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There are currently 26 Chinese banks and seven representative offices operating in Hong Kong. The Bank of China is now the second largest banking group in Hong Kong after HSBC. Hong Kong is also a key offshore capital-raising centre for Chinese enterprises. “By the end of 2003, 258 mainland companies (including H-shares, red-chips and other overseas registered Chinese companies) were listed in Hong Kong with a total market capitalization of US$ 217 billion, or 31% of Hong Kong’s total market capitalization. Total funds raised by these companies amounted to US$ 100 billion.

The listing of two Chinese insurers PICC and China Life is a major recent success. ” [8]. Another advantage is low-cost labor. This is what helps when discussing costs. Most Hong Kong manufacturers have set up plants in the Chinese mainland to take advantage of the lower production costs or to target the domestic market of the Chinese mainland. While an increasing number of machinery manufacturing plants are being relocated to the Chinese mainland, machinery manufacturers in general have been slower than other sectors in setting up offshore plants because of the more capital-intensive nature of the industry.

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And Festo must be one of those who use this advantage. Festo is currently building a plant in China and it may use all the advantages of already existing handling scheme (production in China and distribution via Hong Kong). Festo won’t be the first one but anyway among the first who develop their business this way. Moreover “the Chinese mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003. The mainland will apply zero tariff to 273 imported goods, including certain machinery products, of Hong Kong origin from 1 January 2004.

The mainland will also apply zero tariff to imported goods of Hong Kong origin other than the 273 products not later than 1 January 2006, subject to applications from manufacturers and approvals of responsible authorities from both mainland and Hong Kong” [6]. 4. Competitor analysis: advantages, disadvantages, our risks, our chances. More than 50 competitors are active in the Asian market for pneumatic equipment. A substantial number are smaller firms operating in their domestic markets on a regional basis.

An upper tier of the market contains four larger and internationally focused participants (incl. Festo): Festo, Metal Work, SMC and Parker (see Appendix 4) . Additional firms operate on an inter-Asian basis, but have yet to attain the market share of those in the first tier. Competition between firms in all areas of the market is intense. The standardization of many products means that price is the principle method of distinguishing between products. Delivery, the author observes, is also crucial.

Competition may become less price focused as customers place greater emphasis on expertise. The main competitors of Festo here are: Parker Hannifin Corporation – PH (NYSE), also presented in Hong Kong (Sales-center). Parker-Hannifin Corporation is a worldwide full-line manufacturer of motion control products, including fluid power systems, electromechanical controls and related components etc. The range of products is almost the same. The Company is presented in 45 countries. The products are sold as original and replacement equipment through product and distribution centers worldwide.

The Company markets its products through its direct-sales employees and more than 7,500 independent distributors. Metal Work, an Italian company specializing in the production of pneumatic components for automation systems, also presented in Hong Kong (Sales-center). Since 1967, the year it was formed, the Company has gradually extended it’s structure and production range to became a market leader in the pneumatic sector for automation systems. It has obtained the ISO 9001 certification as well as ISO 14001.

Products are distributed and serviced by a great number of branches all over the world, which guarantee expertise and efficiency together with a comprehensive “before and after” sales service. Product quality and efficient organization are the firm basis on which Metal Work stands today. These qualities have put the company in a position to anticipate market needs and satisfy the most demanding requirements in pneumatic automation. a native Hong Kong producer SMC. It started as a specialized maker of sintered metal filters.

Later on it took a new step as a company that contributes to automation and labor-saving around the world. SMC Pneumatics (Hong Kong) Ltd. manufactures a wide range of pneumatics cylinders to provide a fast and reliable delivery to its customers. It has established a large network of 4 Service Center and over 80 Distributors in China providing Sales and Technical support. To meet the service needs of its customers, SMC Pneumatics (Hong Kong) Ltd. , has provided prompt service to the customers, Comprehensive training courses; production and Sales service.

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