China has become a major trading country and important source of foreign investment around the world as its economic activities with other countries continue to grow. Under the Belt and Road development strategy, Chinese enterprises have stepped up their efforts in “going out” to engage in trade and investment activities in countries along the Belt and Road routes. This has spurred demand for professional services to support these enterprises' growing international business.
China’s coastal areas, including the Pearl River Delta adjoining Hong Kong and the Yangtze River Delta (YRD), have always been major areas for economic co-operation with foreign countries. More and more enterprises in Shanghai and the adjacent areas have been heading for the Belt and Road regions in search of opportunities to boost the development of their businesses.
HKTDC conducted a questionnaire survey in Shanghai, Jiangsu and other places in the YRD in the first quarter of 2017 to gauge the situation. The survey results indicate that the great majority of domestic respondents (84%) would consider tapping business opportunities in Belt and Road countries in the next one to three years. Among these, many enterprises (46%) said that Hong Kong was their preferred destination for seeking professional services outside the mainland for capturing business opportunities. This matches with the findings of a similar HKTDC survey in South China last year. 
The Belt and Road destinations that respondents showed the greatest interest in were Southeast Asia (62%), South Asia (32%), and Central/Eastern Europe (28%). Most enterprises (58%) expressed the hope of selling more industrial products, relevant services and technologies to Belt and Road markets, while one in three (32%) would consider investing and setting up factories in Belt and Road countries.
There is no doubt that Hong Kong is the preferred platform for mainland enterprises “going out” to invest overseas. Hong Kong service providers have been helping mainland enterprises handle their trade and investment businesses in Hong Kong and overseas markets for many years. Further efforts by mainland enterprises, including those in the YRD, to tap Belt and Road opportunities are bound to generate more business for Hong Kong. (For more details on China’s foreign investment and Hong Kong as the preferred platform for mainland enterprises “going out” to invest overseas, see: China Takes Global Number Two Outward FDI Slot: Hong Kong Remains the Preferred Service Platform)
Belt and Road: Hotspot for China’s Foreign Trade and Investment
China has become a major world economy and the economic activities of Chinese enterprises abroad have gradually extended from trade to other fields of investment. China’s foreign trade volume stood at US$3.69 trillion in 2016, second only to the US with US$3.71 trillion.  During the same period, China’s foreign direct investment (FDI) flows (excluding financial sector investment) reached US$170 billion , which was among the highest in the world and exceeded foreign capital inflow. It is now a country with net capital outflow.
China’s trade and investment in Belt and Road countries will see sustained growth particularly under the Belt and Road initiative and development strategy. Figures released by the Ministry of Commerce showed China’s total trade with Belt and Road countries rose by 0.6% to RMB6.3 trillion (equivalent to US$1 trillion) in 2016, accounting for just over a quarter (26%) of China’s total foreign trade during the period. Direct investment made by Chinese enterprises in non-financial sectors in 53 Belt and Road countries totalled US$14.53 billion, accounting for 8.5% of China’s total non-financial FDI during this period. Most of the investment went to Singapore, Indonesia, India, Thailand and Malaysia.
As China gears up for the Belt and Road development strategy and encourages businesses to develop trade and investment with the countries and regions concerned, the Belt and Road initiative has become an important factor in driving the “going out” of Chinese enterprises for all kinds of economic activities. As Hong Kong has consistently been the preferred service platform for these enterprises , the development of the Belt and Road initiative is expected to spur demand for various Hong Kong support services from mainland enterprises.
HKTDC joined hands with the Shanghai Municipal Commission of Commerce in conducting a questionnaire survey among related enterprises in Shanghai and Jiangsu of the YRD in the first quarter of 2017 to find out about the challenges facing mainland enterprises in the region, their transformation, upgrading and investment strategies, their intention of “going out” to capture Belt and Road opportunities, and their demand for related professional services.
This survey was similar to the one conducted by HKTDC in South China in 2016.  A total of 163 completed questionnaires were collected. Of these, 148 were completed by mainland enterprises, including service suppliers, manufacturers and traders. What follows is a summary of the views expressed by these 148 mainland enterprises on “going out” to capture Belt and Road opportunities.
