Research FindingsBack

The research questionnaire consists of 20 main questions, and ended with mapping the company background. Major results of each question are described as follows. For details, please refer to the frequency tables listed in Appendix II. When reading the text, it is noteworthy that the figures are rounded up to the nearest integers, whereas for figures with the first decimal being "5", the second decimal place will also be considered to decide if the rounding-off is deemed appropriate. Hence, inconsistency may exist when compared with the figures listed in the tables.

Current engagement in the China domestic sales market

The survey began by asking the respondents if their business had currently engaged in the China domestic sales market. Results revealed that half of the overall sample had no such engagement (50%) at the time of interview, in which, 55% SMEs and 37% MMEs had not engaged in China domestic sales market. For those who had, 11% of the SMEs said "less than 10%" of their total sales turnover in 2009 were attributed to the domestic sales. While a respective of 4% said "11-20%" and "21-30%", another 1% said "31-40%". At the same time, 6% said "41-50%", 2% said "51%-60%", a respective of 3% said "61%-70%", "71%-80%", "81%-90%" and "91-100%". Similarly, most MMEs (15%) had "1-10%" of their total sales turnover generated from the China domestic sales market. Another 7% said "11-20%", 5% said "21-30%" and 2% said "31-40%". The corresponding figures for "41-50%", "51-60%", "61-70%" and "71-80%" were 6%, 2%, 8% and 3%. Finally, close to 10% of the MMEs interviewed were heavily engaged in the China domestic market by having "81-100%" of their annual turnover generated by this segment. Overall speaking, among the 447 companies who were able to provide a definite answer to this question, the mean percentage out of the total sales turnover was 43% (Table 3).

Among those who had already engaged in China domestic sales market at the time of interview, over half of them (51%) had entered the market for "more than 10 years", with 46% SMEs and 59% MMEs saying so. Meanwhile, 20% of the overall sample said they had been engaging in China domestic sales market for "6 to 10 years", and 18% said "3 to 5 years". Those who said "1 to 2 years" accounted for another 5%, whereas only 3% started engaging in China domestic sales market "less than a year ago" (Table 4).

This group of respondents was then asked to describe their companies』 geographical spread for the China domestic sales. Findings showed that for both the SMEs and MMEs, the most popular area was "Guangdong province" (78% & 77% respectively), followed by "Changjiang Delta" (45% SMEs; 63% MMEs), "Beijing and Bo-hai surroundings" (30% SMEs & 43% MMEs), and then "Fujian province" (16% SMEs; 26% MMEs). While a respective of 12% of SMEs said they had market in "Sichuan" and "Harbin", roughly the same proportion of these companies had business in "Chongqing" (11%), "Xian" (11%) and "Guangxi" (10%). At the same time, 24% of MMEs said they had domestic sales in "Guangxi". A respective of 23% said "Chongqing" and "Sichuan", whilst 22% said "Harbin" and 21% said "Xian" (Table 5).

When asked whether they had set up any sales or service points in mainland China to facilitate the domestic sales, more than half of these SMEs said "no" (51%), while almost one-third reported they had set up a "wholly-owned foreign enterprise" (31%) there and the remaining 15% claimed they had set up "joint venture". The situation was not the same for the MMEs with slightly over one-third of them had no sales or service points in mainland China (34%) whereas almost half had set up "wholly-owned foreign enterprises" (47%) and 16% had set up "joint venture" (Table 6).

As for domestic support, excluding those who had set up joint ventures in mainland China, over half of these SMEs (53%) and MMEs (52%) said they did not have any domestic partners or network, while those who affirmed that they had partners or network supporting their current domestic sales business accounted for 44% of the SME sample and 46% of the MME sample correspondingly (Table 7).

Regarding the major obstacles for starting or running domestic sales, "too many / unclear regulations" topped the lists for both target groups, apart from this, opinions were rather split. Taking the overall sample, a respective of 17% considered "difficult to get payment" and "keen competition" as the major obstacles. Around 10% mentioned "complicated tax system / high tax rate" (11%), "do not know how to find trustable and suitable distribution agents / business partners"(10%) and "financing problem" (10%). Others major obstacles cited by the respondents included "lack of knowledge about domestic market" (9%), "infringement of intellectual property rights" (8%), "have to establish good social network" (7%), "social difference" (6%), "large amount of resources are needed for marketing of the brand and building up distribution network" (5%), "difficult to engage in distribution channels like department stores, hypermarkets or other large scale retailers" (5%) as well as "foreign exchange fluctuations" (5%). Yet, 2% of the total sample thought there were no obstacles in starting or running domestic sales in China at all while 8% did not have a clue (Table 8).

