Contributing value to China

Merlin Swire at UNION, the Opposite House in Beijing.
Merlin Swire at UNION, the Opposite House in Beijing.
On the occasion of the 70th anniversary of the founding of the People's Republic of China, Swire News took the opportunity to have a chat with Merlin Swire, Chairman of John Swire & Sons (H.K.) Limited, about the group’s plans for increased investment on the Mainland, in support of China’s high level of opening up.

2019 marked the 70th anniversary of the founding of the PRC. In your opinion, what has been the biggest change in China since then?

The transformation from a largely rural and agricultural economy to one in which there is an urban middle class of 400 million with tremendous spending power. It's an astonishing transformation. And in China today visitors can't help but feel that they are seeing a society at ease with itself, and with confidence in the future. That sense has been palpable to me on recent visits to Beijing, Shanghai and Shenzhen. And it was also evident in the outpouring of national pride at the 70th anniversary events. I was privileged to attend the State Banquet at the Great Hall of the People on the 30th September and the parade and shows on 1st October. A deeply memorable experience.

China's GDP growth has slowed recently, and there are also many geopolitical uncertainties in the world. How will that affect Swire's overall strategy in China?

There are certainly many geopolitical uncertainties in the world. But China remains the engine of global growth, and our strategy will be to continue to increase our investment in China's domestic economy, to bring high quality services, products, and experiences to Chinese consumers.

We are currently working on lots of investment opportunities in China – in our existing businesses as well as in new areas – and I hope we'll have some exciting news to announce soon. Meanwhile in Shanghai, we are constructing our latest retail development Taikoo Li Qiantan, which is due to open in late 2020, and which together with Taikoo Hui in Jing'an district will give us a great footprint in the city. Our Coca-Cola franchise business is growing stronger than ever after franchise expansion, and the business has recently established a China headquarters in Shanghai Pudong. In summary, I'm excited to imagine what our China business will look like in five years' time – I think it will be much broader and much stronger. And no doubt the number of the group's employees in the Mainland will have grown well beyond the 37,000 we see today.
Our strategy will be to continue to increase our investment in China's domestic economy, to bring high quality services, products, and experiences to Chinese consumers
But we also employ 42,000 people in Hong Kong, and our growth strategy there remains unchanged. We will continue to invest in new aircraft for Cathay Pacific to facilitate future growth, new routes, and a strengthening of the international hub at Hong Kong International Airport ("HKIA"). And the great work that Swire Properties has done in transforming Taikoo Place into Hong Kong's premier decentralised workplace destination will not end. We opened One Taikoo Place in 2018. Two Taikoo Place will open in 2022, and there will be more to come beyond that.

What is your view about China's high level of opening up? What role does Swire play in the process?

We have found the China market to be very welcoming and open to our businesses. I think our role – which should be the role of all foreign companies in China – is to work with local companies and governments to try to raise the quality of life and quality of jobs for Chinese people. The challenge for us is to always be bringing something new, innovative and useful to China.

I think we did that with HAECO Xiamen in the 1990s where we created from nothing in Xiamen an aircraft engineering and maintenance industry which now employs 5,600 people in Swire businesses and a further 1,100 people in aviation related businesses that have grown up following Taikoo's lead. I also feel proud of the place-making work Swire Properties is doing, particularly with its Taikoo Li developments – creating distinctive destinations on a human scale for socialising, eating, shopping. And Swire Coca-Cola is constantly innovating to bring high quality beverages of all types and calorie ranges to the consumer – we now sell 22 beverage brands and sub-brands in China – and brand Coca-Cola itself represents only 23% of our total volume.

What is your view on the integration of Hong Kong's economy into the Mainland? What is Swire's position in Hong Kong?

This year marks the 150th year that Swire has been present in Hong Kong. Throughout that time we've been a committed investor and corporate citizen through all of Hong Kong's ups and downs. In the late 19th and early 20th centuries we made huge capital investments in the Taikoo Sugar Refinery and Taikoo Dockyard, and that period was the origin of our strong CSR credentials – we built modern housing, health clinics, schools, swimming pools and other recreational facilities for our staff. In particular, we remained 100% committed to Hong Kong during the uncertain period between the Joint Declaration in 1984 and the resumption of sovereignty in 1997 – continuing to invest heavily in Hong Kong aviation and property throughout that period.

Today, I think Hong Kong's strength and depth as a financial services centre, with a common law system, continues to grow and continues to provide a completely crucial role for the Chinese economy. Swire's mission in Hong Kong is essentially to support Hong Kong in performing this role for China – through our aviation businesses, which for over 70 years have been working to grow Hong Kong airport as the leading international hub in Asia, and through our property business which is the largest provider of Grade-A office space on Hong Kong Island.

Hong Kong's GDP may now only be 2.7% of China's but the multiplier effect is tremendous. In that sense Hong Kong's economy is already deeply integrated with the Mainland. But the Greater Bay Area (“GBA") concept provides a tremendous opportunity for Hong Kong to create new industries and new jobs for Hong Kong people both in Hong Kong and in Guangdong – particularly in technology, tourism, and entertainment. We really need to grasp that opportunity, and in doing so Hong Kong can also contribute to the faster growth and quality development of Guangdong.

How does Swire position itself in the GBA?

First, our goal is to improve the connectivity between the GBA and the rest of the world. We want to make it as easy and seamless as possible for residents of Guangdong province to travel to HKIA and fly on Cathay Pacific to destinations all over the world. The new hard infrastructure in the GBA is helpful in that regard. We are also working hard to grow our network. In the last two years, the Cathay Pacific group has launched flights to 14 new destinations including Nanning, Jinan, Cape Town, Brussels, Washington DC and Seattle, etc.

Second, some of our divisions have a strong existing presence in the GBA: Swire Coca-Cola has a long established presence throughout Guangdong. Swire Properties' first commercial project in China, Taikoo Hui, was in Guangzhou and we will continue exploring development opportunities in the GBA. But I'd like us to do more, particularly in Shenzhen. And I see the GBA as the perfect market for us to experiment in new sectors, and adjacencies to our current businesses. That is a key strategic focus for us.
Contributing value to China

Contributing value to China

Waste not, want not

Waste not, want not

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