Businesses More Optimistic about Prospects for 2022

Business sentiment in Hong Kong continues to improve, according to the latest findings of the Hong Kong General Chamber of Commerce’s (HKGCC) Business Prospects Survey, with 45% of respondents indicating they expect business turnover to increase in 2022. 

Chamber CEO George Leung credited the improvement in business confidence to Hong Kong’s success in containing the pandemic and optimism over an eventual reopening of the border with Mainland China. 

However, he suggested that such optimism should be tempered with caution. “Let’s not forget we are comparing this year’s results with a low base. The return to normalcy remains quite distant with 32% of respondents anticipating a decrease in business turnover in 2022 compared to pre-pandemic levels. There are also renewed concerns over the latest Omicron variant of Covid,” said Leung. 

Reduced cross-border travel remains the primary concern for businesses and has escalated in intensity compared to a survey conducted by the Chamber in July. The loss of talent has overtaken restrictive social-distancing measures as the second biggest impediment facing businesses, notably for larger corporations. 

“While the pandemic continues to impact businesses regardless of size, SMEs are especially vulnerable because they are less able to access finance. It is important that the Government does not withdraw support too soon or quickly, which could undo the fragile recovery,” added Leung. 

More businesses are planning to increase their workforce over the next 12 months with respondents in this category rising to 35% from 21% a year ago. Investment sentiment remains cautious, with only 17% of those polled planning to put additional capital in Hong Kong, compared to 14% a year ago.

“Underinvestment will have a lasting effect on productivity, an important catalyst of growth and competitiveness. Should businesses become more reluctant to invest, this will surely have a knock-on effect on our economy’s well-being,” said Leung. 

In contrast, the Greater Bay Area (excluding Hong Kong) continues to be an attractive investment destination. For respondents that already operate in the region, 42% said they would increase capital investment over the next 12 months. This compares very favourably to plans for capital investment (30%) in the rest of the Mainland.

Businesses are generally positive about the Northern Metropolis plan with a majority (63%) of respondents indicating that this is likely (44%) or very likely (19%) to improve Hong Kong’s competitiveness. However, there are questions over the project’s execution as “delays and overruns” was identified as the top concern, followed by reservations (“unable to achieve stated benefits”) and the price tag (“too costly”) of the undertaking. 

“The initiative is regarded as a game-changer in furthering Hong Kong’ s economic fortunes and consideration should be given to issues such as better project coordination, greater transparency, as well as costs and benefits to address any concerns over its viability,” he said. 

HKGCC also unveiled its 2022 economic forecast, which predicts real GDP to grow by 2.8% and a headline inflation of 2.2%. 

“With the economy back on its feet, a less favourable base effect will contribute to growth moderation next year. The resumption of cross-border activities is therefore critical in sustaining the economy,” concluded Leung.

HKGCC Economic Forecasts 2021 2022
Real GDP Growth 6.3% 2.8%
Headline Inflation 1.5% 2.2%
Unemployment Rate (year-end) 4.2% 3.7%
Retail Sales Growth 7% 5%
Merchandise Exports Growth 24% 7%

About the survey

A total of 320 companies responded to the Chamber’s survey conducted from 8-12 November 2021. Respondents’ profiles reflect, more or less, Hong Kong’s economic composition. The largest group of respondents (21%) were professional and business services, followed by traders 16%, and financial services 11%. Slides can be downloaded here.