THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT

Transcription

1 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT

2 2 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT LEGAL NOTICE CPA Australia Ltd ( CPA Australia ) is one of the world s largest accounting bodies, representing more than 155,000 members of the financial, accounting and business profession in 118 countries. ISBN: For information about CPA Australia, visit our website cpaaustralia.com.au First published 2016 CPA Australia Ltd ACN Level 20, 28 Freshwater Place Southbank Vic 3006 Australia Copyright CPA Australia Ltd (ABN ) ( CPA Australia ), All rights reserved. CPA Australia owns all copyright in these materials or uses it under licence or applicable law. For permission to reproduce any material, a request in writing is to be made to the Legal Business Unit, CPA Australia Ltd, Level 20, 28 Freshwater Place, Southbank, Victoria 3006 Australia. DISCLAIMER CPA Australia has used reasonable care and skill in compiling the content of these materials. However, CPA Australia makes no warranty that the materials are accurate and up to date. These materials do not constitute the provision of professional advice whether legal or otherwise. Users should seek their own independent advice prior to relying on or entering into any commitment based on the materials. The materials are purely published for reference purposes alone. CPA Australia, their employees, agents and consultants exclude completely all liability to any person for loss or damage of any kind including but not limited to legal costs, indirect, special or consequential loss or damage (however caused, including by negligence) arising from or relating in any way to the materials and/or any use of the materials. Where any law prohibits the exclusion of such liability, then to the maximum extent permitted by law, CPA Australia s liability for breach of the warranty will, at CPA Australia s option, be limited to the supply of the materials again, or the payment of the cost of having them supplied again.

3 3 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT OVERVIEW CPA Australia Asia-Pacific Small Business Survey 2015 is the sixth in a series of annual reports measuring small business confidence, the drivers of confidence, technology uptake and access to finance by small businesses. The data is compared across the eight economies included in this survey and over time. In total, 2932 participants completed the survey, including 510 from Australia, 610 from Mainland China, 265 from Hong Kong, 306 from Indonesia, 310 from Malaysia, 311 from New Zealand, 310 from Singapore and 310 from Vietnam. The online survey was conducted with a random sample of small business owners/managers between 24 September and 14 October The sample was obtained through panel providers. To qualify for the survey, participants were required to be an owner, a senior manager (defined as being a director, a principal, a CEO, a CFO, a senior manager or a managing director) or a qualified accountant of a business with fewer than 20 employees.

4 4 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT SUMMARY OF HONG KONG RESULTS Focus on e-commerce and exporting is boosting the confidence and competiveness of Hong Kong s small business sector. CPA Australia s Asia-Pacific Small Business Survey reveals that a strong focus by many Hong Kong small businesses on e-commerce, social media and exporting is contributing to a more positive outlook by the sector. The focus on e-commerce, social media and exporting also means that many of Hong Kong s small businesses are well placed to outcompete their less nimble and tech-savvy competitors and remain competitive against rivals from fast-growing neighbouring economies who are taking big steps to improve their competitiveness. More than half of the respondents (52.0 per cent) expect Hong Kong s economy to grow in the next 12 months, a 12.6 percentage point increase from the 2014 survey results. This jump in economic confidence has flowed through to confidence in their own business, with 55.1 per cent of Hong Kong businesses expecting to grow in the next 12 months, up from 39.0 per cent in This, however, is still well below the survey average of 70.7 per cent of small businesses expecting to grow in the next 12 months. It is also below the results for the mainland of China (77.7 per cent) and Singapore (56.5 per cent). There is no doubt that the survey results show that economic and small business sentiment in Hong Kong for 2016 has turned positive. Further, Hong Kong s strong focus on e-commerce and exporting and continued strong economic growth in the mainland of China (the Mainland) supported by policies such as the Belt and Road Initiative, show that there is much to be positive about with regard to Hong Kong and its small business sector in 2016 and beyond. The sector is not without its challenges, however. The main challenge is increasing costs, particularly rent, with Hong Kong businesses being the most likely of the markets surveyed to nominate this as the factor most detrimental to their business in the past 12 months. However, the very strong focus on e-commerce means that many Hong Kong businesses are responding well to this challenge. Investing in e-commerce platforms makes good business sense as it may reduce their need for floor space, particularly in high rental locations, and increases the chance of them gaining access to the fast-growing e- commerce market in the Mainland without necessarily needing a physical presence there. With Hong Kong s tourism and retail sectors going through a weak period, efforts to reach customers directly through e-commerce platforms also show that many Hong Kong small businesses have the right strategy in place, and that this should be a positive contributor to long-term growth. Another familiar challenge for Hong Kong small businesses is what appears to be an overreliance on external finance. As in previous years, Hong Kong small businesses continue to seek external finance even when business conditions are not working in their favour. They are also more likely to seek external finance to cover increasing expenses, increasing rent and increasing borrowing costs than small businesses from other markets. These issues should ideally be addressed through improved cash flow management and cost control rather than increased borrowings. While the strong focus on e-commerce and exporting is positive, a stronger focus on innovation would make Hong Kong small businesses even more competitive and likely to grow. As the survey results show, businesses that are innovating are significantly more likely to be growing and creating jobs.

