I've been living in Hong Kong for a year, running the CaixaBank representation office in the region. Among other things, the job involves frequent trips to the nearby island of Taiwan. During this short period of time, I have had the chance to get to know at first hand a modern, cosmopolitan region which at the same time manages to preserve ancient traditions. It is a perfect fusion of East and West, which gives it a unique, unsurpassable character. It is also one of the safest, most orderly cities in the world.
Good geographical location and efficient transport networks
Hong Kong has a total of 7.2 million inhabitants, crammed into just 1,100 km2, making it the most densely-populated city in east Asia. Strategically located at the mouth of the Pearl River, the area with the highest concentration of exporting companies in mainland China and also close to the south-east Asian countries of ASEAN (the Association of Southeast Asian Nations). Moreover, Hong Kong has the best, most efficient airport on the continent and the biggest free port. Taiwan, on the other hand, has an area of 35,980 km2 and is the third most densely-populated city in east Asia, with 23.5 million inhabitants. Its geographical location, about 160 kilometres off the east coast of the People's Republic of China and midway between Japan and Hong Kong, makes it one of the busiest places in the world in terms of maritime traffic. For example, the port of Kaohsiung is the twelfth most important in the world for container traffic.
Hong Kong is a window into the mainland Chinese market
Hong Kong's economic development is based on the capital market. The country has some of the largest currency reserves in the world, with 349,124 million dollars in March 2016, according to IMF figures. Economic activity is concentrated on the central island of Hong Kong, world famous as a financial hub with around 110 international players. The service sector accounts for nearly 93% of the GDP, with China as its main commercial partner, providing 49% of imports. The USA is the only non-Asian country with a place among the top five suppliers. With regard to re-exportation (products imported to Hong Kong, but forwarded to other countries for consumption), the number one destination is once again mainland China.
On the other hand, Hong Kong is number one for speed and simplicity in setting up a new company, according to the publication Doing Business, as well as having an attractive tax rate, no duties on most products, an environment allowing free circulation of capital and a strategic location close to mainland China and the ASEAN countries. In addition, signature of the free trade treaty between Hong Kong and ASEAN is expected in October 2017, giving it access to a new market with 629 million inhabitants.
In the case of Taiwan, the economy is essentially based on foreign trade. For this reason, exports and imports account for about 97% of its GDP. Taiwan is a highly industrialised region, with marked specialisation by areas: the electronic and technology industry is concentrated in the north, precision machinery in the centre and petrochemicals and heavy industry in the south.
Taiwan is the third-most important destination country for foreign investment
Taiwan has a trade surplus with the United States, China and the European Union and, in recent years, there has been an increasing trade surplus with the neighbouring ASEAN countries.
Asia as a whole, excluding the middle east, is the destination for 6% of Spanish exports. In 2016, Hong Kong was the fifth Asian market for Spanish products, behind China, Japan, South Korea and India, and ahead of Singapore, Taiwan, Indonesia and the Philippines. The balance of trade is markedly favourable to Spain, with Spanish exports of 951 million euros according to 2016 figures. The most important sectors are consumer goods (39.39%), and manufactured and capital goods (36.69%); also important are agro-food (22.18%) and drinks (1.74%).
The balance of trade between Spain and Hong Kong is highly favourable to Spain
However, there are also major investments in Spain by Hong Kong and its area of influence. As well as purchases of homes and investments in football teams, there are significant interests in the agro-food sector. In relation to this, the Chinese government has launched the “One Belt, One Road” initiative, a modern recreation of the ancient Silk Road, with the aim of reinforcing trade between China and Europe through improvements in infrastructure and logistics. One of the most recent investments under this initiative is the purchase of Noatum Holding Ports, the leading port operator in Spain, by the Hong Kong concern Cosco Shipping Ports Ltd.
Trading relations between Taiwan and Spain have historically been characterised by a marked imbalance in favour of the former. Spanish exports to Taiwan represent a total of 485 million euros, compared to a volume of imports from Taiwan of 1,031 million euros, according to the latest Icex figures. This is a figure Spanish businesses should take into account as Taiwan is an increasingly worthwhile place for the rest of the world to invest. In fact, according to the Doing Business Report, Taiwan today is the third-most important destination country for foreign investment. Recently, five major concerns, among them the pharmaceutical company S-Cubed and General Electric, have been planning investments on the island worth 336 million dollars.
In my opinion, both Hong Kong and Taiwan offer excellent opportunities for doing business with the south-east Asian region, a market that is gaining increasing international weight due to increasing domestic demand and purchasing power. Naturally, it is always advisable for companies to come and get to know the place for themselves to make their own assessment of the potential and opportunities it might offer them, something the CaixaBank branch in Hong Kong can help with.
