Hong Kong start-ups lack Shenzhen’s international focus, limiting opportunities, survey finds

Local start-ups in Hong Kong are lagging behind their counterparts in Chinese mainland cities, including Shenzhen and Guangzhou, because of a home-market bias that minimises or ignores opportunities internationally, according to a survey by international tax and consultancy firm Deloitte.

Despite Hong Kong being one of the most competitive cities in the world, 65 of the 130 Hong Kong entrepreneurs surveyed said the city’s small market size and lack of dynamic vitality were major challenges to starting a business there. Inefficient government support was also cited by many firms, in contrast to the situation on the mainland.

And Hong Kong businesses were less likely to embrace new technologies than their Chinese counterparts, who were less worried that cutting-edge research would pay off with market demand later on.

The survey was conducted during the third quarter among small, mid-sized and large Hong Kong start-ups, more than 40 per cent of which had revenues of over HK$10 million (US$1.3 million) in 2019. The same survey was conducted with 615 start-ups on the mainland to compare the experience of and environment for start-ups in Hong Kong, the Greater Bay Area cities and the rest of the mainland.

“[The survey finding] reflects a very localised mindset in Hong Kong, which needs to be broadened out,” said Philip Law Yuen-kwong, partner audit and assurance at Deloitte. “Hong Kong’s advantage isn’t in the size of its market, but being a convenient, global connector with foreign countries and different people. Chinese firms do not have such an issue.”

Moreover, without sufficient, stable cash flow, the cost of doing business in the city remained a top concern when compared with the convenience and relatively lower cost on the Chinese mainland. The lack of access to necessary resources and supply channels also added to the cost of Hong Kong firms exploring the Chinese mainland market, the survey found.