Challenges in Business Operation
Virtually all respondents (99%) said that their business operations faced a variety of challenges over the past year. Their foremost concerns were the volatile RMB exchange rate (41%) and rising labour, land and/or other production costs (39%). Other challenges included keen competition in international markets (28%), financing difficulties (26%) and weak overseas markets and inadequate orders (24%).
Most Important Countermeasure: Develop Overseas Markets
In order to tackle these challenges, over 95% of the respondents said either they would consider adjusting their business/operating strategies and making relevant investment in the next one to three years or they had already done so. Almost three out of every four (74%) of the respondents said they would first exert themselves to develop overseas markets. Of these, half (50%) said they would develop further overseas emerging markets and 48% said they would focus on overseas mature markets. More than one in three (37%) said they would develop/promote their own brands, while the same number said they would work on the improvement of product design and technological R&D capability.
Belt and Road Opportunities: Focusing on Southeast Asian Markets
As China continues to promote the Belt and Road development strategy, 84% of the respondents said they would consider tapping business opportunities in Belt and Road countries in the next one to three years.
Among those enterprises that would consider tapping Belt and Road opportunities, most said they wanted to sell more industrial products and related services and technologies to the Belt and Road markets. Just under a third (32%) said they wanted to go to Belt and Road countries to invest and set up factories for production, while 18% said they would like to go to source consumer goods/foodstuff for selling on the Chinese mainland and source raw materials for production on the Chinese mainland. Another 9% said they hoped to set up transit warehouses in Belt and Road countries to improve their international logistics efficiency.
Among those enterprises interested in tapping opportunities in Belt and Road markets, almost two thirds (62%) said they would focus on Southeast Asia, including ASEAN countries. Fewer respondents chose other regions, with a third (32%) picking South Asia (32%), just over one in four going for Central and Eastern Europe (28%) and the Middle East and Africa (27%), and one in five choosing Central and West Asia (19%).
Although there is a slight difference between the preferences of the respondents in this survey and the one conducted in South China last year, the preferences for Belt and Road opportunities and locations of interest are similar, suggesting that most mainland enterprises have the same intentions of tapping Belt and Road opportunities, regardless of where they are based.
Comparison of Survey Findings in South China and YRD
|Opportunities of Interest||Survey in South China||Survey in YRD|
|Investing and setting up factories||36%||32%|
|Setting up transit warehouses||22%||9%|
|Locations of Interest||Survey in South China||Survey in YRD|
|Central & Eastern Europe||24%||28%|
|Middle East & Africa||23%||27%|
|Central & West Asia||20%||19%|
Source: HKTDC survey
Need to Seek Services Support
Of those enterprises looking to tap into Belt and Road opportunities, half (51%) said they would like to become involved in marketing activities tailored for Belt and Road and other overseas markets. Half (50%) said they would require related financial services, including banking, financing and project valuation. Just under half (45%) said they would like to seek related legal, accounting and other professional services. 40% said they would require business consulting services to help understand the investment environment in overseas markets, including Belt and Road markets.
Seeking Services Support in the Chinese Mainland and Hong Kong
In order to locate these aforementioned professional services, more than half (55%) of the respondents looking to tap Belt and Road opportunities said they would first source these support services locally. However, a significant number said they would also seek various professional services outside the mainland. Hong Kong was the most preferred destination for most enterprises, accounting for almost half (46%) of all respondents who would like to tap into Belt and Road markets. This again matched the findings of the survey conducted by HKTDC in South China last year. Other destinations highlighted as of interest included the US (34%), Germany (27%) and Singapore (23%).
HKTDC Research would like to acknowledge the help extended by the Shanghai Municipal Commission of Commerce in conducting the survey.
 For details about the survey in South China, please see: Chinese Enterprises Capturing Belt and Road Opportunities via Hong Kong: Findings of Surveys in South China
 Source: Customs Administration of China; World Trade Organisation
 Source: Ministry of Commerce of China
 On Hong Kong as the preferred service platform for mainland enterprises “going out”, please see: Guangdong: Hong Kong Service Opportunities Amid China’s “Going Out” Strategy, Jiangsu/YRD: Hong Kong Service Opportunities Amid China's "Going Out" Initiative, China’s “Going Out” Initiatives: Professional Services Demand in Bohai and China's “Going Out” Initiative: Service Demand of Western China to Tap Belt and Road Opportunities.