5 5 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Hong Kong small businesses are less likely than the survey average or small businesses in the Mainland to innovate through the introduction in the next 12 months of a new product, service or process that is unique to Hong Kong or the world (17.7 per cent for Hong Kong small businesses compared with the survey average of 22.0 per cent and 31.6 per cent of small businesses from the Mainland). Putting aside the need for a stronger focus on innovation, Hong Kong small businesses are largely competitive and well placed to grow in the coming years as: a large percentage expect to grow their e-commerce presence (42.6 per cent of Hong Kong small businesses expect to grow their e-commerce presence to a large extent in the next 12 months compared with the survey average of 32.2 per cent, the Shanghai reading of 29.5 per cent and the Singapore reading of 19.4 per cent) many expect to grow revenue from overseas markets (22.3 per cent of Hong Kong small businesses expect their revenue from overseas markets to grow strongly in the next 12 months compared with the survey average of 19.1 per cent, Singapore at 17.7 per cent and Shanghai at 10.9 per cent) a very large percentage use social media in their business (93.2 per cent of Hong Kong small businesses use social media in their business compared with the survey average of 81.4 per cent and well ahead of Singapore s reading of 79.6 per cent and Australia s reading of 50.2 per cent). The more positive small business outlook and a focus on some of the key drivers of future growth and competiveness are contributing to the sector creating new jobs, with 32.8 per cent of Hong Kong small businesses forecasting they will increase employee numbers in the next 12 months. This number could be higher with a stronger focus on innovation. Other results from the survey Demographics Hong Kong small business owners are younger than the survey average (63.4 per cent are under 40 compared with the survey average of 53.2 per cent). There is a strong correlation between younger business owners and those businesses that expect to grow, sell online, use social media for business purposes, and innovate through the introduction of new products, processes or services. Improved business management Hong Kong small businesses were slightly less likely to state that improved business management had a major positive impact on their business in the past 12 months than the survey average (20.4 per cent compared with the survey average of 25.4 per cent). Cost control was also a major positive influence on Hong Kong businesses; however, increasing costs remain a major detrimental issue for Hong Kong businesses.

6 6 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Access to finance For those Hong Kong small businesses that sought finance in the past 12 months, access to finance became easier than in the previous 12 months (43.5 per cent found access to finance easy or very easy in this survey compared with 29.9 per cent in the last survey). These easier financing conditions and the more positive economic environment contributed to an increase in the number of businesses seeking external funds (78.1 per cent required external funds in the past 12 months against 69.9 per cent that required external funds in the last survey). While growth remains the most important reason for accessing finance, Hong Kong businesses were also the most likely to access external funds for covering increasing expenses.

7 7 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT MAJOR FINDINGS FOR HONG KONG Innovation is a key driver of growth, job creation and exporting; therefore more Hong Kong small businesses could benefit from a greater focus on innovation. With small businesses with an e-commerce presence being more likely to be growing and creating jobs, Hong Kong s strong focus on e- commerce is a distinct competitive advantage for its business and the economy. With the survey results showing a strong connection between exporting, and growth and jobs, Hong Kong s focus on exporting is a competitive advantage for its small businesses and the economy. With the survey results showing a strong connection between social media use and business growth, the near universal usage of social media by Hong Kong s small businesses is a competitive advantage. Reflecting more positive business conditions, nearly one-third of Hong Kong small businesses plan to increase their headcount in Hong Kong small business confidence in the growth prospects for the local economy and their own business is up in Access to finance for Hong Kong small businesses became easier over the past 12 months.

