Hong Kong is currently without a doubt one of the best examples of prosperity, wealth and affluence in Asia. The city used to be a group of fishing villages before the British occupation. In 1842, after the British won the Opium war, Hong Kong was handed over to Britain as its colony and soon became a famous shipping port.
Hong Kong’s first boat club is believed to be started by a group of oarsmen in 1849 and was named Hong Kong boat Club. In 1894 the Royal Hong Kong yacht club was started. The yacht club was built mainly for British army officers and expatriates who recognized sailing as leisure activity.
The first typhoon shelter in HK was built in 1883 after a typhoon in 1874 devastated HK and Macau, causing 2,000 injuries and 5,000 deaths. The shipping vessels and fishing boats that were moored on the waters were completely destroyed by this typhoon, causing the government to build these shelters to protect all the vessels and maintain the city’s reputation as a safe shipping port. In later years more shelters were built all around the city creating space for mooring commercial and private vessels.
During the World War II, Hong Kong was taken over by Japanese in 1941when they bombed key places around the city and defeated the British army. The Japanese surrendered and left in 1945, giving it back to the British.
In the 1950s and 1960s, many people from China went to HK with their money to escape the civil unrest in China. They set up factories and businesses that turned the city into a manufacturing hub for products such as textiles, plastic products and electronics.
Hong Kong’s boating industry was also growing. In 1967, another boat club was founded in an area called Aberdeen which is in the southern part of the city.
Despite the rise of infrastructure, the city was still known as one of the most corrupt in the world until 1972, when the Independent Anti-Corruption agency was set up to put the country back on the right track. Due to its impressive justice system, low taxes and efficient government, HK attracted foreign investors, traders and talented professionals. The city soon became a financial hub. Today, its stock market is Asia’s second largest, and the 6th largest in the world. HK is currently known as the freest economy in the world, with an advanced infrastructure. Many developers in other Asian countries look up to HK and try to copy their beautiful sky scrapers.
Hong Kong is also a key city for boating in Asia. It is not the largest boating market in Asia like Japan, but has around 12,000 leisure boats registered in its own waters. Hong Kong is a small city with a total area of 1,104 square km and a population of 7.2 million people. The reason Hong Kong is referred to as Asia’s boating capital, is because the city is very globalized and compact, in the sense that boating-related services and expertise are easily accessible. Most of the people in Hong Kong speak English. Maintenance shipyards and professional laborers such as crew, captains, surveyors, mechanics, and consultants are readily available in Hong Kong.
There is a large population of wealthy people in Hong Kong. As a result there are also a lot of high-end, expensive yachts on the water. In Hong Kong, things are very well organized, and it’s possible to get things done incredibly fast, even when government departments are involved. There is also no tolerance for corruption in Hong Kong. It is one of the safest places for boaters in the world, and people adhere to the rule of law. There are around 250 islands in the waters surrounding Hong Kong, which makes it an exciting place for boating. But one of the main reasons for the success of Hong Kong’s boating industry, is the fact that it’s a tax haven that imposes no tax on pleasure boats.
Thousands of full time boat crew and captains are employed by the Hong Kong boating industry. Just the yearly salaries of the boat crew amount to around 200 Million USD. In addition businesses around boating also supply employment, such as shipyards, yacht distributors, machinery and electronics, charters, brokers, handymen etc. This makes it a huge industry that creates significant employment.
During the Asian financial crisis in 1997, the boating industry of Hong Kong underwent an unusual boom. Before the crisis, the industry was already doing well along with the financial markets. There was a lot of affluence and an attitude that the market had reached a new level. The general consensus was that the industry would be unsinkable. Investments in almost all sectors possible were done on borrowed money, people made quick money and thought of themselves as invincible. Some were self-professed kings and princes of the stock market, living in utmost luxury, and many ordinary folks with well paid jobs, saw the affluence and got carried away into taking unnecessary risks. As a result a large number of people were investing borrowed money.
Eventually the unthinkable happened. In 1997, the Asian market crashed. Many who had been greedy would now take more than decade just to get out of debt. Bankruptcy, heavy job losses and worst of all, suicides, became commonplace. Some even took the lives of their families along with their own.
During those difficult times, the used boat market was in an unexpected position for those who understood the opportunity. In superstitious Asian culture, the boats left behind by people who had committed suicide were deemed unlucky and sold cheaply just to get rid of them. These boats were then bought by those who understood the opportunity at almost no cost. Many boats were now the property of banks and financial firms. Some who understood the value of the boats, raised money however they could to buy these distressed assets.
The internet, which was fairly new during 1997, allowed boat sellers great exposure to the world market. In the following years, there was a huge export of used boats to strong economies such as the Australian, U.S. and European markets. All a local agent needed to have was simple know-how to acquire the boats. It was an easy buy and sell.
This practice lasted until well into 2001, when the 9/11 terrorist attacks in U.S slowed down used boat exports from Hong Kong.
