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HKTDC Research | 12 Jan 2017

Guangdong Enterprises Tapping Belt and Road Opportunities: Kennede Electronics Steps Up Exports

Kennede Electronics Co Ltd is one of the many businesses looking to capitalise on China’s Belt and Road Initiative as a way of tapping the rapidly growing Asian markets. The company has hopes of exploring investment opportunities in a number of areas, including Africa, in a bid to reduce its production costs, while strengthening its market coverage in Asia and Europe. Additionally, in order to advance its production and global sales, Kennede Electronics is in the process to set up a company based in Hong Kong to take advantage of the city’s professional services and trade facilities.

Belt and Road Markets Look Promising

Photo: Kennede Electronics’ lighting products. — Kennede Electronics’ lighting products.

Headquartered in Guangdong’s Jiangmen city, Kennede Electronics is a specialist maker of backup lighting and electrical products. At present, the company is optimistic about the market potential of the Asian countries along the Belt and Road. It has plans to further develop its dealings with the major South Asian markets, notably India and Pakistan, as well as the Southeast Asian markets in Malaysia and Thailand.

A representative of the company told HKTDC Research that demand within the global lighting market is mostly stable at present. However, growth in the developed markets, such as Europe and the United States is relatively slow. Somewhat against the odds, then, over recent years the company has achieved impressive sales figures by developing new products, building new sales channels and opening new markets.

Since its inception in 2000, Kennede Electronics has focussed on production and overseas trade for its main exports. These exports cover major lighting series - rechargeable indoor and outdoor backup lighting; rechargeable flashlights; and fire emergency lights. They also include rechargeable desktop and floor fans. Kennede currently owns more than 600 series of products, marketing them to more than 100 countries and regions. In January 2014, the company was listed on the Small and Medium-sized Enterprise Board in the Shenzhen Stock Exchange.

Exploring Overseas Investment Opportunities

Kennede Electronics has comprehensive plans in place to expand its production capacity to match future business developments. These plans cover the increased application of standard modules, as well as altering product design to better suit its Jiangmen plant’s automated production capacity.

Photo: Kennede Electronics is in the process to set up a company in Hong Kong. — Kennede Electronics is in the process to set up a company in Hong Kong.

The company also intends to explore investment in manufacturing plants within the central region of China. It is also studying the feasibility of setting up production lines in Africa. It plans to combine foreign labour and production resources in order to better control its overall production costs, and break into the African markets via local strongholds. In all, using Africa as an overseas production base could enable the company to service the European market more effectively.

When evaluating potential investment in production projects, the company believes that a number of major factors - other than labour supply and production costs - must be considered. The environmental protection requirements of investment locations, as well as other matters such as supply chain and production materials support, also need to be taken into account. Consequently, the company is looking to build its local knowledge prior to any potential investment in Africa.

Although Southeast Asia is geographically closer to China, the company reckons that the continuous inflow of foreign capital has prompted a surge in local production costs. As the labour supply is no longer abundant, some Southeast Asian countries have begun to tighten their requirements for foreign investment in production projects. As a result of this, the company is currently focused on African investment projects, and has reduced its focus on investment opportunities within Southeast Asia.

At present Kennede Electronics is in the process of setting up a company in Hong Kong. As an international financial centre, Hong Kong offers facilities for dealing with foreign exchange, collecting international payments and securing cost-effective capital to finance growing international business. The company also hopes to take advantage of Hong Kong's professional consulting services, amongst others, to undertake feasibility studies in overseas investment projects and early due diligence. This would enable it to control its investment risks and carry out appropriate tax planning to avoid the unnecessary burden of double taxation.

HKTDC Research would like to acknowledge the help extended by the Department of Commerce of Guangdong Province and the Bureau of Commerce of Jiangmen City in conducting surveys and company visits.

