56% of Korean Companies in Hong Kong Say Security Law Negatively Impacts Business

[Asia Economy Reporter Changhwan Lee] 56% of Korean companies operating in Hong Kong predicted that the implementation of the Hong Kong National Security Law would have a negative impact on their business. 88% believed that the enforcement of the security law would adversely affect Hong Kong's status as a financial hub.

The Federation of Korean Industries (FKI) released a report on the 3rd titled "Survey on the Impact and Outlook of the US-China Trade Conflict and the Hong Kong Security Law," stating that changes are expected in Hong Kong's position as an Asian financial hub.

According to the FKI, 55.9% of Korean companies in Hong Kong responded that the enforcement of the Hong Kong National Security Law and the US revocation of Hong Kong's special status would negatively affect their business. Regarding the impact of the Hong Kong security law situation on the Korean economy, 70.6% of companies anticipated a negative effect.

The FKI explained that the sudden enforcement of the Hong Kong National Security Law and the US revocation of Hong Kong's special status have led Korean companies in Hong Kong to view their business environment and the Korean economy negatively.

Due to the intensification of US-China conflicts such as the enforcement of the Hong Kong Security Law, Korean companies in Hong Kong expect their sales in the second half of the year to decrease by an average of about 11.7% compared to the second half of last year. Furthermore, if an Asian financial hub other than Hong Kong replaces it in the future, 88.2% of companies predicted Singapore as the alternative location, while not a single company responded with Seoul, Busan, or other locations in Korea as alternatives.

In the event that the US revokes special tariff benefits for Hong Kong, 85.3% of respondents believed it would negatively impact Hong Kong's status as a hub for intermediary trade. If the US withdraws tariff benefits for Hong Kong, exports to the US will be subject to tariffs of up to 25%.

As a result of the enforcement of the Hong Kong Security Law, about 20.6% of Korean companies' global clients have already withdrawn or plan to withdraw from Hong Kong, indicating that despite the early stage of the law's enforcement, some global companies are moving to leave Hong Kong.

Regarding countermeasures against China's enforcement of the Hong Kong Security Law and the intensifying US-China trade conflict, half (50.0%) of Korean companies in Hong Kong showed a somewhat cautious stance, stating they would decide after observing US and European sanctions against China. Next, 41.2% believed there would be no change in Hong Kong's status, and 8.8% anticipated a reduction in China's circumvention exports through Hong Kong.

The main reason global companies are leaving Hong Kong was cited as the "decline in international status as a financial hub (47.0%)". This was followed by "loss of benefits as an intermediary trade hub (29.4%)", "difficulty in serving as an export base to China (5.9%)", and "spread of major trading companies leaving Hong Kong (5.9%)". Considering that global companies entered Hong Kong due to its international importance as an Asian financial hub, this highlights the significance of the financial hub status.

Despite the greater need for G2 cooperative responses to the novel coronavirus infection (COVID-19), more than two-thirds (67.6%) of Korean companies operating in Hong Kong believed that US-China conflicts would worsen after the enforcement of the Hong Kong Security Law.

Specifically, 58.8% expected a gradual worsening due to "the US's phased sanctions and China's countermeasures continuing," and 8.8% anticipated a rapid deterioration due to the intensification of the US-China trade conflict. Conversely, only 32.4% expected the US-China trade conflict to ease, with 20.6% citing "suppression of the US-China trade conflict due to the global economic recession caused by COVID-19, etc.," and 11.8% noting that "the US and China, being economically interdependent, would restrain confrontation."

This content was produced with the assistance of AI translation services.