How small businesses with Asian ambitions can profit from Hong Kong’s B.C. connections

Companies looking to make a move into Asia could find the right port of call in Hong Kong, where the bond with B.C. is only growing stronger

One warm night in downtown Hong Kong, I’m sipping a Japanese session IPA with the head of the local Vancouver Canucks fan club. Thomas Lau owns this joint: Coedo Taproom, a stylish resto-bar on a back street in the bustling Causeway Bay district.

Lau, president of NextStep Gourmet Group, gripes about the city’s high rents, long lineups, cramped living quarters, volatile weather and traffic congestion. But the bespectacled Vancouver expat, who plans to take his young family home for summer vacation to escape the tropical heat, clearly enjoys being an entrepreneur here.

“In terms of doing business, there’s nowhere like Hong Kong,” Lau says. “It’s a very free market with a lot of opportunities.” Today alone, he had half a dozen meetings: “There’s always some random person who just comes out of nowhere, and you never know if your next big M&A will come from a guy you just met.”

For Lau and many others, the ties between Hong Kong and B.C. run deep. Some British Columbians have built thriving businesses here, while others are tapping its market from home. Although China’s spectacular rise has diminished its economic importance in favour of bigger mainland cities such as Shanghai and nearby Shenzhen, Hong Kong remains a vibrant international centre. For smaller B.C. companies with designs on Asia, the special administrative region (SAR) of some 7.4 million residents can be a good entry point. It helps that the Hong Kong and B.C. governments are both trying to forge stronger links between the two places.

Born in Hong Kong, Lau moved to B.C. with his family in 1992. After attending high school in Vancouver, he earned a BA in humanities from UVic. In 2004 he returned to Hong Kong, co-founding NextStep three years later. Master franchisee for New York Fries in Hong Kong, Macau and mainland China, the company also owns three Hong Kong craft beer bars. NextStep’s third division is Thirsty Brothers, a craft beer and spirits distributor whose brands include B.C.’s Postmark Brewing, Steamworks Brewing Co. and Whistler Brewing Co. Every six weeks or so it brings in a shipping container of beer from Canada, which accounts for 25 to 30 percent of its imports.

Anyone looking to follow in his footsteps won’t find it easy, Lau cautions. “It’s definitely getting more difficult, but at the same time, in the Asian market as a whole, Hong Kong is very internationalized,” he says. “And it changes so fast.”

For example, Lau didn’t sell craft beer until five or six years ago. Now it’s a major force in the Hong Kong food and beverage industry, he explains. “It’s a very fast-moving market, and also it’s a very accepting market,” Lau says. “People will accept a lot of new ideas.”

I’m not just here for the beer. This visit is courtesy of the Hong Kong government, which is hosting the Asia-Pacific Business Forum (APBF) and the Internet Economy Summit (IES). Presenting the APBF: public agency Hong Kong Cyberport Management Co., the government’s Innovation and Technology Bureau and the United Nations’ Economic and Social Commission for Asia and the Pacific (ESCAP). Many of its sessions explore how the private sector can help reach the UN’s 17 Sustainable Development Goals for 2030.

Meanwhile, the IES is part of Hong Kong’s efforts to establish itself as an Asian tech hub. “In Hong Kong, we are looking at how to improve our own competitiveness and also grow our economy through the use of technology and innovation,” says Allen Yeung, the government’s chief information officer, when I meet him at Cyberport, a sprawling office, retail and incubator space in picturesque Telegraph Bay on southwest Hong Kong Island.

With Macau, China’s other SAR, Hong Kong is now part of the proposed Greater Bay Area, a region of 70 million people that includes nine cities in neighbouring Guangdong province. It also wants to help with the Belt and Road Initiative (BRI), China’s ambitious plan to build land and maritime trade routes linking it to 60 other countries. For Yeung, that means deploying Hong Kong’s fat Internet pipeline, which far outstrips the mainland’s, for what’s known as the Digital Silk Road. The city “can be a very important player as a digital connector between Hong Kong and the wider Belt and Road countries,” he says.

