Investment sentiment of overseas companies in Hong Kong has been weakened by prolonged social unrest, according to InvestHK.

Stephen Phillips, director-general of investment promotions at InvestHK said this was creating challenges for foreign firms. "Concerned about the current situation in Hong Kong and global uncertainties, companies will inevitably think more and harder before they make any investment decision in Hong Kong."

However, Phillips said that he had not seen foreign companies withdrawing their businesses from Hong Kong, adding that it was still too early to evaluate the effects of social unrest on investment decisions.

Companies are concerned about Hong Kong's current situation because there has been a downturn in tourism and retail sectors. But they were also looking at a broader portfolio and Hong Kong's advantageous position as part of their global strategy, he explained.

To recover their confidence

In talks with companies overseas, InvestHK, the government department responsible for attracting and facilitating foreign direct investment into Hong Kong, has found that overseas companies were still interested in the SAR. But some were also adopting a wait-and-see attitude due to the current social unrest.

Phillips added that InvestHK had been devoting much effort to promotional work – particularly in strategic markets – to broaden investors' understanding of Hong Kong and to rebuild their confidence. It has also been promoting the city's crucial role in the Guangdong-Hong Kong-Macao Greater Bay Area development and the Belt and Road Initiative.

According to a recent government survey, Hong Kong continues to be competitive in attracting multinationals and startups to the city at a time of global economic uncertainty.

The total number of business operations in Hong Kong with parent companies overseas and on the Chinese mainland was 9,040 in 2019 – a 9.9 percent increase over that of 2017. Among these, there were 1,541 companies which set up regional headquarters in Hong Kong – up 9.1 percent from the number in 2017 – according to the 2019 Annual Survey of Companies in Hong Kong with Parent Companies located outside Hong Kong.

Still holding appeal

Philips added: "Despite global uncertainties, I am confident that Hong Kong's enduring business advantages such as its strategic position in the region as well as its international status as a sophisticated business and financial city will continue to attract world-class investment."

The survey also collected views on the attractiveness of Hong Kong, including its simple tax system and low tax rate, free flow of information, geographical location and free port status.

The increasing number of overseas companies in Hong Kong also boosted the number of people engaged by the overseas and the Chinese mainland companies – which reached an all-time high at 493,000 this year – an increase of 11.3 percent compared with 2017.

In addition, the startup ecosystem in Hong Kong continues to thrive. The 2019 Annual Startup Survey conducted by InvestHK found that there were 3,184 startups operating in major public and private co-work spaces and incubators in Hong Kong, a rise of 42.8 percent over 2017. These startups employed over 12,400 people – an increase of 97.4 percent over 2017.

The startup community was highly international with 34 percent founders from outside Hong Kong. Major sectors included fintech, e-commerce, supply chain management and logistics technology, information, computer and technology.