ORACLE We Lead You There - 1 - World SME Expo 2004 - - On-Site Survey of Mainland Enterprises Hong...

ORACLEORACLEWe Lead You ThereWe Lead You There

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World SME Expo 2004

- On-Site Survey of Mainland Enterprises

Hong Kong Trade Development Council

November 2004

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Date of Survey : November 16, 2004

Target : 267 representatives from Chinese mainland enterprises

Format : Face-to-face interview at the Expo venue

Methodology

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Southern China57%

%Distribution of Enterprises by RegionDistribution of Enterprises by Region

57

27

16

482

7

854316

63115

Southern China

GuangdongHainanFujian*Others

Northeastern China & others

HunanShandongLiaoningChongqingJilinOthers

Eastern and Northern China

Shanghai ZhejiangBeijingJiangsuOthers

Eastern and Northern China

16%

Northeastern China and

Others27%

Visitor Profile (I)

Distribution of Enterprises by CityDistribution of Enterprises by City

Respondents: 267 visitors

Q2

*

* < 0.5%

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Others1%

Nature of EnterpriseNature of Enterprise

Private72%

Manufacturer49%

Nature of BusinessNature of Business

Importer / Exporter

15%Wholesaler

9%Property

Developer5%

Retailer4%

Visitor Profile (II)Q3, Q4

Others 3%

Joint stock14%

State-owned10%

Collectively-owned

3%

Legal Service4%

Investment & Finance3%

Social Service5%

Commission Agent3%

Majority in following Sectors- Electronics, Technology products & accessories- Ceramics and arts and crafts- Metal products & decorations

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18

10

23

19

26Less than Rmb 5 million

Rmb 5 million to less than Rmb 10 million

Rmb 10 million to less than Rmb 50 million

Rmb 50 million to less than Rmb 100 millon

Rmb 100 million or above

%

Q25

Business Turnover of Surveyed Mainland Enterprises in 2003


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Aware55%

NotAware45%

Q17

Awareness of Facilitation Measures for Mainland Enterprises to Invest in Hong Kong


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68

64

39

19

48

37

11

4

Expand overseas markets

Increase domestic sales and expand market shares

Increase product / service competitiveness

Strengthen internal management capability

%

Q6

Future Development Goals of Mainland Enterprises

First Priority Second Priority

20

27

28

15


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3

12

12

13

18

27

31

33

43Insufficient fund for development

Shortage of talents

Restricted access to market information

Restricted access to overseas market sales network and channels

Inadequate product development capability

Internal management failing to cope with business expansion

Insufficient corporate and product advertising and promotion

Ineffective communication with overseas clients or vendors

Logistics and transport services failing to cope with day-to-dayImport / export needs

%

Q8

Difficulties / Hurdles of Mainland Enterprises in Business Development Process


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63

55

22

21

2

32

34

10

12

Project Finance

Bank Loan

Listing in Mainland Stock Market

Listing Offshore

Bond Issuance

%

Q7

Mainland Enterprises’ Most Sought-after Funding Channels


First Priority Second Priority

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Usage of and Demand for Services Offered by Hong Kong / Hong Kong Companies in the Mainland

90

29

Used before Intend to use in future

%

%Loan or financing 36Marketing and promotion 30Personnel training 19Overseas market research 19 and analysisBusiness partner / agent 18Management consulting 17Legal issues and advisory 15 service

%Loan or financing 36Marketing and promotion 30Personnel training 19Overseas market research 19 and analysisBusiness partner / agent 18Management consulting 17Legal issues and advisory 15 service

Services demanded


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Anticipated Business Operation of Mainland Enterprises in Hong Kong

Without any business operation / presence

63%

With office / branch / agent /

business partner37%

Current Status of Mainland Enterprises’ Business Operations in Hong Kong Q13, Q14

Respondents: Representatives of 169 surveyed mainland enterprises which currently do not have any business operation/presence in Hong Kong

With plans to set up office / branch or seek agent / business partner in HK over the next 1-2

years62%

No plans to set up office or seek agent / business partner in HK in the short term

