HONG
KONG, CHINA - Media OutReach - 20 November
2018 - Hong Kong is facing a challenging 2019 owing to a number of global and
domestic uncertainties, however growth in innovation and technology is helping
to counteract some of those uncertainties, according to the latest Hong Kong
Economic Survey conducted by CPA Australia.

From left to right: Ms. Vickie Fan, Divisional Deputy President 2018 -- Greater China, CPA Australia; Mr. Roy Lo, Divisional Deputy President 2018 -- Greater China, CPA Australia; Mr. Paul Ho, Divisional President 2018 -- Greater China, CPA Australia; Mr. Peter Lee, Divisional President 2013 -- Greater China, CPA Australia

A challenging year ahead

Growth
expectations for Hong Kong's economy in 2019 are down from expectation for
2018. While 62 per cent of respondents expected Hong Kong's economy to grow by
two per cent or more in 2018, only 48 per cent of respondents expect the
economy to grow at two per cent or more in 2019.

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"Given
emerging global risks, we are not surprised that respondents have lower growth
expectation for Hong Kong's economy in 2019 than they did in 2018," said Mr Paul
Ho, CPA Australia's Divisional President for Greater China.

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"Our
survey shows that the deteriorating trade relationship between US and
China, anticipated lower
economic growth in mainland China and high property prices are the factors most
likely to have a negative impact on the Hong Kong economy in 2019. Falling
confidence in the city's competitiveness is also likely to be contributing to a
less positive outlook for Hong Kong's economy in 2019."

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"Balancing
out these downside risks is the government's significant investment in
innovation and technology, the Greater Bay Area initiative and the opening of
new infrastructure -- all seen as the factors most likely to have positive
impacts on the economy in 2019," Mr Ho said.

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Trade
war impacts

Though
the possibility of a trade war is the factor respondents were most likely to
expect to have a negative impact on Hong Kong's economy in 2019, it appears
that most companies are taking a 'wait and see' approach to the potential trade
war rather than taking action, with 51 per cent of respondents either stating
they have yet to take any measures or believe the potential trade war will not
have an impact on their company.

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"While
there are concerns with the impact a trade conflict may have on Hong Kong's
economy, these concerns are not necessarily translating through to action at a
company level. In fact, respondents appear somewhat more confident in their
employer's performance in 2019, with 44 per cent expecting their employer to
increase their headcount, compared with 37 per cent in 2018 and 31 per cent in
2017."

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Increased
support for innovation and technology and a lower profits tax rate on the first
HK$2 million in profit is no doubt contributing to a somewhat more positive
outlook at a company level. However, further measures may be required, with a
third of respondents suggesting increased support for SMEs, especially those
most vulnerable to a trade war, as a policy action that would provide the
greatest boost to the local economy in 2019," Mr Ho said.

Mr Ho said
policy action should include expanding Hong Kong's trade relations through new
free trade agreements and comprehensive double taxation agreements and
expanding the Hong Kong government's global network of economic and trade
offices.

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Growth
expectations being driven by industries outside of the four pillar industries

When
asked which industries in Hong Kong have the highest growth potential over the
next three years, respondents selected healthcare and medical services (36 per
cent), followed by innovation and technology (31 per cent) and e-commerce (30
per cent).

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"With
an ageing population and the longest life expectancy in the world, it is not
surprising that most Hong Kong survey respondents considered healthcare and
medical services as having the most potential for growth."

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"What
is more surprising is the high number of respondents that selected innovation
and technology, e-commerce and biomedicine as sectors having the strongest growth
potential in Hong Kong in the next three years. It is a signal that Hong Kong's
economy may be undergoing a transformation to a more knowledge-based, innovation driven economy."

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Greater Bay Area's influence on the
economy�is positive

When
asked what factors are most likely to contribute to Hong Kong's economic growth
in 2019, the Greater Bay Area initiative (31 per cent) was the most popular
factor chosen by respondents. Adding support to this view, respondents were
most likely to choose accelerating Hong Kong's integration with the rest of the
GBA (28 per cent) as the measure that will do most to improve Hong Kong's
international competitiveness.

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"The
opening of new infrastructure to improve Hong Kong's connection to the rest of
the Bay Area is clearly creating economic opportunities for Hong Kong, however
infrastructure alone will not guarantee Hong Kong's success in the Greater Bay
Area, talent is the bridge connecting the region with the world."

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"Our
survey also shows that communication skills (37 per cent) are considered the
top skill university graduates should possess to get a job. Hong Kong's young
graduates should be seeking to master biliteracy and trilingualism to gain a
competitive edge and enable them to capitalise on the opportunities brought by
the GBA initiative," he said.

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"The
year ahead looks positive however downside risk of a global trade war is adding
a strong element of uncertainty that is impacting confidence. But Hong Kong is
a resilient economy that has overcome similar challenges due to its solid
foundations built on a low and simple tax system, strong work force and
business-friendly regulatory environment," Mr Ho concluded.

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About the survey

The survey was conducted from 8 to 23 October
2018 with 178 of CPA Australia's Hong Kong members participating, including
finance and accounting professionals from listed companies, multinational
corporations, private enterprise, government and not-for-profit organizations.