Businesses in Hong Kong remain cautiously optimistic about their prospects for 2024, but are concerned about the challenging external environment and geopolitical headwinds, according to the findings of the Chamber's annual Business Prospects Survey.
Despite experiencing a robust economic rebound when Hong Kong opened its border in early 2023, the pace of recovery has somewhat decelerated over time. For the first 10 months of 2023, 39% of the respondents reported a decrease in business turnover compared to the same period in the previous year. Only 29% indicated an improvement in their business performance, while another 31% asserted that there had been no significant change.
Hong Kong faces a challenging path towards full recovery. A total of 37% of respondents expect an uptick in business turnover in 2024 compared to 2023. However, when comparing to pre-pandemic levels, 42% believe that their business performance has not yet fully rebounded and will continue to lag in 2024. Only 28% were optimistic about surpassing the pre-pandemic levels, in contrast to the 25% recorded in 2022.
However, it should be noted that the survey was conducted back in early November when China-U.S. relations remained tense. The notable warming in China-U.S. relations following the APEC summit may have since improved business sentiment.
In its latest economic outlook report released in November 2023, the Organization for Economic and Cooperation and Development projected global economic growth of 2.9% in 2023, which is expected to weaken to 2.7% in 2024. The global economic slowdown, coupled with unresolved conflicts around the world, has raised significant concerns among businesses regarding the potential negative impact of external uncertainties.
On the domestic front, larger corporations also express concerns about the brain drain, as talented individuals seek opportunities elsewhere. Meanwhile, SMEs are grappling with the challenge of sustaining their operations amid the rising costs of doing business.
Given the uncertain outlook, companies are cautious about their hiring plans, with 31% of respondents planning to hire more staff over the next 12 months, down from 34% last year. A total of 49% said they would maintain their current headcount, while 11% indicated they would reduce their workforce. Notably, larger corporations exhibit a more optimistic outlook, as 35% are planning to hire additional staff in Hong Kong, in contrast to 27% of SMEs.
With the three-year pandemic finally behind us, there is still a cautious sentiment towards investing in Hong Kong. Only 18% of those polled planned to put up additional capital, which is slightly higher than the previous year’s 16%. In contrast, the Mainland remains a favoured investment destination, with increasing interest among businesses to invest in the Greater Bay Area (excluding Hong Kong).
While the Government is making a concerted effort to establish connections with ASEAN countries and the Middle East, many businesses are taking a cautious “wait-and-see” approach when it comes to investing in these regions, with more than a third of the respondents expressed uncertainty regarding their upcoming capital investment plans. This hesitation is particularly evident among SMEs, which is understandable considering their limited resources for expansion into the overseas markets.
The global economy is shrouded in a cloud of mounting uncertainties. The persistent hurdles of high inflation and escalating costs will undoubtedly continue to exert pressure on the businesses. Additionally, the intricate dynamics of geopolitical tensions, combined with the somewhat unstable – albeit improving – relations between China and the U.S., further complicate the situation. Looking ahead, 2024 could potentially present another challenging year to come.
About the Survey
The annual Business Prospects Survey was conducted from 7-16 November 2023, and received a total of 200 valid responses. The largest group of respondents were professional and business services (27%), followed by traders (14%) and real estate/ construction (11%).
Doris Fung, [email protected]