Hong Kong enterprises expand against the tide: ASEAN and mainland China remain the dual engines of regional growth

The Paradox of Declining Confidence and Willingness to Expand

Hong Kong business sentiment saw a notable decline in 2025. According to UOB's latest "Business Outlook Study 2026," the overall business confidence index for Hong Kong enterprises dropped from 73% in 2024 to 63%, and the proportion of businesses optimistic about the next 12 months also fell from 76% to 76% (original data: "76% of businesses expressed confidence in the year ahead", unchanged from the previous year? The actual original text "76% of businesses expressed confidence in the year ahead" does not mention a change, but the confidence index declined). However, this caution has not stopped enterprises from expanding outward — 79% of surveyed companies plan to expand overseas within the next three years, roughly the same proportion as in 2024.

This seemingly contradictory phenomenon reveals that Hong Kong enterprises, facing geopolitical uncertainty and local market saturation, are prioritizing "resilience" over "optimism." George Tung, CEO of UOB Hong Kong, pointed out that companies are "prioritizing resilience while employing selective growth strategies." In other words, expansion stems not from blind optimism about the future, but from a strategic consideration of risk diversification and capturing incremental regional markets.

ASEAN and Mainland China: Irreplaceable Dual Engines

In terms of destinations for overseas expansion, ASEAN (33%) and Mainland China (26%) are far ahead, becoming the two most favored markets. This result is not surprising.

ASEAN's appeal lies in its rapidly growing consumer market, improving manufacturing infrastructure, and its role as a core recipient of the global supply chain's 'China+1' strategy. In recent years, industries such as electronics, auto parts, and textiles have accelerated their relocation to Vietnam, Thailand, Indonesia, and other places. Hong Kong enterprises, as intermediaries in service trade and investment, naturally follow suit. Moreover, the full implementation of RCEP has further lowered regional trade and investment barriers, making ASEAN the primary springboard for Hong Kong enterprises in 'near-shoring' and market diversification.

Mainland China, despite facing economic slowdown and structural adjustments, remains one of the world's largest manufacturing bases and consumer markets. Hong Kong, with its unique 'one country, two systems' advantage, has long served as a super-connector between the mainland and global capital. The fact that 26% of enterprises choose Mainland China reflects that many Hong Kong companies still see long-term value in deep supply chain integration, high-end manufacturing upgrades, and Greater Bay Area integration. Particularly in sectors such as finance, professional services, and logistics, the mainland market is irreplaceable for Hong Kong enterprises.

Enterprise Strategic Focus: From Growth to ResilienceResearch shows that corporate priorities have undergone a subtle shift. 29% of surveyed companies listed “expanding new customer segments” as their top priority, followed by “integrating ESG (Environmental, Social, and Governance)” (26%) and “adjusting business strategy to achieve differentiation” (24%). This indicates that companies are no longer solely pursuing scale growth, but are placing greater emphasis on operational quality and sustainability.

86% of companies consider supply chain management a strategic priority. Specific actions include: diversifying suppliers (27%), exploring alternative sourcing options (27%), digitalizing the supply chain (26%), and 38% of companies plan to strengthen supply networks within ASEAN and the region. This trend toward “nearshoring” aligns with the global shift in supply chains from prioritizing efficiency to prioritizing resilience and security.

Digital Transformation: High Investment but Limited Results

Digitalization is nearly universal across all companies. 93% of companies have adopted digital solutions, and around 80% plan to increase digital spending in the coming year. In the Technology, Media, and Telecom (TMT) sector in particular, over 90% of companies indicated they will increase their AI budgets.

However, the results are underwhelming: only 53% of respondents believe their digital initiatives have achieved the expected outcomes. This reflects that digital transformation still faces challenges at the implementation level, such as organizational change, talent shortages, and vague goal-setting. The main areas where companies are making improvements include productivity (36%), customer experience (33%), and decision-making efficiency (30%), but there is still a long way to go to fully unlock the digital dividend.

Sustainable Development: Awareness First, Action Must Accelerate

86% of companies recognize the importance of sustainable development, and nearly half have already launched related initiatives. Companies see the main benefits as competitive advantage (38%), brand value (37%), and long-term resilience (35%). However, the report also points out that “limited financial incentives and non-financial technical and advisory support remain challenges, highlighting the need to strengthen ecosystem collaboration to accelerate progress.” This indicates that in the absence of adequate policy support and professional guidance, many companies’ ESG practices remain superficial.

Regional Outlook: Redefining Hong Kong’s Role

The expansion intentions shown by Hong Kong companies in this survey essentially represent a recalibration of their regional positioning. Under the “one country, two systems” framework, Hong Kong remains a key hub for Chinese companies going global and for foreign capital coming in; at the same time, during the restructuring of Asian supply chains, Hong Kong’s advantages in finance, law, and logistics services enable it to serve the entire ASEAN-China trade corridor.

The UOB study is based on interviews with 255 business owners and senior decision-makers. Although the sample focuses on large and medium-sized enterprises, the trends are representative. In the future, whether Hong Kong companies can successfully achieve strategic transformation during a period of low confidence will depend on their ability to effectively integrate digital tools, ESG concepts, and regional supply chain networks. And ASEAN and mainland China will continue to serve as the core stage for the reshaping of this regional business landscape.