HKPC and HKBMIA Release “Hong Kong Life and Health Industry Development Study” to Unleash City’s Potential as R&D and Global Financing Hub Leveraging the Appeal of “Made-in-Hong Kong” Brand

(Hong Kong, 23 November 2022) The Hong Kong Productivity Council (HKPC) and the HK Bio-Med Innotech Association (HKBMIA) released the key findings of the “Hong Kong Life and Health Industry Development Study” (the Study) today. Offering an overview of the current status of this industry and its characteristics, the Study identifies future development opportunities. The Study serves as a reference for the government and industry stakeholders as they formulate strategies to leverage Hong Kong’s strengths and consolidate resources to realise life and health industry’s great potential to become a high value-added industry.

With increasing life expectancy and greater awareness for health among the general public, the importance of the life and health industry is fully recognised by governments, enterprises and capital markets worldwide. The HKSAR Government announced in this year’s Policy Address that it will proactively support the development of the life and health technology industry. Data show that life and health sector raised US$70.9 billion worldwide in 2020 and Hong Kong’s healthcare expenditure grew at an average annual rate of 5.6% between 1990 and 2020, reflecting a growing demand for medical services and products.

The “Reindustrialisation Study – Hong Kong” unveiled by HKPC late last year revealed that Health Technology (HealthTech), Food Technology (FoodTech), and Green Technology (GreenTech) are the three local industries with the greatest potential for reindustrialisation. As an extension on the vertical strategies for reindustrialisation, HKPC launched an in-depth study into HealthTech, one of the industries identified with greatest potential. This warranted the “Hong Kong Life and Health Industry Development Study”, which was conducted from July to September this year. HKPC is very pleased to have the support of HKBMIA to present this study together, which surveyed a total of 330 enterprises, including 273 in Hong Kong and 57 from other parts of the Greater Bay Area (GBA). HKPC and HKBMIA hereby jointly announce the main findings.

Key findings:
The Hong Kong enterprises surveyed are mainly engaged in nine fields in the life and health industry, namely, medication and pharmaceutical raw materials (28%), medical and diagnostic equipment (26%), Chinese medicine (11%), health supplements (11%), medical services (8%), genetics and stem cells (3%), artificial intelligence in healthcare (3%), regenerative medicine (2%) and others (8% - including beauty/skincare and medical consumables). Enterprises in other parts of GBA are mainly engaged in medical and diagnostic equipment (39%), medication and pharmaceutical raw materials (18%) and genetics and stem cells (13%).

In terms of business nature, 25% of Hong Kong enterprises surveyed are engaged in research and 51% in manufacture, including original brand manufacturing (OBM), original design manufacturing (ODM) or original equipment manufacturing (OEM). For enterprises in other parts of GBA, 25% are engaged in research and 77% in manufacturing. For Hong Kong enterprises that conduct research, genetics and stem cells (80%) and artificial intelligence in healthcare (80%) have the highest percentage among all categories. For Hong Kong enterprises that conduct manufacturing, the Chinese medicine (63%) sector has the highest percentage among all categories.

75% of Hong Kong enterprises have no more than 50 employees. In terms of land use, for Hong Kong enterprises with research and development (R&D) laboratories in Hong Kong, more than 60% of them operate from laboratories covering less than 1,000 square feet in floor area. For Hong Kong enterprises with pilot production lines, nearly 60% of them covering less than 1,000 square feet in floor area. For Hong Kong enterprises with manufacturing lines in Hong Kong, more than 80% of them covering less than 10,000 square feet in floor area.

In terms of output value, 20% of Hong Kong enterprises surveyed achieved an annual turnover of more than US$10 million, with the genetics and stem cells (30%) sector having the highest percentage to reach this level across all categories. 37% of enterprises in other parts of GBA achieved an annual turnover of more than US$10 million, and the Chinese medicine (67%) sector has the highest percentage to reach this level across all categories.

