Hong Kong companies must step up their move into higher-end production, such as original-design manufacturing (ODM) and own-brand development, if they are to stay ahead of mainland rivals, according to a Trade Development Council (TDC) study.
Mainland companies will see their competitiveness jump once the country joins the World Trade Organisation, thanks to lower tariffs on essential inputs and more secure access to the world's markets.
'Hong Kong will face more competition,' said Daniel Poon Wing-choi, an assistant chief economist at the TDC. 'We think it will be a stimulus for Hong Kong companies to move more into ODM and brand-name production.'
Faced with increasing competition from low-cost manufacturing centres around the region, the SAR's manufacturers have long been moving into higher-value-added processes.
Many began as original-equipment manufacturers (OEM), buying equipment in bulk and customising it for customers who would then sell it under their own brand name. But barriers to entry are low for OEM, so Hong Kong companies began moving further up the value chain.
In ODM, companies create original designs for their clients and then produce them based on those designs or hire OEMs to do the manufacturing. The final product would be sold under the contracting customer's brand name.
