How Guangdong FTZ e-commerce plan can benefit Hong Kong

November 07, 2015 08:01
Logistics and customs clearance are two key stages in the cross-border e-commerce chain. Hong Kong needs to improve both. Photo: Xinhua

Cross-border e-commerce has an important role in Guangdong’s free trade zone development.

The blueprint strengthens supervision of port operations, quarantine services, taxation and cross-border foreign exchange trading, among others.

Zhuhai's Hengqing economic zone has been designated as a pilot area for cross-border e-commerce while Guangzhou’s Nansha district will become an experimental zone for port-related e-commerce.

Shekou district in Shenzhen’s Qianhai area has attracted great attention due to its connection with Hong Kong.

According to the plan, the area will be built into a national e-commerce ecosystem.

Here, pilot schemes will be launched to develop online and offline foreign trade and create industry clusters worth several hundred billion yuan.

The 30 square kilometer zone will be centered around Shekou.

It will build on existing infrastructure such as the Shenzhen and Hong Kong airports, shipping facilities and postal services.

This is in line with Beijing’s efforts to build an Asia-Europe economic corridor called  “One Belt, One Road” and give it a bigger say in world trade.

Supply and demand can be matched instantly through the internet and logistics providers can respond in real time, creating more demand for cross-border e-commerce.

Hong Kong companies should target mainland customers to develop its cross-border e-commerce business.

They will be able to negotiate prices directly with foreign brands thanks to improved customs procedures and delivery services.

However, they need to explore new markets to diversify their products and services.

The Hong Kong government can help by providing a one-stop cross-border e-commerce platform.

In fact, some Hong Kong merchants have dedicated online shopping platforms for mainland buyers, although many of them have yet to build transit centers to be able to deliver directly to mainland cities.

Logistics and customs clearance are two key stages in the cross-border e-commerce chain.

At the moment, Chinese online shoppers, commonly refered to as "haitao", have to go through various checks after placing an order before they can take delivery.

This wastes time due to an underdeveloped e-commerce logistics infrastructure and ambiguous government policy.

The Hong Kong government should discuss these issues with Beijing and there's no better time to take action than now.

Hong Kong, which continues to rely on a traditional retail business model, has been hit by a fall in Chinese arrivals.

In the first eight months, inbound traffic fell 0.1 percent from a year earlier.

Tourist spending slipped 1.6 percent from the previous year.

The decline has been attributed to a sluggish global economy, competition from other destinations, a strong Hong Kong dollar, limited tourism resources and frictions between local residents and mainland visitors.

The "haitao" mindset has also had a negative impact on revenue.

But the tourism industry has paid little attention to the challenge posed by cross-border e-commerce on traditional businesses.

Johnny Ng, vice chairman of the Hong Kong United Youth Association, said Hong Kong relies too much on traditional retailing.

He said it has failed to blow fresh air into the retail industry nor has it created a new business model to replace the old one.

Hong Kong needs to strengthen its business ties with the rest of the Pearl River delta region to tap into its vast hinterland and growing economy.

This article appeared in the Hong Kong Economic Journal on Nov. 2.

Translation by Julie Zhu

[Chinese version中文版]

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Director of the Economic and Social Development Research Centre at the China Development Institute