For enterprises in other parts of GBA to invest in Hong Kong, they have favourable views on Hong Kong’s performances in four of the five major consideration factors, namely (in descending order of importance), business environment, convenience to expand into overseas markets, government support, and industry-related preferential policies, as well as the overseas recognition of local clinical data. This is a remarkable testament to Hong Kong’s international competitiveness and its strong attractiveness to overseas enterprises. Apart from the four factors receiving positive views, the fifth major consideration factor —— high operating costs is a main concern for many enterprises.

38% of Hong Kong enterprises surveyed are interested in investing in Hong Kong; of these, 84% are interested in investing in R&D, 65% in pilot production and 67% in manufacturing. 70% need less than 5,000 square feet for R&D labs; 65% need less than 5,000 square feet for pilot production; and 51% need less than 10,000 square feet for manufacturing. And the percentages of these enterprises that consider investing US$3 million or above are: in R&D (21%), pilot production (27%), or manufacturing (48%).

37% of enterprises in other parts of GBA are interested in investing in Hong Kong, of which 100% of them are interested in investing in R&D, while 14% of them are interested in investing in pilot production or manufacturing in Hong Kong. 62% need less than 5,000 square feet for R&D labs; 43% need less than 5,000 square feet for pilot production; and 33% need less than 10,000 square feet for manufacturing. And the percentages of these enterprises that consider investing US$3 million or above are: in R&D (27%), pilot production (47%), or manufacturing (71%).

The Study outlines the lack of multi-skilled talents as the biggest challenge faced by the life and health industry in the commercialisation of their R&D outcomes. According to Hong Kong enterprises surveyed, staff in marketing, information technology/statistics/data analysis, product testing and certification, business management and manufacturing/industrial engineering are most needed in the coming year. More than 60% of the companies in need of manufacturing/industrial engineering talent believe that local supply is insufficient. According to surveyed enterprises in other parts of GBA, staff in marketing, manufacturing/industrial engineering, business management, product testing and certification and information technology/statistics/data analysis will be most needed in the coming year.

Four major development recommendations:
Taking into account the strengths of Hong Kong’s life and health industry, the challenges faced and the support required by the industry, and the analyses and insights of experts from the industry, academia and research institutes, the Study puts forward four major recommendations for the development of Hong Kong’s life and health industry:

1. Focus on the development of three industries which enjoy advantages: medical and diagnostic equipment, Chinese medicine and health supplements;
2. Accelerate the development of the emerging industry of genetics and stem cells;
3. Nurture Bio+ multi-skilled talents;
4. Enhance institutional interoperability between the Mainland China and Hong Kong, such as, mutual recognition of medication/medical devices/patents/clinical data, and the import and export of R&D specimen /experimental reagents/genetic resources.

Mr Edmond LAI, Chief Digital Officer of HKPC, said, “The high R&D investment, high percentage of enterprises engaged in production, high output value, small number of employees and relatively low land use of Hong Kong’s life and health enterprises at present are indicative of a high value-added industry worthy of active promotion, especially the three sectors enjoying advantages, namely, medical and diagnostic equipment, Chinese medicine and health supplements. The Study also found that Hong Kong enterprises engaged in the field of genetics and stem cells have higher R&D investment, and a higher percentage of achieving an annual turnover of more than US$10 million when compared with enterprises in other categories. It shows that this emerging industry has strong development potential, and is expected to expand significantly. Hong Kong is the largest financing destination for biotech enterprises in Asia and the second largest in the world. The HKSAR Government should fortify the city’s position as a top financing centre for biotech enterprises, make good use of the stipulations of Chapter 18A of the HKEX Listing Rules, which allow pre-revenue biotech enterprises to raise capital in Hong Kong. In addition, the HKSAR Government has pledged to introduce more supporting measures, including the provision of infrastructure, such as, the Hong Kong-Shenzhen Innovation and Technology Park, the Northern Metropolis and the San Tin Technopole. These favourable conditions can attract leading enterprises and promising start-ups to Hong Kong, thus bringing in overseas capital and advanced technology while allowing enterprises in Mainland China to go global through leveraging the appeal of the ’Made-in-Hong Kong’ brand. Given that operating costs are an important factor for overseas enterprises to decide whether to invest in Hong Kong, it is imperative to provide more support for enterprises, such as, promoting smart production technologies under “Industry 4.0” (“i4.0”), to help enterprises reduce operating costs, improve quality, minimise land use, upgrade and transform the business models. This way, more enterprises of the upstream, midstream and downstream chains of the life and health industry establish a presence and thrive with synergy in Hong Kong.”

