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HONG KONG
From Site Selection magazine, November 2019
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Safety in Numbers? Reports Point to Business as Usual

by MARK AREND
HONG KONG

The number of business operations in Hong Kong with parent companies overseas and in Mainland China are up 9.9% over 2017, according to a recent survey conducted by InvestHK and the Census and Statistics Department (C&SD).

A separate survey found the number of startups in Hong Kong rose by 42.8% over the 2017 figure. This despite months of protests, some of them violent, in the wake of a proposed and since-rescinded measure to extradite to Mainland China citizens of Hong Kong rather than try them in Hong Kong. Protests in recent weeks are about loosening Beijing’s grip on the special administrative region as that grip is tightened.

What does this mean for inward investment? On the one hand, not much.

According to the first survey, the number of business operations in Hong Kong with parent companies overseas and in Mainland China was 9,040 in 2019. Among them, 1,541 had set up regional headquarters in Hong Kong, up 9.1% over the number in 2017.

In terms of jobs, the number of people engaged by the overseas and Mainland companies reached an all-time high at 493,000, compared to 443,000 in 2017, recording an increase of 11.3%. In terms of origin, Mainland China ranked first with 1,799 companies, followed by Japan (1,413), the U.S. (1,344), the UK (713) and Singapore (446).

On the other hand, we won’t know the results of the 2021 surveys for two more years, at which point the trend might have moved in a different direction.

Site Selection conducted an interview in late September with Stephen Phillips, Director-General of Investment Promotion at InvestHK, for his take on investors’ appetite for Hong Kong property assets, and how his agency is coping with the unrest. Following are highlights:

What is the economic mood in Hong Kong this fall?

Stephen Phillips: The external headwinds are indeed strong – the U.S.-China trade tensions, the possibility of a hard Brexit and other uncertainties. The economic activities within Asia are also slowing down. But how this would further develop will depend on many different factors. We do not want to speculate to what extent all these will translate into impact on our economy. But it would be prudent and reasonable to assume that the economic headwind will continue to be very strong.

To counter the challenging external and local economic environment, the government has announced a package of measures to support enterprises, especially small and medium enterprises (SMEs), to safeguard jobs and the economy. These include, for example: tax relief, waiver of government fees and charges for 12 months whereby a wide range of sectors can benefit ... and extra injection to the dedicated fund on Branding, Upgrading and Domestic Sales and the SME Export Marketing Fund.

What should readers understand about the ongoing protests against China that they may be missing?

SP: I am sure you have read or heard a lot about the events and protests in Hong Kong. But what you read on media, including social media, is just one piece of a complex social, economic and political jigsaw puzzle. Despite recent disruptions, the fundamentals and institutional underpinning of Hong Kong’s economy and society are strong. We remain a safe, open, welcoming and cosmopolitan society and an internationally connected, vibrant and dynamic economy.

Stephen Phillips
Stephen Phillips, Director-General of Investment Promotion, InvestHK

We have confidence that we will bounce back eventually as we always did in the past.

Investment decisions are based on many considerations including market potential, tax system, legal system, ease of doing business, access to information, transport connections, I&T infrastructure and availability of talent. Hong Kong stacks up very well in all these aspects and is a highly competitive, global hub for financial and business services, legal and professional services, as well as trade, logistics, air cargo and maritime services.

What has been Invest Hong Kong’s message as the situation has unfolded over the recent months?

SP: InvestHK has been actively liaising with investors, both overseas and locally. Sentiment of individual investors varies. Some indicated that it is still “business as usual” and their investment plans would still proceed; some are withholding or withdrawing their plans, while quite a lot of overseas investors indicated that they had cancelled or postponed their trips to Hong Kong in view of recent incidents.

We do understand the situation in Hong Kong would cause concern. The Government and the society at large are working in earnest to enhance dialogue. We are no doubt working hard to reach out to our partners in the business and the international communities to explain conditions in Hong Kong and to ease any doubts and worries.

How is Hong Kong’s role in the region evolving?

SP: Hong Kong is very well established as a global financial services center, and its roles will continue to evolve in the development of the Guangdong-Hong Kong Macao Greater Bay Area (GBA) and the Belt and Road initiative.

The GBA represents an enormous market with a population of 71 million and a gross domestic product of US$1.6 trillion. As one of the most open and economically vibrant regions in China, the GBA is well placed to give new impetus to Hong Kong’s development, especially as an international financial and trade center, as well as an international aviation hub, a global offshore RMB business hub, an international asset management center and a risk management center, and as the center for international legal and dispute resolution services in the Asia-Pacific region.

Hong Kong has long been a cultural exchange center between East and West and is perfectly placed to play different roles in the Belt and Road initiative. The Chief Executive just announced at the Belt and Road Summit on 11 September that the Government will embark on a program for interactive exchanges on practices and experiences on various fronts including finance, commerce, foreign-related legal matters, dispute resolution, city management, aviation and transportation, professional services and with the Mainland.

Which industry sectors is Hong Kong most likely to be known for in coming years that it is not as well known for now?

SP: The government has been putting in a lot of resources in recent years to position the city as an innovation hub, especially around artificial intelligence, healthcare, biomedicine and financial technologies. The Lok Ma Chau Loop is going to be developed into the Hong Kong-Shenzhen Innovation and Technology Park, and resources have been set aside to support non-profit-making scientific research institutions to be set up at the two InnoHK research clusters on healthcare and on artificial intelligence and robotics.

Mark Arend
Editor in Chief of Site Selection magazine

Mark Arend

Mark Arend has been editor in chief of Site Selection magazine since 2001. Prior to joining the editorial staff in 1997, he worked for 10 years in New York City at Wall Street Computer Review, ABA Banking Journal and Global Investment Technology. Mark graduated from the University of Hartford (Conn.) in 1985 and lives near Atlanta, Georgia.

 




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