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17 Jan 2017

Making Inroads: Chinese Infrastructure Investment in ASEAN and Beyond

By Inclusive Development International

Introduction

Little more than a decade ago, China was a relatively minor actor in global investment and finance. By 2014 China had become the second largest global investor, second only to the United States. Outbound investment has been made possible due to strong backing from the Chinese state and financing from its policy and commercial banks. China has become a more influential player within international financial institutions such as the World Bank and the Asian Development Bank. However, it has also grown increasingly frustrated with the dominance of developed nations and the limited role of emerging economies within the management and direction of these institutions. In response, China has promoted the establishment of new institutions and initiatives, including the multilateral Asian Infrastructure Investment Bank (AIIB). China has also established investment funds such as the Silk Road Fund to provide further capital to outbound investment. These new institutions and initiatives focus for the most part on infrastructure development.

Across the world, many developing nations face an infrastructure deficit. Inadequate infrastructure has both social and economic impacts. For example, weak transport links, limited power supply, and lack of access to irrigation all impact on the daily lives of some of the world’s poorest people. According to the World Bank, 1.2 billion people live without electricity; 1 billion people live over two kilometres away from an all-weather road; and at least 748 million people lack access to safe drinking water. While infrastructure is lacking in many countries, population growth means that demand continues to increase. Limited infrastructure can also create barriers to the development of industry, which can help catalyse economic development and contribute to lifting people out of poverty. China’s remarkable domestic growth was fuelled by infrastructure investment, and as its role in overseas investment and finance has developed, China has also become a key actor in global infrastructure development.

China’s overseas investment has increased rapidly over the last ten years. According to statistics from China’s Ministry of Commerce, mainland China’s outbound investment flows reached a record high of over US$123 billion in 2014. This is over 45 times higher than in 2002, when overseas investment was just US$2.7 billion. This investment flows to various sectors, including infrastructure development, and China plays a major role in the development of transport, energy and telecommunications infrastructure in Southeast Asia. Cambodia, Laos and Myanmar have all gone to great lengths to attract foreign investment, and China is now the top investor in all three countries. Chinese investment in Vietnam, Thailand, Indonesia and Malaysia is also significant and increasing.

All Association of Southeast Asian Nations (ASEAN) countries are members of the newly established AIIB, and the region also lies within the route of China’s One Belt One Road, an initiative announced by Xi Jinping in 2013 that seeks to promote and enhance interconnectivity and cooperation between China and over 60 countries en route to Europe. Following the announcement of this initiative, the Chinese state has made a revitalized push to promote outbound investment, focusing especially on infrastructure and connectivity. In addition, China has launched several multibillion dollar investment funds targeting overseas investments.

This renewed push from China is likely to have a significant impact on the availability of financing for large-scale infrastructure projects in Asia. At the same time, the emergence of new multilateral banks, and in particular the AIIB, creates an environment in which, for the first time, emerging economies have a leading voice regarding governance and management decisions in a major international financial institution. As a result, the landscape of both regional and global development finance and investment is likely to change significantly in the coming years. There has been much discussion and speculation about the potential impact of the new institutions and initiatives, especially regarding the social and environmental standards that will apply to their operations.

This study examines this rapidly evolving landscape and its potential implications. It focuses on the ASEAN region, and draws examples particularly from the lower Mekong countries. However, it will also be of value to individuals and groups elsewhere in Asia and internationally who are monitoring these developments. The main focus is on the formation of the AIIB and the implementation of the One Belt One Road initiative. The paper also looks at other Chinese financial institutions, including policy banks and investment funds, assessing the potential impact they are likely to have in the region and beyond as Chinese outbound investment continues to grow.

The aim of this study is to increase civil society awareness of these institutions and initiatives, how they will potentially impact on local communities and the environment in the areas where they work, and what environmental and social standards and governance systems that they have adopted. The paper concludes by exploring strategies that civil society could deploy to respond to these developments and influence the policies, projects and operations of Chinese-led finance institutions.

Please click to read full report.

