Express Luck Industrial, a manufacturer of high-technology TVs founded and headquartered in Shenzhen, ships its products to various parts of the globe. The firm has offices in different places, from Hong Kong to Hungary to Mexico. Among these branches, the one in Hong Kong plays a pivotal role in central management and raising capital for the company.
One of the major markets for Express Luck’s products is Central and Eastern Europe (CEE). A few years ago, the firm started to manufacture TV sets in Romania and shipped the finished goods directly to different parts of the region, helping Express Luck enhance operational efficiency.
Then in the first half of 2016, Express Luck chanced upon an opportunity for growth in CEE: a global electronic company was looking for a buyer to take over its production plant in an industrial area on the outskirt of Budapest, Hungary. It was an attractive offer because the plant is well-located and well-equipped, and only slight moderation of the existing facilities was needed to ensure compatibility with Express Luck’s production activity. Express Luck bought it without much hesitation.
In the process of setting up the plant, the Hong Kong office of Express Luck played a leading role in management matters, including financial planning and devising business strategies for the plant.
Terry Tam, Chief Financial Officer of the Hong Kong office of Express Luck, says the plant, launched into operation in October 2016, now produces LED TVs for the company’s own brands and some other licensed brands. In 2016, Express Luck exported a total of five million TV sets. It expects the plant in Hungary to produce 600,000 sets for the year 2017 – about one-tenth of the aggregate output of the whole company – and more in the years to come, given the great growth potential of the CEE market.
Express Luck is not alone in its optimistic projections of CEE. Over the past decade, Chinese investment in CEE has been growing by 32 per cent annually. In 2016, China set up a 10 billion-euro investment fund to finance projects in the region. In pushing its Belt and Road Initiative, China has also enlisted CEE as a strategic partner.
As Chinese interest in the region continues to grow, CEE countries are also making an effort to promote closer economic ties with China. Hungary, China’s biggest investment destination in CEE, is in particular responsive to the Belt and Road Initiative. In June 2015, it became the first EU member to sign a memorandum of understanding with China on integrating its “Eastern Opening” policy with the Belt and Road Initiative. In May 2017, the two countries announced the establishment of a comprehensive strategic partnership.
According to Tam, the advantages of investing in Hungary are plenty, including the “availability of skilled workers, established infrastructure and supportive government policies”. He believes the Belt and Road Initiative will raise the living standard of people in the CEE and therefore drive up demand for consumer products such as TVs.
“Demand for TVs in Eastern Europe is already on the rise. Many people still have an old model TV at home and they want to switch to inexpensive LED TVs. The Belt and Road Initiative should help push the demand further as it will bring more growth opportunities to the region. When that happens, we may expand our operation there,” Tam says.
Meanwhile, Express Luck is gradually expanding its Hong Kong operation to cope with the company’s growth at home and abroad. The branch moved to a bigger office in April 2017 and is positioned as a second headquarters. According to Tam, as Express Luck’s business is expanding in CEE, the Hong Kong operation is expected to play a bigger role in helping to raise capital, given that the city is a “world-class financing platform” offering different means for companies to raise funds.
With its geographical advantage and a sophisticated financial system, Hong Kong demonstrates through Express Luck’s story what added value it can offer to Chinese companies seeking to build up a presence in countries along the Belt and Road.