[Interview with Shih Wing Ching] Challenges and opportunities for Hong Kong companies in High-tech Era

Mr. Shih Wing Ching

  • Chairman and President of Centaline Group

Dr. Mark Lee

Mark Sir: Some industries are more optimistic about Hong Kong's competitiveness, while others are pessimistic. For example, in Hong Kong financial industry, medium-sized investment banks, on one hand, are lack of government support and are subject to more regulation, on the other hand, all kinds of costs are very high. For another example, the timing for innovation and technology may have passed, Shenzhen has already emerged and formed an industrial cluster, and it will be more difficult for Hong Kong to do it again. There are also some optimistic industries, such as logistics. The rent of warehouses will become more expensive. After 1990s, there were no new factories and commercial buildings in Hong Kong. However, Hong Kong’s demands and the development of entrepot trade have higher and higher demands on logistics. So, what are the challenges and opportunities for the development of the industry in Hong Kong under the current situation?

Mr. Shih: For the financial industry, the impact of the market is indeed great. For example, many Chinese companies enter with low-price strategies, but at the same time they also have sufficient resources to strategically deploy the Hong Kong market, Goldman Sachs and Morgan Stanley are difficult to do. On the one hand, the loss of personnel is relatively serious. On the other hand, the US government also has restrictions on them, which has a great impact on their competition. It is not as easy to develop business as before.

The direction of immigration also reflects the competitiveness of the industry. Immigrants generally move from places with poor economic development to places with good economic development. If the economy develops upward, there are more opportunities. At present, the upward trend of Hong Kong is beginning to show that it is better than many other places, so there is no need to worry too much about the loss of talents, because there are also good opportunities for the development of talents.

Talent is the vane of a market. Where talents emerge, the market tends to improve, and vice versa. However, the cultivation of talents is more economic need, and the industry needs to be born, even more talented than the education sector. The business field develops upward in the society, talents will be gradually cultivated, and the opportunities for these talents will be greater. Many entrepreneurs in China did not study at a famous university in their youth, or even a university. For example, Yang Guoqiang, Chairman of Country Garden’and Dong Mingzhu, Chairman of Gree’were all refined in practice. Under the opportunities provided by the big environment, they The management ability is very strong. The output of Country Garden in one year exceeds that of all real estate developers in Hong Kong. When they found that youth is very important to the company, they basically achieved “Youngerness” within two or three years, with great courage, strong management ability and strong execution ability. If in the future mainland management talents have both knowledge and fighting spirit, they will have more prospects. This is an opportunity for Hong Kong to integrate talents into the mainland or obtain talents from the mainland.

Mark Sir: Although the epidemic still exists, the manufacturing industry is actually relatively prosperous this year. They are all competing for containers and prices are rising. But the general response is that there is no money to make, everything is expensive, and the cost is high. The hotel industry can basically recover to 70%, but the domestic business is more miserable. What are the difficulties and challenges in doing business in Hong Kong?

Mr. Shih: The big challenge is the progress of science and technology. The progress of science and technology has caused fundamental changes in the way of serving customers and the internal management of the company. If we can’t keep up, we must be subverted. We should adjust and enter a new era. For example, when the agricultural society enters the industrial society, if you still work manually, you must lose to the mechanized production line. If you don't use the technology that can be used now, then you are behind. For example, mobile phones have basically become a part of personal life. The mobile phone empowers individuals and changes their personal abilities, as well as their personal life and work patterns. If your business can match this change, then you can have a greater benefit in the process. If you continue to use the old method, you will find that there is less and less business and more and more difficult to do business. Just like our real estate industry, the ability of the Internet to acquire customers determines whether the business is good or not.

In Hong Kong, the development of digitalization started early, but now many companies are lagging behind. For example, they usually do external services first, and then build IT systems in each department and business separately. For example, financial system, HR system, and audit system are all independent. However, without a unified system for overall planning. The data cannot be unified or complete, so we can't master big data in a comprehensive and timely manner, and the decision-making will not be too accurate. To promote the unification of this system, there are great challenges, including the difficulty of planning and the coordination of each department's business. Each department is often reluctant to make changes. Even the boss may be difficult to promote. On the one hand, he has to take care of the existing interests, and on the other hand, he is also worried about risks. However, this work must be promoted by the boss, but many Hong Kong bosses are afraid of trouble and are not used to such big changes. If they are handed over to the colleagues below, all aspects need to be weighed, and it will be difficult to promote.