Hong Kong was to face another blow to its economy by the outbreak of a flu virus known as the SARS virus. The first case was reported in March 2003, when a businessman travelling to Hong Kong was infected with a deadly virus. The infection quickly spread to hospital workers and people in the hotel where he was living. Hong Kong’s health authority quickly took steps to contain the virus, but panic spread throughout city. The entire city slowed down as people were less willing to go out and use public transport. There were also cases of residential buildings placed under quarantine. During that time, the property market was also brought to an almost all-time low. Under these difficult circumstances, the boating market continued to be lethargic, although a few new markets appeared for exporting used boats, such as Russia, Korea and the Philippines.
After 2004 and 2005 the economy started to recover worldwide. Hong Kong quickly experienced a hike in the stock markets and property prices. The boating market had taken a slight turn during the difficult times. The export of used boats was still a small market, but by then the new motor yacht market had started. The locals were buying new European yachts, and Hong Kong’s boating industry was on its way up again. This time around, many more brands were being represented in the market and many more boat dealers were in the game. Distributors and sellers were competing with each other. It was truly a buyer’s market, where interested parties would find good discounts. Because there were few differences between boats’ designs and overall functionality, buyers were in a position to go to the agents who provided the best price. Hong Kong’s boating market had always been price sensitive. Regardless of how rich buyers are, they are always interested in getting a bargain. Nevertheless, older and better known brands were still the most popular at that time, and buyers were cautious of buying new brands.
The next economic downturn in 2008 shook the industry again, but surprisingly, the sales did not suffer as much as people thought it would, at least not in Hong Kong. The main reason for this was China. Hong Kong had new buyers from mainland China, who generally preferred fairly known European brands that looked flashy. But due to lack of shipyard maintenance in China, taxation and licensing complications, Chinese buyers preferred to keep their boats in Hong Kong.
Hong Kong was soon to witness a new problem in the industry. Since 2001, Hong Kong had not exported many boats overseas, and the continuous influx of small and big boats over a decade soon made Hong Kong’s mooring spaces few and far between. The few yacht clubs in Hong Kong were quickly full. The moorings for pleasure vessels provided by the government within the waters sheltered by breakwater walls were becoming full. Space is a rare commodity in Hong Kong. Unfortunately, this aspect is still not taken seriously by the government, who wish to avoid possible political confrontations and accusations for spending money to accommodate the rich.
This misconception has until now put the industry in an unfortunate position. Membership of the yacht clubs are over booked, and some yacht clubs are skyrocketing their membership fees. Berths are on waiting lists and rentals are overpriced. For example, in 2015 a 60ft berth has a rent of almost USD 8000 monthly, and a swing mooring for a 50ft boat can cost up to USD 3,000 monthly. Boat ownership has become only for the very rich who don’t care much about the way they spend their money.
Other casual boat owners who worked hard to earn their boats are forced to say goodbye to the hobby of boating, due to the overvalued cost of just mooring a boat.
Since 2009 the majority of buyers for high-end luxury yachts in Hong Kong are from mainland China. Due to taxation issues in their country, they prefer to keep their yachts moored in Hong Kong. But since 2013, the central government of China has begun a major corruption crackdown in all sectors in the country. This has stopped the sale of many luxury products in China. The Chinese businessmen who may have been affiliated with corrupt officials or involved in tax evasion avoid any unwanted attention they can get by flashing any luxury products like yachts.
The Chinese government has also started to stop unregulated firms from lending money to businesses. This is called ‘shadow banking’ in finance. This kind of high-risk lending used to be very common. Shadow banking involves a company X asking a common man to buy an investment in which they will give him monthly returns with good interest over a period of a few years. Then company X takes that money and in turn lends it to a developer who promises company X a higher return. Company X also doesn’t check if the developer is capable of paying back the money should something go wrong. If the developer loses this money and cannot pay back company X, company X cannot pay the money back to the common man. In such a case there is also no insurance or bailout from the government, and the common man ends up taking all the risk and losing his money. If he had invested in a bank, the risk would be less because banks are regulated and the government bails them out in case of trouble.
Since the Chinese government has stopped this type of unregulated lending, many high-end buyers who had access to money have suddenly found themselves stuck. This has greatly affected yacht sales in Hong Kong since 2013.
Having said that, there are also many other buyers in China who can buy yachts without borrowing heavily from banks. But the majority of these buyers are not out there to spend unrealistic amounts of money for club memberships and mooring boats in Hong Kong. Neither are they interested to pay heavy taxes in China. So they simply do not indulge in boating.This further damages the market.
If this situation continues without any major action from the Hong Kong government, we will be seeing the upper middle class moving out of the boating market completely. Only the super-rich or those public company directors and CEOs that spend their investors’ money into buying expensive club memberships and berthing spaces will be able to afford boating. And if for any reason there is a fluctuation in stock or property markets, the yachting business may suffer heavily. The business would suffer much less if buyers were more diversified and in less debt. The industry would also suffer less if more buyers were to buy cheaper and smaller boats that are easy, and not so costly, to store. Then the shipyards would still have some business in economic downturns.