It's all about money

DEMAND AND SUPPLY

It's all about money

By Boo Chanco

Hong Kong – There are good reasons why I had not been to this former British crown colony for years. For one thing, the air here is as polluted or more so than Manila’s. And since China opened up to the world, visiting Chinese cities seemed a lot more interesting and fulfilling. There was a time when Hong Kong was all that plus being affordable. It was a shopping heaven where getting bargains was half the fun even if it meant exchanging insults with the Cantonese shopkeepers in languages neither of you understood. It isn’t any more.

Lately, the only reason to fly to Hong Kong is to eat. But even that is becoming less of a valid excuse. More and more local restaurants are bringing Hong Kong chefs to Manila offering worthy Chinese cuisine. Still, with all the tempting cut throat fares and hotel packages, Hong Kong is too close, too convenient not to visit now and then even for no good reason.

When Hong Kong was turned over to China, a lot of people wondered if its importance will eventually wane and Shanghai will take its place as the most important city for anyone who wants to tap the China market. Well, it’s almost 15 years since Chinese sovereignty was restored to Hong Kong and it seems Deng Xiaoping’s One Country, Two Systems principle is working. The same principle has apparently worked to make Hong Kong and Shanghai more complementary than competitive.

There is no doubt mainland officials want to turn Shanghai into an international financial center. One report says they target accomplishing that goal by 2020. Even if Hong Kong is now part of China, it seems making Shanghai unquestionably pre-eminent is a matter of national pride. As one official puts it, Shanghai’s emergence would reflect “China’s economic strength.” Hong Kong will always be the former British colony.

And Shanghai has not disappointed Beijing. It has become an international center that has indeed rivaled Hong Kong. The World Expo 2010 Shanghai was a lavish coming out party for the Chinese metropolis as it was for China. One can appreciate Shanghai’s dramatic transformation if you were there at its moment of creation, so to speak, as Filipino entrepreneur Carlos Chan was. He told me that when China was just opening up to the world, he was there to see there was nothing much in Pudong, the area across the river from old Shanghai. Now, well… Pudong is as world class as it gets.

A great financial center is however, not just about glitzy skyscrapers and iconic landmarks. It is also about talented manpower. And Shanghai is luring top talent. Its stock exchange is carefully watched by international financial analysts. Observers note that Shanghai has accumulated nearly all of the ingredients needed to be an international financial center. “They have a big hinterland, a lot of small to medium sized companies growing at a rapid pace, excellent initial public offering candidates and a swelling middle class that is likely to be future shareholders.”

Thus, there had been a raging debate in Hong Kong over whether China can successfully have two international financial centers and more importantly – whether Hong Kong can survive Shanghai’s competition. Will Shanghai eventually deal “a devastating blow” to Hong Kong?

Or maybe as another observer puts it, Shanghai’s ascendancy may not necessarily be bad for Hong Kong. “I believe we’re looking at a cake that is going to become much bigger in terms of the development of the Chinese economy,” he says. “It’s just a different share of a bigger cake.” While Shanghai is likely to woo mainland manufacturing and port companies for listing on its exchange, experts predict that Hong Kong will get the wealth management business and multinational firms wanting to tap into the strength of the Pearl RiverDelta region. The development of Shanghai as an international finance center doesn’t have to be a “zero-sum game” for Hong Kong.

An article in the magazine of the HongKong Institute of CPAs noted that “Hong Kong’s sophisticated wealth management industry will boom in the coming decade, as a growing number of wealthy mainlanders look for reliable private banking services… Just as people elsewhere have a Swiss bank account, people in China will have a Hong Kong account…”

But there are problems. Deng’s One Country, Two Systems may be working fine, but at the ground level, animosities emerge in daily interactions among people. The Economist reports that “In the past two months Hong Kong has seen a spate of related protests: one against the thousands of expectant mothers who pour in from the mainland to give birth in local hospitals; another involving a march against Dolce & Gabbana, a prominent Italian retailer, when it was thought to be favoring shoppers from the mainland.”