8 8 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT KEY SURVEY FINDINGS FOR HONG KONG INNOVATION Innovation 1 is a key driver of growth, job creation and exporting. More Hong Kong small businesses could therefore benefit from a greater focus on innovation. Small businesses that in the next 12 months will definitely introduce a new product, service or process that is new to their market or the world 2 Indonesia 45.8% China 31.6% Malaysia 29.0% Vietnam 26.1% Hong Kong 17.7% Singapore 15.2% New Zealand 6.8% Australia 5.1% 1 Innovation, for the purpose of the survey, is taken to be the introduction of a new product, service or process that is unique to a market or the world. 2 All data for China excludes Hong Kong, which is shown separately.

9 9 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT The relationship between innovation and jobs creation, business growth and exporting EMPLOYEE NUMBERS Percentage that expect to definitely introduce a product, service or process that is new to their market or the world Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months BUSINESS GROWTH Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months EXPORTING Expecting revenue from overseas sales to grow strongly in the next 12 months NOT expecting to grow their revenue from overseas sales in the next 12 months

10 10 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Innovation is a core driver of business growth and competitiveness, and while a reasonable number of Hong Kong small businesses are undertaking innovation, more could be done. With the survey results showing innovative businesses are significantly more likely to be growing, exporting and creating jobs, it is easy to see why innovation and technology is one of the key economic areas the Hong Kong government seeks to further develop. As a recent OECD paper on innovation stated, in the long run, it is difficult to imagine growth without innovation. The OECD estimates that innovation can contribute up to 50 per cent of economic growth depending on the economy, the level of economic development and the phase of the economic cycle. 3 Such an estimate highlights why the Hong Kong government is absolutely right to have innovation as a core policy focus. Businesses are also more likely to definitely expect to undertake innovation through the introduction in the next 12 months of a new product, service or process that is unique to their market or the world if they: have a business owner/manager aged under 40 have between 5 and 19 staff are from the banking, finance and insurance sector, or the manufacturing sector. KEY FINDING Innovation is a core driver of economic growth, business growth, job creation and exporting. We suggest that more Hong Kong small businesses should place a greater emphasis on innovation and take advantage of the support for innovation offered by the Hong Kong government. 3 OECD Innovation Strategy: An Agenda for Policy Action, OECD Publishing, Paris, 2015, p. 4

11 11 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT E-COMMERCE With small businesses with an e-commerce presence being more likely to be growing and creating jobs, Hong Kong s strong focus on e-commerce is a distinct competitive advantage for its business and the economy. Small business that generated revenue from online sales a comparison between Hong Kong, Shanghai and Singapore 100% 90% Shanghai 80% Hong Kong 70% 60% Singapore 50% Small business that intend to grow their e-commerce presence to a large extent in next 12 months a comparison between Hong Kong, Shanghai and Singapore 50% 40% Hong Kong 30% Shanghai 20% Singapore 10%

12 12 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT The relationship between e-commerce and business growth, jobs creation and exporting BUSINESS GROWTH Percentage that expect to grow their e-commerce presence to a large extent Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months EMPLOYEE NUMBERS Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months EXPORTING Expecting revenue from overseas sales to grow strongly over the next 12 months NOT expecting to sell into overseas markets in the next 12 months

