Pining for a golden era of business opportunities

PUBLISHED : Friday, 29 June, 2012, 12:00am
UPDATED : Friday, 29 June, 2012, 12:00am


The Asian financial crisis, the Sars outbreak - for many Hongkongers the period from 1997 to 2003 is a long, bad memory. But for Peter Chai Kwong-Wah, those were the good years.

One of the many Hongkongers who live in Guangdong, Chai and his wife left their children behind in Hong Kong in 1993 and moved to Henggang, Shenzhen, where they had no friends or relatives.

They set up a company, Milliard Toys Manufacturing, which made Hello Kitty products for Japan and Disney dolls and animals for the US and Europe - and turned Chai and his wife into multimillionaires.

Chai, 63, calls Hongkongers of his kind and age group the 'golden generation' - a lucky minority who escaped the ups and downs of post-handover Hong Kong by making their living on the mainland. Almost all that time, he says, he enjoyed not only a wild and profitable ride in China - on the back of its low costs and insatiable overseas demand - but also the chance to commute back to Hong Kong.

When Chai first arrived in Longgang in 1993 as the owner of a small factory in Kowloon intent on expanding, the land where his factories now sit was farmland. Labour and raw materials were dirt cheap. Government officials from all levels were happy to help Hong Kong-invested factories.

'At that time, the local authorities offered three years tax-free and two years tax reduced by half,' he says from his office in Kowloon Bay. 'We only needed to pay the government 100 yuan for each square metre of land for 30 years. Local workers' wages were only 200 yuan a month, while skilled Hong Kong workers got over HK$8,000. Gross profit could be up to 40 per cent, and a middle-scale Hong Kong-invested factory with a few hundred workers could see over 10 million yuan of net profit in a single year.'

Business grew quickly. 'I started my business in 1984 in Lam Hing Street in Kowloon Bay, and by 1993 I still had only a small factory of about 100 workers,' Chai says. 'Moving north gave me the biggest chance in my life. Within about five years I expanded my Shenzhen factory to about 10,000 full-time and part-time workers.'

As the handover approached in 1997, Chai grew scared for Hong Kong's future and, like so many city residents, he took his family to Canada. But he and his wife soon returned, leaving their children to grow up in North America. He came back because he 'found the Hong Kong handover had little effect on our business on the mainland'. 'Most Hong Kong manufacturers' profits peaked between 1996 and 1998, a really splendid period,' he says.

The Asian financial crisis of 1997 and 1998 was barely a hiccup for Chai. As orders shifted away from Hong Kong, they went to the factories of Hong Kong manufacturers who had relocated to Guangdong as a production base for goods for export.

By 2002, over 63,000 Hong Kong manufacturers had set up factories on the mainland, employing more than 11 million workers, according to the Federation of Hong Kong Industries. Hong Kong's advantages remained valuable for the mainland market until the mid-2000s. Many mainland cities, particularly in the Pearl River Delta, were eager to build better relationships with Hong Kong and learn from its government.

The period between 2000 and 2005 was smooth and steady for his career. 'Sars in 2003 was scary, but our manufacturing base in the delta was unaffected and goods continued to be exported through Hong Kong at the normal rate,' Chai says.

The Closer Economic Partnership Arrangement (Cepa) was a gift to recession-hit Hong Kong when it came in 2004. But while the pact aided the finance and service industries, Chai says: 'I don't think Cepa helped little Hong Kong manufacturers and grassroots Hongkongers.'

In 2005 and 2006, Chai began to sense that Hong Kong's importance to the mainland was dimming. 'For example, the Shenzhen government no longer praised Hong Kong manufacturing factories of our kind - labour-intensive but with no high-added-value products,' he says. In the 1980s and 1990s, senior Shenzhen government officials come out to celebrate each opening of a Hong Kong-invested plant. But a decade after the handover, thriving cities like Guangzhou and Shenzhen were no longer basing their economies on Hong Kong's. Guangzhou thrived on its booming car industry, thanks to joint ventures with Japanese carmakers. Shenzhen had a successful hi-tech industry, led by home-grown companies such as Huawei and ZTE.

Now conditions are only worsening for Hongkongers who moved their businesses north: labour shortages, stricter labour laws, rising inflation, higher costs of raw materials, and the plunge in overseas orders caused by the global financial crisis.

'In Shenzhen, a migrant worker costs over 3,000 yuan a month, three times higher than two or three years ago. But the price of a toy, a skirt or other clothing to export overseas has remained almost the same over the past 20 years,' Chai says.

'In 2007 the net profit in the industry was about 3 per cent. I thought that was the worst moment. Now, it has dropped to even less than 2 per cent. I see no hope for the factory. I think we will only see more factories closing in Shenzhen and moving away.'

Growing reflective, Chai says: 'I and Hongkongers of my generation were lucky to have the golden years. Two decades or even one decade ago, a diligent Hong Kong man could definitely build up his career.

'At that time we worked around the clock but we were happy and full of hope. Now that I am going to retire and return to Hong Kong, I find the community full of complaints and resentment. Many young people prefer to stay in Hong Kong despite being jobless, rather than trying hard to chase the dream.'

Those golden days, he says, are over.

'Now is the darkest time for Hong Kong firms to make money on the mainland since the handover,' Chai says. 'I really miss the time between 1994 and 2000.'