Global Future: The Next Challenge for Asian Business.
"It is not a new phenomenon," adds David Meyer, author of Hong Kong as a Global Metropolis. "Hong Kong-headquartered firms have always had investments outside Hong Kong. Of course, most of the investments traditionally were in Asia, and especially the Chinese Mainland."
Now, more local firms are venturing further afield. The experts agree these external investments underscore Hong Kong's business track record and its strength as a source of capital.
In March it was announced that CLP Power Asia would take over Singapore Power's merchant energy business in Australia. The Hong Kong-based firm has since 1998 invested in power plants in Taiwan, Australia, India and Thailand, as well as in the mainland.
Eyeing global expansion
In April, eyewear manufacturer Moulin Global Eyecare acquired a controlling interest in Eye Care Centers of America (ECCA), the second-largest optical retail chain in the US. Moulin may be a trendsetter. It was the first Hong Kong optical company to move manufacturing to the mainland in the 1980s and now also has facilities in the Czech Republic.
Another emerging global retailer is A.S. Watson, founded in 1828 and with operations now spanning 31 markets. In early April it acquired France's largest toiletries retailer, Marionnaud, and Turkey's health and beauty chain, Cosmo.
The firm is a retail arm of Hong Kong-based conglomerate Hutchison Whampoa. Hutchison is the world's largest private port operator, with facilities in the UK, the Bahamas, Panama, Indonesia, Hong Kong and the mainland. It recently bought an 83 per cent interest in Poland's Gdynia Container Terminal.
The conglomerate's telecommunications arm, Hutchison Telecommunications International, is also looking at Poland for 3G opportunities. It already has 2G or 3G mobile operations in India, Macau, Sri Lanka, Ghana, Paraguay and Israel. The associated 3G Group has business in seven countries of Europe and Australia.
UK a target market
In the same field, a subsidiary of Hong Kong's PCCW last year launched a wireless broadband service in southern England. PCCW also has subsidiaries in Macau, Taiwan, Singapore, S. Korea, Japan and the US.
England is a target too for Hong Kong's underground railway operator, the MTR Corporation. It is bidding for South Eastern Trains, a commuter and high-speed train franchise in Kent.
"The external investments of quasi-public companies like the MTRC would seem to be new," says Mr Meyer.
But Hong Kong firms started "going global" quite early on. Chinese firms based there emerged as transnationals in the early 1950s, experts say.
Adaptable SMEs
In the 1960s and 1970s Hong Kong-based firms in the textile, electrical and electronics industries turned to production overseas to create export platforms, so overcoming quotas imposed by developed countries. This was later reinforced by the need to minimise mounting production costs.
The family-owned Esquel Group is a prime example. It operates 17 garment manufacturing plants in nine countries, including Malaysia, Mauritius, Sri Lanka and the Chinese mainland.
Other reasons for investing abroad were to secure supplies of essential raw materials and take advantage of the need by other developing countries for import substitution and services.
Investment in developed countries started in the 1970s and accelerated in the 1980s, initially as a way of acquiring advanced technology: Watch firms established subsidiaries in the US or Switzerland, while textile firms set up branches in the UK.
Cost effective production
"Many Hong Kong companies have prospered based largely on what can be termed 'resource-based' advantages," says Mr Richter, referring to access to low-cost raw materials and labour in nearby Chinese mainland. "A company that thrives because of low raw material costs can potentially export its product competitively. But it will have little to bring to an overseas market when it establishes a subsidiary there. With the opening of world markets and the continued globalisation of services, Hong Kong companies will perish if they do not have real global scale."
"All of the external investments, in my view, are a positive sign about the strength of Hong Kong's investors as sources of capital for investment," says Mr Meyer.
"These investments underscore Hong Kong's position as a centre of capital allocation and exchange in Asia and outside Asia. There are not enough possibilities for local investment in Hong Kong to meet the demand for investment options by Hong Kong's wealthy citizens and its successful firms. That is a sign of the strength of Hong Kong as a source of capital," he added.
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