GDP (US$ Billion)

13,407.00 (2018)

World Ranking 2/194

GDP Per Capita (US$)

9,608 (2018)

World Ranking 72/193

Economic Structure

(in terms of GDP composition, 2017)

Services

(51.6%)

Industry

(40.5%)

Agriculture

(7.9%)

External Trade (% of GDP)

37.8 (2017)

Currency (Period Average)

Renminbi

6.6174per US$ (2018)

Political System

Single-party people's republic

Sources: CIA World Factbook, Encyclopædia Britannica, IMF, Pew Research Center, United Nations, World Bank

Latest development

China’s GDP declined by 6.8% in the first quarter of 2020 and grew by 3.2% in the second quarter of 2020.

Added-value industrial output grew by 4.8% in June 2020 up from 4.4% in May 2020.

Fixed assets investment declined by 3.1% in Jan-Jun 2020, which was narrowed by 3.2 percentage points compared with that in Jan-May 2020.

Retail sales decreased by 1.8% in June 2020, registering a decline narrowed by 1.0 percentage points compared with May 2020.

Inflation stood at 2.5% in June 2020, with food prices increased by 11.1% and non-food prices increased by 0.3%.

In June 2020, exports (in terms of US$) increased by 0.5%, while imports (in terms of US$) increased by 2.7%, resulting in a trade surplus of US$46.4 billion.

The Manufacturing Purchasing Managers’ Index up from 50.6 in May 2020 to 50.9 in June 2020.

Major Economic Indicators	2019		Jan-Jun 2020
Major Economic Indicators	Value	Growth (%)	Value	Growth (%)
Population (mn)	1,400.0	-	1,400.0	-
Gross Domestic Product (RMB bn)	99,086.5	6.1¹	45,661.4	-1.6¹
GDP Per Capita (RMB)	70,892	5.7	-	-
Fixed Assets Investment ² (RMB bn)	55,147.8	5.4	28,160.3	-3.1
Added-Value of Industrial Output³	-	5.7¹	-	-1.3¹
Consumer Goods Retail Sales (RMB bn)	41,164.9	8.0	17,225.6	-11.4
Consumer Price Index	-	2.9	-	3.8
Exports (US$ bn)	2,498.4	0.5	1,098.8	-6.2
Imports (US$ bn)	2,076.9	-2.8	931.0	-7.1
Trade Surplus (US$ bn)	421.5	-	167.8	-
Utilised Foreign Direct Investment (US$ bn)	138.1	2.4	-	-
Foreign Currency Reserves (US$ bn)	3,107.9	1.1	3,112.3⁴	-0.2
Note: ¹ Real growth ² Urban investments in fixed assets ³All state-owned and other types of enterprises with annual sales over RMB 20 million ⁴ June 2020 Sources: The National Bureau of Statistics, Ministry of Commerce, and General Administration of Customs.

Major International Ranking

According to the World Bank, China is the second-largest economy in the world, behind the United States, ahead of Japan.

According to UNCTAD World Investment Report, China was the second-largest recipients of FDI inflows (USD 141 billion) in the world in 2019 (China ranked 2^nd in 2008), behind the United States (USD 246 billion).

According to UNCTAD World Investment Report, China was the fourth-largest source of outward FDI flows (USD 117 billion) in the world in 2019 (up from the 11^th in 2008), behind Japan (USD 227 billion), the United States (USD 125 billion) and the Netherlands (USD 125 billion).

According to the World Trade Organisation (WTO), China was the world’s largest exporter of merchandise trade in 2019 (up from the 11^th in 1995), reaching USD 2,499 billion.

According to WTO, China was the world’s 4^th largest exporter of commercial services in 2019 (up from the 16^th in 1995), reaching USD282 billion.

According to International Monetary Fund, China has the largest foreign currency reserves as of December 2019, reaching USD 3,108 billion.

According to HKSAR Marine Department, Shanghai’s container throughput surpassed Singapore and ranked the first in the world since 2010.

According to World Tourism Organisation (UNWTO), China ranked the world’s top tourism spending in 2018 (USD 277 billion), followed by the United States (USD 144 billion) and Germany (USD 94 billion).

According to Hong Kong Securities and Futures Commission, as at end December 2019, the market capitalisation of Shanghai Stock Exchange is the second-largest in Asia (after Japan) and the fourth largest in the world.

