Help Hong Kong businesses weather US-China trade war with quicker free-trade deals, government urged

Chairman of one of the biggest local business chambers, who recently visited Washington with government delegation, says city ‘already trapped in the middle’

PUBLISHED : Thursday, 04 October, 2018, 9:35am
UPDATED : Friday, 05 October, 2018, 5:31pm

Hong Kong businesses badly need new markets as the China-US trade war rages on, a business leader has said, urging the government to help them export.

Jimmy Kwok Chun-wah, chairman of one of the city’s largest business chambers, the Federation of Hong Kong Industries, said officials should speed up work on free-trade deals with other countries.

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Since firing the first shot in the trade war in July with a series of tariffs, the United States has slapped 10 per cent tariffs on US$200 billion worth of Chinese products. China hit back with a 5 per cent to 10 per cent levy on US$60 billion worth of American goods.

Almost half of the Chinese goods shipped via Hong Kong to the US will be affected by the tariffs, according to commerce minister Edward Yau Tang-wah. The US is Hong Kong’s second-largest trade partner.

Trade war aside, Asian manufacturers could find it harder to sell their products in American markets after the US, Mexico and Canada signed a new trade deal on Monday.

“The government should accelerate trade talks or enter interim arrangements for individual sectors to help ease the Hong Kong business sector’s woes,” Kwok said. “[US President Donald] Trump may change his tactics on China at any time, and Hong Kong is already trapped in the middle.”

Kwok, who travelled with Yau last week to Washington in a business delegation sent partly to lobby US officials over the trade war, said: “We expressed clearly to US counterparts that no Hong Kong manufacturers operating in China are able to absorb or share any of the tariffs.”

Yau met US Secretary of Commerce Wilbur Ross and other administration officials to discuss the trade war’s collateral damage, and promote business ties with the US.

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Kwok said Hong Kong entrepreneurs operating in mainland China could consider circumventing the tariffs by setting up a factory in an industrial estate run by state-owned enterprises along the “Belt and Road Initiative” countries such as Cambodia, Myanmar and Laos. The initiative is China’s signature global trade push.

Kwok said the entrepreneurs could export materials from their mainland factories to the new factories in these countries for assembly, and process products for shipment to the US or other markets.

“These new factories can make good use of the supply chain services already put in place by state-owned enterprises,” he said. “For example, if logistics services are unavailable, this will not work.”

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A government source said free-trade agreements were among key ways the administration was expanding the reach of Hong Kong businesses, together with creating more offshore trade liaison offices.

In her policy address on October 10, chambers expected Chief Executive Carrie Lam Cheng Yuet-ngor to shore up Hong Kong businesses with relief for companies reeling from the trade war and fresh measures on IT development.

How will Hong Kong be affected by the US-China trade war?

Hong Kong has signed seven free-trade agreements, the latest with Georgia in June. Others included the deal with the 10-strong Association of Southeast Asian Nations, mainland China and New Zealand.

Negotiations on a deal with Australia officially started in May last year.

Chinese Manufacturers’ Association president Dennis Ng Wang-pun said Hong Kong could consider bringing back some high-end manufacturing, such as jewellery polishing and design, and precision clocks and watches.