The ninth "Hong Kong Business Environment" survey of Japanese companies in Hong Kong released five appeals to the Hong Kong government

The Consulate General of Japan in Hong Kong, the Japan External Trade Organization (JETRO) Hong Kong Office, and the Hong Kong Japanese Chamber of Commerce and Industry conducted a survey on Hong Kong's business environment in the second half of 2021 in early January.

The investigation team said that due to the deterioration of Sino-US relations, the economic recession under the epidemic and the implementation of the "Hong Kong National Security Law" since June 2020, Hong Kong's business environment has changed a lot.

The purpose of the survey is to assess the actual situation of Japanese companies in Hong Kong and examine possible measures to be taken in the event of a drastic change in the business environment.

From January 3 to January 7, the investigation team sent out research invitations to 620 Japanese-funded enterprises in Hong Kong, of which 232 responded.

The survey results lay out six key points:

First, the DI value* in the second half of 2021 was 19.1 points, down 4.3 points from Q2 in 2021.

The expected DI value in the first half of 2022 is 3.7, down 15.4 percentage points from the DI in the second half of 2021.

*Editor's Note: The DI value refers to the Diffusion index, which is a forecasting method for judging whether the economic outlook is prosperous or not based on the rise and fall of a number of economic indicators.

Second, 68.1% of the interviewed Japanese companies said that the biggest factor affecting their business performance was the COVID-19 pandemic; 14.3% of the interviewed companies said it was "China's economic trend"; 11.6% of the respondents answered "other" factors, such as semiconductors Out of stock, supply chain disruption, etc.

Third, 8.8% of the surveyed companies expressed "very concern" about the "Hong Kong National Security Law", 42.2% of the surveyed companies said "concerned"; 66.9% of the surveyed companies said "no impact", 20.2% said "currently I don’t know,” and 12.5% ​​said that the National Security Law had a negative impact.

Fourth, 75.3% of the companies surveyed said the national security law had "no significant impact" on their Hong Kong offices.

In addition, 56.6% of the respondents said that the current travel restrictions in Hong Kong for epidemic prevention "have no significant impact" on their Hong Kong office.

Fifth, about 64% of the companies surveyed said that the most serious business problem is "the obstruction of business activities between the Mainland-Hong Kong and Hong Kong-Japan due to travel restrictions".

Sixth, 36.6% of the companies surveyed said that their Japanese headquarters were pessimistic about Hong Kong.

Regarding the impact of the pessimistic view of headquarters on their business in Hong Kong, 42.9% of the companies surveyed said they had been asked or urged to consider reducing the number of people in their Hong Kong offices.

Hong Kong: The picture shows an interior view of a shopping mall in Hong Kong on March 26, 2020.

(Getty)

The survey has been running since September 2019 and is now in its ninth edition.

Beginning with the ninth edition, the frequency has changed from quarterly to six-monthly.

business performance

Specifically in terms of performance performance, comparing the responses in Q2 2021 and the second half of 2021, the proportion of those who believed that "the situation has improved compared to the previous quarter" increased from 37.9% to 38.2%; but at the same time, the responses "worsened" The proportion of respondents who responded "severely deteriorated" increased from 12.6% to 16.2%, and those who answered "severe deterioration" also increased from 1.9% to 2.9%; the proportion of respondents who answered "no change" decreased from 47.5% to 42.7%.

The reasons for the improvement in the business of Japanese-funded enterprises in Hong Kong in the second half of 2021 include the increase in sales in the Hong Kong market, the increase in entrepot trade, and the reduction in miscellaneous fees and rental costs; Reduced, increased procurement costs, etc.

61.4% of the surveyed companies believe that their business situation will not change much in the first half of 2022, while 21.2% believe that their business will improve, and 17.4% believe that it will deteriorate (2021). The relevant results of the Q2 survey were 25.4% and 13.1% respectively).

The results of the ninth questionnaire survey on Hong Kong’s business environment showed that the main factors for the improvement of the business of Japanese companies in Hong Kong in the second half of 2021 included sales in the Hong Kong market and entrepot trade; , purchase cost, etc.

(Provided by the Consulate General of Japan in Hong Kong)

Impact of the National Security Law

51.0% of the respondents indicated that they were “concerned” (42.2%) or “very concerned” (8.8%) about the National Security Law. items combined to 56.5%).

66.9% of the companies surveyed said that the National Security Law "has no impact" on their business operations (previously 60.3%), while 12.5% ​​thought it had a "negative impact" on their business (previously 15.5%).

Another 20.2% of the surveyed companies replied "I don't know", and 0.4% responded "It has a positive impact".

Specifically, in terms of the impact of the National Security Law on the Hong Kong offices of the interviewed Japanese-funded companies, 75.3% of the interviewed companies said that "there is no significant impact", 10.9% said that "the local staff has been reduced", and 8.5% said that "all or part of the business will be relocated to Guangdong." , Mainland China or overseas", 8.5% said "reduction of Japanese employees", and 6.5% said "consider changing the function of Hong Kong as a regional headquarters".

A total of 247 companies responded specifically to the impact of the National Security Law.

(Provided by the Consulate General of Japan in Hong Kong)

Future operations and current difficulties

Among the 251 companies that responded, 6.8% said they would "expand the Hong Kong office", 57.4% said they would "maintain the same", 10.4% said they would "reduce the size of the Hong Kong office", and 3.2% said they would "reconsider the Hong Kong office as the The function of regional headquarters”, 1.6% said they would “evacuate from Hong Kong”, 13.2% said “or consider future evacuation”, and 7.6% said “currently unknown”.

Regarding difficulties in business operations, 64% of the 138 companies that responded indicated that "restricted business activities due to travel restrictions" was the most serious problem in their operations.

In addition, serious difficulties include difficulty in hiring people, worsening customer performance, and increases in rent and labor.

Difficulties generally reported by respondents include: travel restrictions between Hong Kong-Mainland and Hong Kong-Japan, inability to visit customers and conduct sales activities in Mainland China, brain drain caused by immigration and other factors, costs of materials/logistics/energy/labor, etc. Rising, restaurant restrictions on gatherings.

Impressions of the Japanese headquarters on Hong Kong

Regarding the impression of the Japanese headquarters on Hong Kong, a total of 238 Japanese-funded enterprises in Hong Kong responded.

Among them, the proportion of "the Japanese headquarters has an accurate understanding of the actual situation in Hong Kong" was 24.8%, 7.6% were optimistic, 36.6% were pessimistic, and 31.1% were difficult to define.

238 Japanese-funded enterprises in Hong Kong responded to the "impression of the Japanese headquarters in Hong Kong".

Among them, 36.6% held a pessimistic attitude.

(Provided by the Consulate General of Japan in Hong Kong)

Appeal to the Hong Kong government

The questionnaire integrated the opinions of 54 Japanese-funded enterprises in Hong Kong and the main requests of 5 enterprises to the Hong Kong government.

One is to ease travel restrictions between Hong Kong and mainland China and Japan as soon as possible.

Second, provide rescue policies, including the resumption of the "employment protection" program.

Third, implement relevant policies in the Greater Bay Area, such as easing import restrictions and travel restrictions.

Fourth, take timely and effective public measures against the Omicron variant virus.

Fifth, under the global trend of electronic payment systems, it is necessary for the government to take proactive measures to reduce the circulation of local bills of exchange.

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