Global business confidence - a local perspective from Hong Kong & China

The latest FT/Economist Global Business Barometer indicated a fall in confidence among businesses around the world. More than a third of respondents expect conditions to worsen. This survey data was captured before the US rating downgrade by S&P and the latest default worries in the Eurozone - and we can only guess what that confidence level would be like today. These surveys are at best an interesting insight into macro trend, rather than the more important matters of what is actually happening on the ground. Different countries have different challenges - and different insights.

I have just returned from a trip to China visiting RSM International's offices in the region, and so I took the opportunity to ask the RSM team there and in Hong Kong about how they view the global economy and how they expect it to impact their markets. It is crucial in our business to understand these diverse pressures and ensure they are planned for.

Our teams in China and Hong Kong provided me with a range of opinions that on balance saw positivity for the future. However, they do have medium-term concerns about the impact of a US and European slowdown.  I wanted to share these insights and have summarised some of the key themes below: On sustainability of China’s growth China is an economic powerhouse fuelled on exports and companies involved in the export business to US and Europe will be affected by a slow down. An interesting insight from our RSM team in China is that this would be offset to a degree as China expands its internal consumption market, which will continue to fuel the economy. On currency inflation & the property market Currency inflation is another concern. Hong Kong dollars are pegged to US dollars thus the continuous devaluation of USD will lead to higher inflation in Hong Kong. This is likely to have an effect on the Hong Kong property market which is supported by the low interest rate regime. Last week, on a day when the stock market dipped 10% there was an unusually poor response to a public land auction. The property market in Hong Kong is a strong indicator for the optimism and confidence of Hong Kong consumers, businessmen and investors. Our team hope that the recent US announcement to maintain low interest rates over the next two years will help stabilise the property market, and provide that foundation of confidence on which the rest of the economy can base itself. General business outlook The slow recovery of major western economies will definitely slow down the export sector and transport sector in Hong Kong for the next twelve to eighteen months. The business outlook will slow down compared to the last eighteen months. Business will continue to grow but at a slower rate – and may be buffeted by economic changes impacting on political risk. There is always a concern of social unrest during times of economic uncertainty (UK being a recent case in point!) and changes in political leadership can also add to uncertainties to the global economy and business conditions.

These local perspectives may resonate with all of us in our own markets and I am glad that our common response is to get out there and create positives for our business. Throughout my travels I am consistently impressed by the measures taken by RSM member firms to get closer to their client’s business and understand more about the impact of economic and social change. There is no doubt that in this business to be truly effective we have to continue developing new products and services adapting quickly to our clients changing needs.



Jean M Stephens
Chief Executive Officer