Hong Kong exporters should explore relocating some production outside the Pearl River Delta and even outside of China to mitigate soaring production costs on the mainland, a leading Hong Kong economist said last week.
“More important, they should upgrade their production structure, shifting from simple processing to high value-added activities and high technology,” said Edward Leung, chief economist with the Hong Kong Trade Development Council.
Leung warned exporters will have to contend with demand for lower prices from the West even as an ascendant Renminbi, skyrocketing labor costs and rising commodity costs continue to increase manufacturing costs inside China.
Leung made his comments while unveiling “Hong Kong Export Outlook for 2011,” which forecast growth of Hong Kong’s exports would slow to 8% next year as the global economic recovery and demand for electronics slowed. The report is based in part on the HKTDC’s Export Index, which showed that Hong Kong exporters expect shipments to the U.S. and Europe to be flat in the near term. Exporters’ outlook improved for China and India and commodity exporting nations such as Chile, Brazil, Russia as well as oil exporters in the Middle East, which will benefit from sustained growth in developing Asia.
Leung said the inventory-rebuilding cycle had nearly run its course in Europe and North America, where consumers would remain focused on paying down debt. He advised HK companies to shift their focus toward meeting China’s growing demand for consumer products.
“Mainland initiatives to encourage income redistribution and consumption, coupled with efforts to transform and upgrade industry structure, will spawn huge demand for consumer goods, as well as technology, including green technology, which may not be available on the mainland,” said Leung.
