A bus passes by commercial buildings in Central, Hong Kong, on Jan 8, 2024. (GARY CHIU / CHINA DAILY)

More United States enterprises have expressed confidence in Hong Kong’s rule of law and as an arbitration center, a survey by the American Chamber of Commerce in Hong Kong shows.

The organization’s 2024 business sentiment survey interviewed 136 business decision makers of AmCham member companies in an online survey in November and December last. Thirty-five percent of those polled have global revenues exceeding $1 billion.

According to the survey, 79 percent of the respondents said they were confident about the rule of law in the special administrative region, compared with 73 percent in 2023 and 25 percent in 2022. It also revealed that 78 percent of the companies do not plan to move their regional headquarters away from Hong Kong in the next three years.

A further 72 percent indicated they expect the SAR, to a great or moderate extent, retain its position as an arbitration center, especially for businesses with contractual relationships with their counterparts on the Chinese mainland

A further 72 percent indicated they expect the SAR, to a great or moderate extent, retain its position as an arbitration center, especially for businesses with contractual relationships with their counterparts on the Chinese mainland.

Senior company executives cited Hong Kong’s distinctive positioning in global banking, the city’s judicial independence, the application of common law and legal practitioner professionalism, ease of enforcement, and clean government, as the SAR’s advantages as an arbitration center.

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In the survey, 69 percent of the enterprises’ senior representatives said their operations had not been negatively affected by the National Security Law for Hong Kong. For those that have experienced negative effects, 65 percent said the impact has been indirect, such as staff morale, departure of Hong Kong employees, or diverting resources to seeking guidance and/or compliance.

Seventy-six percent of the respondents viewed Hong Kong as highly competitive or competitive as an international business hub due to its international connectivity, free flow of capital, a low and simple tax regime, legal and regulatory system, free flow of information/data, the city’s status as the gateway to the Chinese mainland, as well as its efficient infrastructure and transportation links.

Pedestrians use a crossing in Hong Kong's Central district on Jan 29, 2024. (SHAMIM ASHRAF / CHINA DAILY)

But, the cost of living (including housing), the cost of doing business, and talent availability are hurting Hong Kong’s competitiveness.

Thirty-four percent of the surveyed enterprises said they were optimistic about Hong Kong’s business conditions this year, but regard US-China tensions, overseas public perceptions of the city, and the sluggish mainland economy as the top three business challenges this year.

The respondents said they were also worried about Hong Kong’s competitiveness in financial services due to the slowdown in the city’s capital market activities, as well as a limited regulatory governance framework on virtual assets.

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Despite the potential opportunities, the companies said they were hesitant to expand operations to the Guangdong-Hong Kong-Macao Greater Bay Area amid policy and regulatory uncertainties, a lack of policy coordination among local governments in the region, and competition from GBA companies.