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News Release

HONG KONG

Will TPP Impact Hong Kong’s Role as a Regional Hub?

Hong Kong’s industrial market remains focused on its existing trade agreements


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Twelve Pacific Rim countries signed the Trans-Pacific Partnership (TPP), the largest regional trade agreement to date. China and Hong Kong are not among them. TPP signatories represent 40% of global GDP, one-third of world trade, and comprise a population of 800 million. As a regional trade center, what are the implications for Hong Kong trade and warehousing demand?

Ricky Lau​, Head of Industrial ​at JLL, is optimistic that the Hong Kong warehouse sector remains an attractive market for investors and developers in the medium to long run. China and Hong Kong have the potential to join the agreement in the future, and in the near to mid-term demand is expected to rise when road and bridge infrastructure between Hong Kong and China is completed.

On the other hand, Lau admits that China and Hong Kong's absence from the TPP will likely hurt the competitiveness of made-in-China exports and trim the growth of Hong Kong's export trade, which consists mainly of re-exports to and from the mainland. He adds that although China already has Free Trade Agreements (FTAs) with eight of the 12 TPP members, the absence of a FTA with the US (which accounted for 17% of China's total exports in 2014), will mean more competition for China exports to the US in future. According to the Hong Kong Trade Development Council, this friction is likely to come from nations such as Vietnam, which is part of the TPP deal. Indeed, many Hong Kong textile and apparel manufacturers are considering moving (or already have moved) their production facilities there to stay competitive. 

According to Lau, Hong Kong's industrial market is more focused on its existing trade agreements than the TPP deal. Hong Kong's status as a key logistics and trading hub will be cemented by China's "One Belt, One Road" infrastructure improvement initiative – the Silk Road Economic Belt and the 21st Century Maritime Silk Road. This will increase trade efficiency, remove tariffs and enhance security along routes linking China to Southeast Asia, the Middle East and Europe. Hong Kong's location as the focal point of the Maritime Silk Road should see the city's warehouse market benefit from the increased trade flows between China and Southeast Asian countries.

"Being a regional trade hub with extensive business networks on the mainland and in neighbouring countries means Hong Kong is well positioned to capitalise on any spillover from a more thriving Trans-Pacific economy and increased trade flow within the region," said Lau.

Currently, the countries participating in TPP include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. Six more markets – Columbia, Indonesia, South Korea, Taiwan, Thailand and the Philippines – have expressed their intention to join.

To find out more about JLL's Industrial and Logistics services, contact Ricky Lau.