Hong Kong Unrest Largely No Issue for the Industry
By Thomas Schmid
China’s special administrative region of Hong Kong has been gripped by public unrest and often rather violent protests. The protests have been swelling on and off over the past months. While the former British crown colony has long lost its former luster as an important seaport, her hyper-modern airport handles a substantial amount of cargo – also for the myriad of vaping device manufacturers located in the nearby city of Shenzhen.
Additionally, Hong Kong hosts the representative offices of quite a few regional and international tobacco companies, including leaf merchants and cigarette suppliers. It additionally also serves as the home base of a handful of tobacco machinery manufacturers.
But has the civil strife impacted these industry players?
“Yes, it has, at least as far as we are concerned,” said Mandip S. Sandhu, technical sales executive at HK Daehon Machinery Limited. The firm maintains a final assembly facility for its range of cigarette manufacturing machines in the city territory and Sandhu claimed that 100% of HK Daehon’s annual business is conducted through Hong Kong.
“Hong Kong is very important for us,” Sandhu pointed out. “It provides for very efficient logistics and financial services, offers a favorable taxation system, has excellent government departments with business-friendly policies, and of course it is a free port.”
Although the company has started migrating to semi-assembled kits instead of sourcing individual components “in order to reduce the final assembly time in Hong Kong”, it still prefers to accomplish the entire assembly from component level in order “to avoid possible synchronization problems in the end.”
Across the inner-Chinese border in Shenzhen, vaping and HNB device manufacturers meanwhile seem to experience tittle – if any – impact from the explosive climate in neighboring Hong Kong. Guo Hongli, founder of trailblazing HNB manufacturer Shenzhen Yukan Technology Co. Ltd., explained his company didn’t maintain an office in Hong Kong and that, secondly, “almost none” of its business presently was generated in the special administrative region.
“We feel almost no effect because [Hong Kong] is a tiny market for us,” he asserted. Guo also spoke on behalf of other Shenzhen-based firms, saying “the situation [in Hong Kong] won’t make much difference to them either. Maybe transportation will be affected a little bit.” Unlike other consumer goods, “most vaping products are shipped by air freight from Hong Kong, not by sea,” he explained. “We cannot use cargo flights with Shenzhen Airlines [from Shenzhen airport], as it does not permit products containing batteries or [vaping] oil.”
Declining to comment on politics, Guo nevertheless insisted that the persisting political turmoil in Hong Kong “does not impact [mainland] China.” Some tobacco trading companies with a presence in Hong Kong likewise appear rather unfazed by the waves of unrest.
“We have an office and some employees there, but it is only used for accounting and administrative purposes,” said Zafer Atici, managing director of Prestige Leaf, an internationally active independent merchant. He added that “most [of our tobacco] shipments are not going via Hong Kong anyway. Even our China-purchased tobacco is shipped from mainland ports.”
So, if there is any wider impact to speak of, it would mostly concern the local retail sector for tobacco products. But even that effect is contained and, apparently, negligible. Speaking on condition of strict anonymity, a source at a leading regional tobacco product manufacturer disclosed to Tobacco Asia: “Part of our business does indeed cover the Hong Kong market, yet it is merely one of many markets for us and the situation, therefore, affects our overall operations only in a rather limited way.” That may be the case, but it is not universally true for everybody. HK Daehon’s Mandip Sandhu pointed out that client visits have somewhat dwindled since things turned nasty.
“In our business, customers must visit us in order to have first-hand interaction, particularly where a possible purchase of new models that we launch is concerned. After all, the machines they’re contemplating to purchase represent substantial investment capital.”
However, in the present scenario, Sandhu noted, potential clients had become “very apprehensive at the very thought of traveling to Hong Kong.”
To make matters worse, the company’s assembly plant staff occasionally didn’t turn up for work when the mayhem in the streets became too volatile. “But violence is not the way of life in Hong Kong and people usually resolve their issues and problems peacefully. Sooner or later this core thinking will prevail again,” he mentioned. The huge gains made by the opposition pro-democracy movement in the recent district council elections could be a first step back to normalcy.