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Business trends

Japanese companies drop Hong Kong expansions as clashes bite

Shiseido and others look to mainland China for growth amid unrest

Ongoing unrest is hurting Hong Kong's appeal as a global business hub.   © AP

TOKYO -- Japanese businesses in Hong Kong are scaling down operations there as protests continue and clashes with police intensify, leading some companies to shift their focus to other parts of China.

Following escalation of the unrest, as police fired guns and laid siege to a university campus, one in three of the 270 Japanese companies in Hong Kong are considering sending the families of Japanese expats home, according to a survey conducted by the Hong Kong Japanese Chamber of Commerce and Industry as of late November. Of the companies, 1.1% have already decided to return their Japanese employees home, and 8.9% are considering doing so.

A September poll by the Japan External Trade Organization showed that 4.3% of Japanese businesses in Hong Kong had ordered expatriate families back to Japan, while 1.2% said they were considering closing their offices.

Since then, Yusuke Fuchita, JETRO's Hong Kong office deputy director general, said that "more companies are strengthening information gathering, and considering various options." Some companies including Japanese cosmetics manufacturer Shiseido and shoemaker ASICS are shifting their expansion strategies out of Hong Kong.

Shiseido announced last month that it will "offset the negative impact in Hong Kong by shifting some of our Hong Kong investments to mainland China." CEO Masahiko Uotani told Nikkei Asian Review that his business in Hong Kong has been affected by the protest, and would "minimize" advertising costs there. He added that he will "look at the Greater China region as a whole," including Macao.

The company's revenue in Hong Kong for the July to September period sunk about 10 percent. It also announced a downward revision for the one-year financial results forecast ending in December 2019, partly due to the Hong Kong situation.

ASICS is also considering expanding its sales operations in the rest of the Greater China region such as in the mainland and Taiwan in case its Hong Kong business slumps in the future, according to its spokesperson. She added that its 11 shops in Hong Kong have been hit by the demonstrations, but still retained double-digit growth.

Japanese Ramen chain Ichiran's two restaurants in Causeway Bay and Tsim Sha Tsui were closed temporarily when the protests became more violent. The company says if the situation gets worse, it will consider revisions of its supply chain and workforce management.

Japanese real estate company Tokyu Livable said its headquarters is communicating with the Hong Kong office every day. "Depending on the future situation, we might close [the office] temporarily," said the company spokesperson.

The ongoing unrest is hurting Hong Kong's appeal as a global business hub. According to Cushman & Wakefield, Hong Kong office rental prices in the third quarter through September decreased by 2% quarter-on-quarter. "We have seen office demand impacted by the recent unrest, with some occupiers shelving expansion plans and opting to renew in the face of the current uncertainties," said Reed Hatcher, head of research in Hong Kong.

Nevertheless, Hatcher also suggested that there have not been any signs of any major companies relocating. "While there are increasing demands from some local investors [in Hong Kong] to shift their assets out of Hong Kong, they are not necessarily heading toward Japan," said a Tokyu Livable spokesperson.

Many companies are taking a cautious approach while watching the situation. A number of trading and financial companies told the Nikkei Asian Review that the only measures they are taking on the ground are adapting their travel schedules and commuting hours. "As for future plans, we will continue to closely monitor the situation," said a spokesperson for Uniqlo owner Fast Retailing.

Oishii Promotion has opened three new Kaneko Hannosuke restaurants in Hong Kong since September. According to a spokesperson, their daily sales can be as low as 50% of their initial targets. "We can only see the situation through," said a company spokesperson. He explained that "the entry into Hong Kong was made more than half a year ago, and we cannot do anything about it."

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