Recent Government Initiatives

In March 2016, the National People’s Congress (NPC) adopted the 13th Five-Year Plan. It also announces the launch of six key scientific and technological (S&T) projects and nine major projects under the “Scientific Innovation 2030” initiative, as well as the implementation of the “Made in China 2025” strategy for building a strong manufacturing country.

The Belt and Road Initiative (BRI) is a significant development strategy launched by the Chinese government in March 2015. The Chinese government also issued its Vision and Actions of Jointly Building the Silk Road Economic Belt and 21st Century Maritime Silk Road which outlined the framework, key areas of cooperation and cooperation mechanisms regarding the BRI.

The State Council promulgated the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area on 18 February 2019, mapping out the development plan for the Greater Bay Area (GBA). The Greater Bay Area is strategically positioned to be (i) a vibrant world-class city cluster; (ii) a globally influential international innovation and technology hub; (iii) an important support pillar for the Belt and Road Initiative; (iv) a showcase for in-depth cooperation between the Mainland and Hong Kong and Macao; and (v) a quality living circle for living, working and travelling.

On 5 July 2019, Guangdong has issued two key strategy documents relating to the Greater Bay Area – the Implementation Plan for the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area and a Three-Year Action Plan for Building the Guangdong-Hong Kong-Macao Greater Bay Area (2018-2020). The Action Plan proposes the implementation of 100 key measures across nine areas, including optimising and upgrading the environment of the GBA’s four core cities, establishing an international science and technology innovation centre and maintaining a state-of-the-art infrastructure base.

On 9 August 2019, China’s State Council has endorsed plans to establish Shenzhen as a model for the country’s wider urban development and, ultimately, one of the foremost cities in the world in terms of economic resource and sustained, high-quality development. The five priorities for its future development include: establishing a national model for high-quality development, delivering exemplary law-based governance, proving a model of optimum urban living, prioritising the prosperity and wellbeing of residents and pioneering sustainable development in an urban environment.

During the Boao Forum in April 2018, President Xi Jinping announced that China decides to adopt a series of new significant measures in expanding its opening-up. These measures include broadening market access, enhancing alignment with international economic and trade rules, strengthening protection of intellectual property rights and lowering imports tariffs.

China is shifting towards a consumption-driven economy by lowering its import tariffs. In November 2017, China cut import tariff on 187 consumer goods, the tariffs drop from an average 17.3% to 7.7% on products including pharmaceuticals, food, health supplements and clothing. From 1 July 2018, China has further reduced tariffs on 1,449 items, from an average tariff rate of 15.7% to 6.9%; and lower import tariffs on vehicles (from average 21.5% to 13.8%) and auto parts (from average 10.2% to 6.0%).

China reduced the Most-Favoured-Nation (MFN) tariff on 1,585 taxable items as of 1 November 2018. This coincided with the provisional MFN tariff rates being abolished for 39 import items, while the existing MFN provisional tariff rates remained in force for all goods unaffected by this latest round of cut. In total, the tariff reductions apply to 19% of all taxable import items, with the average tariff rate having fallen from 10.5% to 7.8%.

The provisional import and export tariffs on a range of goods were revised as of 1 January 2019 in line with a prior announcement by the State Council Customs Tariff Commission. This has seen new provisional tax rates applied to such items as food stuffs and various categories of industrial equipment, while duty on several information technology products will be removed and the rates for a raft of other IT products reduced as of 1 July 2019.

From 1 April 2019, China implemented a value-added tax (VAT) cut for manufacturing sector from 16% to 13% and VAT cut for construction and transportation sectors from 10% to 9%. From 1 May 2019, China reduced social security fees from 20% to 16%.

The Foreign Investment Law of the People’s Republic of China took effect from 1 January 2020. This law assures non-mainland investors of national level protection for all their committed funds, income and other interests, provided their projects so not fall within the remit of the statutory Negative list.

