Opinion | Hong Kong's business environment still ideal
Hong Kong is back on the world stage. A wide array of commercial, sports and art events have returned to the City of the Orient. Notwithstanding this, some cast doubts on the city's business environment. One of the concerns is whether and how the escalating political tensions or decoupling would hamper business operations. When facing these rumours, we should look at the issues rationally and pragmatically. Here are reasons why Hong Kong will continue to have an ideal business environment despite political risks.
The tensions between China and the United States (US) do not necessarily harm Hong Kong's business environment. Some argue that if one imposes sanctions, the other may take retaliatory measures; therefore, foreign companies in Hong Kong will expose to political risks. But in practice, it is the other way around. Both sides have long been tenacious in economic relationships. Though the US launched a trade war in 2018 and introduced a series of sanctions, the US could not overcome its deep dependence on Chinese goods. In 2022, the total annual import and export volume between China and the US was 690.5 billion US dollars, and the trade deficit increased to 382.9 billion US dollars, hitting a record high.
Conversely, Sino-US relations catalyse China's promotion of the Belt and Road Initiative and integration of surrounding regional economies. The trade war launched by the US has prompted China to strengthen its promotion of the external markets, thereby reducing its dependence on the US market. One of the milestones is the enactment of the "Regional Comprehensive Economic Partnership Agreement" (RCEP) signed by ten ASEAN countries, China, Japan, South Korea, Australia and New Zealand, which forms the world's largest free trade zone. The trade volume between ASEAN and China is 1.35 trillion renminbi, with China being the largest trading partner.
RCEP renders new opportunities to the Hong Kong business community. Hong Kong benefits from the market access treatment provided by RCEP, which is conducive to expanding service trade and investment in the region. The service industry accounts for more than 90% of Hong Kong's Gross Domestic Product (GDP), and the professional services and financial sectors are highly competitive in the areas covered by RCEP. According to the provisions of RCEP, more than 65% of the service industry will be fully open to foreign investors, including professional services, finance, logistics, and so forth.
Besides, the changing Sino-US relations give rise to the emphasis on China's internal market. China has a comprehensive production base as well as a growing consumer market. Amidst the global uncertainty, China's large-scale economy allows her to enhance the internal market's integration, enlarge the domestic demand market, and bring investment opportunities. In 2022, the total economic volume of the Guangdong-Hong Kong-Macao Greater Bay Area exceeded 13 trillion renminbi, with an increase of nearly 3 trillion yuan in five years, which surpassed the GDP of South Korea and Australia in 2022, and four times that of Singapore.
Against the above background, Hong Kong can continue to leverage its strengths thanks to its uniqueness and proximity to Mainland China. Hailed as the international financial centre, Hong Kong has a free flow of capital, a simple and low tax regime, a rich talent pool and a world-class infrastructure. With all these advantages, Hong Kong has a first-class business environment for multinational companies and global talents to harness opportunities. As proof, the bilateral merchandise trade volume between Hong Kong and the US maintains a high level, reaching 502.057 billion Hong Kong dollars in total trade value in 2022.
In short, don't meet trouble halfway. Hong Kong still has a world-class business environment, and the doubts about it are mostly unfounded. Geopolitical risks are controllable, while business opportunities are ample. The Sino-US game stimulates China's integration of regional economies, strengthens internal market integration, and brings new opportunities to Hong Kong. At the same time, Hong Kong society is forging ahead for a speedy economic recovery. Business sectors should not give up eating for fear of choking.