Joining the Greater Bay Area comes with two physical links to the mainland: the Hong Kong–Zhuhai–Macau Bridge, a 55-kilometre bridge and tunnel system; and a high-speed rail network that puts Shenzhen and its 12.5 million residents just 15 minutes away. Both are scheduled for completion this year.

RED FLAGS

You don’t have to look far for proof of B.C.’s presence in Hong Kong. Close to my downtown hotel, I pass an outpost of White Spot’s Triple O’s burger chain. In the mall at the International Finance Centre, outdoor clothing maker Arc’teryx Equipment has a brand store—one of many throughout Asia. “We have a global consumer that travels the world in search of adventure and experiences, and Hong Kong is an important epicentre market for our brand,” says Megan Cheesbrough, the North Vancouver–based company’s VP retail.

Then there are the eerie geographical parallels between Hong Kong and Vancouver. Both cities stand on a vast harbour with a mountain backdrop. Hong Kong even has its own North Shore—somewhat more crowded Kowloon—accessible on the weather-beaten Star Ferry, the local version of the SeaBus.

“When I first arrived in Hong Kong, I looked around and I thought, Oh my God, this feels like home,” recalls Vancouver native Chris Baker, managing director of Totem Media, a Hong Kong–based social media solutions firm that helps companies including Walt Disney Co. with marketing and branding in China. “Within about a year, I had unearthed a dozen friends from my high school who were also living here,” says Baker, who recently relocated his family to his hometown. “The connections between the two cities are really powerful.”

In a 2011 survey, Vancouver-based think tank the Asia Pacific Foundation of Canada estimated that Hong Kong was home to about 300,000 Canadian citizens, more than 65 percent of them born in the territory. Hong Kong is Canada’s top overseas passport issuing office by far, according to the Canadian consulate general, dispensing some 30,000 of the documents each year.

This is my first visit to Hong Kong since 2010, and I notice that the Chinese flag is now inescapable. With its five gold stars, the red emblem of the People’s Republic of China flies everywhere, alongside its Hong Kong counterpart, which features a white orchid on a red field.

David Armitage, who moved to Hong Kong in 1995, has watched China consolidate its hold after the 1997 handover by one-time colonial master Britain. Until 2047, under “one country, two systems,” it’s ostensibly business as usual for Hong Kong and Macau. BCBusiness first interviewed Armitage, the North Vancouver–raised president of IT services firm Velocity Solutions, a decade ago. What’s changed?

“The biggest shift is that China is now clearly in charge,” the perennially blunt Armitage says over schnitzel on a restaurant patio near his Wan Chai office. “They’ve been doing a fairly good job of keeping their hands off, despite what you hear,” he asserts. “There’s an awful lot of aggressive anti-China rhetoric that plays well in the international press.”

For Armitage, who has a cabin on Salt Spring Island, Hong Kong still presents the same opportunity. “Tell me what’s different,” he asks, having just praised the young members of the local democracy movement. “I don’t get to vote?”

Velocity now has about 110 employees across its group; most of its business is in Hong Kong and outside China, in Asia, North America and Europe. “I’m more interested in what is going on in the Pacific Rim as a whole,” Armitage says, citing the Association of Southeast Asian Nations (ASEAN) countries, whose fast-growing members include Indonesia, the Philippines, Singapore and Thailand.

When it comes to those markets, his home base compares favourably with archrival Singapore, he contends: “Hong Kong is, I think, as well placed and in some ways better placed for accessing ASEAN.”

Armitage gives the local government’s tech push mixed reviews. “They’re trying real hard to promote innovation,” he says of Cyberport, lamenting Hong Kong’s shortage of skilled computer programmers, which he attributes to a cultural bias against careers in IT. “We’ll see if this changes, if a little bit of funding will make a difference.”

A FISH TALE

Back in Vancouver, I stop by Fishermen’s Wharf near Granville Island to see Steve Johansen. At the picnic table outside his warehouse, next to a bin of fish on ice, the co-founder of Organic Ocean Seafood tells his Hong Kong success story.