Major Economic Indicators

Major Economic Indicators

Chart: Real GDP Growth (China)

Chart: GDP composition, by sector (2019) (China)

Chart: Fixed Assets Investment Growth (China)

Chart: Added-value of Industrial Output Growth (China)

Chart: Retail Sales Growth (China)

Graph: Change in CPI (China)

Chart: Manufacturing PMI (China)

Chart: Growth of the RMB Loans (China)

Chart: RMB Against the US dollars (China)

Chart: Foreign Exchange Reserves (China)

Sources: The National Bureau of Statistics, Pacific Exchange Rate Service; State Administration of Foreign Exchang

External Trade

External Trade

Chart: Growth of Trade (China)

Chart: Trade Balance (China)

Chart: Major Export Commodities (2019) (China)

Chart: Major Export Markets (2019) (China)

Chart: Trade in Services (China)

Sources: Ministry of Commerce, General Administration of Customs

Investment Flows

Investment Flows

Chart: Flows of Inward FDI (China)

Chart: Flows of Inward FDI by Major Source (2018) (China)

Chart: Stock of Inward FDI (China)

Chart: Stock of Inward FDI by Major Source (2018) (China)

Chart: Flow of Outward Direct Investment (China)

Chart: Flow of Outward Direct Investment by Major Destination (2018) (China)

Chart: Stock of Outward Direct Investment (China)

Chart: Stock of Outward Direct Investment by Major Destination (2018) (China)

Trade Relations, Trade Policies and Tax Treaties

Trade Relations, Trade Policies and Tax Treaties

Trade Relations

Founding member of the Asian Infrastructure Investment Bank (AIIB)
Member of the World Trade Organization (WTO)
Member of the Asia-Pacific Economic Cooperation (APEC)
Member of the Pacific Economic Cooperation Council (PECC)
Member of the Asian Development Bank (ADB)
Member of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)
Observer of the Trade Committee of the Organization for Economic Cooperation and Development (OECD)

Trade Policies

According to WTO, China’s average applied most favoured nation (MFN) tariff rate was 9.8% in 2018, progressively down from 15.3% in 2001. The average tariff was higher for agricultural products at 15.6% while the average tariff for non-agricultural products was 8.8%.
Since expanding domestic consumer demand is an important move in achieving stable economic growth and economic restructuring, the State Council further reduced the import tariffs on 187 foreign daily consumer goods items in December 2017. The average import tariff has been lowered down from 17.3% to 7.7%. On 1 July 2018, China will further lower import tariff on 1,449 items, from an average tariff rate of 15.7% to 6.9%.
China adopted the practice of “quarantine inspection before customs declaration” in customs clearance. Import Goods Clearance Slips and Export Goods Clearance Slips stamped with the special seal of inspection and quarantine authorities are issued to goods subject to entry-exit inspection and quarantine. The Customs will examine and release the goods against the Import Goods Clearance Slip or Export Goods Clearance Slip issued by the entry-exit inspection and quarantine authorities at the place of customs declaration.
Inspection is required for all import and export goods listed in the Catalogue of Import and Export Commodities Subject to Inspection and Quarantine by Entry-Exit Inspection and Quarantine Authorities, or subject to inspection pursuant to other laws and regulations.
Safety licence and other regulatory requirements apply to imports of medicines, foodstuffs, animal and plant products, and mechanical and electronic products. For details, please refer to State Administration for Market Regulation website.

For details, please refer to Guide to Doing Business in China.

Free Trade Agreements (FTAs)

Currently, China has signed and implemented 20 free trade agreements (FTAs), 13 FTAs are under negotiation and another 8 FTAs are under considerations. China has also signed and implemented 1 preferential trade agreement.

China’s FTAs (signed and implemented)

China-Mauritius FTA
China-Maldives FTA
China-Georgia FTA
China-Australia FTA
China-Korea FTA
China-Switzerland FTA
China-Iceland FTA
China-Costa Rica FTA
China-Peru FTA
China-Singapore FTA
China-New Zealand FTA
China-Chile FTA
China-Pakistan FTA
China-ASEAN FTA
Mainland and Hong Kong Closer Economic and Partnership Agreement (CEPA)
Mainland and Macau Closer Economic and Partnership Agreement
China-ASEAN FTA Upgrade
China-Chile FTA Upgrade
China-Singapore FTA Upgrade
China-Pakistan FTA second phase

