George Zafirov | 3PL News

It’s not if, or why, but where… to set up shop in Asia.

Hong-Kong-FlagAs the center of gravity of global wealth is continuously shifting towards Asia, many global brands are now re-considering the place of China in their supply chain strategies. With its rapidly growing consumer base, China is not only a common place to source products, but it is also becoming a target destination for many goods. A common topic in corporate boardrooms all over the world is how to re-design the supply chain of a company to most effectively take advantage of the growing markets in Asia. One key question is which city would be the best location for the command center of all Asian operations.

Obviously, each company has its unique circumstances, which should be taken into account when looking for the perfect location to drop the corporate anchor in Asia. In general terms, the advantages of some key Asian cities are obvious. Any global business executive can immediately identify many good places to set up shop in Asia: Hong Kong, Singapore, Tokyo, Shanghai, Beijing, Kuala Lumpur, Taipei, Mumbai, Bangkok, Seoul... The list is long.

Hong Kong is just the place. The obvious reasons.

In my view, Hong Kong offers the most unique advantages, and is therefore a perfect spot for your global business gateway to Asia and the world. Let’s look at some of the more obvious reasons first – geographical location, business friendly environment, and modern logistics infrastructure.

Geographically, Hong Kong is situated just perfectly. It offers convenient access to the flourishing hinterland of the Pearl River Delta, as well as the entire Asia-Pacific region. Billions of people live within a short flight.

Hong Kong is also one of the most open and business-friendly cities in the world. Think free trade, low taxes, solid legal system, and a great banking network. It is considered the freest economy in the world. It also has access to a great talent pool, has a rich cultural heritage, and has plenty of entertainment options. The casino wonderland Macau is just an hour way with the ferry, and it offers thousands of luxurious hotel rooms for congressional events of any size.

Another very important advantage is the well-established logistics infrastructure, which is built to handle world class supply chain operations. Over the last several decades, Hong Kong has become the heart of a vast multi-modal network, and it can handle staggering volumes of cargo to and from anywhere.

One of the world’s best airports is here, with its ever expanding capacity and a new air cargo terminal was built just last year. The container port is the third busiest in the world, and they are not done expanding, with ongoing improvements to handle the latest generation of super large container ships. All operations are facilitated by modern equipment with the sole mission to achieve the highest efficiency.

With regards to warehousing, Hong Kong’s has plenty of efficient and secure distribution facilities. There are various possibilities for their expansion as well. Current government discussions involve the potential development of additional modern warehousing complexes in the outlying New Territories. Such a project would essentially double the total available warehousing space in Hong Kong. It’s a low risk proposition – the new warehouses can handle new inventories as the city’s global logistics role expands. Alternatively, they can take over the goods from the existing intra city warehouses, allowing more room for urban development there. Either way, the HK Government is keenly aware of the need for efficient warehousing facilities of both global businesses and local enterprises.  

Why Hong Kong - The not so obvious reasons

One might argue that other cities also offer such benefits. Singapore for example is also a business friendly city with a great port. In addition, Hong Kong is considered to be in competition with some nearby fast growing cities in China, such as Shenzhen. That brings us to the advantages of Hong Kong, which are not immediately obvious, at least not to all people.

First and foremost, there is the issue of China. If a company is moving towards the Asian market, it has to feed two consumer beasts – China and the rest of Asia. These are two distinct types of markets, both of which are enormous, and require a different mindset. It is best to be in China to serve the Chinese consumers, and it is best to be outside of China to serve the rest of Asia. Of all major Asian cities, only Hong Kong is in the unique position of being inside and outside of China at the same time. Everyone has heard the phrase “One Country Two Systems”. As a Special Administrative Region (SAR) Hong Kong has its own political system, legal, economic and financial affairs. It maintains economic independence from China, while at the same time has a dense interaction with the Mainland. China is taking full advantage of the unique status of Hong Kong. The fact is that Hong Kong is not only the world’s gateway to China, but also China’s gateway to the world. This just doubles the value of being in Hong Kong, especially for businesses that offer services to Chinese enterprises seeking global expansion.

Then there is the issue of perceived competition by fast growing neighboring cities with large free trade zones in mainland China. The fact is that many businessmen in Hong Kong, specifically in the field of supply chain and logistics, actually embrace this development. A more practical way to look at the improving business and logistics infrastructure in cities like Shenzhen is that in reality they solidify the position of Hong Kong as the best place for a first step in Asia, by adding almost unlimited additional expansion capacity. The fast growing infrastructure network north of the Lou Wu River (Hong Kong’s northern border) is like one massive extension of Hong Kong. At the very least, a company would set up a branch in Hong Kong exactly for the purpose to examine the possibilities of distribution in Southern China, while residing in convenient financial, legal and political system.

Expanding a global business in China requires a thorough understanding of the local supply chain infrastructure and contacts with reliable local logistics providers. This is a daunting task, considering the sheer size of the territory. But there are solutions. The OYM Logistics Alliance is a large independent network of warehouses, which was established in Hong Kong in 2012 with the objective to streamline regional distribution in China. It is the availability of such knowledge centers in Hong Kong that enable foreign enterprises to develop the best supply chain models for entering China.

When asked which would be the most suitable business hub for doing business in Asia, you can always provide the ambiguous “It depends”.  But if you must give an answer that is always good, you can just say “Hong Kong”.

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