Protectionist barriers have been rising worldwide recently. The intensifying U.S.-China trade conflict, coupled with Western efforts to address Chinese overcapacity, is extending to the European Union (EU). This global shift towards protectionism poses a significant threat to South Korea, which has built its economic growth on exports. Experts recommend that South Korea diversify its export markets and reduce its dependence on any single economy, such as the U.S., to navigate this crisis. In response, ChosunBiz will explore how major export and import partners perceive the South Korean market. This analysis will examine how domestic companies can develop new export strategies and achieve breakthroughs in this era of protectionism.
As Asia’s financial hub, Hong Kong stands as one of the region’s most dynamic areas, excelling not only in finance but also in industry and culture. Since China’s economic reforms in the 1970s, Hong Kong’s financial sector has developed significantly, evolving into a global financial center. While part of Greater China, Hong Kong has successfully attracted major global players through its free foreign exchange transactions, flexible labor market, minimal regulations, low taxes, and foreigner-friendly environment, establishing itself as a nexus of global free trade.
Hong Kong has also played a crucial role as a gateway to mainland China. Recognizing its unique status, the U.S. has treated Hong Kong differently from China, offering benefits that simplify tariffs, investments, trade, and visa issuance, effectively acknowledging it as an economic free zone.
For South Korea, which thrives on trade, Hong Kong is of significant importance. It ranks as South Korea’s fourth-largest export destination by volume. According to the Korea Trade-Investment Promotion Agency (KOTRA), as of last month, South Korea’s exports to Hong Kong totaled $2.71 billion, accounting for 4.7% of the country’s total exports. This places Hong Kong just behind China, the U.S., and Vietnam in terms of export volume. The primary exports to Hong Kong include semiconductors, petroleum products, and precious metals such as gold, silver, and platinum.
Hong Kong has encountered significant challenges, including population and capital outflows, along with rising emigration rates. Numerous multinational companies have exited Hong Kong, opting to enter mainland China directly or establish their Asian hubs in Singapore, one of Hong Kong’s key competitors. The Hong Kong stock market has also experienced a withdrawal of foreign investors, particularly from major Chinese companies listed there, further clouding trade prospects. This concern is reflected in the Hong Kong Trade Development Council (HKTDC) Export Index, a key indicator of export prospects, which dropped to 40.5 in the third quarter of last year, down 7.3 points from 47.8 in the second quarter.
Nevertheless, Hong Kong retains significant growth potential. According to data released by the Census and Statistics Department of Hong Kong in January, the region’s real GDP grew by 3.2% year-on-year in 2023, driven by increased private consumption and service exports. For this year, Hong Kong is projected to achieve modest growth of 2-4%, supported by a rebound in domestic demand and a potential recovery in goods exports.
ChosunBiz recently met with Billy Lee, Director of the Hong Kong Trade Development Council (HKTDC) Korea office. Lee, who has overseen trade and investment between Hong Kong and South Korea since early this year following his tenure at the HKTDC Hangzhou Office, shared his insights on the trade synergy and outlook between Hong Kong and South Korea.
What is the trade relationship between South Korea and Hong Kong?
“South Korea and Hong Kong have long been significant trade partners. Last year, Korea was Hong Kong’s sixth-largest trading partner, with a trade volume of $38.12 billion, accounting for 3.4% of Hong Kong’s total trade. Korea is Hong Kong’s 10th largest export destination and 4th largest import source, with exports and imports valued at $9.45 billion and $28.67 billion, respectively. In the first four months of this year, trade between Hong Kong and Korea increased by 38% compared to the previous year, driven by a 55.6% rise in imports from Korea, which significantly contributed to the overall trade growth. Additionally, Hong Kong plays a crucial role in the trade relationship between mainland China and Korea. Since 2019, the value of Korean products re-exported to the mainland through Hong Kong has accounted for more than 20% of Korea’s total export value to mainland China.”
What are the primary trade items and areas targeted for expansion between South Korea and Hong Kong?
“Firstly, electronic products represent a significant portion of the trade between Hong Kong and South Korea. Last year, the top five exports from Hong Kong to South Korea were semiconductors (35.9%), electrical machinery (10.7%), communication equipment (8.6%), travel bags and handbags (6.5%), and computers (4.3%). In return, the leading imports from South Korea to Hong Kong included semiconductors (58.7%), perfumes and cosmetics (8.0%), communication equipment (7.0%), office machines and computer parts (5.8%), and petroleum oil (3.7%). Remarkably, between 2019 and 2023, imports of pharmaceuticals from South Korea to Hong Kong surged by 253.9%, reaching $122.5 million.
Moreover, the Korean Wave (Hallyu) is gaining momentum in Hong Kong, and there is a growing interest in Korean cuisine in mainland China. South Korean companies and local governments are prioritizing the expansion of agricultural exports to Hong Kong. The Korea Agro-Fisheries & Food Trade Corporation has been actively promoting Korean agricultural products at the HKTDC’s Hong Kong Food Expo for several years. In response to the increasing demand for Korean food, they plan to expand the exhibition space by approximately 25% to showcase more Korean companies and food products in the future.”
