40 percent of companies in Hong Kong are pessimistic about the outlook of the city’s business environment for 2021, according to a business survey released on Jan. 11.
The survey was carried out by the American Chamber (AmCham) of Commerce in Hong Kong, which obtained responses from 15 percent of its members, or 181 participants, between Dec. 11 last year and Jan. 4 this year. Among those polled, 51 percent said their companies are headquartered in the United States, followed by 37 percent with headquarters in Hong Kong.
Those that expressed pessimism said that they believed the city’s business environment would continue to be unstable or get worse in the next 12 months. Among their top concerns for 2021 were troubled U.S.-China relations, Hong Kong’s fractious political situation, and a resurgence of infection cases caused by the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus.
“Close to half of respondents are worried about the tightening grip on free speech/media, which will eventually result in a brain drain out of Hong Kong and a non-transparent legal system,” according to the survey.
Hong Kong began reporting a surge in COVID-19 cases in November last year. For the past week from Jan. 5 and Jan. 11, the city recorded a total of 266 new cases, pushing the total recorded infection cases in the city to 9,284 as of Jan. 11. A total of 159 have died from COVID-19.
In addition, 37 percent viewed the city’s business environment in 2021 as unchanged compared to that of 2020. Only 23 percent said the future would be either good or very good.
AmCham President Tara Joseph stated: “Not a single business in Hong Kong was immune to challenges faced in 2020; COVID-19, violent protests in the streets, the promulgation of a new National Security Law or increased U.S.-China political and trade friction.”
As for 2021, Joseph said: “[T]here is a growing splinter of views over Hong Kong’s future. This makes for messier reading but suggests a trend of an evolving city.”
When asked about 2020, 61 percent of the respondents said the city’s business environment was unstable or has worsened. Some respondents said the national security law has “destabilized HK’s legal framework.”
Last summer, the Chinese regime imposed the national security law on Hong Kong, which penalizes vaguely-defined crimes such as subversion and “collusion with foreign forces” with a maximum of life imprisonment.
Prominent pro-democracy activists have since been charged for violating the new law, including Jimmy Lai, founder of the local newspaper Apple Daily. He is now being held in detention as he awaits trial for his fraud and “collusion with foreign forces” charges.
A third of those surveyed stated that they saw Hong Kong as a less competitive city compared to other international cities. Some respondents cited factors such as deteriorating legal, judicial, and banking systems, and high real estate costs.
The most cited factor (35.3 percent) that made Hong Kong “insufficiently competitive” was cost of living. Following in second place was the city’s political system (23.3 percent) and third the cost of doing business (19.3 percent).
When asked if they considered Hong Kong a key innovation center in Asia, 53 percent said no, and 18 percent said yes.
One unnamed respondent explained: “With the deteriorating legal, juridical, and banking systems, not a good option to invest in innovation projects in Hong Kong.”
“Taiwan and Singapore are where our innovation is centered in East Asia,” another unnamed respondent said.
Overall, 50 percent of all respondents said they were “cautiously optimistic” about the performance of their companies in 2021, while 27 percent said they were either pessimistic or very pessimistic.
“We’re very optimistic for the company globally and in Asia Pacific outside of Hong Kong. Within Hong Kong, we’re very pessimistic,” one unnamed respondent stated.