Mark Sir: There are different ways of digital transformation, whether to do it directly internally, or to reinvest in new business promotion, or to outsource it to a third party?

Mr. Shih: The more successful the company, the more difficult it is, especially the industry leader. The original model has been very successful. Even if there are new ways, it is basically unwilling to destroy the original model. From this perspective, the chances of reinvesting in the new model to succeed are much greater than doing it on the original basis, and there must be a lot of resistance to the transformation on the original basis. When investing in a new company, it is often affected by the success of the original model, because the new business model is often at a loss, and it is not a little loss. For example, Lianjia still suffered a lot of losses in last three years before listing. Many managers often do not have courage to bear, and it is difficult to face the existing shareholders. For new companies entering the market,, if ample social idle capital enters, they tend to advance faster, and they are more confident, then the new market model will enter a subversion stage.

Mark Sir: Centaline Property's leading position in the Mainland faces similar challenges from Lianjia. What do you think about this issue?

Mr. Shih: Centaline has always promoted " Noninterference", while the mainland enterprises basically have strong control and pursue "Interference." Centaline Property’s self-management and self-control model, each place has its own mobility and policy capabilities, and has strong self-adjustment and optimization capabilities; however, it is more difficult to implement new changes in the group. Such as talking about cooperation with real estate developers, there may be different attitudes and cooperation models, and one policy cannot be implemented. This is like every federal government system. Many institutions in Mainland are centralized, and they do have certain advantages in capturing the market. From a magnified point of view, Centaline Property in the mainland is being challenged by competitors who "National system". Lianjia is a typical example. He uses a set of software across the country and may have tens of thousands of franchise stores. They are building a platform that many people use, and the scale is up quickly. Centaline Property has its own platform in different places, which is highly adaptable, adapts to local characteristics, and adapts to the management preferences of branch managers, but it is not easy to reunify the country.

In the current era, the development of science and technology has changed the concept of time and space. With the capabilities of science and technology, the vision and positioning of enterprises may be greater. Many enterprises start to define their own enterprises with "family and country feelings". From a strategic perspective, this completely surpasses many existing companies that " little rich is spoiled". Under the grand vision, more outstanding talents can be gathered, and at the same time more capital can be gathered. Under the unified command, these talents can capture the market quickly. The vision of Hong Kong entrepreneurs is usually not so grand, and from the perspective, the vision of mainland entrepreneurs is also very high. They usually think from the perspective of promoting the industry, serving the society, or even changing the society , rather than purely talking about business and making money. In this situation, with the help of in-depth application of technology, whoever can master big data in a complete, comprehensive and timely manner can make accurate judgments and actions, and even change the industry and society. For example, in the real estate industry, when the data of house sellers and buyers are mastered, it can even affect the pricing and supply of real estate developers, and change the entire real estate industry from another aspect.

Mark Sir: Is there any space for Hong Kong entrepreneurs to find new opportunities? In t High-tech Era, is it basically a winner takes all?

Mr. Shih: In China, there are Alibaba and JD.com, but it still appears Pinduoduo. There is Tencent, you can also find Bytedance and Tik Tok. It's not just a dominant one, there can also be a second and third one, but it is really very difficult to have more. Basically, the leading company is a big platform, and many companies rely on it or join such a platform. Entrepreneurship opportunities based on these platforms are still very large. For example, opening a 711 is also an entrepreneurial opportunity. Although the greater profit is occupied by the platform, the entrepreneurial cost is also very low.

Mark Sir: Many people think that Hong Kong companies can help mainland companies "go global," or that the Guangdong-Hong Kong-Macao Greater Bay Area and the mainland market are also major markets in Hong Kong. What is the role of Hong Kong companies in the Greater Bay Area?

Mr. Shih: The economic growth of many cities such as the Greater Bay Area and mainland cities may be faster than that of Hong Kong, and there are more opportunities for Hong Kong during entering mainland China. For example, SF Express, which was originally a Hong Kong company, entered the mainland, and now it is basically a mainland-based company. The founder of LalaMove is a Hong Kong native. At present, most of its business is in Mainland, and the scale has risen all at once. At the same time, many companies that entered the mainland early have also retreated due to many unsuitable factors, but those Hong Kong companies that can survive in the mainland are basically mainlandized. They have adapted to the development requirements, market characteristics and company operations of the mainland. Since Hong Kong’s management methods did not have advanced advantages like those decades ago, Hong Kong companies cannot indoctrinate management methods to Mainland companies any more.

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Asia Pacific Institute for Strategy (C) 2021

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