China’s FTAs Under Negotiation

Regional Comprehensive Economic Partnership (RCEP)
China-GCC (Gulf Cooperation Council) FTA
China- Japan-Korea FTA
China-Sir Lanka FTA
China-Israel FTA
China-Norway FTA
China-New Zealand Upgrade FTA
China-Moldova FTA
China-Panama FTA
China-Korea FTA second phrase
China-Palestine FTA
China-Peru FTA Upgrade
China-Cambodia FTA

China’s FTAs Under Consideration

China-Columbia FTA Joint Feasibility Study
China-Fiji FTA Joint Feasibility Study
China-NePal FTA Joint Feasibility Study
China-Papua New Guinea FTA Joint Feasibility Study
China-Canada FTA Joint Feasibility Study
China-Bangladesh FTA Joint Feasibility Study
China-Mongolia FTA Joint Feasibility Study
China-Switzerland FTA Upgrade Joint Feasibility Study

Preferential Trade Agreement

Asia-Pacific Trade Agreement (APTA)

For details, please refer to China FTA Network.

Economic Relations with Hong Kong

Economic Relations with Hong Kong

Hong Kong is the largest source of overseas direct investment in the Chinese Mainland. By the end of 2018, among all the overseas-funded projects approved in the Chinese Mainland, 46.3% were tied to Hong Kong interests. Cumulative utilised capital inflow from Hong Kong amounted to US$1,098.1 billion, accounting for 54.1% of the national total.
Hong Kong is also the leading destination for China’s FDI outflow. According to Chinese statistics, by 2018, the stock of FDI going to Hong Kong accumulated to US$1,100.4billion, or 55.5% of the total outflow of FDI.
Chinese Mainland is one of the leading sources of inward investment in Hong Kong. According to Hong Kong statistics, the stock of Hong Kong's inward investment from the Chinese mainland amounted to US$526.1 billion at market value or 26.8% of the total at the end of 2018.
As of December 2019, 1,241 mainland companies were listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalisation of around US$3.58 trillion, or 73% of the market total.

Hong Kong's Direct Investment in the Chinese Mainland

Projects, contracted and utilised direct investment	2018		1979-2018
Projects, contracted and utilised direct investment	No./ Value	Share of the national total (%)	No./ Value	Share of the national total (%)
Number of approved projects	39,868	65.9	444,398	46.3
Utilised direct investment (US$ bn)	89.9	66.6	1,098.1	54.1
Sources: China Monthly Economic Indicators

Hong Kong was the Mainland's third largest trading partner (after the US and Japan) in 2019. According to China's Customs Statistics, bilateral trade between the Mainland and Hong Kong amounted to US$288.0 billion (6.3% of the Mainland's total external trade) in 2019. Of which exports from the Chinese Mainland to Hong Kong stood at US$278.9 billion, making Hong Kong the second largest export market, after the US.
The Mainland has been Hong Kong's largest trading partner since 1985. Share of the Mainland in Hong Kong's global trade jumped from 9.3% in 1978 to 50.8% in 2019. The Chinese Mainland was Hong Kong’s largest import source accounting for 46.6% of Hong Kong’s total imports, and the largest export market accounting for 55.4% of Hong Kong’s total exports in 2019.
Hong Kong's trade with the Chinese Mainland is to a large extent related to outward processing activities. In 2019, 25.3% of Hong Kong's total exports to the Chinese Mainland were related to outward processing activities. Meanwhile, 38.6% of Hong Kong’s imports from the Mainland and 68.7% of Hong Kong's re-exports of the Mainland origin to all countries were related to outward processing.

Hong Kong's Trade with the Chinese Mainland [1]

Unit (US$ million)	2019			Jan-May 2020
Unit (US$ million)	Value	Growth (+/-,%)	Ranking	Value	Growth (+/-,%)	Ranking
Total exports	283,443	-3.3	1	109,330	1.0	1
Domestic exports	2,649	0.9	1	959	0.5	1
Re-exports	280,794	-3.4	1	108,371	1.0	1
Imports	263,858	-5.9	1	89,069	-15.1	1
Total Trade	547,301	-4.6	1	198,398	-6.9	1
Trade Balance	19,585			20,261
Sources: Census & Statistics Department of Hong Kong [1] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the total business managed by Hong Kong companies.