Are there any noteworthy export or import items in the trade exchange?
“In Hong Kong, Japanese Wagyu beef is often considered the gold standard of premium beef, akin to the ‘Rolls-Royce’ of meats. However, Korean beef, known as ‘Hanwoo,’ has recently gained recognition for its exceptional flavors. Hong Kong became the first export destination for Hanwoo in 2015 and continues to be a key market alongside Macau, Cambodia, and Malaysia. According to the South China Morning Post (SCMP), nearly 90% of Hanwoo exports in 2022 were destined for Hong Kong.
The COVID-19 pandemic saw an increase in Korean restaurants and supermarkets in Hong Kong, likely due to travel restrictions. Korean cuisine in Hong Kong has diversified beyond traditional BBQ and fried chicken to include coffee, desserts, and fine dining. As of June. 12, 570 Korean restaurants were registered on Hong Kong’s leading restaurant guide app, OpenRice. Despite the highly competitive and challenging dining industry in Hong Kong, the steady number of Korean restaurants in recent years underscores their competitiveness and resilience.”
What are the strengths and weaknesses of South Korean products in the market?
“South Korean producers have earned a strong reputation in the Hong Kong market thanks to their commitment to excellent quality, innovation, and a variety of price options. This appeals to a wide range of consumer groups. Hong Kong buyers prioritize both value for money and product quality. As a small, open economy with access to global brands and products, Hong Kong provides an ideal market for South Korean products to leverage their innovation and high standards, maintaining their appeal to local consumers.”
Hong Kong has long been a leading hub for finance and logistics. However, in recent years, Singapore has emerged as a strong competitor. What do you think about this shift?
“Hong Kong and Singapore have a deep-rooted partnership, and despite external perceptions of us as competitors, we maintain a strong, robust, and prosperous relationship. Given the global economic growth driven by ASEAN countries and mainland China, The idea that the two regions are competitors needs to be reconsidered. In reality, Hong Kong and Singapore have numerous opportunities to complement each other’s strengths and reinforce Asia’s economic prominence. There are abundant opportunities in financial and investment cooperation, cultural and educational exchanges, connectivity and infrastructure, and access to new markets. These initiatives will benefit not only Hong Kong and Singapore but also the entire Asian region. New cooperative frameworks, such as the recently launched Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade bloc, will further bolster this collaboration.”
How do you view the potential for investment and exchange through startups between South Korea and Hong Kong, given the high expectations from many stakeholders?
“Beyond traditional fields such as finance, professional services, and logistics, Hong Kong has made significant strides in innovation and technology. The region is home to around 4,000 startups, with a quarter founded by non-local entrepreneurs. Hong Kong’s government supports world-class R&D and intellectual property infrastructure, leading academic research and accelerated IT growth. The Northern Metropolis development strategy in Hong Kong is expected to boost economic growth and enhance cooperation within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), an economic activation zone. Furthermore, Hong Kong actively supports the incubation and acceleration of foreign companies and startups, helping them adapt and grow in new environments. We want to invite South Korean startups to seize the diverse and new business opportunities offered through this initiative.”
The GBA, which includes the two special administrative regions of Hong Kong and Macao as well as nine municipalities in Guangdong Province, including Shenzhen, is the second-largest economic zone in the world. How can the GBA be leveraged to enhance trade and exchanges between South Korea and Hong Kong?
“The GBA boasts the highest per capita GDP in China, offering significant growth potential for South Korean products and services. South Korean exporters can efficiently expand their markets in the GBA by leveraging Hong Kong’s international logistics and execution services. Additionally, the GBA serves as a crucial hub for innovative technology research and development and is recognized as a global technology center. By combining diverse research expertise, commercialization experience, and its status as an international financial platform, the GBA can enhance and transform the businesses of overseas tech companies. South Korean tech firms can take advantage of the GBA’s benefits and systems through Hong Kong’s platform, enabling them to efficiently expand their services and partnerships across the GBA market.”
There are external concerns about Hong Kong’s political environment, particularly regarding the National Security Law. What are your thoughts on these issues?
“Hong Kong’s traditional strengths remain robust. It boasts favorable geographic advantages for business and enjoys economic freedom. It also has low levels of corruption and supports the free flow of international talent, capital, goods, people, and information. Given Asia’s growth potential and Hong Kong’s significant role in the region, I believe investors will continue to have confidence in our strengths.
In addition, the stability of Hong Kong’s economy is steadily recovering. Over 9,000 international and mainland Chinese companies operate here, and the number of startups is consistently increasing. This underscores Hong Kong’s strong position as a global business hub. The implementation of free trade agreements between Hong Kong and the ASEAN region, along with the entry into force of the Regional Comprehensive Economic Partnership (RCEP), will further strengthen regional trade, providing an additional boost to Hong Kong’s economy.”
