Speeches and Presentations

SCED's speech at Prime Source Forum 2013

Following is the speech by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Prime Source Forum 2013 today (March 26):

Michael (Director of APLF Ltd, Mr Michael Duck), distinguished guests, ladies and gentlemen,

I am delighted to join you all today at the Prime Source Forum 2013. The Forum provides an important platform for trade professionals from all over the world to discuss opportunities and challenges facing the apparel and fashion industry globally.

Speaking of challenges, perhaps many of you will agree that we are facing unprecedented challenges in the current business environment. The growth of the advanced economies continues to slow down. These economies are exploring ways to handle structural problems which would unfortunately take time to resolve. The external environment will remain uncertain in the foreseeable future.

Fortunately, challenges always go hand in hand with opportunities. I do see plenty of business opportunities for the apparel and fashion industry in Hong Kong.

The Mainland advantages

Hong Kong is an international business hub in one of the fastest growing economies in the world. Mainland China is the second largest economy in the world. Its GDP grew by 7.8 per cent in 2012, staying ahead of all other major economies. It is the largest exporter and second largest importer in the world. Mainland China has been Hong Kong's largest trading partner for decades, while Hong Kong is the Mainland's second largest trading partner. In addition, given our strategic geographical location, well-developed infrastructure and international communication network, Hong Kong is the entrepot for trade between the Mainland and the rest of the world. In 2012, the value of goods re-exported through Hong Kong from and to the Mainland accounted for 90 per cent of Hong Kong's total re-export trade or US$390 billion.

With a total population set to reach 1.4 billion by 2015 and the fact that Chinese consumers are becoming more fashionable and brand-conscious, the Mainland potentially offers a huge consumer market. The National 12th Five-Year Plan places much emphasis on the expansion of domestic consumption and demand. This provides an invaluable opportunity for the development of the apparel and fashion industry. Hong Kong offers foreign enterprises the most ideal channel to enter into the thriving Mainland market. A great number of overseas players have already opened flagship stores in Hong Kong, and are using Hong Kong as a springboard to tap into the vast Mainland market.


In 2003, the Mainland and Hong Kong signed a free trade agreement called the Closer Economic Partnership Arrangement, or CEPA in short. Nine supplements were subsequently concluded between 2004 and 2012 to provide for further liberalisation measures in goods and services.

Under CEPA, all Hong Kong products meeting the relevant CEPA origin rules can enjoy zero tariff on importation into the Mainland. At present, apparel products are subject to Mainland tariff rates of 14-16 per cent on average. Under CEPA, eligible Hong Kong products are tariff-free. This gives our traders a 14-16 per cent advantage in terms of cost compared with their competitors, which is remarkable. More importantly, CEPA does not impose any restriction on the ownership or source of capital of the manufacturers. Overseas investors are welcomed to set up manufacturing operations in Hong Kong to enjoy the zero tariff benefits. Hong Kong's independent legal system and intellectual property rights protection regime also make it an ideal place to manufacture high value-added brand name products as well as products with high intellectual property content. Indeed, textiles and apparel products have been a major beneficiary under CEPA. So far, about US$700 million worth of textiles and apparel products have been exported to the Mainland without tariff under CEPA.

Hong Kong as the sourcing and logistics hub

Besides acting as the gateway to the vast Mainland market, Hong Kong plays another major role as the global sourcing and logistics hub. Our local trade professionals have comprehensive knowledge about material and product sourcing. They understand and can cater for the preferences of a diverse customer base. They also possess good knowledge of international and national rules and regulations governing textiles and apparel exports, such as rules of origin, import and export restrictions, tariff rates and documentation requirements.

Hong Kong is strategically located at the heart of Asia. Half of the world's population can be reached within a five-hour flight. We have excellent infrastructure to support business activities, backed up by world class port and airport facilities. The Hong Kong International Airport is well-managed, reliable and well-connected. We also have one of the world's busiest container ports. The comprehensive multi-modal transport network, coupled with our integrated services expertise, makes Hong Kong the preferred international logistics hub and supply chain base for the textiles and apparel trade in Asia. Indeed, many international trading houses and major retailers are sourcing in Hong Kong through their buying offices or other intermediaries.

Ladies and gentlemen, the world is changing fast. The industry has to make timely adjustment to the dynamic external environment. The Government is keeping a close watch on the global developments and will liaise closely with the stakeholders to facilitate formulation of timely strategy for their businesses.

I wish you all a very successful Forum and an enjoyable stay in Hong Kong. Thank you.

Tuesday, March 26, 2013