13 13 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Small businesses from Hong Kong are leading their peers and competitors from Singapore, Australia and New Zealand on generating revenue from online sales. This advantage is only likely to grow as small businesses from Hong Kong are significantly more likely to expect to grow their e-commerce presence in the next 12 months than businesses from almost all other markets in the survey including Shanghai and Singapore. With the survey results showing that small businesses that are selling online and seeking to grow their e-commerce presence are significantly more likely to be growing and creating jobs, it is easy to see why the Hong Kong government has innovation and technology as a key economic area for further development. The focus on e-commerce should also assist Hong Kong small businesses reduce the impact that rent has on their business, as e-commerce could allow them to take up less floor space, particularly in high rental locations. It could also allow them to better connect with customers, particularly in the Mainland, without necessarily having a physical presence there. With Hong Kong s retail and tourism sectors going through a weak period, such a focus on e-commerce may be an important way to help businesses in those sectors to manage through this difficulty and place them in a good position for future growth. While online sales are not relevant for all businesses, when you combine the data that shows a strong connection between e-commerce and growth, growing digital penetration and literacy of customers, high rent and weaknesses in some sectors of the Hong Kong economy, the results suggest it would be wise for all businesses to investigate establishing and growing their e-commerce presence. Small businesses are also more likely to earn income from online sales where: they have between 5 and 19 staff the business has been established for less than 21 years the respondent is aged under 40 the business is from the manufacturing sector. KEY FINDING The high degree of focus on e-commerce by Hong Kong s small businesses is a key competitive advantage for those businesses and the economy. The focus on e-commerce should also allow Hong Kong s small businesses to better control rent costs and make it easier for them to connect with customers in the Mainland.

14 14 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT SMALL BUSINESS AND EXPORTING With the survey results showing a strong connection between exporting, and growth and jobs, Hong Kong s focus on exporting is a competitive advantage for its small businesses and the economy. Small businesses expecting revenue from overseas sales to grow strongly in the next 12 months a comparison between Hong Kong, Shanghai and Singapore 25% Hong Kong 20% Singapore 15% 10% Shanghai 5% 0% The relationship between exporting, and jobs creation and business growth EMPLOYEE NUMBERS Percentage that expect their revenue from exporting to grow strongly Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months

15 15 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT BUSINESS GROWTH Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months Hong Kong s small businesses are the second most likely of the markets surveyed to expect to strongly grow their revenue from exporting in the next 12 months. With the survey results showing that small businesses that are exporting are more likely to be growing and creating jobs, this focus is a strong competitive advantage for Hong Kong s small businesses and the broader economy. While such an external focus does come with risks, including foreign exchange risks and the potential for downturns in key markets, the advantages of exporting over focusing on the domestic market are significant. A focus on the domestic market limits growth potential and increases the business s risk exposure should the local economy slow. It also means that the business may be less exposed to competitive pressures, which the survey results show may have a negative impact on innovation and growth. Further, the business may be less exposed to new ideas from other markets, which may also negatively impact innovation. For Hong Kong s small businesses to maintain this competitive advantage, more businesses should be looking to export, not only to the Mainland but to other fast-growing economies such as Indonesia and Vietnam. Small businesses are also more likely to expect strong growth in their earnings from overseas in the next 12 markets if: the business is from the manufacturing sector the businesses has between 5 and 19 employees the respondent is aged under 50 the business has been established for less than 21 years. KEY FINDING With Hong Kong s small businesses being more likely to focus on exporting than nearly all other markets, this is a competitive advantage for its businesses and the economy. With a strong connection between exporting and growth and jobs, more Hong Kong small businesses should consider exporting as part of their business strategy.

16 16 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT SOCIAL MEDIA With the survey results showing a strong connection between social media use and business growth, the near universal usage of social media by Hong Kong s small businesses is a competitive advantage. Small businesses that used social media in their business a comparison between Hong Kong, Shanghai and Singapore 100% Shanghai 90% Hong Kong 80% Singapore 70% 60% With the survey results showing a connection between social media use for business purposes and business growth, the very strong uptake of social media amongst Hong Kong s small businesses gives them a competitive advantage over businesses from Singapore, New Zealand and Australia where the number of small businesses using social media is much lower. With customers being increasingly likely to seek to communicate and transact with businesses via social media, a robust social media presence should enhance a small business s ability to attract, retain and transact with customers. It may also enhance their brand reputation and assist them to grow their business. Those that use social media use it for a variety of purposes including communicating with existing customers, promoting their business to potential customers, and selling their products or services. Small businesses are significantly less likely to be using social media for business purposes where: the respondent is aged 50 or over the business has been established for over 20 years the business has four or fewer staff. KEY FINDING With small businesses using social media being more likely to grow, the large-scale adoption of social media by Hong Kong s small businesses is a competitive advantage that should help generate future growth.

