Majority of Japanese firms in Hong Kong see earnings fall on protests, U.S.-China trade row

24, Oct. 2019

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HONG KONG, NNA - A majority of Japanese companies with operations in Hong Kong saw earnings fall in the first eight months of 2019 due to U.S.-China trade frictions, the economic slowdown in China and simmering antigovernment protests in Hong Kong, according to a survey released on Tuesday.

Nearly 53 percent of survey respondents said earnings from January through August this year had “worsened” or “greatly worsened (by more than 20 percent)” over the same period of 2018. In contrast, 36.8 percent said there had been “no change”, and 10.4 percent reported improvement.

Just short of 59 percent cited the U.S.-China trade friction as a reason and another 58.9 percent pointed to the economic slowdown in China. Antigovernment protests in Hong Kong was a factor cited by 38.7 percent of respondents.

Mainland China weighed on performance because Hong Kong-based Japanese companies do business in the adjacent Chinese province of Guangdong, Japan External Trade Organization (JETRO) Hong Kong Director General Tomohiro Takashima told a press conference on Tuesday.

Some companies had asked JETRO Hong Kong, the Consulate-General and the Japanese chamber to tell the Hong Kong government about their deteriorating business performance in a “precise manner” and demand “urgent and effective remedial measures,” the report said.

They also demanded the Hong Kong government solve the turmoil in a peaceful manner through dialogue as soon as possible and ensuring safe transportation. Protests, sometimes violent, have hit the Hong Kong metro system and shut down the airport.

‘Emergency survey’

The “emergency survey” was jointly conducted Sept. 11-24 by JETRO in Hong Kong, the Consulate-General of Japan in Hong Kong and the territory’s Japanese Chamber of Commerce and Industry.

The circulated the survey to help Japanese companies in the region “better understand” the business environment there and “study countermeasures,” the three institutions said in the survey results.

The 541 regular member companies of the Japanese chamber and 39 members of the Hong Kong Japanese Restaurant Association were invited to take the survey. Of those, 163 firms responded.

Travel curbs, no pullouts

In response to the protests in Hong Kong, 41.1 percent of respondents said they had avoided nonessential business trips out of Hong Kong as a number of flights had canceled at Hong Kong International Airport in mid-August due to protests inside terminal buildings. Meanwhile, 15.3 percent said they had canceled business trips to Hong Kong from Japan and elsewhere.

None respondent had withdrawn operations and 92 percent had no plans to do so, a report based on the survey said. “A great majority of the companies are presumed to be watching developments in a calm manner,” the report said.

Only 4.3 percent of respondents said family members of their Japanese employees had returned home from Hong Kong, suggesting the territory remains safe for them unless they step into protest sites.

Talent and information sharing

Some respondents flagged a possible “need to greatly revamp business plans for the next fiscal year and onward” in Hong Kong and worries about talent departing the territory “in increasing numbers” as time passes, the survey found.

More than 90 percent of respondents said they had used emails from the Japanese Consulate-General to gather information about Hong Kong’s protests, while 68.7 percent said they had frequently relied on word-of-mouth information from their local staffers, the report said.

The JETRO Hong Kong head said the three institutions were considering conducting a similar survey every quarter to tell the Hong Kong government about issues facing Japanese companies.

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