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Hong Kong Small Business Confidence Lowest in APAC Markets, Survey Finds

Medianet International-AsiaNet
2019-03-27 16:48

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HONG KONG, Mar. 27, 2019 /Medianet International-AsiaNet/--Hong Kong small business confidence in the local economy, and growth  expectations for 2019, has fallen to the lowest levels in the Asia-Pacific,  according to new data from CPA Australia's 10th annual Asia-Pacific Small  Business Survey.

The findings follow extensive surveying of 3,607 small business operators in  Hong Kong, Mainland China, Taiwan, Malaysia, Vietnam, Indonesia, Philippines,  Singapore, Australia and New Zealand.

Trade tensions weaken confidence

Gavan Ord, Manager of Business & Investment Policy at CPA Australia, says  overall conditions for small businesses in Hong Kong were weaker, with 10 per  cent fewer businesses reporting that they grew in 2018 than in 2017, compared  with a two per cent fall across the Asia Pacific. These less positive  conditions are likely to continue in the near future, with only 47 per cent of  Hong Kong respondents expecting their businesses to grow in 2019 compared with  the Asia-Pacific average of 68.8 per cent.

"Global trade tensions appear to be the primary reason for a general weakening  in confidence, especially in Hong Kong, with 52 per cent of respondents  forecasting that a global trade war could have negative impacts on their  business in 2019, the highest level of concern among all markets surveyed in  the Asia-Pacific.

"On the other hand, small business confidence is strongest in developing  markets, with small businesses in the Philippines, Vietnam, and Indonesia  having the most positive outlook for their businesses.

"With fast growing local economies, it is not surprising that small business  confidence in those markets is very high. As small businesses in those markets  are heavily focused on key drivers of business growth, such as technology,  innovation and customer satisfaction, small business conditions in those  markets are likely to remain very positive for some time to come.

"For businesses in Hong Kong, this strong level of confidence in Indonesia, the  Philippines and Vietnam creates opportunities for growth and collaboration,  especially with a challenging local environment."

Janssen Chan, CPA Australia's Deputy Divisional President and Chairperson of  SME Committee in Greater China says the survey results show that Hong Kong  small businesses are showing caution.

"Confidence in local economic growth over the next 12 months has dropped  sharply to 29 per cent ¨C down by about 30 per cent from 12 months ago. This is  also the lowest result of the surveyed markets.

"Only 47 per cent of respondents from Hong Kong expect their business will grow  in the next 12 months, which is also the weakest result in the Asia-Pacific  region. Reflecting this declining business confidence, respondents showed a  conservative attitude to increasing headcounts and seeking external finance in  2018 compared with the results of the last survey.

"Increasing costs and competition are two major factors respondents identified  as detrimental to small businesses in Hong Kong. As has been the case for many  years, Hong Kong small businesses were the most likely in the Asia-Pacific to  select rent as the cost most detrimental to their business.

"With Hong Kong's small business sector facing a challenging period, the  government¡¯s announcement of increased support for the sector in the Budget is  most welcome. Measures such as the extension of the geographical scope of the  BUD Fund, an increase in the funding ceiling of the Technology Voucher Program  and improving the SME Financing Guarantee Scheme, will all provide timely and  effective support to small businesses in Hong Kong.

"The survey shows that 52 per cent of respondents believe accessing finance  will be difficult in the next 12 months but according to my observation there  has been an increase in applications to the SME Financing Guarantee Scheme  since it has been announced. This should lead to small businesses having  greater confidence in their ability to access finance," Janssen says.

Younger respondents are more positive about business growth

Although business growth sentiment in Hong Kong is generally down, the survey  found that younger respondents (aged under 40) are more likely to state that  their business is growing, creating jobs and focusing on key drivers of  business growth ¨C  including innovation, technology and exporting ¨C than  respondents aged 40 and above.

Janssen stated "Younger respondents in Hong Kong are more willing to use  technology in their business, from operations to sales, maintaining customer  relations and better understanding customer behaviour. They are also more  likely to invest in technology, such as software, mobile apps and websites, and  that such investments are quickly improving their profitability.

"The survey also found that businesses focused on using technology and social  media to better engage with and understand their customers are much more likely  to be growing strongly. This is particularly so in developing economies,  including the Mainland, Indonesia, Vietnam and the Philippines.

"Due to their typically stronger focus on technology, younger respondents are  much more likely to expect a cyberattack in 2019 and are therefore more likely  to have reviewed their cybersecurity measures in the last six months.

"The higher the uptake of technology, the more vulnerable the business is to  cyberattacks. Small businesses in Hong Kong are actively protecting their  systems, however, with 54 per cent of respondents having reviewed cybersecurity  in the past 6 months, ranking third in the Asia-Pacific," Janssen says.

Amid lower business confidence, Hong Kong's small businesses are focusing more  on cost control and enhancing customer loyalty. While this is an appropriate  response to the current environment, these are more defensive actions by  businesses rather than drivers of growth.

CPA Australia has suggested seven tips for Hong Kong's small businesses in 2019:

- Invest in developing your business's understanding of digital technologies so  you can better use technologies such as social media, e-commerce and new  payment technologies

- Seek advice on which technologies are best suited for your business and  invest in those technologies

- Use data so that you can learn more about your customers to improve customer  satisfaction

- Take advantage of government incentives that supports innovation

- Explore opportunities in the Greater Bay Area and other fast-growing ASEAN  economies

- Invest in improving the strategic and management skills of your business
- Undertake a strategic review of costs and risks
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