Anticipated business outlook in mainland China the next 12 months

What did the respondents think of the business outlook, in terms of profit/revenue growth, in mainland China in the next 12 months? More than a quarter of the SME sample thought it would be "the same as 2009" (26%) whilst 28% of MMEs thought there would be a "more than 10%" profit/revenue growth and another 24% were expecting an "increase of 5-10%". In other words, the MME sector seemed to be more optimistic. For the remaining SMEs, 13%, 21%, and 19% thought there would be a "within 5%", "5-10%", and "more than 10%" increase of profit correspondingly. Meanwhile, the proportion of SMEs who thought there would be a decrease in profit/revenue in the next 12 months only took up less than 10% in total and 12% failed to make a business forecast. As for the MMEs, apart from the positive responses mentioned above, around one-fifth (21%) believed their mainland market would yield the same amount of profit/revenue as in 2009 while another 13% believed they could achieve an increase within 5%. Similarly, those who predicted their profit/revenue would go down in the next 12 months accounted for 5% of the MME sample only while 9% did not have a clue (Table 10).

Business expansion in China domestic sales market

When asked about the future plans to expand their China domestic sales market in the next 12 to 24 months, 60% of the MMEs gave a positive answer, 6% said "maybe" and 26% said they had no expansion plan while 8% did not give a definite answer. As for the SMEs, those who said "yes" and "no" took up almost the same proportion, i.e. 46% vs. 42%, while 4% said "maybe". Similarly, 8% of SMEs had no idea at this moment (Table 11).

Among the 279 companies (154 SMEs and 125 MMEs) who had already engaged in domestic sales markets and planned to or were likely to expand their domestic sales market within the next 2 years, the majority intended to invest "less than HK$1 million" (30%) or "HK$ 1 million to below HK$5 million" (25%). For SMEs alone, 44% claimed that they intended to invest "less than HK$1 million" and 23% opted for "HK$1 million to below HK$5 million". Only 4% said they planned to further invest "HK$5 million to below HK$10 million" and just 1% said "HK$100 million or above". On the other hand, 26% of these MMEs claimed that their intended investment amount would be "HK$ 1 million to below HK$ 5 million", 13% said "HK$10 million to below HK$50 million", while a respective of 10% would invest "less than HK1 million" and "HK$5 million to below HK$10 million", another 8% said "HK$100 million or above", only 2% said "HK$50 million to below HK$100 million". The average intended further investment amount for SMEs and MMEs were HK$3.4 million and HK$21.1 million respectively. Nevertheless, there were as many as 27% of SMEs and 30% of MMEs failed to provide an answer to this futuristic question (Table 12).

Based on the same group of companies who intended to expand their domestic sales market in China, the majority said there would not be a change in their operation modes (73%), specifically, 67% SMEs and 80% MMEs said so. While 6% of SMEs reported that they would "set up wholly-owned foreign enterprise" to cope with the expansion, a respective of 3% said they would "set up joint venture" and "change from wholly-owned foreign enterprise to joint venture" correspondingly. Only 1% said they would change "from joint venture to wholly-owned foreign enterprise" while the remaining 20% of SMEs did not give a definite answer. As for the MMEs, a respective of 3% and 2% said they would "set up wholly-owned foreign enterprise" and "change from wholly-owned foreign enterprise to joint venture" whereas 14% did not have any idea (Table 13).

As for the areas of these companies』 intended expansion outlet, "Changjiang Delta" ranked first for both the SMEs (40%) and MMEs (31%), closely followed by "Guangdong province" (36% SMEs; 31% MMEs) and then "Beijing and Bo-hai surroundings" (23% SMEs and 25% MMEs). Other potential areas mentioned by these SMEs included "Sichuan" (11%), "Fujian province" (11%), "Harbin" (10%), "Guangxi" (9%), "Xian" (8%) and "Chongqing" (8%). Meanwhile, the business potential of these areas as perceived by the MMEs was not the same, and the order was "Xian" (16%), "Harbin" (15%), "Guangxi" (14%), "Chongqing" (11%), "Sichuan" (10%) and "Fujian province" (9%). Meanwhile, approximately a quarter (26%) of this overall sample could not give a definite answer to this question (Table 14).

