HKGCC Business Prospects Survey: Business Remains Cautious About Prospects for 2021

Forty percent of Hong Kong companies expect the city’s business prospects to be negative in the next 12 months, according to the results of the Hong Kong General Chamber of Commerce’s (HKGCC) Business Prospects Survey,

conducted during 9-13 November this year. Only 25% of respondents were positive about the business environment for 2021.

The Chamber’s CEO George Leung said the results showed companies remain cautious about their future prospects after many were severely impacted by Covid-19 this year.

Some 62% of respondents said business turnover for the first 10 months of 2020 had decreased, compared to the same period last year, while 22% saw their turnover plunge by more than half. Border and social restrictions due to Covid-19 were cited as the two key reasons for the decline in business turnover, followed by local social unrest and the Sino-U.S. conflict.

“The weakened spending power as a result of significant loss of incomes and jobs this year will continue to drag on Hong Kong’s economic recovery unless there is sustained fiscal pump-priming,” said Leung.

As Hong Kong is an international city and gateway to the Mainland, the Covid-19 restrictions have significantly affected many businesses, not just retail and tourism, considering that 34% of survey respondents were in the professional, business and financial services sector, and only 17% in the import & export/wholesale business.

For the coming 12 months, respondents said disruptions to cross-border activities due to the ongoing Covid-19 pandemic remained the main challenge that would undermine the economic recovery. Second was Hong Kong’s narrowing advantage over surrounding Mainland cities as our economic policies lag behind. Third was the threat of foreign sanctions draining investment if the Sino-U.S. conflict continues. The concerns over social unrest eased following the introduction of the National Security Law, as respondents ranked the negative impact of these in last place.

As a sign of digitalization of the economy, over half (55%) of companies surveyed said they would allow employees to work remotely, at least some of the time, after the Covid-19 pandemic recedes. A similar number (58%) said they planned to make a major investment in digitalization over the next 12 months.

“The outbreak of the coronavirus has accelerated the digitalization process of businesses’ operations. But the race to embrace a digital world doesn’t seem to be a level-playing field for all. Large companies (72%) said they were likely to invest significantly in digitalization, compared to only 49% for SMEs. This might be linked to cash-flow challenges facing SMEs due to the difficult times during the coronavirus outbreak, but with digitalization of the economy being an important factor in competitiveness, we hope the Government can do more to help SMEs prepare for the digital economy,” said Leung.

Regarding companies’ capital investment plans for their Hong Kong operations over the next 12 months, 61% of respondents said they had no plan to increase investment. Only 14% said they would increase investment in Hong Kong, while 9% said they would cut capital investment. This mainly reflects the somewhat cautious view being held by companies about next year’s prospects.

In contrast, companies are more bullish on investment in the Greater Bay Area (GBA) as 50% said they would increase capital investment. This was more than respondents’ plans for capital investment (35%) in the rest of the Mainland.

“The results reflect that the GBA has become an increasingly important investment destination for Hong Kong companies amid the policy measures designed to further integration between the two places and fully open up the GBA market,” concluded Leung.

About the survey

A total of 314 companies responded to the Chamber’s survey conducted during 9-13 November 2020. Respondents largely reflected the structure of Hong Kong’s economy. The largest (26%) group were professional and business services, followed by traders 17%, and financial services 8%.