Expert: Reform spinoffs good for Asian neighbors

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With supply-side structural reform as one of the highlights of this year's political consultative and legislative sessions, Hong Kong is set to play a big role, according to an expert.

Hong Kong companies that locate their factories to the Chinese mainland will take the lead in feeling the impact of the country's economic overhaul, said Alan Lee Yuk-lun, president of the Hong Kong Commerce and Industry Associations.

For the past few decades, Hong Kong companies with plants in the Pearl River Delta have become known for labor-intensive low-end manufacturing businesses. But as Guangdong province gears up for industrial restructuring by shutting down or relocating a slew of low-end manufacturing businesses to other inland provinces or neighboring countries, Hong Kong firms should set about adjusting and upgrading their mainland businesses, Lee said.

Supply-side structural reform was proposed by mainland policymakers in the final quarter of last year to put the world's second-largest economy on a more sustainable growth path.

It soon became something of a nationwide buzzword for efforts to boost the efficiency and competitiveness in the manufacturing and service industries via innovation, better quality control and deregulation.

"As China joins the league of middle-income countries, the global economic powerhouse cannot maintain robust growth simply on the back of cheap labor, land resources and capital," Lee said.

Instead, more attention should be given to stimulating the cooling domestic economy through far-reaching technological and institutional innovations.

"This is where Hong Kong could come in and play a big part," he said.

The financial hub, Lee pointed out, is well positioned to facilitate the listing of mainland tech companies on the Hong Kong Stock Exchange, which has attracted many big names such as Tencent, ZTE, Lenovo and Kingsoft.

Meanwhile, on a previous tour to Beijing's Zhongguancun Science Park, known as "China's Silicon Valley", Hong Kong's Chief Executive Leung Chun-ying pitched cooperation between the two cities in terms of innovation and research.

Lee said he believes Hong Kong has what it takes to pave the way for mainland firms to jump on the high-tech wagon by partnering with Beijing on research projects.

As structural reform focuses on phasing out excess capacity in high-polluting and high energy-consuming sectors, Southeast Asian countries, some of which are in dire need of steel and cement businesses, may pick up the slack, Lee said.

Relocating these businesses may lift economies in Southeast Asia to some extent, but if governments in these countries fail to do a good job of environmental protection, the local environment is likely to become polluted and contaminated, he warned.

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