‘HK firms nowhere in the big league’, yesterday’s South China Morning Post reported…
The global influence of Asian multinational companies is growing, a study has found. Chinese companies in particular are rising fast – but, perhaps surprisingly, Hong Kong firms aren’t among them. In fact, so few were seen as having global reach that Hong Kong was excluded from the study.
“There were no Hong Kong companies included in this study largely because there are not many Hong Kong-headquartered companies that we would consider genuinely global. You could argue that Jardines, Swire, and Hutchison Telecom are, but probably no more than that,” said Gavin Watkins, director of professional services company Towers Watson’s International Consulting Group for Asia-Pacific, which commissioned the study.
Watkins said: “I was quite surprised that there weren’t more intrinsically Hong Kong multinational corporations. What you do have in Hong Kong are notional headquarters of some mainland Chinese companies that have been established here for the purposes of the Hong Kong stock exchange or the like. But genuine headquarters – where the brains of the business are, such as the head of human resources of the chief executive – seem to be disproportionately small.”
(‘Small’ here probably means ‘few’. If a relevant press release or executive summary existed, it would be here, but apparently none does.)
Towers Watson is an HR consultancy – hence the suggestion that a city’s ranking in multinational business comes down to the presence or absence of ‘brains’ in the form of human resources bosses. Still, the basic gist of the article seems true enough: “a quarter of the Fortune 100 companies are Asian multinationals,” yet none are from the Big Lychee.
A glance at the Fortune line-up shows Hong Kong-listed Sinopec at number 5. Not only is it not local, you could argue it is not really even a company; coming under the State-owned Assets Supervision and Administration Commission of China’s State Council, it is more of a government department. Down at number 46, tucked in between Honda and Siemens, comes HSBC. This really is a Hong Kong company, but it became more British after absorbing a large UK bank back in the 1990s. Although the CEO tends to hang out in Hong Kong, so far as I know the HSBC Holdings HQ in London houses the group’s supreme HR boss and is therefore not ‘notional’.
That’s pretty much it. As the Towers Watson guy says, you’ve got Jardines, Swire (including Cathay Pacific) and Li Ka-shing’s Hutchison empire, which as well as telecoms interests also runs a nice slice of the planet’s sea ports.
Should Hong Kong have more and bigger home-grown multinationals? Global companies tend to emerge from big countries. There aren’t many world-beating corporate behemoths from Ireland, Israel, Belgium or plucky little Singapore. Even the (non-Indian) emerging markets’ giants are mainly state-linked.
On the other hand, if any smaller economy had spawned big international corporations, it should have been Hong Kong. Local tycoons like Li, YT Cheng, the Kwoks and SK Lee pop up around the top of the famous international Forbes lists of billionaires. Surely, they could have or should have grown globe-straddling businesses to match?
Running our finger back down the Fortune 100, we see at number 32 the French retailer Carrefour. It is successful because it delivers what customers want: a massive range of groceries at decent prices in convenient hypermarkets. They are all over the place, as you will see if you go over to Shenzhen, or Taipei or dozens of other regional cities. But not Hong Kong. When Carrefour tried setting up here, it failed, at least partly – most people assume – because the established supermarket duopoly used its influence in real estate and wholesale to keep it out.
Big Hong Kong companies do not appear in Fortune’s list of multinationals because they are fat, lazy fiefdoms that can only make profits if they do not have to compete. With seven million captive consumers on this side of the border, plus exposure to the ever-scummy Mainland property market, they have little incentive to create value or be innovative. They wouldn’t last five minutes in a modern, free-market capitalist environment. Furthermore, particularly with their government-guaranteed stranglehold on space, they make sure real entrepreneurs have as little chance of growing as possible.
We eagerly await the Fortune 100 Corporate Parasites – a list of firms ranked by how much profit they make from monopoly, collusion and other forms of legalized theft – which will surely make Hong Kong hearts glow with pride.