Young Japanese show increasing interest in setting up businesses in Hong Kong
Originally published at the South China Morning Post on October 29, 2016.
A growing number of Japanese – especially younger people – are rediscovering Hong Kong as a place for starting businesses, according to the country’s latest residency figures.
Japan’s top diplomat in Hong Kong, Kuninori Matsuda, told the South China Morning Post that more young Japanese were becoming interested in the city, with more small and medium-sized companies looking to set up businesses in food-related industries and seeing it as an entry point into mainland China.
More Japanese were also interested in emerging sectors like health care for the elderly and research and development, he said.
The number of Japanese foreign residents in Hong Kong declined over the past decade but a rebound appears to be taking place.
Although the number of Japanese foreign residents physically present in the city more than halved from 9,808 in December 2007 to 4,276 last December, it spiked to 6,905 in August, figures from the Immigration Department show.
The department does not keep a record of the total number of Japanese citizens with residential status, but the latest data from the consulate shows 26,869 Japanese citizens lived in Hong Kong as of October 1 last year.
Japan has also been competing with the United States as the country with the highest number of businesses in the city, according to the Japanese consulate. There were 1,358 Japanese companies with offices in Hong Kong last year, up 25 per cent from 2010.
“To be frank, several years ago Hong Kong’s presence was a little bit eclipsed by Shanghai. Now, I think that Hong Kong is recapturing attention,” Matsuda said, explaining that Hong Kong had appeared on Japan’s radar for political and social reasons. “Political activities in Hong Kong attracted many [people’s] attention in Japan.”
Standard Chartered Bank economist Betty Rui Wang said that the influx of Japanese workers may also be related to the rise in overseas mergers and acquisitions by Japanese companies following the depreciation of the yen against the US dollar in recent years. The yen strengthened against the greenback between 2007 and 2012 before declining until last year.
The weakened yen had increased the profits of Japanese companies in the past couple of years, leading them to increase overseas investment, Wang said.
“Another reason Japanese workers are moving out of Japan may be because of the very rigid labour market locally and sluggish domestic demand,” Wang said. “Globally, Hong Kong is not a big market for Japanese investment. But in Asia, it is still regarded as a financial hub by Japanese companies.”
Rural Japanese markets were now paying more attention to the global market, with Hong Kong as a key player, Matsuda said. Hong Kong has been the top importer of Japanese agricultural products for 11 years, representing 24.1 per cent of the total last year.
Trade and tourism between the two places have also continued to strengthen. Over 1.52 million Hongkongers visited Japan last year, up 65 per cent from 2014, with almost one-fifth visiting more than 10 times.
In the first half of this year, the number of Japanese visiting Hong Kong rose 3 per cent to 500,000.
Japan was also Hong Kong’s third largest trading partner in goods, while Hong Kong was Japan’s seventh. In services, Japan was Hong Kong’s fourth largest partner.
“Many Japanese companies in Hong Kong are working closely with their headquarters in Tokyo as well as other regional headquarters in the US and Europe,” Matsuda said, adding that the city’s free flow of information and status as a free port were crucial to its regional competitive advantage.
“Hong Kong’s unique place as a centre of information makes it an attractive place to do business,” the consul general said.
Hong Kong’s recent political turmoil and strained relations with the mainland had no impact on Japanese business activities, he said, adding that the reaction from the Japanese community had been “very cool”.
Matsuda said the community was more interested in how Hong Kong would respond to challenges such as slowing mainland tourism, as well as seizing new opportunities like China’s “One Belt, One Road” initiative linking China with Europe through central and western Asia.
“We have high trust in Hong Kong’s political and social maturity,” Matsuda said. “We fully understand the importance of one country, two systems, and we’re also closely watching how Beijing and Hong Kong are making efforts to try to maintain this.”
This article appeared in the South China Morning Post print edition as: Japanese setting up shop in Hong Kong