CPA Australia survey: Hong Kong’s Economy To Be Challenged In 2019 Amid Opportunities – AsiaOne

HONG KONG, CHINA – Media OutReach
– 20 November 2018 – Hong Kong is facing a challenging 2019 owing
to a number of global and domestic uncertainties, however growth in
innovation and technology is helping to counteract some of those
uncertainties, according to the latest Hong Kong Economic Survey
conducted by CPA Australia.

From left to right: Ms. Vickie Fan, Divisional Deputy President
2018 — Greater China, CPA Australia; Mr. Roy Lo, Divisional Deputy
President 2018 — Greater China, CPA Australia; Mr. Paul Ho,
Divisional President 2018 — Greater China, CPA Australia; Mr.
Peter Lee, Divisional President 2013 — Greater China, CPA
Australia

A challenging year ahead

Growth expectations for Hong Kong’s economy in 2019 are down from
expectation for 2018. While 62 per cent of respondents expected
Hong Kong’s economy to grow by two per cent or more in 2018, only
48 per cent of respondents expect the economy to grow at two per
cent or more in 2019.

“Given emerging global risks, we are not surprised that respondents
have lower growth expectation for Hong Kong’s economy in 2019 than
they did in 2018,” said Mr Paul Ho, CPA Australia’s Divisional
President for Greater China.

“Our survey shows that the deteriorating trade relationship between US and China
, anticipated lower economic growth in mainland China and high
property prices are the factors most likely to have a negative
impact on the Hong Kong economy in 2019. Falling confidence in the
city’s competitiveness is also likely to be contributing to a less
positive outlook for Hong Kong’s economy in 2019.”

“Balancing out these downside risks is the government’s significant
investment in innovation and technology, the Greater Bay Area
initiative and the opening of new infrastructure — all seen as the
factors most likely to have positive impacts on the economy in
2019,” Mr Ho said.

Trade war impacts

Though the possibility of a trade war is the factor respondents
were most likely to expect to have a negative impact on Hong Kong’s
economy in 2019, it appears that most companies are taking a ‘wait
and see’ approach to the potential trade war rather than taking
action, with 51 per cent of respondents either stating they have
yet to take any measures or believe the potential trade war will
not have an impact on their company.

“While there are concerns with the impact a trade conflict may have
on Hong Kong’s economy, these concerns are not necessarily
translating through to action at a company level. In fact,
respondents appear somewhat more confident in their employer’s
performance in 2019, with 44 per cent expecting their employer to
increase their headcount, compared with 37 per cent in 2018 and 31
per cent in 2017.”

Increased support for innovation and technology and a lower profits
tax rate on the first HK$2 million in profit is no doubt
contributing to a somewhat more positive outlook at a company
level. However, further measures may be required, with a third of
respondents suggesting increased support for SMEs, especially those
most vulnerable to a trade war, as a policy action that would
provide the greatest boost to the local economy in 2019,” Mr Ho
said.

Mr Ho said policy action should include expanding Hong Kong’s trade
relations through new free trade agreements and comprehensive
double taxation agreements and expanding the Hong Kong government’s
global network of economic and trade offices.

Growth expectations being driven by industries outside of the four
pillar industries

When asked which industries in Hong Kong have the highest growth
potential over the next three years, respondents selected
healthcare and medical services (36 per cent), followed by
innovation and technology (31 per cent) and e-commerce (30 per
cent).

“With an ageing population and the longest life expectancy in the
world, it is not surprising that most Hong Kong survey respondents
considered healthcare and medical services as having the most
potential for growth.”

“What is more surprising is the high number of respondents that
selected innovation and technology, e-commerce and biomedicine as
sectors having the strongest growth potential in Hong Kong in the
next three years. It is a signal that Hong Kong’s economy may be
undergoing a transformation to a more knowledge-based, innovation driven economy.”

Greater Bay Area’s influence on the economy┬áis positive

When asked what factors are most likely to contribute to Hong
Kong’s economic growth in 2019, the Greater Bay Area initiative (31
per cent) was the most popular factor chosen by respondents. Adding
support to this view, respondents were most likely to choose
accelerating Hong Kong’s integration with the rest of the GBA (28
per cent) as the measure that will do most to improve Hong Kong’s
international competitiveness.

“The opening of new infrastructure to improve Hong Kong’s
connection to the rest of the Bay Area is clearly creating economic
opportunities for Hong Kong, however infrastructure alone will not
guarantee Hong Kong’s success in the Greater Bay Area, talent is
the bridge connecting the region with the world.”

“Our survey also shows that communication skills (37 per cent) are
considered the top skill university graduates should possess to get
a job. Hong Kong’s young graduates should be seeking to master
biliteracy and trilingualism to gain a competitive edge and enable
them to capitalise on the opportunities brought by the GBA
initiative,” he said.

“The year ahead looks positive however downside risk of a global
trade war is adding a strong element of uncertainty that is
impacting confidence. But Hong Kong is a resilient economy that has
overcome similar challenges due to its solid foundations built on a
low and simple tax system, strong work force and business-friendly
regulatory environment,” Mr Ho concluded.

About the survey

The survey was conducted from 8 to 23 October 2018 with 178 of CPA
Australia’s Hong Kong members participating, including finance and
accounting professionals from listed companies, multinational
corporations, private enterprise, government and not-for-profit
organizations.

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