In 2013, Johansen got a message from Gray Kunz, chef at Café Gray Deluxe in Hong Kong’s swish Upper House hotel. After Johansen had a friend bring him a box of frozen spot prawns, Kunz wanted to order more seafood, but it was impossible without a distributor.  

Two years later, the Swiss-born chef put Johansen in touch with Cristian Giancaterino, proprietor of the House of Fine Foods in Hong Kong. “They go after our kind of clients, and that’s the higher-end hotels, restaurants and the kind of chefs that appreciate what we have to offer,” says the unassuming fisherman, who sports a knapsack and white sunglasses.

The timing was good, too, Johansen notes, given Asia’s growing interest in sustainability. Also, most chefs at the Hong Kong establishments that Organic Ocean deals with are from North America, Europe and Australia. “They know what sustainable stuff is, but they have a hard time getting it,” Johansen says. “That’s where we come in.”

Today, House of Fine Foods supplies chefs in Hong Kong, Macau and Singapore with Organic Ocean black cod and whatever’s in season: halibut, wild salmon, lingcod. Some product is frozen at sea, but the company’s fresh seafood gets served to Asian diners three days out of the ocean. In Hong Kong, another client is the City Super grocery chain, and regular visitor Johansen does demos at House of Fine Foods’ local stores. “Every trip I go over there, we seem to have two or three things on the go with the British Columbia trade office,” he says. “It’s a big help for us.”

With Hong Kong accounting for a small but growing portion of Organic Ocean‘s revenue, he, business partner Dane Chauvel and their dozen staff have no plans to expand into Greater China—for now, anyway. “We’re not really looking to the mainland because there’s only so much good stuff,”  Johansen explains.

Totem Media‘s Baker, who has fewer than 20 employees and draws on a global network of part-time staff and freelancers, thinks Hong Kong could be the right choice for B.C. companies with a limited budget and risk appetite. Most businesses that set up shop there aim to have a mainland presence, he says, but for anyone coming from Canada, the city offers a decent market.

“If you’re a medium-size company here and you don’t want to tackle a behemoth like the U.S. or China, then Hong Kong might be a really interesting option, knowing that the benefit is pretty tight alignment with Canada and affinity for Canada.”

For companies that have thrived in relatively small countries, cracking the mainland is a huge task, Baker explains. “It’s a bigger undertaking than trying to enter the U.S., for sure, because apart from language, culture and regulations, you’ve got a situation in China where it’s a bigger market, there’s more big cities, and there’s also many times the number of competitors in China in any given segment.”

Besides, too many businesses underestimate how different Hong Kong is from Greater China, Baker says. Sending management there and assuming you can just leap to the mainland won’t cut it, he warns: “It’s as big a jump as it would be to say, Oh, we’re going to penetrate the U.S., but we’re going to set up our office in Vancouver.”

Baker came to Hong Kong in 2000, spending seven years in the city before moving to Beijing for a similar stretch. He’s seen Hong Kong lose manufacturing and shipping to the mainland; even its mainstays, banking and real estate, have slowly been shifting away, he says. Between 1993 and last year, the city’s contribution to Chinese GDP plunged from a peak of 27 percent to less than 3 percent. “It’s increasingly less of a regional hub,” Baker says.

Although he expects that decline to continue, he doesn’t foresee China making big changes to Hong Kong. “Somebody who’s super negative about that relationship and the prospects of Hong Kong would say that Beijing is just going to let Hong Kong wither on the vine,” he says. “If you’re really positive, you can look at developments that are taking place to connect Hong Kong, Shenzhen, Zhuhai and Macau.”

Relishing his first day on the job, Derrick Lee falls into the second group. Lee, new managing director of the British Columbia Trade and Investment Representative Office in Hong Kong, calls the city a gateway to China and ASEAN. He rattles off its competitive advantages: the rule of law, freedom of speech, good transportation, a hands-off government. B.C. exports to Hong Kong have grown about 30 percent over the past 10 years, says Lee, who was born there and grew up in Edmonton. After forestry products, food is the top commodity category.

