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  • Dec 20, 2014
  • Updated: 9:42am
Mr. Shangkong
PUBLISHED : Monday, 28 October, 2013, 4:32am
UPDATED : Monday, 28 October, 2013, 7:53am

Chong Hing sale sounds alarm bells for Hong Kong's small businesses

While it may make financial sense, the bank deal has made Hongkongers ponder the fate of home-grown businesses trying to stay afloat in the city


George Chen is the Financial Editor and Mr. Shangkong Columnist at the South China Morning Post. George has covered China's political and economic changes since 2002. George is the author of two books -- This is Hong Kong I Know (2014) and Foreign Banks in China (2011). George has been named a 2014 Yale World Fellow. More about George: www.mrshangkong.com

The sale of Chong Hing Bank, one of the four remaining family-owned banks in Hong Kong, may be good news for its shareholders who can cash out at a high premium, but it is sad news to many Hongkongers when we try to find a way for the city's small businesses to prosper.

Chong Hing has been a witness of Hong Kong's ups and downs since it was founded in 1948.

In more recent years, the main reason its business kept growing was its loyal customers, including many local small and medium-sized businesses that have been growing with the bank for the past six decades.

Many of those customers were also old friends of the Liu family, which controlled the bank until last week when it agreed to sell to Yue Xiu, an investment arm of the Guangzhou government for HK$11.6 billion.

If we look at the deal purely from a financial perspective, it does make a lot of sense to both the Liu family and the new owner, which is already an experienced mainland institutional investor active in real estate and capital markets.

Many banking industry analysts described the deal as a "win-win" because they were previously worried how long small family banks such as Chong Hing could survive amid the fast-rising competition in Hong Kong's banking business.

In 2008, Shenzhen's China Merchants Bank, acquired Wing Lung Bank from the Wu family.

At least Merchants Bank is now a more familiar banking brand in Hong Kong after the acquisition.

Financially speaking, you can definitely call the deal a "win-win" and I am sure the Chong Hing-Yue Xiu deal will be just another "win-win".

But emotionally speaking, the sale has made many Hong Kong people ponder the fate of the city's home-grown businesses that are now in a "small" shape, particularly when compared with giant rivals from the north or around the world.

Last weekend, I met a retired teacher at lunch and she was well informed about the Chong Hing sale.

"It must be very, very hard for the Liu family that set up the bank from almost nothing in the late 1940s," she said. "That was a very difficult time for Hong Kong and they still made it.

"And now it is just sold that easily when Hong Kong is definitely not in as much difficulties as it was in the 1940s or 1950s."

I ask myself why. Financially, I do have a very clear answer. Emotionally, the answer is much more mixed.

There are of course still some local businesses that are fighting very hard to survive. When was your last visit to a Sincere department store?

A lot of Shanghai people still have fond memories of Sincere, which used to be one of the so-called "Big Four companies" in the city before the civil war. Now its business has slowed down quickly and instead you see more global luxury labels and stores coming to occupy the city.

But Sincere is set to open a new store in Causeway Bay, right across the street from Japan's Uniqlo, already a global retail giant.

If Sincere can survive, what about other local small banks? If not, then what on earth is wrong with Hong Kong?


George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit facebook.com/mrshangkong


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This article is now closed to comments

Far too simplistic. It is questionable whether HK brands would want to be recognised as 'Chinese' brands. Firms have a profit motive and a 'brand name' signifies a guaranteed standard. Only the blindest patriot, those with no contact with the outside world or shoe shiners would argue that being identified as a 'Chinese' brand is good for business.
Since the opening up of China Hong Kong firms have taken advantage of cheaper labour and land to build their businesses. Many companies throughout the world have done so, but they do not clamour to be a Chinese brand nor do they need to do so in order to sell their product/service nationally. For evidence of mainlanders demand for HK/International brands look outside any LV shop or queue up with other parents for a seat in a HK kindergarten.
Really, do we need to buy you a supply of shoe polish for xmas?
From my little French village, I cannot help worrying about the damages the US bad debts and the US dollar as an international currency are doing to the world, to Europe and Hong Kong alike .
The Hong Kong dollar is pegged to the US dollar but the US dollar is dying out of the growing international lack of confidence towards the refunding of the American himalayas of bad debts while the Chinese mainland yuan/renminbi is bound to skyrocket.
Whereas a collapsing Hong Kong dollar may make a few big Hong Kong and mainland Chinese exporters very happy for boosting their exports, it will soon be tragic for the gigantic inflation it generates in Hong Kong . As Hong Kong's food and everyday goods are mostly imported from the yuan currencied mainland , most of Hong Kong families could be starving by 2014 if the Hong Kong authorities do not react very soon by pegging the Hong Kong dollar to the yuan or by adopting the yuan as Hong Kong's one and only currency .
And what if the US dollar collapses to be worth next to nothing by the next debt limit ?
I would like to know your opinion about it .
I'm afraid this topic is taboo on SCMP. It is not a Hong Kong paper in the truest sense of the word, it is a paper designed to forward the interests of the ASEAN and the Commonwealth in East Asia (i.e. PRC, ROC, The Koreas, Mongolia and Japan) with the possible intention to stoke up a doomed-to-fail "Arab Spring". The people of Hong Kong have their own papers.
Stay in your village. You will be okay if you are self-sufficient and grow your own food.
Which HK brand can or will grow into a Chinese brand? As long as HK is treated like a separate country, not just a separate system, local businesses have limited opportunities for growth in national markets.


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