2016 | ISSUE 1 English繁體简体
Integrated Solutions eNewsletter
THEME STORY: Hong Kong Re-industrialization. Opportunity?


HK I.T. needs to CATCH UP!

Hong Kong "Re-industrialization. Opportunity?

"Re-industrialization" is a policy to stimulate economic growth especially under the government's assistance. It helps the revival and modernization of the old industrial sector, and supports growth in the emerging industrial                                              sector."

"Re-industrialization" is believed to be familiar to experts. However, it is possible that it may be completely new to laymen. According to the 2016 Hong Kong Government Policy Address, "Re-industrialization" is one of the measures outlined by the Chief Executive, CY Leung. It is a potential and new direction to promote economic growth and a smart manufacturing era in the city.

Simply speaking, "Re-industrialization" is a policy to stimulate economic growth especially under the government's assistance. It helps the revival and modernization of the old industrial sector, and supports growth in the emerging industrial sector. For a more simple explanation, "Re-industrialization" means"Industrial Reflux". Nonetheless, "Re-industrialization" is not merely referring to the relocation of plants and factories back to Hong Kong, but it is through the digitization, computerization and fully automation of the production process throughout the industrial production in order to develop the advanced"Industry 4.0"goal.

"Industry 4.0" focuses on comprehensive intelligence. Every workflow can be automated and personalized. In recent years, many factories closed down in the Pearl River Delta due to a serious shortage of workers. According to the "People's Daily", statistics showed that the employment gap is around 100,000 or more only in Dongguan. Yet, if machinery is to be used in the production, it is not necessary for factories to be set up in the Pearl River Delta or South-East Asia, but rather it will be more favorable to the region near the consumption markets and the logistics centers. In other words, industrial reflux can be made feasible by Hong Kong’s advocation of "Re-industrialization".

"Re-industrialization" is not a new term created by the Hong Kong Government; it had been mentioned back in the 60s by the economists. As we all know, Hong Kong’s industrial plants moved to the North and declined gradually. But in fact, this phenomenon is not difficult to be found in the advanced countries around the world. Because of globalization, it is increasingly common that factories are being moved to China and South East Asia, resulting in the decline of many national industries in various countries. Using the United States as an example, according to the World Bank report, the GDP ratio of the U.S. service sector before the financial crisis is about 77% whereas the manufacturing sector accounts for only about 12.9%. The service sector is the main driving force in the US economy while the largest contribution is actually from the financial industry which is "non-industrial". This phenomenon is similar to Hong Kong, while Hong Kong’s ratio of manufacturing industry is even lower.

There are two main reasons to launch "Re-industrialization". Firstly, manufacturing is important in enhancing the growth potential and sustainability. Manufacturing is the main driving force of research and development. It benefits new ideas, new inventions and produces patents so as to encourage the renewal and promotion of high technology, allowing the economy to produce more and better products on the basis of existing resources, and improving potential economic growth rate. In the U.S., research department spends more than two thirds of the funds on the manufacturing sector, and a vibrant manufacturing sector is an important basis for research and development activities. The continuous improvement of production technology will lead to an increase in manufacturing productivity, which in turn is conducive to achieving sustainable economic growth.

Secondly, manufacturing helps driving the overall economic growth and increasing the employment levels. Production activities in manufacturing will create a large demand on raw materials, provision of service on construction and energy service, producing the multi-sector multiplier effects. According to the research of the US Bureau of Economic Analysis, every US$1 of manufacturing the final product will support other sectors of the economy for about US$1.40 output value. The multiplier effect of the manufacturing sector is also reflected in the employment creation. Through the extension of the supply chain, from construction to packaging, electronic communications and other fields, manufacturing industry has formed a job stimulus in various areas.

The most direct goal of the implementation of "Re-industrialization" is to speed up the economic recovery and safeguard employment growth. The medium-term goal is to be able to optimize the industrial structure, and enhance Hong Kong's competitiveness in the international market. As a forward-looking city, the long-term goal of "Re-industrialization" is to rectify the virtual economy from being out of touch with the real economy in order to attain sustainable development. In other words, "Re-industrialization" is the corrective mechanism for the developed economies to deal with the discrepancy between the real economy and the virtual economy. Thus, the completion of "Re-industrialization" means that the developed economy has returned from excessive "De-industrialization" to the real economy.

During the process, through the application and promotion of high-tech, developed economies will further advance its manufacturing industry while strengthening the integration of manufacturing and service industries; promoting the development of high-end service sector, and taking it as an opportunity to bolster the convergence of real economy and the virtual economy, so as to achieve a sustainable economic development.

Based on the above analysis, coupled with the excessive emphasis on the real estate and financial services in Hong Kong, a serious problem of economic imbalance has existed for many years. It is indeed not a healthy economic structure. Therefore, it may more good than harm for the Government to advocate the reflux of manufacturing industry, and put the implementation of"Re-industrialization"into practice.