Global rush a sign of the times

At a factory in Tijuana, in the state of Baja California, Mexico, more than 300 local workers pull together, working efficiently with fully automated machines to produce a variety of products, including 3C and other related electronic devices. The entire production process is meticulously recorded by an intelligent management system and shared in real time with the company's headquarters in Huizhou, Guangdong province - tens of thousands of kilometers away.

The plant is run by Ka Shui International Holdings - a company founded in Hong Kong in 1980 and which later set up factories in Shenzhen and Huizhou. By late 2023, it had opened a plant in Mexico, joining a number of other enterprises in the nation's "go global" rush to expand and explore overseas markets.

Peter Wong, who's in charge of the Tijuana factory, says the trend has been driven by increased market demand, and Ka Shui has amassed a relatively stable customer base in North America over the years. The Mexican facility, working in synergy with the company's office and warehouse in the United States, has helped to cut the costs of transporting its products, while offering efficient services to the North American market and opening the door to potential markets in Central and South America.

With this concept in mind, Ka Shui conducted a year of extensive research before choosing the factory's location, after having consulted Chinese business organizations in analyzing regional factors like political stability, wages, taxes and labor policies. It also compared transportation costs, hydroelectric power access, and industrial clusters to optimize supply chain proximity. To facilitate operations, the company hired culturally knowledgeable Mexican managers while receiving technical support from its head office.

Since its opening, the factory has grown steadily and is projected to break even within two years.

Wong attributes the company's success to its close proximity to clients, robust research initiatives, and the strategic leverage of resources from both Hong Kong and Guangdong. Initially, he says Mexican workers were unfamiliar with the operations, and the factory had to employ more than 1,000 workers at its peak to keep up with the speed of production. To raise efficiency, Ka Shui introduced numerous automated machines and teamed up with the Hong Kong Productivity Council, which developed an intelligent management mode for the company by digitizing various aspects of daily operations, such as warehousing, production and delivery times. This has significantly boosted efficiency, requiring a workforce of just 300 at present.

With the HKPC's support, Ka Shui won the Industry 4.0 "1i Maturity Level Recognition" in October 2018 - the global benchmark for smart manufacturing that helped the company quickly gain credibility with international partners, including those in North America.

Global expansion efforts

Hong Kong is determined to help Chinese mainland enterprises venture abroad. Following Chief Executive John Lee Ka-chiu's appeal in his latest Policy Address, InvestHK - the special administrative region's investment promotion agency - and the Hong Kong Trade Development Council have created a high-value supply chain services mechanism offering one-stop advisory services to mainland companies entering world markets.

By February, InvestHK had carried out 20 promotion campaigns in mainland cities, while the HKTDC's global offices provide onsite support to enterprises venturing into international markets. The support covers building up connections with markets abroad, providing legal insights, and conducting market research in emerging regions like the Middle East, Central Asia and Latin America. In addition, areas like ESG (environmental, social and governance) practices, testing, certification and export credit risk management are covered.

A growing number of organizations, like Hong Kong Export Credit Insurance Corp, Hong Kong Science Park and Cyberport, have rolled out similar programs.

Joanna Zhang Liying, HKPC's general manager of mainland business development, notes that since the implementation of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area in 2019, especially after the COVID-19 pandemic, mainland businesses' global expansion aspirations have surged, with Huizhou-based enterprises among the most active.

She says Huizhou's businesses, especially the electronics and consumer goods firms, are interested in getting advice on how to expand worldwide, covering technology innovation, intellectual property management and protection, regulatory compliance, and support for overseas exhibitions.

To meet the demand, the HKPC joined mainland innotech centers in launching its going global service center "The Cradle" in April in Hong Kong, helping enterprises to tap world markets.

Zhang says Huizhou enterprises have unparalleled advantages in going global. Consistently ranking among the nation's top 50 foreign trade cities in recent years, Huizhou boasts a strong industrial foundation, with the manufacturing and electronics industries recognized as highly competitive. The city's strategic location in the Greater Bay Area facilitates efficient logistics and supply chain management.

She also notes that a closely-knit and robust support network is being established in Huizhou, involving taxation, foreign exchange and legal aspects.

To help businesses benefit from export tax rebates, the city's tax authorities have digitized and streamlined the entire process - from registration to refund application - speeding up the retrieval of funds. Tailored cross-boundary tax services are also offered, including overseas risk prevention.

Legal issues are also a major concern for many enterprises when expanding overseas, particularly concerning the protection and enforcement of intellectual property rights.

Among numerous sessions and seminars in the city on international expansion, local trade, judicial and arbitration departments held a seminar in March, focusing on foreign-related rule of law and enhancing compliance management for enterprises' overseas business operations. During special training sessions, experts in intellectual property and lawyers are invited to address pressing concerns like safeguarding trade secrets with business representatives. Efforts are underway to create a regular platform through which stakeholders can share expertise and discuss potential overseas legal risks, fostering collaborative solutions to tackle the challenges.

When local enterprises face infringements on their rights abroad, the Huizhou authorities offer practical assistance, including subsidies for legal costs to protect their interests.

In May last year, Huizhou introduced regulations allowing eligible enterprises to receive a 30 percent subsidy for overseas rights protection expenses, with a maximum annual subsidy of up to 200,000 yuan ($27,840) for each company per year. An alliance for safeguarding overseas rights in the automotive electronics industry was formed in April last year under governmental guidance to support the sector's enterprises in expanding globally and fostering intellectual property development.

At the same time, customs and banking departments have enacted policies to streamline processes for businesses dealing with customs clearance, foreign exchange, and other procedures when expanding internationally.

In line with the operations of its Huizhou headquarters, the Tijuana factory is pursuing Industry 4.0 "1i" certification, targeting completion in six months, underscoring the group's global expansion drive.

With local and Hong Kong support, more Huizhou enterprises like Ka Shui are poised to take the plunge into international waters.

Contact the writer at amberwu@chinadailyhk.com