Despite favorable policies offered to Hong Kong people starting an enterprise on the Chinese mainland, there are still obstacles for them to clear, especially in self-employed businesses. Liu Yifan reports from Hong Kong.
Li Chau-faat — the Hong Kong-born owner of Jiangmen-based beauty products shop Yishihang — has been swamped with business calls and online chats with his suppliers and clients amid an air of optimism as COVID-19 wanes.
With the lifting of anti-pandemic restrictions on the Chinese mainland late last year, hope has prevailed across the nation as the world’s largest consumer pool unleashes its buying power greater and sooner than expected.
It’s encouraging to see a more inclusive environment for Hong Kong people on the mainland, and some of my friends would like to settle down in Jiangmen.
Li Chau-faat, Hong Kong-born owner of Jiangmen-based beauty products shop Yishihang
“It’s a striking contrast to the sagging market over the past few years,” says Li, who’s poised to jump-start his business. “I know many clients are already becoming less budget-conscious. And it’s reasonable to believe business will be back on track this year.”
As one of the very first businesspeople from the Hong Kong Special Administrative Region to secure a front seat in the mainland’s booming business environment amid deepening cross-boundary integration over the decades, Li has good reason to be hopeful.
Li won a license to deal in beauty products in 2004 in Jiangmen — a city in Guangdong province that traditionally has been home to millions of overseas Chinese. Jiangmen is also among the 11-city cluster in the region’s emerging economic powerhouse, the Guangdong-Hong Kong-Macao Greater Bay Area.
Li’s business began a year after the Closer Economic Partnership Arrangement was signed by the HKSAR government and the central government. The free-trade pact covers trade, investments, and economic and technical cooperation, serving as the bedrock of closer ties between Hong Kong and the mainland.
“My operations have gone fairly well. The Jiangmen government has offered loans and other financing channels for Hong Kong people, just like mainland residents,” says Li, revealing that he has obtained millions of yuan in loans from mainland banks so far.
In addition to giving capital support, mainland authorities have continued to expand the scope of self-employed businesses for Hong Kong residents. More than 130 categories of businesses, except for sectors like tobacco and auctions, are open to Hong Kong individuals.
“It’s encouraging to see a more inclusive environment for Hong Kong people on the mainland, and some of my friends would like to settle down in Jiangmen,” says Li.
Li Chau-faat, Hong Kong-born owner of Jiangmen-based beauty products shop Yishihang. (PHOTO PROVIDED TO CHINA DAILY)
Business support
According to the Guangdong Administration for Market Regulation, the province saw an average of more than 1,200 new self-employed businesses owned and set up by Hong Kong residents each year from 2013 through 2016.
The trend has continued following a boom in infrastructure projects linking Hong Kong with the Pearl River estuary and the development of the Greater Bay Area, which comprises nine mainland cities in Guangdong, and the Hong Kong and Macao SARs.
Among an increasingly sophisticated jigsaw puzzle of interconnected infrastructure projects in the Greater Bay Area is the 55-kilometer Hong Kong-Zhuhai-Macao Bridge — the world’s longest bridge-tunnel sea-crossing, which opened in 2018. Other key projects include express rail links, special cooperation zones, and massive real-estate investments that have boosted the cross-boundary flow of people, capital, logistics and information.
However, weaker demand from clients following the COVID-19 outbreak in early 2020 hit Li’s business hard. “The pandemic caught many business owners like me off guard. Revenue plummeted, and I could only see cash burned up,” he recalls. “Without relief measures, my shop would have closed.”
Against all odds and thanks to the lifeline thrown by the local government, Li rode out the storm. During the pandemic, he was exempted from paying rent for a 1,000-square-meter warehouse for six months, saving him tens of thousands of yuan.
To further cut operating costs, strengthen financial support and ease tax burdens for individually owned businesses, the Guangdong government rolled out a package of 31 supporting measures in January. The package includes encouraging banks to offer incentives and discounts of not less than 50 percent for individually owned businesses when they open their first account with them. “Eligible” business owners are also allowed to apply for loans of up to 500,000 yuan ($72,700) that are guaranteed by the National Financing Guarantee Fund, plus interest subsidies.
“The new provincial policies are an important aspect of cross-boundary integration. They open up vast opportunities for most Hong Kong people, or those in the middle-to-lower levels, to grab the dividends from the mainland market,” says Cao Zhongxiong, director of the Department of Digital Strategy and Economics at China Development Institute, a Shenzhen-based think tank. “It’s a major breakthrough because our favorable policies had given high priority to enterprises in the past, particularly large or innovative companies.”