He continued, “The lack of multi-skilled talents is the biggest challenge for the industry to commercialise R&D outcomes. What enterprises need the most in the future is talents – people who are not just well-versed in biotechnology, but also in interdisciplinary know-how, such as, marketing, information technology/statistics/data analysis, product testing and certification, business management, manufacturing /industrial engineering, etc. In view of the strong demand for multi-skilled talents, the Study recommends that universities in Hong Kong consider offering more interdisciplinary programmes to nurture multi-skilled talents. The Study also encourages enterprises to provide internship opportunities for graduates, and to provide on-the-job training by making good use of government funding. For instance, HKPC’s summer and winter internship programmes, which provides hands-on practical experiences in the workplace and learning opportunities for university students, can help Hong Kong to nurture more Bio+ multi-skilled talents, and support the development of the life and health industry.”

Professor LO Yuk Lam, President of HKBMIA, said, “This Study shows that greater institutional interoperability between Mainland China and Hong Kong can facilitate the commercialisation of R&D outcomes, strengthen the complementarity of Hong Kong and other GBA cities, and converge global innovation resources. As a life and health innovation R&D hub, Hong Kong is home to 26 State Key Laboratories, Hong Kong Branches of Chinese National Engineering Research Centres and world-leading joint research centres. Local clinical data are recognised by the National Medical Products Administration (NMPA) in Mainland China, the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA) for drug registration purposes. Because of all these, Hong Kong enjoys prominent strengths, as the life and health industry relies highly on R&D. We support the HKSAR Government striving to have more local medical institutions included in the list of accredited clinical trial sites, so that the clinical trial data of these institutions can be used to apply for drug registration in Mainland China, thereby giving momentum for Hong Kong to become a crucial platform for local and international pharmaceutical enterprises to enter the Mainland China market. In addition, as the “measure of using HK registered drugs and medical devices used in Hong Kong public hospitals in Guangdong-Hong Kong-Macao Greater Bay Area” (the Measure) has allowed designated medical institutions in the GBA to use, upon approval by Guangdong Provincial Government, medication and medical devices that are urgently needed for clinical use, bringing new opportunities to Hong Kong’s life and health industry. We also support expanding the scope of the Measure, including expanding the directory of drugs, medical devices as well as the gradual expansion of the relevant arrangements to other cities in the GBA and more cities in Mainland China, so as to foster a high level of integration between the life and health industries in Hong Kong and Mainland China. This will fully unleash the industry potentials; leverage Hong Kong’s unique strengths of having the Motherland’s support and being a Super-Connector with the world, to add fresh momentum to Hong Kong’s development into an international innovation and technology hub and the development of the GBA.”

Please click here to view the key findings of the “Hong Kong Life and Health Industry Development Study” (Chinese only). The full report will be available by December for download from HKPC and HKBMIA websites.

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Mr Edmond LAI, Chief Digital Officer of HKPC (left); and Professor LO Yuk Lam, President of HKBMIA (right), present the results of the “Hong Kong Life and Health Industry Development Study”, which supports Hong Kong to leverage its strengths and consolidate resources to realise life and health industry’s great potential to become a high value-added industry. The Study puts forward four major recommendations, namely: to focus on the development of three industries which enjoy advantages —— medical and diagnostic equipment, Chinese medicine and health supplements; to accelerate the development of the emerging industry of genetics and stem cells; to nurture Bio+ multi-skilled talents; and to enhance institutional interoperability between the Mainland China and Hong Kong