China trade deal helps Hong Kong

In a windowless Hong Kong jewellery factory workers hunch over wooden benches, mixing molten metal, casting moulds and setting gems, scrambling to meet a last-minute order.

    Production has dropped sharply from Hong Kong's heyday

    "We make most of our stuff in China, but our Hong Kong

    plant is invaluable for emergency orders," said Michael Luk,

    general manager at Nelson Jewellery Arts Co Ltd, which mass

    produces gold and diamond jewellery for chains in Europe and

    the United States.

     

    A buzzing shop floor is a rare sight in the former British c

    olony's beleaguered manufacturing industry these days, but a

    new free trade deal with China and a fledgling economic rebound

    could offer the territory's ailing manufacturers a stay of

    execution.

     

    Once a cornerstone of the territory's economy, the

    factories that churned out plastic flowers, toys and

    electronics have migrated over the border in the last two

    decades in pursuit of China's deep and cheap pool of labour.

     

    Nelson Jewellery employs around 100 people at its factory

    in the city's once-thriving Hunghom gem district, where

    high-rise housing estates and shopping malls now encroach on

    decrepit factory buildings.

     

    The number pales compared with the 1700 factory workers

    the firm employs in China, but Luk said the firm plans to take

    on 20 extra workers in Hong Kong this year.

     

    Manufacturing has come a long
    way from plastic flowers and toys

    The production line at the Hong Kong plant saves three

    days, a boon for Luk's customers who are keen to get the latest

    fashions on their shelves while fads are still hot.

     

    The smaller plant is more flexible in meeting spot orders

    and less than an hour away from Hong Kong's ultra-modern

    airport, the world's biggest international air cargo hub.

     

    Lately the factory has been busy making diamond crosses as

    retailers anticipate hot demand as Mel Gibson's film "The

    Passion of Christ" hits cinemas worldwide.

     

    Expensive production space

     

    Manufacturing makes up 5% of Hong Kong's economy

    compared with 21% in 1982 during the industry's heyday.

     

    Most factories now concentrate on making higher-quality,

    higher-margin goods such as watches, jewellery and lenses that

    require less production space in high-rent Hong Kong. 

     

    The free trade deal with China, known as the Closer

    Economic Partnership Agreement (CEPA), that took effect in

    January, offers zero tariffs for many Hong Kong-made goods.

     

    High value items require less
    expensive manufacturing space

    The city's Jewellery Manufacturers' Association said that,

    once fully implemented, it could lead to double-digit growth

    fuelled by China's vast, fast-growing retail market.

     

    "Three Chinese department stores have approached us, but we

    don't have any concrete orders yet," said Luk.

     

    A recent poll by recruitment firm Manpower Inc showed 20%

    of Hong Kong manufacturers planned to take on more

    staff between April and June, double the number in the first

    quarter.

     

    By contrast, only 5% of employers in the same

    sector in regional rival Singapore, whose manufacturing

    industry has seen a similar decline, said they would employ

    more staff.

     

    "It is also hoped that some foreign manufacturers that plan

    to set up production lines in the region will be attracted to

    Hong Kong," said Kevin Lau of Hanville Co Ltd, which makes

    watches under the Michel Renee brand.

     

    Mainland distribution

     

    Textile manufacturers and makers of Chinese medicines also

    could benefit, economists say. Last year, a Chinese autoglass

    maker set up a factory employing 80 people in Hong Kong to

    avoid US anti-dumping measures.

     

    "For us the main benefit will be in distribution of our

    products in the mainland," said Cathy Tse, China marketing

    manager at Nin Jiom Medicine Manufacturing HK Ltd, which makes

    Chinese medicine.

       

    Though they typically earn US$1,283 a month --

    seven times more than their co-workers across the border --

    many Hong Kong workers look down on repetitive factory jobs.


    But some manufacturers remain cautious.

     

    They say mainland trade policy is still mired in red tape

    and the much-hyped trade deal has yet to yield any tangible g

    ains.

     

    And economists say the big picture is still one of decline.

     

    Manufacturing employment fell 8% in December

    from the same month last year.

     

    What's more, Luk says he has problems finding staff.

     

    Though they typically earn US$1,283 a month --

    seven times more than their co-workers across the border --

    many Hong Kong workers look down on repetitive factory jobs.

     

    "CEPA could slow the decline, but manufacturing is never

    going to be Hong Kong's bread and butter again," said CK Lee,

    an economist at investment firm Core Pacific-Yamaichi

    International.

    SOURCE: Reuters


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