Li is among more than 9 million self-employed business owners in Guangdong who are bound to reap the benefits of the new policies.
Pu Chun, deputy head of the State Administration for Market Regulation, said last year that as major market entities that carry out business activities by individuals and families, self-employed businesses play an irreplaceable role in driving economic growth and promoting employment.
According to the market watchdog’s data, every registered self-employed business can create about three jobs, or a combined total of 25 million jobs, in Guangdong.
Xiao Geng, chairman of the Hong Kong Institution for International Finance and director of the Institute of Policy and Practice at the Shenzhen Finance Institute, expects a growing trend of Hong Kong people heading north to start self-employed businesses, backed by the mainland’s new supportive measures and their increased appeal.
Many mainland cities in the Greater Bay Area, which are less than an hour away by high-speed train from Hong Kong, are considered livable places by many Hong Kong residents, given their more-affordable housing and living costs, as well as the intimate cultural and linguistic ties among cities in the region.
In June 2022, the State Council released a blueprint for Guangzhou’s Nansha district to build homes there for Hong Kong and Macao residents, with measures to woo Hong Kong businesses and professionals, and upgrade public resources, such as healthcare and elderly services.
The southern Guangzhou district, along with Shenzhen’s Qianhai and Zhuhai’s Hengqin economic development zones, have been earmarked by the central government as three key cooperation areas aimed at fostering Hong Kong and Macao communities on the mainland.
“An improving environment will undoubtedly attract more Hong Kong people, and if they intend to make a living on the mainland, it would be much more convenient for them to apply to operate self-employed businesses instead of setting up a company,” explains Xiao, adding that Hong Kong people will help drive the mainland’s development and offer a workforce that will buttress the local labor market.
But, despite Guangdong’s favorable measures and a gradually recovering economy, Cheung Ho-cheong, who founded the Lafengxiaozhu snack bar in Shenzhen, has reservations.
Liu Guangming, director general of the Guangdong Administration for Market Regulation (Guangdong Intellectual Property Administration), introduces 31 supporting measures to support self-employed individuals at a news briefing on Jan 29. (PHOTO PROVIDED TO CHINA DAILY)
Hurdles to overcome
With about 15,000 yuan as initial capital last year to start up the snack bar selling egg waffles, Cheung’s business had relied on online orders during the pandemic and found it difficult just to break even.
To make matters worse, the Hong Kong entrepreneur, without adequate assets and turnover, couldn’t obtain loans from mainland banks. The only grant he had received was an entrepreneurship subsidy of 6,000 yuan after he had paid social security for six consecutive months. “Would 6,000 yuan be enough?” asks Cheung with a wry smile. “Lack of capital has always been the biggest challenge. I hope the threshold for obtaining loans can be lowered and more subsidies offered.”
The financial hurdles facing Cheung aren’t rare, as Hong Kong people normally do not have mainland assets that can be used as collateral for securing loans, says Cao.
“It’s just one big obstacle Hong Kong people face when they start a business on the mainland. There’s an urgent need to address the gaps between the mainland’s business regulations and those of Hong Kong,” says Cao. “Unlike enterprises, which may easily find consultants, self-employed businesses have limited resources in dealing with legal and compliance problems.”
Another Hong Kong entrepreneur, Jessie Tse, went to Shenzhen several years ago to launch a factory manufacturing zippers until production hit a bottleneck during the pandemic.
In anticipation of a market turnaround, Tse shifted to the service industry and opened a restaurant in the city’s Longhua district late last year. But so far, she’s in the dark about any supporting measure that could help her business alleviate operating costs.
“I’ve made Shenzhen my home. If it doesn’t work out this time, I’ll look for other businesses,” she says. “Anyway, I guess this year can’t be any worse than the past three years.”
Like Cheung and Tse, most Hong Kong residents who are willing to run a business on the mainland tend to opt for manufacturing, catering and other traditional sectors. But it could be a better idea for them to seek fresh opportunities and tap new markets, such as cross-boundary logistics, e-commerce and online streaming, suggests Xiao.
“For example, express delivery services on the mainland are much more developed than Hong Kong’s, and many goods in Hong Kong come directly from mainland factories and markets. Hong Kong residents could consider setting up a transfer station as a self-employed business in Guangdong to operate cross-boundary delivery services.”
According to Xiao, such a station could gather various types of goods and then distribute them to Hong Kong. This would streamline the entire cross-boundary delivery process and help cut costs.
“Self-employed businesses play a supporting role in the economy rather than the ‘star’ part. But, it doesn’t mean they can’t think outside the box.”
Contact the writer at evanliu@chinadailyhk.com