17 17 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT JOBS AND SMALL BUSINESSES Reflecting more positive business conditions, nearly one-third of Hong Kong small businesses plan to increase their headcount in Small businesses that increased employee numbers in the past 12 months a comparison between Hong Kong, Shanghai and Singapore 50% 40% Shanghai 30% Hong Kong 20% Singapore 10% Small businesses that plan to increase employee numbers in the next 12 months a comparison between Hong Kong, Shanghai and Singapore 50% Shanghai 40% 30% 20% Hong Kong Singapore 10%

18 18 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Relationship between jobs creation and business growth, innovation, exporting and e-commerce BUSINESS GROWTH Percentage that expect to increase employee numbers in the next 12 months Expecting to grow in the coming 12 months NOT expecting to grow in the coming 12 months INNOVATION Definitely expecting to introduce a new product, service or process unique to their country or the world NOT expecting to introduce a new product, service or process unique to their country or the world EXPORTING Expect to grow export revenue strongly NOT expecting to sell into overseas markets

19 19 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT E-COMMERCE Expect to grow their e-commerce presence to a large extent NOT expecting to grow their e-commerce presence The jump in the number of Hong Kong businesses that are expecting their business to grow in 2016 from 2015 is flowing through to jobs, with 32.8 per cent of Hong Kong s small businesses planning to increase employee numbers in the next 12 months. Other factors contributing to this healthy reading of jobs growth is the strong focus on e-commerce and exporting by many of Hong Kong s small businesses. While Hong Kong s small businesses are significantly less likely to be creating jobs than businesses from Indonesia, Vietnam and the Mainland, they are more likely to do so than Singaporean, Australian and New Zealand small businesses. Over the next 12 months, businesses that expect to increase employee numbers are also significantly more likely to: intend to significantly increase their e-commerce presence strongly grow their revenue from overseas sales innovate through definitely introducing a new product, service or process. Small businesses are also more likely to expect to increase employee numbers over the next 12 months if: the business is in the manufacturing, accommodation or food services industries the business has between 5 and 19 staff the respondent is aged under 40. KEY FINDING A stronger focus on innovation should lead to more Hong Kong small businesses increasing their headcount.

20 20 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT BUSINESS AND ECONOMIC CONDITIONS Hong Kong small business confidence in the growth prospects for the local economy and their own small business is up in Small businesses that grew over the past 12 months by market 4 Indonesia Vietnam China 57% 63% 70% 34% 26% 8% Malaysia Hong Kong Singapore 51% 49% 55% 9% 12% 14% New Zealand 41% 15% Australia 32% 13% Grown A Little Grown Strongly Small businesses that expect their business to grow in the coming 12 months, 2009 to 2015 by market 100% 90% 80% 70% 60% 50% 40% Vietnam Mainland China Singapore New Zealand Malaysia Indonesia Hong Kong Australia 30% All data for China excludes Hong Kong, which is shown separately.

21 21 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Small businesses that expect their local economy to grow over the next 12 months, 2011 to 2015 by market 100% 90% 80% 70% 60% 50% 40% Australia Hong Kong Indonesia Malaysia New Zealand Singapore Mainland China Vietnam 30% 20% Just over half of Hong Kong s respondents (52.1 per cent) expect Hong Kong s economy to grow in 2016, a 12.7 percentage point increase from their forecast for This positivity is expected to flow through to business growth, with 55.1 per cent of Hong Kong small businesses expecting their business to grow in the next 12 months, a 16.1 percentage point jump from their forecast for Despite these large increases in confidence, Hong Kong s small businesses remain the least positive of the markets surveyed, slightly below Australia and Singapore. Having said that, with many small businesses focused on e-commerce, social media and exporting (which the survey results show are important drivers of growth), there is much to be confident about for 2016 and beyond. This increase in economic and business confidence comes at a time when Hong Kong s economy is facing a range of external pressures including slowing growth in the Mainland (although it remains very robust), uncertainty over US interest rates and weaker than expected recoveries in the economies of the US, Japan and the euro area. Small businesses that expect to innovate, grow their e-commerce presence to a large extent and strongly grow revenue from exports are significantly more likely to expect their business to grow in the next 12 months. In addition, small businesses are also more likely to expect to grow if: they have between 5 and 19 employees the respondent is aged under 50 the business reported growing in the past 12 months. Further, small businesses are more likely to expect their local economy to grow if: they have between 5 and 19 employees they are in the manufacturing, property or construction sector the respondent is aged under 40.

