Business as Usual in Hong Kong

Mark Carroll

Trade between Taiwan and China follows a circuitous route that passes through Hong Kong. However, next month, when Hong Kong reverts to mainland China, few people in Taipei think that commerce will change. Taiwanese companies ship components to Hong Kong-registered Taiwanese front companies that then pass the components on to Chinese factories for assembly. The finished products are then shipped to their final destination. Currently, China produces about 40 percent of the world's mice and keyboards and up to 20 percent of the world's monitors.

Air traffic between Taiwan and Hong Kong is secure until 2001, thanks to a previously negotiated agreement. Products such as ICs, printed circuit boards, and smaller components will have no immediate problem in re aching China. In fact, companies can make products such as keyboards and mice from components produced i n China. The CRTs for monitors (Taiwan's leading IT product) will need to be shipped via container for their delivery to Taiwanese monitor factories in China.

Monitor manufacturers aren't too concerned about easy access to their Chinese factories. Jorgen Gunnarson, marketing manager for Philips' monitor unit, says, "As a global company, we currently source CRTs from many parts of Asia, even though we have major CRT production facilities in Taiwan. If for some reason we can't ship CRTs from Taiwan to our monitor production facility in China, we have alternate sources for the components."

Acer Peripheral is Taiwan's largest peripheral manufacturer. It has several operations in China. Its president, K. Y. Lee, says, "Any interruption of trade between Taiwan and China wouldn't be a problem. Only about 5 percent of our monitors are currently made in China. We can sou rce CRTs from Malaysia, Thailand, and even some from Matsushita's CRT plant in Beijing."

In fact, all the contacted Taiwanese IT companies with operations in China see the trade situation being resolved before July. One analyst says: "Both governments have already agreed off the record that Hong Kong-Taiwan shipping will not be affected by the turnover."