Rapaport Magazine

Hong Kong

By Liana Cafolla
Speculation or Real Recovery

Impressive growth in Mainland China’s industrial production,
which was up 10.1 percent in November compared with a year earlier, pushed some market watchers to suggest that the worst was
over in the recent gloomy economic outlook. However, others believe
that the rise is more likely due to political manipulations than actual economic improvements.

   “Speculation abounds that the recent surge in activities in and out of
the bonded duty-free zones is largely encouraged by local governments cooking up their export figures ahead of the 18th Party Congress,” said ANZ bank economists.

   In contrast to the growth in industrial production, a sharper-than-expected slowdown in export growth in Mainland China reflected falling shipments of goods to Europe and the U.S. The decline was due to weak holiday demand, according to economists. Mainland customs figures showed that exports in November were just 2.9 percent above the same month in 2011, which was well below the 11.9 percent growth seen in October and the
9.9 percent growth recorded in September.

   “With the seasonal boost from pre-Christmas orders fast fading, shipments to the West will likely stay soft into 2013,” said economists
from HSBC bank. “Lackluster exports pose the biggest downside risk to China’s ongoing recovery.”

   Mizuho Securities forecasts growth of less than 6 percent in China’s exports in 2013 based on uncertainty about the U.S. ability to resolve its fiscal cliff issue and reports that the euro area’s GDP growth will contract by .30 percent in 2013.

   The fallout from the territorial dispute between China and Japan over ownership of the Diaoyu Islands — known as the Senkaku Islands in Japan — continues to grow. Most recently, the impact of the dispute was reflected in a sharp drop in Mainland imports from Japan, which fell by 15 percent in November, after a fall of 10.2 percent in October.
   The number of Japanese visitors to Hong Kong also fell sharply and was down 24 percent in October compared to the same month in 2011. Tourism operators blamed the decline on the sovereignty dispute. The drop is a concern for the Hong Kong government, which has been trying to broaden its tourism base and reduce the dominance of visitors from the Mainland, who accounted for 67 percent of total arrivals in 2011.
   “Hong Kong is part of China and the perception among the Japanese people is not to differentiate between them,” said Masaki Hirata, executive director of the Japan National Tourism Organization’s Hong Kong office. He added that Japanese visitors were deterred from coming to Hong Kong by fears of a negative reception and possible violence.

   With the return to power of Shinzo Abe in Japan in a landslide win for his Liberal Democratic Party in December, tensions between the two countries over the islands are likely to increase, further damaging trade on both sides. Following the election, Abe vowed not to compromise on the islands, saying there was “no room for negotiation” on the issue. During the election, he campaigned for an end to Japan’s pacifist constitution and an increase in spending on the military.
   China’s military, which is now controlled by Xi Jinping, the country’s newly elected president, sent a government surveillance aircraft to the islands in December, a move that is likely to heighten regional tensions even further. China has sent several surveillance ships to waters around
the island in recent months, but this is the first time it has sent an aircraft to accompany them. Japan complained that the aircraft violated its airspace.

   China’s stance on the islands appeared to be hardening recently.
In November, it angered neighboring countries by printing a map in millions of new passports that showed the islands as part of its
South China Sea territories.

   Fine jewelry maker Qeelin, which was founded in 2004 by Hong Kong designer Dennis Chan and Guillaume Brochard, a French entrepreneur,
has been taken over by PPR. The Paris-based company owns such luxury brands as Yves Saint Laurent, Gucci and Bottega Veneta. PPR bought
a majority share in Qeelin, which has seven shops in China, four in
Hong Kong and three in Europe. It is the French company’s first
Asian label.

   “The market for jewelry in China is very sizable, and there’s a tradition
of jewelry consumption in the country,” Alexis Babeau, managing director of PPR’s luxury division, told the South China Morning Post. “We are optimistic about the future growth potential for Qeelin,” he added.

   Qeelin’s most famous product is a bejeweled panda bear, a beloved animal in China, and the majority of the company’s customers are Mainland Chinese.

Article from the Rapaport Magazine - January 2013. To subscribe click here.

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