China’s halal food trade shows promise, thanks to the country’s plan to expand links with countries along the Belt and Road.

Much of the attention on China’s Belt and Road Initiative, which envisions linking 65 nations from Southeast Asia, Africa and Europe, has focused on infrastructure opportunities. But business prospects arising from China’s economic development plan extend beyond infrastructure and finance.

At an August seminar organised by the Hong Kong Trade Development Council (HKTDC), the focus centred on developing the nascent but lucrative halal food industry to cater to the large Muslim population along the Belt and Road regions.

The global halal food market was worth US$500 billion in 2014, according to seminar speaker, Wang Guoliang, Deputy Secretary General of the China Islamic Association. He said companies should consider not just the Western European market, but also the emerging Southeast Asia market, where the majority of Muslims live.

“Eighty per cent of halal foods consumed are imported,” said Mr Wong. “The halal sector is expected to double to US$6.4 trillion in 2018, from US$3.2 trillion in 2014.” He said the three largest halal consumer markets are in the Middle East, Southeast Asia and Europe.

Strong European Following

An Arabic word meaning “lawful” or “permitted”, halal is used to describe goods or actions that are in keeping with Sharia law and Islamic principles. While many traders are aware that pork and alcohol are diet restrictions, halal calls for animals to be killed just before processing and using special slaughtering conditions. Blood by-products are also forbidden.

Such strict quality control has given halal foods a wide following in Europe. Mr Wang, noted that about 500 million non-Muslims consume halal foods, representing a large untapped market for Chinese food suppliers.

Halal Certification

Chinese companies currently export less than one per cent of halal food supplies annually. Among the new entrants is Hong Kong-based financial group, Mega Capital International Holdings Ltd, which established a halal food division in June 2014 to connect Chinese manufacturers with Jakim, Malaysia’s Department of Islamic Development responsible for issuing halal certifications.

“Jakim has two main criteria,” said Carson Kwong, President of the company’s halal food subsidiary, MCH Halal International Holdings Ltd. “First, it’s to make sure production flows smoothly and is hygienic. Then, it’s the religious component – that the food is properly prepared according to Islamic principles.”

Standards Pioneer

Recognised by the United Nations and in 57 countries, the Jakim certification can help operators build an extensive distribution network across Asia, the Middle East and North Africa, according to Rusli Mohd Nor, Chief Advisor of Jabatan Kemajuan Islam Malaysia.

“Malaysia is the first in the world to introduce halal food standards,” said Mr Nor. “We are keen to serve as a stepping stone for Chinese halal exports targeting the Belt and Road region.” Mr Nor noted that halal logistics involves managing the supply chain, from transportation to storage and handling, to ensure adherence to Islamic principles, with the goal of safeguarding the integrity and purity of halal products.

While Jakim officials periodically conduct on-site inspections, Mr Kwong said his company pays close attention to factories without ISO9000 certification. The company’s halal food division has already received about 100 applications since starting operations in June 2014.

“Many Chinese SMEs are waking up to the lucrative opportunities in Southeast Asia,” said Mr Kwong. “Events such as the HKTDC seminar encourage them to think out of the box by targeting untapped markets.” He said the seminar generated plenty of discussion, which he welcomed as the halal food business remains an untapped niche in Hong Kong. Eligible applicants, he said, can become halal-certified in about two months, with two years’ validity.

Mr Kwong underscored Hong Kong’s position in helping mainland companies go global. “Free access to information is our biggest advantage,” he said. “We can access Jakim’s big data on halal trade, which is important for our upcoming online trading platform. It provides an alternative channel for Chinese manufacturers to connect with international buyers.”

The company will set up customer services centres in Shenzhen and Guangzhou, and seek funding support from mainland provincial governments to market Chinese-made halal products to the world.