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Business trends

Hong Kong downsizing considered by one-third of Japanese companies

Only 1% say new national security law has increased stability

Police stand guard to avoid mass a gathering during a protest by Hong Kong activists.   © Reuters

HONG KONG -- A majority of Japanese companies with a presence in Hong Kong are concerned about the national security law imposed by China, a survey released Monday shows, with 34% contemplating restructuring operations there or leaving the territory entirely.

The Hong Kong government claims the national security legislation has led to social stability. But out of 296 Japanese firms that answered the survey conducted in part by the Japan External Trade Organization (JETRO), only 1% reported seeing any positive effects. Some 8.5% said it was having a negative impact, such as dampening the appetite to invest.

Meanwhile, 52% of the companies said they "are concerned" about the national security law. Another 15% said they were "very concerned." Just 19% report not being too concerned about the legislation.

Regarding the reasons behind the concerns, the prospect of limits being placed on information came up 67% of the time. This was followed by the fear that the rule of law in Hong Kong will be undermined, which was mentioned at a 60% rate. This portion of the survey allowed for multiple responses.

When asked about their plans concerning business activities in Hong Kong, 47% of the respondents said nothing will change, representing an increase of 30 companies from the previous survey published in July.

On the other hand, 34% said they would consider overhauling business operations in some manner. This was broken down into the 13% that said they would downsize operations. Another 4.5% of the companies stated they will re-examine the functions of their Hong Kong arms as administrative centers, while 1.7% said they plan to exit the metropolis.

An additional 15% of the companies stated they may consider making the above changes at a later date. Candidates for redomiciling included Singapore, Indonesia and mainland China.

Earnings for the third quarter ended September improved for 32% of the respondents compared to the second quarter, a large jump from 23% in the previous survey, with the mainland's economic recovery factoring significantly.

But the sense of uncertainty remains strong among Japanese companies. The latest survey shows 39% of the respondents predicting the business environment will worsen slightly in a year. For current conditions, 8.5% say the status quo has produced a negative impact, including lowering the appetite to invest.

JETRO conducted the survey over five days through Oct. 9 in conjunction with the Consulate-General of Japan in Hong Kong and the Hong Kong Japanese Chamber of Commerce & Industry.

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