BEIJING: Hong Kong must continue to develop its distinctive position as an open, intermediary business center separate from the mainland in order to maintain its appeal globally, including for South Korean businesses, according to the South Korean consul general in the city. According to Baek Yong-chun, who was appointed the 28th Consul General in late 2020, the South Korean business community in Hong Kong has declined as a result of COVID-19 policies over the past two years. However, he is unsure whether the Greater Bay Area strategy will make the city a more desirable investment location.
He described the current status of Beijing's plan to turn nine cities in Guangdong province, Hong Kong and Macau into economic superpowers by 2035. According to Back, the normalization of land transport routes between the city and Guangdong province, which has been hampered by strict coronavirus rules on both sides of the border, is the most urgent need for South Korean businesses in Hong Kong.
The first priority, he said in an exclusive interview with the South China Morning Post, is to normalize the dialogue between the beginning and the end, both on a physical and human level. If they are missing then nothing more can be done. The fact that Hong Kong is a free, open and competitive environment with active international exchanges is ultimately its strength.
In 1949, when Hong Kong was still a British colony, South Korea opened a consulate there, a year after the first Republic of South Korea was established in 1948. This was about 43 years ago when the country opened its embassy in Beijing. The first five foreign diplomatic missions established by the newly formed Korean government were all based in the United States, with the exception of the General Office of the Consulate in Hong Kong, which was the only one in Asia. According to Back, this shows how unique Hong Kong's relationship with Korea is.
Before Seoul and Beijing formalized their diplomatic relations in 1992, the office periodically served as a "window between the two countries", according to Back. On Wednesday, China and South Korea will celebrate 30 years of diplomatic relations. The Consul General claimed that a South Korean-flagged ship entered Hong Kong's Victoria Harbor for the first time as an international trading port in 1948, reflecting the close ties between the trading partners that continue today.
That initial trip took place, months before South Korea gained independence in August 1948, which included seafood from Busan. With an estimated US$37 billion in exports to South Korea in 2021, Hong Kong is the country's fourth-highest value export market after more than seven decades. Hong Kong serves as an intermediary business center for most South Korean companies, giving them access to the mainland.
11 percent of South Korean exports to Hong Kong go to other countries in the region, while about 81 percent is re-exported to the mainland. Hong Kong now has only 9%. Semiconductors account for 85 percent of all South Korean exports to Hong Kong. On the other hand, Hong Kong exported goods worth US$2.2 billion to South Korea in 2021, of which 55% came from the Chinese mainland, 44% from other countries and 2% from Hong Kong.
According to Byk, the COVID-19 pandemic has had such a negative impact on South Korean businesses in Hong Kong because of the emphasis on intermediate trade.
When the border with Guangdong was closed, for example, South Korean companies shipping chips to Chinese cities such as Shenzhen via Hong Kong faced immediate difficulties. While new flight paths for in-demand semiconductors were eventually discovered, the issue remained for exporters of less glamorous Korean-made home goods. Since it is not necessary that household goods be manufactured in Korea and Chinese companies could easily find alternative sources, this resulted in the destruction of their sales network, according to Back.
"Finally, our office assisted the Korea Trade-Investment Promotion Agency in helping 50 companies whose sales networks in China were disrupted by land transportation disruptions, find alternative markets." The COVID-19 regulations in Hong Kong have had a significant impact on South Korean businesses engaged in the service and travel industries.
Several well-known names in the hospitality and travel sectors have completely closed their operations in Hong Kong and shifted to Korea, he claimed. Even businesses that didn't leave the area completely cut back on staff and relocated employees. Since the pandemic began, the number of South Korean nationals living in Hong Kong has decreased. According to Back, the number of Koreans holding short-term resident visas, excluding permanent residents and students studying abroad, has dropped in half from 10,000 to 5,000 from two and a half years ago.
Beck expressed skepticism when asked if he believe that the Greater Bay Area would revitalize Hong Kong and make the region attractive once again for South Korean businesses.
This is how the Chinese government works. According to him, the Chinese style is only to present the bigger picture to the central government. After presenting the big picture, it is left to the local government to fill in the details. ... Therefore, local governments in Guangdong, Hong Kong and Macau will eventually need to find a way to make it work as the central government pushes for a comprehensive development plan. They are given a blank canvas to work on. I wouldn't say that I fully understand the future of [Greater Bay Area] at the moment.
Beck said that by promoting its exclusivity and competitiveness, rather than merely "demarcating industrial sectors", Hong Kong would be able to maintain its international status. "As for China's background, it is clear that Hong Kong will create a lot of unique and diverse business opportunities. ... However, he added, "Hong Kong does not need to exist if it really reflects China.
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