Business Environment

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Chapter 1Hong Kong’s Business Environment

Think it over (p. 2)

1Arguments for: lower costs (e.g., rent and salary), larger space for expansion, and a better living environment for workers, which makes it easier to recruit overseas staff.

Arguments against: high relocation costs, poor communication network, restricted flow of information, far from China’s market, increase in transportation costs, difficult to hire skilled labour.

2When considering relocation, students should weigh the benefits against the costs. They should consider the business nature of an international publishing company and the characteristics of Hong Kong’s business environment.

To an international publishing company, information and manpower are two major assets. Freedom of the press and productive manpower are essential for its long-term development.

The Hong Kong government allows a free flow of information. The mass media in Hong Kong enjoy a high degree of freedom. Firms can obtain information from any source and distribute information freely. Coupled with advanced information and communication technology, it is easy for the publishing company to gain access to fast and comprehensive information.

On the other hand, Hong Kong can provide the publishing company with a skilled and hardworking labour force. The company can then respond to the changing environment rapidly. Hong Kong also has laws protecting intellectual property rights. This is very important for a publishing company. Therefore, despite the high rental, it might be reasonable for the firm to keep its regional headquarters in Hong Kong.

(or any other reasonable answer)

Try This Activity

A1(a)In 1980, Hong Kong was a manufacturing centre. More than half of employees (54.7%) worked in the secondary sector (which was dominated by the manufacturing industry). In 2006, Hong Kong served as a business and services centre. Of those employed, 90.9% worked in the tertiary sector.

(b)As shown in the figure, the primary sector is relatively unimportant. The contribution of the primary sector to the GDP was 1% in 1980; it further fell to 0.1% in 2006.

In 1980, the secondary sector played a relatively important role but this began to decline afterwards. The proportion of the labour force engaged in the secondary sector dropped from 54.7% in 1980 to 9.1% in 2006. Its contribution to the GDP sharply fell from 30.8% in 1980 to 8.7% in 2006.

On the other hand, Hong Kong has shifted its reliance from secondary production to tertiary production. The tertiary sector was becoming increasingly important. The proportion of the labour force engaged in the tertiary sector increased significantly from 45.2% in 1980 to 90.9% in 2006. Its contribution to the GDP also increased from 68.3% to 91.2%, which was much larger than the sum of the primary and secondary sectors.

(c)The major factors accounting for the changes include: (China adopted its open-door policy in 1978 which encouraged foreign investments. (Many Hong Kong manufacturers relocated their factories to the Mainland to lower their production costs. (There was a growing demand for high value-added services (e.g., finance, banking, IT, marketing, design) to support relocated factories. (Hong Kong has become a financial and services centre to support business activities (e.g., trading, tourism, investment) on the Mainland. (Hong Kong is transforming itself towards a knowledge-based economy. (or any other reasonable answers)

A2The Basic Law states that the capitalist system and way of life shall remain unchanged for 50 years (Article 5). The common law shall be maintained (Article 8). The HKSAR shall protect private property rights (Article 105), strive to achieve fiscal balance (Article 107), maintain a low tax policy (Article 108) and the status of a free port (Article 114), and pursue a policy of...
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