19 June 2019
Before the establishment of the WTO in 1995, the SMEs in Hong Kong, Macau , and Mainland China were all concentrated in OEM manufacturing and import and export trading. At that time, our factories were mainly producing garment products to take advantage of the zero tariff or low tariffs to the United States and the European countries. However, since China was admitted into WTO in December 2001 and the removal of the MFA quotas on garments in 2002, the SMEs in Hong Kong and Macau had to change drastically their business model. They were forced to look to other Asian countries to re-establish their manufacturing bases. Thus, the new scenario has led the SMEs in Hong Kong and Macau to go international in order to seek new technologies and new markets.
Because they have to compete without the protection of MFA treatment with their counterparts in other developed countries, therefore, they have to learn some new business and management concepts such as:
- Diffusion of innovations
- Eclectic paradigm
- Foreign direct investment theories
- Monopolistic advantage theory
- Technology gap theory
- Uppsala model
- Internationalization of firms
- Contract theory,
- Transaction cost theory
- Non-availability approach
- Theory of the growth of the firm
The aforesaid knowledge embraces some of the tricks the entrepreneurs are obliged to learn, though not exhaustive. Recently, they are adopting AI and robots in their manufacturing processes in order to improve their production efficiency and to reduce production costs.
In the last two decades, the Chinese government has been very aggressive in driving the SMEs to diversify their products and their markets by going overseas and through mergers and acquisitions. Also the Chinese government is encouraging foreign direct investment to bring in new products and technologies through technology transfers. The Central Government has also poured billions of dollars to foster innovative or hi-tech startups. The result has been very encouraging, successfully cultivating many giant hi-tech companies such as Huawei Technology, ZTE Technology, Alibaba, and Tencent. There are, of course, many unicorns thus created too. The venture capital market in the Greater China Area is very active and many of these young and unproven companies can access to working capital by listing in the Startup Sections of the stock exchanges.
In recent years, the Central Government created two mega projects to help the entrepreneurs to expand their businesses out of their own localities. One of them is the Greater Bay Area Project situated in the Guangdong Province. The government has spent billions of dollars in infrastructure by building a network of rapid railway and high-speed trains to link up the nine largest cities in the province plus Hong Kong and Macau. This project has created a market of 70 million people and a GDP of 1.5 trillion dollars. This 9+2 market should be very attractive to the foreign entrepreneurs too. If any one of you is interested to look into this market, we at the Macau SME Association are delighted to assist you in doing due diligence in this market.
The other project is the “Belt & Road” Initiative. This initiative is a global development strategy adopted by the Chinese government involving infrastructure development and investments in 152 countries and multilateral organisations in Asia, Europe, Africa, the Middle East and the Americas. The SMEs in the Greater China are encouraged to take part in this huge initiative. This, indeed, is an internationalisation project of an unprecedented scale for the SMEs in China. I trust you would agree with me that the SMEs in Greater China are amidst a strong tidal wave of internationalisation.
We at the Macau SME Association are doing our part as much as possible in helping the Macau entrepreneurs to acquire the necessary know-why and know-how to strengthen their home bases and then go overseas to look for further opportunities. We have also established a Delta Asia Academy to provide training to our SMEs.
Even though we are now facing the challenges of a global slow down, yet let us under the umbrella of ICSB be alert to ride on the current tide of internationalisation.
Thank you for listening!