Hong Kong Casts Wary Eye on China

HONG KONG—Even in a city filled with gleaming skyscrapers, stores of every kind packed with crowds of people buying goods and 15,000 factories nearby churning out even more products, the global economic crisis has begun to make its mark.

Long a symbol of financial health and prosperity, Hong Kong’s good fortunes intrinsically are tied to China’s, and companies on the mainland have started to falter.

At last count, 20 million people had lost their jobs in China because of the decrease in demand for consumer goods worldwide.

While it’s a drop in the bucket, compared with the sheer volume of factories still open and thriving, the slowdown in consumer spending also has created a ripple effect, albeit a small one so far, on two of the venues in Hong Kong that host mainly product-related tradeshows – the Hong Kong Convention and Exhibition Centre and AsiaWorld-Expo.

According to Raymond Yip, assistant executive director of the Hong Kong Trade Development Council, tradeshows in Hong Kong have a $26.4 billion annual impact on the city.

With 33 shows produced at the HKCEC, and even more on the mainland, Yip said China is an important business partner for the HKTDC, and the country’s health is crucial to continuing success in Hong Kong.

“If things are bad (in China), it will have an impact on us,” Yip added. “(The Chinese government) has a $570 billion plan to help stimulate the economy and to spur internal demand, which is good news for Hong Kong.”

So far, Yip said, there hasn’t been a large dip in attendees and exhibitors at any of the HKTDC’s shows at the HKCEC, but he also cautioned that tougher times could be on the horizon. “We haven’t seen the full impact yet,” he added.

According to Cliff Wallace, the HKCEC’s managing director, the center, with close to 900,000 square feet of rentable space, hosts more than 100 exhibitions annually, such as Cosmoprof Asia, the Hong Kong Electronics Fair and APLF – Materials Manufacturing and Technology, and the focus right now is on retaining business.

“Our interest is to help our existing business,” Wallace said. “We work in tandem with the organizers. We have a proven portfolio of 85 annual, recurrent shows. No other venue in the world has that.”

Most of the shows cater to the consumer goods market – jewelry, toys and cosmetics – which is heavily dependent on the factories in the Pearl River Delta, in which Hong Kong is located, and elsewhere in China. Wallace acknowledged Hong Kong isn’t immune to the economic downturn, but he said he remains optimistic about shows at the venue.

“The global economy is affecting every business in the world one way or another,” he added. “Despite the fact there is doom and gloom in Hong Kong, we are very fortunate. We are not being hit so hard in the overall economy, but if this thing lasts through 2009, there will be more problems.”

The stakes are even higher for the HKCEC, Wallace said, since it will open its second expansion, adding 320,000 sq. ft. to the center, in a few weeks.

“Here we are getting 40 percent more space in the middle of the economic downturn,” he added. “I hope (the downturn) will be a bump in the road.”

Allen Ha, AsiaWorld-Expo’s CEO, also has a lot of space to keep filled at the 700,000 sq. ft. center adjacent to the Hong Kong Intl. Airport on Lantau Island.

The convention center, a 23-minute train ride from the center of Hong Kong, opened in 2005 and hosts more than 40 tradeshows and conventions annually, including three editions of organizer CMP Asia’s jewelry shows, several of Global Sources’ sourcing fairs and events such as the AsiaWorld-Summit that drew 1,000 attendees in February.

Similar to the HKCEC, many of the tradeshows are product-related, and, according to Ha, one of the primary reasons the center has been successful so far is because of its perceived neutrality and the fact that it caters to businesses worldwide.

“We position ourselves as a neutral venue for buyers and sellers,” he added. “Most visitors who come here are from outside of Hong Kong.”

As an example, he pointed out that a sourcing company from India brought its show to AsiaWorld-Expo, not to sell to Hong Kong buyers, but to the United States, Europe and the Middle East.

With even more shows booked into the venue in the upcoming year, including Reed Exhibitions’ Asian Aerospace Intl. Expo & Congress, the state of the economy also is on Ha’s mind.

“We’ve seen slight drops at some of the shows,” he added. “We need to be very careful over the next two years. There are some who may cut their budget … and can’t afford to come here. I think the key right now is the quality of the shows.”

Some of the most successful shows at AsiaWorld-Expo, as well as the HKCEC, are held by CMP Asia, the largest non-governmental organizer in the region, according to Michael Duck, the company’s senior vice president.

CMP Asia hosts more than 100 shows in the Asia-Pacific region, with three major groups in Hong Kong – jewelry, cosmetics and raw materials and manufacturing of fashion products and accessories.

“Hong Kong is very business-friendly, with no sales taxes, few visa restrictions and low income and business taxes,” Duck said. “It’s very much a free business port.”

He, too, is realistic about the economy and said, while there might be slight decreases in numbers at some of the company’s portfolio of shows, there still will be buying on the showfloor.

“One of the good things we are seeing as a trend is people are still coming to definitive events,” Duck said. “We will still get the most important buyers who may not do shows in other regions.”

Around the same time as CMP Asia’s recent Asia’s Fashion Jewelry & Accessories Fair at the AsiaWorld-Expo and the HKTDC’s Hong Kong Intl. Jewellry Show at the HKCEC, for example, there are several competing jewelry tradeshows in other countries in the region, such as Bangkok, Thailand.

“(These) shows can be an irritant for an organizer,” Duck said. “It’s the feeder shows that are going to be affected when people decide not to go to them.”

For now, he added, if there’s any question as to the health of CMP Asia’s portfolio, one only has to look at United Business Media, its parent company, which recently posted its preliminary earnings results for 2008.

Last year, the company saw a nearly 9-percent revenue increase in its events division, from £244.8 million ($338.2 million) in 2007 to £291.8 million ($403.2 million) this year.

A lot of that success, Duck said, is because of the Hong Kong shows. “(It’s) a perfect place to do business,” he added. “It brings countries from all over the world to a neutral platform.”