38%

Current Status of Mainland Enterprises’ Business Operations in Hong Kong

Current Status of Mainland Enterprises’ Business Operations in Hong Kong


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10

10

11

26

28

37

48Explore overseas markets and establish sales

network

Explore Hong Kong market

Seek offshore investment and business partners

Gather market information

Product R & D

Establish supplier network and product sourcing

Raise working capital or seek listing

%

Q14, Q15

Mainland Enterprises’ Expectations of the Functions of Hong Kong Branch / Partner

Respondents: Representatives of the 105 surveyed mainland enterprises with plans to set up office / branch or seek agent / business partner in Hong Kong

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9

14

15

21

30

44High operating costs in Hong Kong

Lack of understanding and information about setting up offices in Hong Kong

Restrictions imposed by Hong Kong on the entry, residence and work of mainlanders

Mainland authorities’ complex approval procedures for offshore investments

Lack of resources on the part of enterprises

Stringent foreign exchange control on mainland enterprises investing offshore

%

Q16

Biggest Hurdles Facing Mainland Enterprises Wishing to Invest and Set up Offices in Hong Kong


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17

26

27

34

49Business development support offered by Hong Kong to mainland enterprises in the areas of market development, capital and management, as well as information on relevant service providers

Legal protection for mainland enterprises investing in Hong Kong

Operating costs in Hong Kong, such as salary, rental and professional service fees

Procedures and capital requirement for mainland enterprises to set up companies in Hong Kong

Restrictions on the entry, residence and work of management and other staff of mainland enterprises in Hong Kong

%

Q19

Information/Assistance Most Needed by Mainland Enterprises Wishing to Set up in Hong Kong


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Mayincrease

13%

Willincrease

65%

Will notincrease

22%

Q18a, b

Factors encouraging mainland enterprises to invest or discouraging mainland enterprises from investing in Hong Kong

%Hong Kong’s high operating costs 55Mainland approval procedures 18Foreign exchange control 13Entry and residence issues 11Limited market demand 3

Respondents: Representatives of the 94 surveyed enterprises which may or may not set up office / business in Hong Kong

Mainland Enterprises’ Intention to Invest in Hong Kong Following the Simplification of Approval Procedures


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Characteristics of Guangdong Enterprises

Guangdong Enterprises

Higher awareness about the simplification of approval 63% > 47%procedures for mainland enterprises investing in Hong Kong

More interested in exploring overseas markets 75% > 65%

More enterprises have set up office / branch or 52% > 23%appointed agent / business partner

Non-Guangdong Enterprises

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Characteristics of Non-Guangdong Enterprises

Guangdong Enterprises

Higher average business turnover Rmb33.8 million < Rmb 46.86 million

Greater need for development capital- More enterprises consider capital shortage as a hurdle in 29% < 56% the process of business development

Interested in project finance as a means of funding 55% < 71%

Interested in making use of Hong Kong financing services 27% < 45%

More enterprises consider the lack of understanding and 21% < 38%information on setting up in Hong Kong a hurdle in investingin Hong Kong

Non-Guangdong Enterprises


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SummarySummary

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Summary - I

Development of Mainland Enterprises

70% of the mainland enterprises consider expansion into overseas market as their top priority development goal. Guangdong enterprises are especially keen in this respect compared to other parts of the country. Expanding sales and market share in the domestic market is also a major development target of mainland enterprises.

Mainland enterprises encounter various difficulties and hurdles in their business development process. Over 40% of them are faced with capital shortage. The situation of non-Guangdong enterprises is worse than that of their Guangdong counterparts. Other hurdles include the shortage of talents and limited access to market information.

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Summary – II

Over 60% of the surveyed mainland enterprises which do not have a business presence in Hong Kong indicate they intend to set up an office or appoint business agents in Hong Kong over the next one to two years. Most of them expect their Hong Kong business partners will help them establish sale networks in overseas and Hong Kong markets.

Usage of the services of Hong Kong companies by mainland enterprises will increase. Currently, less than 30% of the surveyed mainland enterprises have used Hong Kong services. However, the vast majority (90%) of them indicate that they would use the services offered by Hong Kong companies in the mainland in future. Services that are most sought after include financing, marketing and promotion.

Development of Mainland Enterprises in Hong Kong

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Summary – III

About two-thirds of the mainland enterprises indicate that they are more interested in investing in Hong Kong following the simplification of approval procedures. The relatively high operating costs continues to be the main reason for not setting up in Hong Kong.

Simplified Approval Procedures for Mainland Enterprises Investing in Hong Kong


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