On display in Lee’s small office is a shelf crammed with B.C. eats, including Bremner’s juices, Holy Crap cereal and Whistler Chocolate. “We have about 40-million-plus travellers from China coming to Hong Kong every year, to give them a sense of new tastes and new products,” he says, noting that the province also has mainland rep offices in Beijing, Guangzhou and Shanghai. “Sometimes Hong Kong can be a showcase.”

Lee, previously CEO of the Canadian Chamber of Commerce in Hong Kong, invokes the Greater Bay Area, too. “Whenever we do promotion, it’s about companies coming here in a regional context,” he says. “Hong Kong’s going to have a larger base of consumers from China.”

TWO BIRDS WITH ONE STONE

No one can accuse Hong Kong of setting the bar low. In her opening address for the Internet Economy Summit at the downtown Convention and Exhibition Centre, Carrie Lam, the territory’s chief executive, explains that it’s focusing on health tech, artificial intelligence, smart cities and fintech. The plan is to create China’s version of Silicon Valley, Lam says.

That quartet figures heavily in panel discussions at the IES and the Asia-Pacific Business Forum, which feature guests from places like the U.S., India and Israel. Among the IES speakers is Xu Bing, co-founder of SenseTime Group, which launched at Hong Kong Science Park in 2014. Backed by e-commerce giant Alibaba Group Holding and others, the Beijing-based unicorn was worth some US$4.5 billion as of June, according to Bloomberg, making it the world’s most valuable AI startup. One customer is the Chinese government, which uses SenseTime’s facial recognition software for its vast surveillance network.

Hong Kong was home to some 2,300 startups in 2017, up 16 percent from the previous year, says chief information officer Yeung. Digital hub Cyberport‘s on-site and off-site community consists of more than 1,000 multinationals, small and medium-sized companies, and startups. About one-third of the latter are foreign, including several with Canadian roots.

The government, which is investing HK$300 million (about $50 million) in Cyberport this year, supports business much more than it did 20 years ago, Yeung says. “If we look back, a lot of Hong Kong people are actually more transactional. They look for short-term returns,” he adds. “For long-term returns like technology, we need to take a longer-range view in order to see the return. And without the government’s participation, it would be very difficult to leave it entirely to the private market.”

As a leading financial centre, the territory has plenty of fundraising capacity, says Lee George Lam, chair of Cyberport Management Co. “Therefore, in Hong Kong we can kill two birds with one stone. You can use Hong Kong to improve access to financing, and you can also make use of Hong Kong to harness the power of innovation and technology.”

High salaries can make it a tough place to run a startup, Totem Media’s Baker maintains. However, he says, the authorities are drawing attention to three local subsectors where would-be investors have profited: financial, property-related and patentable technology, the latter including hardware. “In terms of financing, I think if you’re in one of those three areas, it would make sense to look at Hong Kong.”

WHO OWNS HONG KONG

For my last day in town, there’s a helicopter tour of the area. Clearing the downtown waterfront on a sunny afternoon, we float above huge banks of apartment blocks jutting from lush hillsides and turquoise bays. Suddenly it’s Shenzhen, a forest of gleaming highrises—incongruously flanked by the marshes of the Mai Po Nature Reserve—that makes the typical North American city look like a trailer park. On the way back we pass the nearly completed bridge to the mainland, a reminder that Hong Kong is part of China now, for good.

Restaurateur Thomas Lau admits that he and his wife often discuss moving back to Vancouver. But they don’t see it happening soon, given that he can’t run his business remotely. “We talk about it every day, and we shoot it down every day,” Lau says with a laugh.

If he and his family do decide to leave, the political situation will play a big role, he admits. “We’re losing our freedom of speech with the amount of control that China is giving us,” Lau says. To him, the mainland Chinese who move to Hong Kong are different from those who head to Canada. “They think they own Hong Kong,” he says. “The ones who go to Canada, they appreciate the Canadian way of living, so they will try to adapt.”

For Lau, the country where he spent much of his childhood is more than a Plan B. “I love Canada,” he says. “I always ask myself a question: If I had to represent a soccer team at the World Cup, would it be Canada or Hong Kong? I would represent Canada.”