Hong Kong-owned businesses face tougher mainland China market

Tougher market for city manufacturers amid credit crunch and slowing economy

PUBLISHED : Thursday, 04 July, 2013, 12:00am
UPDATED : Thursday, 04 July, 2013, 3:48am

Hong Kong manufacturers are facing a tougher market on the mainland because of a credit crunch and a slowing economy, the Chinese Manufacturers' Association (CMA) said yesterday.

There are more than 40,000 Hong Kong-owned factories operating in the Pearl River Delta region, with nearly 60 per cent selling their products on the mainland, according to a CMA survey that polled 266 member companies in March.

Only 14 per cent saw mainland sales grow in the first three months of the year, compared with 31 per cent a year ago. Thirty-three per cent expect increased mainland sales this year, compared with 38 per cent last year.

"For the near term, we are less positive about the domestic market as the tightening policy has hit consumption," CMA president Irons Sze said yesterday.

Danny Wan, who supplies water pipes to mainland property developers, said the credit period had recently lengthened to 90 days from 60 days because of the sluggish mainland property market and the credit crunch.

"It's very difficult for small to medium-sized companies to obtain financing from the mainland banks," Wan said. "They can borrow money from other institutions at higher cost."

The property market is a major driver for domestic consumption on the mainland.

Manufacturers were more positive about the export market than they were about domestic demand - reversing the previous situation - the survey found, with an uptick in demand from the United States gathering pace. Twenty-nine per cent of respondents forecast that export orders would increase this year, up from 21 per cent in the previous survey.

In the long run, Sze said, Hong Kong still needed to muscle into the mainland market. It was a long-term national policy to stimulate the mainland's economy through domestic consumptions, he added.

The mainland market was promising, he said, but also beset by problems, ranging from an unfair tax burden and weaker pricing to long payment periods.

On the other hand, upward pressure on costs for Hong Kong manufacturers had eased this year, with 82.6 per cent expecting costs to increase this year, down from 88 per cent last year.