Hong Kong business optimism mildly affected by global downturn. Cautious salary increments do not cease the thirst for skilled workforce

Hong Kong – Hong Kong’s business optimism fell only 4% from the second quarter of this year, according to the latest International Business Report (IBR) released by Grant Thornton Jingdu Tianhua, in the midst of a prolonged US economic slowdown and no solution in sight to the European sovereign debt crisis. While the net global business optimism has collapsed from +31% to +3%, which is the worst since 2009, Hong Kong registered a much milder decline in the last quarter compared to most key international finance centres and developed economies.  

The research also reveals that employment and the demand of a skilled labour workforce exhibit a strong upward trend while pay rise expectations begin to curb in Hong Kong.

Hong Kong optimism mildly affected  

Though Hong Kong saw a decrease in business optimism from +46% to +42% in the third quarter of this year1, it stands as one of the least affected economies surveyed. The Asia Pacific average and global average plummeted on a quarterly basis by 15% and 28% respectively. Among the Asia Pacific economies surveyed, mainland China, Taiwan and Singapore experienced the greatest blows to business optimism, while Malaysia and Philippines were the only economies in the region to demonstrate improvements. Japan ranked yet again as the country with the lowest optimism level among all economies at -69%, a 7% decrease from the previous quarter.  

Daniel Lin, managing partner of Grant Thornton Jingdu Tianhua, commented “With the US Federal Reserve holding back the new round of quantitative easing measures, it is no surprise that global markets have lowered their optimism as they brace themselves for an economic contraction. While Hong Kong’s recent on-going stock market plummet has clearly reflected these global economic woes, Hong Kong’s sustained performance in tourism and trade has partially helped offset the impact of weakening global economic sentiments.”

Daniel continues. “The Q3 report was conducted in August/September. The survey results demonstrated the sentiment about the wider economy in general, but the fast-moving economic environment might have already changed the Hong Kong business landscape in the last couple of weeks.”

Hong Kong employers become more cautious under economic uncertainty

Despite faltering global business optimism, Hong Kong remained one of the top five countries to report an increase in employment. On balance, +62% of business reported increasing levels of employment over the past 12 months, compared with +50% in Q2. This places Hong Kong second globally after India (+70%) this quarter, up from fifth position in the previous quarter. Meanwhile, 7% fewer businesses in mainland China reported increasing employment.

The increasing appetite to hire in Hong Kong is particularly interesting when we consider that Hong Kong privately held businesses cited the lack of a skilled workforce as the key impediment to the development of their businesses. This emphasises the difficulty firms have in finding the right talent to support growth.    

In the face of a talent shortage, the trend of employers offering pay rises in line with inflation is on the decline with a decrease of 8% from the previous quarter. The number of businesses planning to offer no pay rise doubled, climbing from 12% in Q2 to 24% in Q3.

Daniel Lin continued: “On one hand, Hong Kong businesses are confronted with the challenge of a highly competitive recruitment landscape. On the other, their proposed pay rises struggle to keep up with mounting inflation. This leaves employers with the dilemma and double challenge of tackling rising costs and a lack of market talent at the same time.”

“Global concerns over stagflation are gradually taking form in Hong Kong. Whether the US takes the risk of printing money or bears the pain of allowing the economy to adjust itself, imported inflation will not be kept at bay.”

- ends –

[1] The "Percentage Balance of Optimism / Pessimism” is the percentage of respondents who are optimistic less the percentage of those who are pessimistic. The highest score possible is +100% and the lowest is -100%.