Hong Kong Industry Profiles

• The furniture and furnishing industry is a manufacturing sector in Hong Kong with a long history.  It includes the production of household, office and kitchen furniture, as well as mattresses, bedding and parts of furniture. A vast variety of raw materials are used in production, including wood, rattan, plastic and metal. Among others, wooden furniture is the major production and exports of the industry.
  

• Hong Kong companies have strong design capability, while accommodating themselves to OEM orders from overseas buyers. Some specialise in the manufacture of higher-end set furniture for hotels, offices and other real estate projects under tender-contracts.
  

• Hong Kong's furniture manufacturers have also started to develop their own brands. Furniture manufacturers also become more careful about the choice of raw materials to meet international standards, such as compliance with legal or other environmental requirements in their target markets.
  

• Green furniture is a major product trend.  As a result of the increasing awareness about environmental protection and more stringent legal requirements worldwide, furniture manufacturers are more cautious in choosing the materials for production. Some manufacturers are adopting a de-materialisation approach by designing furniture which uses less material. Furniture painting also needs to be environmentally friendly.
  

Industry Features

Hong Kong's furniture manufacturers engage in the production of a wide range of products including household, office and kitchen furniture, as well as mattresses, bedding and parts of furniture.

Most of the manufacturing activities of the furniture industry are now carried out on the Chinese mainland. With the head office in Hong Kong, acting as a controlling office principally responsible for high value-added services such as management, finance, accounting and marketing, production plants have been set up on the Chinese mainland to utilise the advantage of lower operation cost and abundant land supply there.

A wide variety of raw materials are used in production, including wood, rattan, plastic and metal. Among others, wooden furniture is the major production and exports of the industry. It includes furniture in rosewood and black-wood, especially wooden tables, chairs and wardrobes. To many Hong Kong furniture manufacturers, Asian countries are the major source of raw materials. For example, solid wood is mainly sourced from Malaysia and Thailand, while Indonesia is the major supplier of rattan, whereas Japan and Taiwan supply iron and steel.

Performance of Hong Kong Furniture Exports^

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

The US remains the largest market for Hong Kong's furniture exports.  Following the US are the Chinese mainland, EU and Japan. The Chinese mainland’s share in exports is picking up in recent years.  Wooden furniture remains takes up the largest share in exports, the share of metal furniture is also increasing.

Sales Channels

On the retail side, chain stores and hypermarkets are the most popular sales channels in North America.  In Japan, imported furniture is mainly sold in specialty stores as well as department stores. In these mature markets, buyers increasingly source furniture directly from manufacturers, while some still purchase through agents and distributors. Specialised furniture districts or shopping malls are popular on the Chinese mainland for both retail and wholesale business, such as the "furniture street" in Dongguan.

Many Hong Kong manufacturers produce on an OEM/ODM basis for major foreign brands. For example, JF Household Furnishings Ltd, a listed company in Hong Kong Stock Exchange, is one of the suppliers of IKEA. Many Hong Kong manufacturers have established their own retail outlets in overseas markets, particularly on the mainland, for example, Lamex, Four Seas Furniture and Dickson Furniture have set up subsidiaries, branch offices and sales outlets in major Chinese cities to facilitate domestic sales.

Low to medium-end products are often sold in hypermarkets. For standard products such as garden chairs, folding chairs, shoes racks and mattresses, Hong Kong manufacturers mainly rely on trading firms, foreign buying offices stationed in Hong Kong. They may also appoint sales agents to develop overseas markets.

Industry Trends

Competition is keen in the furniture industry. Furniture manufacturers and exporters are suffering from decreasing profit margins. Many companies strive to reduce their cost of production and increase efficiency.  Some relocate their manufacturing operations to other areas with lower operation cost. Some foreign manufacturers are taking steps to strengthen their domestic production through product specialisation.  For example, some US companies focus on popular wood species not available elsewhere.

Hong Kong's furniture manufacturers have also started to develop their own brands. Notable examples include mattress manufacturers marketing their own brands in the local and overseas markets. Furniture manufacturers also become more careful about the choice of raw materials to meet international standards, such as compliance with legal or other environmental requirements in their target markets. 

