Imports and Exports

Hong Kong is the world's 10th largest trading economy. In 2002, Hong Kong's total exports amounted to US$200 billion, 122% of the GDP. In the latter half of 2002, a robust growth of 12 per cent was recorded. Within the total exports, Hong Kong's domestic exports nevertheless fell by 14.7 per cent in 2002 amid acceleration in relocation of Hong Kong production to the Chinese mainland. On the other hand, driven by the fast-growing intra-Asia trade of raw materials and semi-manufactures, re-exports increased by 7.7% in 2002, indicative of the central role of Hong Kong in sourcing and coordinating production in the region.

However, due to the World Health Organisation's (WHO) travel advisory against Hong Kong, trade shows and conferences - vehicles for international trade, were either delayed or cancelled. Hong Kong Trade Development Council (HKTDC) had to consolidate its three trade fairs for gifts, houseware and product licensing into two sessions from April 28 to May 1 and July 23 to 25, respectively.

On 2 April 2003, the Swiss government banned Hong Kong exhibitors from attending the Basel World Watch and Jewellery Show because of SARS, at the end, about 300 Hong Kong exhibitors pulled out of the trade show. The Federation of Hong Kong Watch Trade & Industries chairman Carollio Chow estimated that Hong Kong's 160 exporting watch and jewellery firms would loose 30 per cent of annual orders as a result of not attending the show. Buyers might place orders with Hong Kong's competitors, including businesses in Thailand and India.

On 8 May 2003, 40 exhibitors decided to pull out of the JCK Jewellery Fair to be held 30 May-3 June 2003 in Las Vegas because they were not allowed in the main hall. On 14 May 2003, the US organiser reversed the decision to ban them from attending. More than 100 Hong Kong jewellers were prepared to take part in the show again. It was estimated that a withdrawal from the show would incur an estimated loss of orders worth up to HK$ 3 billion.

Although Hong Kong exports jumped 15.4 per cent in March 2003 from the same period last year as global demand for goods made on the mainland stayed strong and preparations for the Iraqi war apparently boosted overseas orders, economists were cautious over prospects for the second half, because autumn shipments were based on orders made in April-May.

SARS' Impact on Imports & Exports

It appears that SARS outbreak in mid-March has not inflicted an uniformed impact on all manufacturers and exporters. By and large, well-established and large manufacturers are in a better position to weather the storm because of the diversified production locations and ability to use alternative methods to maintain communication with overseas buyers. Capital-intensive high-technology firms reliant on one or two main production facilities were more susceptible to a virus-related disruption. Also, for most of the Small and Medium Enterprises (SMEs) that are already running on a tight budget are in a very risky position and the delay in order placement could be the final straw that breaks their back.

With manufacturing facilities relocated in the mainland, the impact to Hong Kong also depends on the SARS situation in China:

1. Extra resources are needed to manage factory workers for prevention of infection.
2. Confusing and constantly changing directives from provincial and city government officials made it difficult for factory owners to follow.
3. The restrictions and quarantine requirements of mainland Chinese government prohibited Hong Kong people to travel to the mainland to monitor the operation of the factories.
4. Rumours of virus' survival on object surface for days concerned overseas buyers and led to additional costs for tightened hygiene requirements on goods.
5. The travel advisory and quarantine requirements by the mainland have forced material sourcing and order placing to be put on hold.
6. Small manufacturers are in more serious situation because they had been hit by the economic recession in Hong Kong, the retail downturn, the Iraqi war, and the weak economic conditions in Europe and in the States. SARS was like putting frost on the snow. Some of them may not be able to survive for much longer.
   

Positive Outcomes of the SARS Crisis

1. For most of manufacturers SARS proved that Hong Kong and China's combined position as the world's factory has not been wavered under the crisis. The products are of high quality and low cost, SARS had no affected repeat orders.
2. A lot of large manufacturers have used tele-conferencing during the travel disruption. Smaller enterprises could not afford to do so but with the help of email, telephone, courier service, digital photos, and the Internet, they could still conduct business with foreigners.
3. Hong Kong people demonstrated versatility. Production process was modified to produce healthcare, hygiene products in response to market demand.
4. According to Textile Council, there was increase communication amongst members especially regarding the new guidelines/rules announcement in China.
5. Manufacturers in the PRD may relocate some of their operations back to Hong Kong because of a central government ban on recruitment fairs and other large gathering. Yet, this will only be a fallback facility since the workers in Dongguan were paid an average monthly salary of only 600 yuan (HK$564).
6. Medical supply companies are reporting a boom in business, in particular the firms which sell surgical masks and gowns. One businessman who has capitalised on the situation has raked in a massive HK$1 million profit in just three weeks by selling masks.

Actions

1. Some of the manufacturers who are SMEs have already formed alliances among themselves in order to act as back-up production resources for each other.
2. Since WHO's travel advisory was lifted, garment manufacturers have been trying to catch up with the lost opportunities in March and April. Factories became more flexible in taking orders, even though that means smaller quantities per order, thinner profit margin and shorter delivery time.
3. Jewellery manufacturers are organising an independent exhibition near Basel in 3rd quarter this year to make up for the lost in Basel in April.

Last Modified Date : Tuesday, January 27, 2004 5:09:48 PM

Sources of information:

1. Interview with Mr. Michael Leung, Executive Director, Textile Council of Hong Kong. 14 May 2003.
2. Interview with Mr. Paul Yin, Vice President, The Chinese Manufacturers' Association. 14 May 2003.
3. Hong Kong Trade Development Council
   
4. South China Morning Post