Hong Kong must embrace digitally-enabled trade to tap belt and road opportunities
The global shift to digitally-enabled trade presents a great opportunity for Greater China management teams
Hong Kong has long been one of the key conduits for trade between China and the rest of the world. And although its role as the hub for manufacturing trade may be waning as the growth of global trade in goods slows, that doesn’t mean there isn’t room for reinvention.
The “Belt and Road Initiative” obliquely refers to the historic, often romanticised Silk Road, which put China at the centre of trade. This new route once again puts Greater China at the epicentre of connectivity between more than 60 countries from Asia to Europe via Southeast Asia, South Asia, Central Asia, West Asia and the Middle East. As the Hong Kong Trade Development Council notes, “Hong Kong is the perfect launch pad to assess feasibility, potential and risk of Belt and Road projects”.
The image of camels crossing a desert or ancient wooden sailing ships spring to mind when one thinks of the Silk Road – and if you think of the belt and road without including digital solutions, then you’re planning is nearly as archaic as those camels and wooden ships.
The share of global service trade in industries such as banking, media, and consulting grew from 42 per cent in 2001 to nearly 50 per cent in 2015. But trade in services has yet to take off in Asia. In the past 15 years, the share of services trade as a percentage of total trade hovered around 39 per cent in Asia. In China, this percentage was even lower – 31 per cent.
Think of how Chinese payment companies are expanding their mobile payment offerings to Southeast Asia, Europe, and North America. In additive manufacturing, Matsuura Machinery and KoiWai Co, two Japanese companies, are delivering their world-class 3D printers and systems to Germany and India. Digital solutions can transcend borders; they can help grow businesses quickly without the need for bricks and mortar. And they are the ultimate disruptors of industry.
Keep in mind that it’s a two-way road. Greater China business leaders shouldn’t just consider what they can export but also what they can import. Health care is a prime example where importing solutions may be a growth market. Asia’s ageing population, large geography and fast per capita income growth have led to a strong local demand for better health care services provided by doctors from more advanced regions. Aware of the opportunity, an American hospital in Kansas now uses a cloud-based platform for medical image sharing to provide imaging consultation services for a Chinese hospital in Guangdong Province. In a time before digital, such a partnership would have been unimaginable.
But these days, thanks to digital, small and medium-size enterprises (SMEs), the backbone of many Asian economies, can reach international markets right out of the starting gate. For example, Musical.ly, a social networking app for music videos built by a Shanghai-based startup, targeted the US teenage market from day one. Now it is one of the most fashionable apps among Western youngsters in more than 30 countries.
The potential for new business growth is real – but it will take proactive thinking. Managers who are looking to lead their companies into new international markets should fully embrace digital technologies, forge the right partnerships, and stay alert for possible digital disruptions along supply chains.
Gianfranco Casati is Accenture’s group chief executive for growth markets and Leo Ng is managing director of Accenture’s Hong Kong office