The Chinese mainland is the largest furniture exporter to many countries, including the US and Japan. In the 2010, mainland's exports of furniture and parts amounted to US$39 billion, an average yearly growth of 17% over the last five years, despite the economic slowdown in 2009. Guangdong province is a major manufacturing centre of furniture on the Chinese mainland. Apart from Hong Kong, manufacturers from Taiwan and even the US have also set up production plants on the mainland.

China also offers a huge potential market for furniture manufacturers. The increasing consumption power of Chinese people, its booming property market and promising tourist industry serve to drive the demand for both residential and hotel furniture, as well as other higher-end products.  Over the last five years to 2009, China’s retail sales of furniture recorded an average growth over 30% per annum. In 2010, it grew by 37%. Some foreign companies are actively seeking for business partners in China to explore opportunities of setting up production operation in China. Hong Kong can act as a platform for these companies to enter the mainland market with its long-time experience in production and distribution network on the mainland, as well as the reputation for its quality, integrity, reliable delivery and management.

CEPA

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003 and subsequently expanded in following years. All products made in Hong Kong, subject to CEPA's rules of origin, enjoy duty-free access to the Chinese mainland. Detailed information is available from the following hyperlink: http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2011.pdf

Trade Measures Affecting Furniture Exports

Exports of furniture are subject to relevant safety and environmental requirements.  Safety requirements include, for example, the stability, strength and even height requirements for children furniture, and fire-safety requirements for bedding, mattresses, fabric sofas and curtains. In October 2002, a law was passed in Japan to monitor and reduce harmful gas emissions from interiors, which would hinder the use of materials.

On 28 December 2004, the US Department of Commerce amended its final affirmative determination in the anti-dumping duty investigation of wooden bedroom furniture from China. Currently the dumping margins ranges from 43.23% for the individually investigated respondents to a China-wide rate of 216.01% applicable to all other imports.  In May 2008, the US approved legislation that significantly tightens the requirements for the importation of plant and plant products, including products made of wood.  Importers are required to file a declaration upon importation that contains (i) the scientific name of any plant (including the genus and species) contained in the importation, (ii) a description of the value and quantity (including the unit of measure) of the importation and (iii) the name of the country from which the plant was taken.  In July 2010, the US enacted into law the Formaldehyde Standards for Composite Wood Product Act which came into effect in January 2011.  This Act sets the standard for formaldehyde emissions from related wood products fro sale in the US.

Product Trends

Green furniture: As a result of the increasing awareness about environmental protection and more stringent legal requirements worldwide, furniture manufacturers are more cautious in choosing the materials for production. For example, they use fabrics that do not give off toxic fumes in the production process, such as polypropylene.  In order to reduce the consumption of wood, some alternative materials are used in view of environmental concerns. Some manufacturers are also making furniture from recycled products, such as reclaimed wood and old teak from wood buildings. Some manufacturers are adopting a de-materialisation approach by designing furniture which uses less material. Furniture painting also needs to be environmentally friendly.

Multi-functionality: More flexible, functional and smaller furniture which incorporates more than one function is popular. The demand for this type of furniture is not limited to people living in small quarters, but also people cluttered up with stuffs. Products such as a raised bed with lots of storage space underneath and folding chairs hung on a wall can help provide storage solution and free space on the floor. 

Home office in the US: In the US, there is an increasing demand for home offices in order to meet the need of people working at home.

Ready-to-assemble (RTA) and Do-it-yourself (DIY) furniture: RTA and DIY furniture and home furnishing products have gained popularity around the world, especially in Europe and North America. Fewer official working hours, increasing aging population and early retirements will be the major drive for the growth in the sector.

Natural variations: the new American classic with simplicity designs is coming back. Furniture featured with clean lines and a visible sign of hand workmanship is popular in the US. Wood species such as cherry, white oak, maple and pine are well-liked by the customers.

Globally inspired design: The idea of bringing the world into our home is catching on and the cultures in other parts of the world in getting reflected in the design of furniture.  For example, a more Zen-like interior space can be found Asian inspired furniture.

Modern style upholstered furniture: Contemporary and trendy upholstery is in demand in Europe with robust growth in the past few years. Popular designs include clear and simple lines which are made from different materials. Leather and heavier durable fabrics are the majority for upholstered furniture.