22 22 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT KEY FINDING A stronger focus on innovation should lead to more Hong Kong small businesses experiencing growth.

23 23 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT ACCESSING FINANCE Access to finance for Hong Kong s small businesses became easier over the past 12 months. Access to finance the percentage that experienced easy to very easy financing conditions in the previous 12 months Indonesia 60.6% Indonesia 56.3% China 59.3% New Zealand 53.7% Australia 54.3% Australia 48.1% New Zealand 50.0% China 33.4% Hong Kong 43.5% Malaysia 32.3% Singapore 34.1% Vietnam 32.0% Malaysia 31.8% Singapore 30.9% Vietnam 29.7% Hong Kong 29.9% Access to finance became easier for many Hong Kong small businesses that sought external finance in the past 12 months than in These easier financing conditions may have encouraged more Hong Kong small businesses to seek external finance, with 78.1 per cent seeking external finance in the past 12 months, up from 69.1 per cent in the preceding 12 months. It should be noted that this result is well above the number of Australian and New Zealand small businesses that sought external finance over the same period, even though small businesses in those markets experienced easier financing conditions. Banks are the most popular source of finance for Hong Kong s small businesses, followed by investors. Hong Kong s small businesses were most likely to have sought external finance to assist with business growth. Hong Kong s small businesses were, however, the most likely to have borrowed in the past 12 months to cover increasing expenses, increasing rent and increasing borrowing expenses. A stronger focus on cash flow management and cost control should see fewer businesses borrow for these purposes. 5 All data for China excludes Hong Kong, which is shown separately.

24 24 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT KEY FINDING Accessing finance became easier for many of Hong Kong s small businesses in A stronger focus on cash flow and cost control should see the number of Hong Kong s small businesses borrowing to cover increasing costs, rent and borrowing expenses fall.

25 25 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT APPENDICES HONG KONG DATA SNAPSHOT Business and economic growth Small businesses that expect their business to grow - Hong Kong against survey average Hong Kong small businesses that expect their business to grow against small business growth expectations for Hong Kong's economy 90% 90% 70% 70% 50% 50% 30% Survey average Hong Kong 30% Expect local economy to grow Expect their business to grow 2015 Rank Rank survey average Businesses that grew in the past 12 months 63.8% 5/8 46.5% 7/8 68.2% Businesses that expect to grow in the next 12 months Businesses that expect the local economy to grow in the next 12 months 55.1% 8/8 39.0% 8/8 70.7% 52.1% 5/8 39.4% 8/8 61.1%

26 26 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Business activity over the past 12 months 2015 Rank Rank survey average Increased employee numbers 32.5% 4/8 18.1% 6/8 33.1% Improved business management had a major positive impact on their business Increasing costs had a major negative impact on their business 20.4% 5/8 N/A N/A 25.4% 41.9% 3/8 N/A N/A 39.0% Required funds from an external source 78.1% 4/8 69.9% 5/8 59.9% Sought external funds for business growth 50.2% 6/8 51.8% 6/8 56.3% Found it easy or very easy to access external finance Rent was the most detrimental factor impacting their business 43.5% 5/8 29.9% 8/8 47.6% 41.9% 1/8 N/A N/A 22.9% Planned business activity over the next 12 months 2015 Rank Rank survey average Increase employee numbers 32.8% 5/8 22.7% 6/8 41.8% Definitely expect to introduce a new product, service or process unique to their market or the world Expect to grow their e-commerce presence to a large extent Expect revenue from overseas markets to grow strongly Expect to significantly increase spending on marketing and promotion Expect to grow their investment in assets strongly 17.7% 5/8 N/A N/A 22.0% 42.6% 2/8 N/A N/A 32.2% 22.3% 2/8 N/A N/A 19.1% 24.5% 4/8 N/A N/A 22.8% 23.4% 4/8 N/A N/A 23.1% Definitely will seek external funds 31.3% 4/8 18.1% 5/8 29.2% Expect easy to very easy access to finance 41.7% 3/8 27.3% 7/8 43.3% Expect to seek external finance to fund growth 51.9% 6/8 49.5% 7/8 59.7%