The Economist continues: “On February 1st another group took out a full-page advertisement in a Hong Kong newspaper complaining about mainland ‘locusts’ swarming into the territory; it called for the government to stop the ‘infiltration’… Though Hong Kong reverted to Chinese sovereignty in 1997, a border still runs between the territory and mainland China, and access from the mainland is restricted. The Hong Kongers’ broad complaint is long-standing: they see hordes of mainlanders putting a strain on public resources. Mainlanders, in turn, feel that Hong Kongers are arrogant and disloyal to the motherland.”

But, The Economist observed, despite these irritants, “What has changed drastically in the past few years is that the old fear of poor mainland Chinese swamping Hong Kong has been washed away by floods of rich mainland shoppers. Where once Hong Kongers disdained their countrymen from the mainland as Ah Chan, the derisory term for a bumpkin, they are now more likely to hear themselves disparaged as Kong Chan, Hong Kong bumpkins, by mainlanders flush with cash.”

Indeed, Hong Kong shopkeepers have a lot to thank mainlanders for. Over half of the historic high of almost 42 million tourists that visited Hong Kong last year came from mainland China – all 28.1 million of them. Total tourism receipts will also likely surpass HK$250 billion ($32.19 billion). According to Nielsen, visitors from mainland China have now become one of the biggest consumer segments.

“The growth of mainland tourists in 2010 has grown 26.3 percent compared to 2009 and has contributed to Hong Kong’s economic boom in recent years. In 2010, the number of mainland tourists arriving into Hong Kong reached 22.7 million, accounting for 60 percent of all tourists – triple Hong Kong’s population. Mainland tourists are spending on average HK$ 12,000 per stay (roughly $1,500 US), and these appealing figures are expected to grow, representing future opportunities for marketers.” Nielsen reports that mainland tourists planned to spend more than half of the money allocated on shopping (59 percent), one quarter on food (23 percent) and less than a quarter on accommodations (18 percent).

Despite recent reported animosities, Nielsen surveys reveal that “more than 80 percent of local consumers in general are either positive or neutral towards the increasing number of mainland tourists shopping in Hong Kong. Hong Kong consumers believe the increased spending of mainland tourists is creating more job opportunities and boosting the tourism / catering industries and thus bringing prosperity to Hong Kong. On the other hand, 18 percent of Hong Kong consumers have negative feelings about the influx of mainland tourists into Hong Kong, stating that places are now too crowded for shopping and they cannot adapt to the cultural differences of the mainland tourists.”

There must be something DOT Secretary Mon Jimenez can learn from Hong Kong’s experience with mainland tourists. Tapping this segment of the international tourism market is certainly worthwhile due to sheer numbers. But we have to do something about the product and introduce adaptations that will cater to their needs and wants.

Going back to the topic of Hong Kong vs Shanghai, it seems both will continue to flourish as they serve particular needs of the Chinese economy. Deng Xiaoping was right again… the One Country, Two Systems do work. In the end, it really is all about money.

Lost in translation

From from www.yellowbridge.com

Coca Cola’s first version of its Chinese name was different from the one it presently uses. Unfortunately, the company found the people interpreted its first choice as “bite the wax tadpole” or “female horse stuffed with wax”, depending on the dialect. Coke then settled with Ke Kou Ke Le, which translates literally as “tasty, can make you happy” or very loosely as “so mouth-watering it makes you happy.”

Pepsi didn’t fare much later with the translation of its “Come alive with the Pepsi Generation” slogan. In Taiwan, it became “Pepsi will bring your ancestors back from the dead.”

The KFC slogan “Finger-lickin’ good” was interpreted as “Eat your fingers off.”

And Americans talk about the inscrutable Asians?

Boo Chanco’s e-mail address isbchanco@gmail.com. He is also on Twitter @boochanco