Hong Kong Service Sector down, but IT & Tech Hiring Resilient 

23rd September 2019

As Hong Kong protests continue with major effects on tourism, retail, and employment, even HK's privileged position as a financial center could be challenged by Mainland and other APAC cities. Yet despite this, the view from Silicon Valley Associates remains positive within Technology and IT, based on what we are seeing on the ground. 

 

Here we explain the situation in HK from several different viewpoints:

- Hoteliers and retailers, who are discounting drastically to stay afloat

- Employers, putting permanent hires on hold

- Recruiters, some unable to fill vacancies, others seeing growth

 

Background

The protests are against the proposed legislation that would allow criminal suspects to be extradited to Mainland China. The bill was suspended in June, and protesters have been insisting that Lam must withdraw the extradition bill and instigate an independent inquiry into the use of force by HK police. 

 

What began as peaceful demonstrations have become increasingly intense, with protesters showing their anger over police handling of the demonstrations. In their most disruptive move, protesters occupied Hong Kong International Airport [1] for six days, forcing nearly 1000 flights to be canceled. 

 

Service Sector Impact

Hoteliers have seen a 30% fall in global tourist arrivals, forcing them to cut room rates by at least 50% compared with 2018; some by as much as 70%. Airlines, in turn, are planning to reduce capacity: Qantas will scale down capacity by 7% and use smaller planes, Cathay Pacific is expecting to see "significant impact" on its revenues.

 

Retailers are feeling the effects of reduced tourism and lack of confidence from both consumers and investors. Shares in premier retail operator Lifestyle International have fallen by 19.5% since the beginning of June, and HK's benchmark Hang Seng index was down 3.14%. One prominent economist is predicting a 10% fall in retail sales for 2019, as compared with an 8.7% increase last year.

 

Recruitment Impact

Recruiters depending on their specialization are reporting very different stories. Some are reporting "a massive slowdown" and mentions online advertisements in July that received no replies, the first such occurrence in 12 years.

 

Unemployment has risen for the first time in a year, particularly in the service sector. The HK Retail Management Association is warning of staff lay-offs and store closures. Hotels are asking staff to take unpaid leave and holidays. Restaurants, such as the Tsui Wah have closed their doors, with customers concerned that their cars will be torched.

 

Other employers in other sectors are putting projects on the back burner and placing a hold on budgeted hires until the end of the protests. 

 

There has been a spike in Candidates who have also become wary of moving to or staying in HK due to the protests. Silicon Valley Associates has personally seen some successful overseas applicants declining job offers as they or their partners have doubts about the short-term stability of HK, and in some cases, the local staff has asked about opportunities in other locations, particularly Singapore. The combined effect has been to reduce the talent pool available to employers.

 

In Tech & IT, however, we are seeing a sustained demand from Technology companies and IT Departments, particularly local in Hong Kong and non-US Enterprises- Japan, Korean, and European as well as Asian and Singaporean firms. These clients talk about the business opportunities that the US-China trade war has opened for them, and of course the Greater Bay Area. 

 

Whilst the longer the protests continue, the more impetus there will be for Mainland China cities such as Shenzhen and Shanghai to liberalize their financial markets to rival HK, the role of the city within the Greater Bay Region and the Asia Pacific is unlikely to be affected in the medium term.

 

Opportunity or Threat?

The protests in Hong Kong are having a serious effect on the service sector, with a knock-on impact on employment. Recruitment in most sectors is also seeing a downturn in some sectors, but IT & Tech remains strong. 

 

Silicon Valley Associates is ideally positioned to support the continual demand from tech companies and IT Departments looking to hire in Hong Kong. In the best free-market tradition, they see the US-China trade war and the Greater Bay Area as an opportunity not to be missed.

 

[1] https://www.bbc.co.uk/news/world-asia-china-49317975

 

 

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Silicon Valley Associates is ideally positioned to support the continual demand from tech companies and IT Departments looking to hire in Hong Kong, Asia, and Worldwide. Please let us know if you would further advise on the above topic or your hiring needs

 

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