27 27 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Social media and e-commerce 2015 Rank Rank survey average Earned revenue from online sales 80.4% 4/8 75.5% 5/8 68.9% Used social media for business purposes 93.2% 4/8 87.9% 5/8 81.4% Demographics 2015 Rank Rank survey average Business is 10 years old or younger 58.9% 6/8 60.6% 5/8 65.6% Respondent is aged 39 or younger 63.4% 4/8 55.7% 6/8 53.3%

28 28 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT COMPARISON OF RESULTS BETWEEN HONG KONG, SHANGHAI AND SINGAPORE Key results Business and economic growth Hong Kong Shanghai Singapore Businesses that grew in the last 12 months 63.8% 79.5% 58.7% Businesses that expect to grow in the next 12 months 55.1% 76.9% 56.5% Businesses that expect the local economy to grow in the next 12 months 52.1% 71.1% 48.1% Jobs creation Hong Kong Shanghai Singapore Increased employee numbers over the PAST 12 months 32.5% 39.7% 19.7% Plan to increase employee numbers over the NEXT 12 months 32.8% 45.5% 27.7% Innovation Hong Kong Shanghai Singapore Definitely expect to introduce a new product, service or process unique to their market or the world 17.7% 25.0% 15.2% Online sales and social media Hong Kong Shanghai Singapore Earned revenue from online sales 80.4% 92.3% 63.6% Expect to grow their e-commerce presence to a large extent in the next 12 months 42.6% 29.5% 19.4% Used social media for business purposes 93.2% 96.2% 79.6%

29 29 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT Exporting Hong Kong Shanghai Singapore Expect revenue from overseas markets to grow strongly over the next 12 months 22.3% 10.9% 17.7% Improved business management Hong Kong Shanghai Singapore Improved business management had a major positive impact on their business 20.4% 32.1% 20.3% Costs Hong Kong Shanghai Singapore Increasing costs had a major negative impact on their business 41.9% 39.1% 36.1% Rent was the cost increase most detrimental to their business 41.9% 41.7% 32.6%

30 30 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 HONG KONG REPORT ABOUT THE SURVEY The CPA Australia Asia-Pacific Small Business Survey 2015 is part of a longitudinal annual study of small business conducted by CPA Australia since This report presents a cross-market comparison between the eight markets surveyed and, where applicable, a comparison of results from 2009 onwards. The survey was conducted between 24 September and 14 October The mainland of China and Vietnam were included in the survey for the first time in Indonesia and New Zealand were included in The survey in the mainland of China was conducted in Beijing, Chongqing, Guangzhou and Shanghai. All data for China excludes Hong Kong, which is shown separately. Interview method In each market, the online survey was conducted amongst a random sample of small business owners/managers. The sample was obtained through online panel provider Research Now and their Asian panel partner ipanelonline. To qualify for the survey, participants were required to be an owner, a senior manager (defined as being a director, a principal, a CEO, a CFO, a senior manager or a managing director) or a qualified accountant of a business with fewer than 20 employees. Sample In total, 2932 participants completed the survey, including 510 from Australia, 610 from the mainland of China, 265 from Hong Kong, 306 from Indonesia, 310 from Malaysia, 311 from New Zealand, 310 from Singapore and 310 from Vietnam. Of the 610 participants from the mainland of China, 155 were from Beijing, 152 were from Chongqing, 147 were from Guangzhou and 156 were from Shanghai. Questioning Questions on small business confidence, employment, social media, costs and access to finance were drawn from previous surveys. Some slight modifications to question wording were made to a number of those repeated questions. Questions on innovation, major influences on the business environment, e-commerce, spending on marketing and assets and exporting are new in this survey. Questionnaires in Australia, Singapore and New Zealand were administered in English. The Hong Kong questionnaire was administered in traditional Chinese, the questionnaire for Malaysia was administered in both English and Bahasa Malaysia, Indonesia s questionnaire was administered in Bahasa Indonesia, China s questionnaire was administered in simplified Chinese, and Vietnam s questionnaire was administered in Vietnamese. Rounding All percentage results shown in this report have been rounded.

31 29 cpaaustralia.com.au