Hong Kong’s licensing market began to take shape in the early 1990s. Despite a relatively short history of development, Hong Kong has grown into a highly developed licensing market in Asia. Similar to the global and regional pattern, characters and entertainment properties from the US and Japan are also popular in Hong Kong.
Hong Kong consumers are sensitive to the latest market trends, with trendy licensed products and high-end international brands having a strong local presence. Main categories of licensed products are food and beverages, toys, books, gift items, stationery, computer supplies and sales promotions for fast food chains and banks. As a popular destination of shopping and entertainment in Asia, Hong Kong has attracted a number of sports brands to launch their licensing activities too.
Hong Kong has relatively few home-grown brands and properties for licensing. Nevertheless, many international licensors, like Warner Bros., Mattel and the National Basketball Association (NBA) have chosen to set up offices in Hong Kong, many of which also function as the licensors’ regional headquarters in Asia. Moreover, many famous foreign licensors have entrusted the exclusive property rights to Hong Kong licensing agents to develop the business in Asia.
Hong Kong companies, such as YGM Trading, are also licensees of European designer brands, handling the sales and distribution on the Chinese mainland as well as in other Asian markets. There are some Hong Kong licensing agents which are also licensors of local properties, such as B Duck. Many licensing industry participants are members of the Licensing Executive Society of China, Hong Kong Chapter. Utilising Hong Kong as a springboard to the Greater China and Southeast Asia markets, several global licensing agents and brand management companies, including those from Europe, Japan and the US like Iconix Brand Group, have also established their offices in the city.
Trade in Services
The significance of Hong Kong’s licensing business lies in its status as a hub for licensing activities in Asia. Local business usually accounts for a small proportion of overall business of licensors and licensing agents, who are most active in other Asian countries.
Licensing activities between Hong Kong and the rest of the world can be partly reflected in the cross-border payments for the use of intellectual properties.
China’s burgeoning licensing market
While the global licensing market has generally been stagnant, licensing activities are growing in Asia, particularly the China market. China is a fast-growing market for licensed goods, which has grown from US$5.5 billion in 2013 by about 22% to US$6.7 billion in 2016. Despite a short history of development, the huge size of the economy has made China the second largest licensing market in Asia, following Japan.
In China, e-commerce has become one of the top trends in the licensing industry. Many foreign brands and properties are fast gaining popularity in China through utilising some B2C online platforms, which often require more support and resources from the licensors. For instance, basketball sport brand NBA has established an online shop in Alibaba’s Tmall, which helped the brand strengthen its presence in the Chinese consumer market. Leveraging the marketing impact of social media platforms, such as Sina’s Weibo, NBA China established its online fans club with interactive campaigns to help promote licensed NBA products.
At present, characters are the major type of properties handled by the Chinese licensing industry players. The number of home-grown licensing properties on the mainland has increased rapidly in recent years, popular characters include Pleasant Goat and Big Big Wolf, Balala the Fairies and Armor Hero.
With strong networks on the Chinese mainland and in Southeast Asia, Hong Kong licensing agents are considered by many foreign licensors the most preferred partners to tap these emerging opportunities. Hong Kong-based licensing companies are major players on the mainland, setting up offices in cities like Shanghai and Guangzhou with distinct functions.
On the other hand, Hong Kong is the best gateway for mainland-based enterprises to promote their brand names and trademarks overseas due to Hong Kong’s remarkable international network, as well as resourceful licensing players providing quality licensing services, including public relations support and personnel training. The increased demand for licensing services from mainland-based companies is expected to drive the Hong Kong licensing industry to a higher level.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
Among other provisions, CEPA further opens up the mainland market for Hong Kong products and the distribution business to Hong Kong companies.
In 2014, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong was signed for implementation from March 2015, and the geographical coverage was extended from Guangdong to the rest of the mainland starting from June 2016 under the Agreement on Trade in Services (ATIS). Under ATIS, HKSS are granted national treatment to conduct retailing and wholesale services on the Chinese mainland. Unlike the ten yearly Supplements which adopted a positive-list approach to introducing liberalisation measures, the two latest agreements adopt a hybrid approach to granting preferential access to Hong Kong using both positive and negative lists. Further information on the latest CEPA agreements can be found here.
Since effective distribution is vital to the success of a licensing deal, Hong Kong companies making use of the opportunities provided by CEPA to develop their mainland business will likely be sought after as distributors for foreign licensors, who prefer to work with distributors that offer adequate IPR protection and services in line with international practices.
Hong Kong manufacturers on the mainland who build their own distribution channels on the mainland or partner with a reliable Hong Kong-invested distributor can become even stronger candidates as licensees for popular foreign properties. Hong Kong manufacturers/licensees can also benefit from CEPA, given that all Hong Kong-produced goods fulfilling the required origin rules – many of which are hot products for licensing – can now enter the mainland market free of tariff.
 The negative list of ATIS explicitly excludes the distribution services in relation to books, newspapers, magazines, cultural relics, though it is added therein as a positive-list item for HKSS to distribute these products.