Hong Kong firms pick Saudi Arabia over mainland China for expansion: HSBC survey

Hong Kong businesses are increasingly turning to Saudi Arabia as their top choice for supply chain diversification amid changing trade conditions, according to an HSBC survey.\nNearly a fifth of Hong Kong businesses identified Saudi Arabia as their preferred market to expand production, followed by mainland China at 14 per cent, according to the survey released on Thursday. Interest was strongest among technology, media and telecommunications firms.\nFavourable policies bolstered the trend, the study said, including a proposed US$1 billion fund between the Hong Kong Monetary Authority and Saudi Arabia’s sovereign wealth fund to help companies from Hong Kong and other Greater Bay Area cities expand into the Middle Eastern country. The fund would be launched “soon”, said Hong Kong Financial Secretary Paul Chan Mo-po on Tuesday.\nLast month, Chan led a 40-member delegation to Riyadh, which yielded five memorandums of understanding (MOUs) that involved collaboration in investment and technology. Maphive Technology signed an MOU with a subsidiary of Olayan Saudi Holding, part of the hospitality and events sector, while GoGoChart, a Hong Kong digital marketing start-up, struck an initial accord with an investment fund in the kingdom.\n\nIn a separate survey in June, half of the Hong Kong respondents named mainland China as their top pick, while a quarter identified South Asia – which has benefited from Hong Kong and Beijing’s efforts to forge stronger ties amid a tense US-China trade relationship.\nThe latest survey, which polled 6,750 decision-makers across 17 markets, found that Hong Kong firms planned to continue their diversification, with 68 per cent maintaining or planning to do so.\nNearly half of them gained more clarity over international trade policy changes compared with six months ago, while 61 per cent found it easier to understand recent trade policy changes.\nAs a result, optimism for international trade growth over the next two years was solid at 69 per cent, though it had decreased slightly from 74 per cent six months ago, according to the survey.\nUS-China tariff tensions peaked in April. A truce reached at the end of October saw a number of thorny issues, including tariffs, put on hold until August.\nHong Kong firms were more upbeat than their global peers about costs, with 22 per cent expecting tariff pressures to ease, compared with 14 per cent worldwide. Fewer firms feared steep revenue losses, with only 13 per cent anticipating declines of more than 25 per cent, down from 27 per cent six months ago.\nThe findings pointed to growing confidence among Hong Kong businesses in managing costs and safeguarding revenue, according to the survey.\n“The proactive supply chain diversification strategy of local businesses, coupled with its enduring appeal as a highly efficient export and re-export hub, reinforces Hong Kong’s role as a major gateway in global trade,” said Frank Fang, head of commercial banking for Hong Kong and Macau at HSBC.\n