Pivot to ASEAN and RCEP for trade hub growth?

HKSAR seeks access

Concluded in November 2020, RCEP is the world's largest free trade agreement aggregating 2.3 billion people with a combined GDP of $26.3 trillion. Hong Kong is liaising with trade ministers of RCEP economies to join the trading bloc.

Hong Kong has deep trade linkages with RCEP's advanced economies. RCEP provides potential for the city's trade intermediary business. In 2019, total trade between Hong Kong and the 15 RCEP economies amounted to $765.5 billion, or 71 percent of the city's total trade. The 15 RCEP economies contributed 73 percent of Hong Kong's merchandise trade in 2020, and 59.7 percent of the city's services trade in 2018, according to Hong Kong Census and Statistics Department data.

"The signing of the Regional Comprehensive Economic Partnership means that East Asia, Southeast Asia and Oceania will soon form the world's largest single market, in which ASEAN is a major part. After the signing of RCEP, the increasing economic interactions of the Greater Bay Area and other parts of the mainland with ASEAN give Hong Kong a unique position and advantage to act as a gateway between the mainland and ASEAN," said Helen Chin Wai-man, Fung Business Intelligence's head of research.

Fung Business Intelligence is the research arm of the Fung Group - a privately held business entity in Hong Kong.

"As Hong Kong does not impose any tariffs on imported goods, there is flexibility for e-commerce players from the mainland, ASEAN, Japan and Australia using Hong Kong as a transfer hub," said Alice Tsang Sze-wan, assistant principal economist (Greater China) at the Hong Kong Trade Development Council.

"If e-commerce companies ship mercantile goods in bulk directly to a particular country but those products are not well-received in that consumer market, the companies would already have incurred import tariffs, management fees, and warehouse costs, which are very expensive. And they use Hong Kong as a transfer hub by shipping mercantile goods to other consumer markets when those goods prove well-received," Tsang explained. "They can use Hong Kong as a base to reach everywhere in the Asia-Pacific region."

Hong Kong has signed eight free trade agreements with 20 economies, and 22 investment promotion protection agreements as of January. Hong Kong has signed FTAs with the RECP economies except Japan and South Korea. The city will seek more such agreements to propel its merchandise trade sector.