Hindering factors of entering the China domestic sales market

With regards to those companies who had not yet engaged in China domestic sales market up till now, what were the hindering factors? Results showed that most companies considered their "business nature not suitable for developing domestic sales" as the major reason (32% for both SMEs and MMEs). Other reasons as cited by both target groups included "no knowledge about the domestic market" (15%), "did not think it was the right timing" (13%), "no network in Mainland" (12%), "no resources to develop other market" (11%), "not interested / no such need" (8%), "keen competition" (8%), "difficult to get payment" (6%), "business already good enough" (4%), "license issues" (3%), "complicated tax system" (2%) and "human resources management" (2%; Table 15).

Plans to enter the China domestic sales market in the next 12 to 24 months

When asked if they planned to enter the China domestic sales market in the next 12 to 24 months, over 70% of them said "no" (72%), comprising 73% SMEs and 68% MMEs. In the meantime, 13% of SMEs had plans to enter such market in the next 12 to 24 months and 9% said "maybe". Likewise, 15% of MMEs said "yes" and 10% said "maybe". Besides, those who did not have a clue accounted for 5% of SMEs and 7% of MMEs (Table 17).

Regarding the 87 SMEs who had not yet engaged in China domestic market but planned to or were likely to do so in the next 12 to 24 months, 43% said their intended initial investment amount would be "less than HK$1 million", 32% said "HK$1 million to below HK$5 million" and a respective of 1% said "HK$5 million to below HK$10 million" and "HK$100 million or above". More than 20% of them had no idea (22%). As for the 28 MMEs who planned to or were likely to enter the China domestic sales market in the next 12 to 24 months, a respective of 8 respondents claimed their intended initial investment would be "less than HK$1 million" and "HK$1 million to below HK$5 million" while another 5 respondents said they would invest "HK$5 million or above" and 7 of them failed to provide a definite answer. (Table 18).

As for their intended operation mode when they entered the China domestic sales market, 46% of SMEs and 57% of MMEs who had such plans said they would opt for "wholly-owned foreign enterprise", while 31% of SMEs and 21% of MMEs preferred to set up a "joint venture". However, as many as 22% of SMEs and 21% of MMEs did not have any concrete idea yet (Table 19).

Which areas in mainland China would become these companies』 first attempted outlet? Findings showed that the preference of both target groups were highly similar with "Guangdong province" topped the list (SMEs : 67% & MMEs : 57%), followed by "Changjing Delta" (25% SMEs; 32% MMEs), then "Beijing and Bo-hai surroundings" (8% SMEs; 14% MMEs). Yet, 16% of the SME sample and 14% of the MME sample did not have a clue (Table 20).

Desired banking services in support of China domestic sales market

At the last part of the interview, all respondents were asked what kind of banking services they would seek in Hong Kong for (further) developing their China domestic sales market. "Remittances" ranked first for SMEs (32%), followed by "financing" (27%) at a distance, while other desired banking services included "cash management" (10%), "trade" (6%), "insurance" (6%). As for the MME group, the most wanted service was "financing" (33%), followed closely by "remittances" (32%), and other services in demand included "cash management" (11%), "insurance" (8%) and "trade" (7%). While a respective of 7% SMEs and 5% MMEs believed they did not need any support from the local banks, whereas 37% of SMEs and 30% of MMEs did not have a clue (Table 21).

With regard to their preference over foreign bank or Chinese bank when seeking financial support, more than half of the SMEs said they had "no preference" (52%), while 32% preferred "Chinese bank", 10% preferred "foreign bank" and 6% said "don』t know / hard to say". Similarly, almost half of the MMEs said "no preference" (49%), 31% preferred "Chinese bank", 15% preferred "foreign bank" and 6% did not give a definite answer (Table 22).

Satisfaction level with the banking services in Hong Kong

When asked what kind of banks they were currently using in Hong Kong, as many as two-thirds of SMEs were using "local banks" (67%), only 11% were using "foreign banks" while 21% said they were using both local and foreign banks. As for the MMEs, 43% of them were using "local banks" while 18% were using "foreign banks", and 38% were using "both" (Table 23).

The survey ended by gauging their satisfaction level with the services of the banks currently used by them in Hong Kong. Findings revealed that close to 70% of the companies interviewed were satisfied in general (68%), and the corresponding figures among SMEs and MMEs were 66% and 72%. While a respective of 26% SMEs and 22% MMEs opted for "half-half", those who were not satisfied with the banking services accounted for 6% of SMEs and 3% MMEs only. Last of all, 2% of the SME sample and 3% of the MME sample could not give a definite answer (Table 24).