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Hong Kong: The Key Facilitator for US and European Firms Venturing into the Greater Bay Area

The 2019 European and US Company Survey

A poll of 55 US and European companies with operations in Hong Kong indicated that optimism is rising with regard to the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) development, despite the escalating trade dispute between the US and mainland China.

In collaboration with The American Chamber of Commerce in Hong Kong (AmCham HK) and The European Chamber of Commerce Hong Kong (EuroCham HK) and its 16 constituent national chambers, HKTDC Research conducted a questionnaire survey in April-May 2019 in order to determine how US- and Europe-domiciled companies in Hong Kong viewed the development of the GBA from a commercial perspective.

Overall, many of the participants expressed rising interest in the development of the GBA initiative. In line with this, a significant number plan to expand their Hong Kong operations to better capitalise on the emerging market opportunities, while trusting in the city’s professional services sector to resolve problems related to any initial cross-jurisdictional incompatibility.

Full of Opportunities

In total, 62% of respondents indicated that the proportion of their Hong Kong turnover derived from the GBA over the last 12 months had been 20% at most.

Chart: % of Business Turnover from the GBA over last 12 Months
Chart: % of Business Turnover from the GBA over last 12 Months

Encouragingly, 95% of respondents believed that, over the next three years, the enhanced connectivity of the cities within the GBA would in no way diminish their current level of related income. Indeed, the majority were confident that the new arrangements and, in particular, access to a far larger regional market would only lead to the expansion of their existing Hong Kong operations.

Chart: Expected Changes of GBA Turnover Contribution over the Next 3 Years
Chart: Expected Changes of GBA Turnover Contribution over the Next 3 Years

Preparing for Greater Success

In terms of the specific emerging opportunities, more than half believed that Hong Kong-based professional service providers will have the best prospects in the expanded GBA market. Among the other sectors /  activities seen as likely to benefit are consumer goods suppliers (according to 25% of all respondents), sourcing (22%), industrial products, services and technology  businesses (18%) and R&D (investment and set-up) (11%).

Chart: Most Appealing GBA Opportunities
Chart: Most Appealing GBA Opportunities

While these results are largely in line with the respondents’ current strategies, 36% indicated they are likely to expand their existing operations in Hong Kong, while a further 7% are looking to add additional business functions – notably marketing, human resource management and business development services – in order to better serve the GBA market. Overall, 53% of respondents, however, stated they had yet to adjust their business strategies in order to capitalise on the GBA opportunities or were still in the process of doing so.

Chart: Business Adjustments to Tap GBA Opportunities over the Next Three Years
Chart: Business Adjustments to Tap GBA Opportunities over the Next Three Years

Hong Kong Strengths Offer Advantages

The survey also revealed some of the challenges the respondents believe they may face when first accessing the extended GBA market. Among these, the biggest obstacles were seen as rationalising and integrating the legal and regulatory challenges across the three jurisdictions (58%); policy uncertainty and lack of transparency (40%); information flow and security (29%), IPR protection (25%); and cross-border capital movement (25%).

Chart: Major GBA Challenges
Chart: Major GBA Challenges

To overcome the challenges and mitigate the risks for business expansion in the GBA, the respondents placed considerable faith in Hong Kong’s professional service suppliers particularly those with considerable existing experience of working both with Chinese businesses and their global counterparts. Among the Hong Kong professional services seen as likely to be of most benefit were legal and dispute resolution (45%), accountancy (31%) and banking and finance (31%).

Chart: Most Beneficial Hong Kong Professional Services
Chart: Most Beneficial Hong Kong Professional Services

Profile of Respondents

Among the 55 respondents, 30 were European-domiciled and 25 were US-domiciled companies. Most were service providers (49%), followed by manufacturers (24%) and traders (15%). Some 71% had been established in Hong Kong for more than 10 years, while 60% had less than 50 employees.

The key Hong Kong business functions of the participating companies were sales (45%), marketing (40%), administration (38%), logistics and distribution (24%), corporate finance (20%) and R&D (20%).

Chart: Areas of Business
Chart: Areas of Business
Chart: Years of Establishment in Hong Kong
Chart: Years of Establishment in Hong Kong
Chart: No. of Employees in Hong Kong
Chart: No. of Employees in Hong Kong
Chart: Key Business Functions in Hong Kong
Chart: Key Business Functions in Hong Kong

in collaboration with


Picture: AmCham HK
Picture: AmCham HK
 


Picture: EuroCham HK
Picture: EuroCham HK
 

 

Content provided by Picture: Louis Chan
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