Overall business sentiment in Hong Kong remains positive, with approximately two-thirds of enterprises expecting improved performance in 2024 despite economic uncertainties, a study found on Thursday.

According to the study conducted by Singapore-headquartered United Overseas Bank (UOB), 62 percent of surveyed Hong Kong enterprises hold a positive outlook on the current business environment despite rising operational costs and high inflation.

The study found that nearly 80 percent of the 550 polled firms are increasingly exploring expansion beyond the city over the next three years to enhance profitability and build up an international reputation

Moreover, 22 percent of the companies said they’re “very positive”. Real estate and hospitality are among the most optimistic industries.

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Underpinned by strategies, including diversifying product offerings, enhancing customer experiences and increased adoption of digital solutions to drive growth, 64 percent of businesses expect improved performance in 2024, with nearly two-thirds anticipating revenue growth in 2025 and 2026.

“The findings of the study underscore the remarkable resilience displayed by Hong Kong businesses in capturing new growth opportunities despite challenges,” said Ricky Ng, head of wholesale banking at UOB Hong Kong.

The study found that nearly 80 percent of the 550 polled firms are increasingly exploring expansion beyond the city over the next three years to enhance profitability and build up an international reputation. The Chinese mainland is the most popular destination, with more than half of the enterprises eying that market, followed by Taiwan region and Southeast Asia.

But the path to international expansion is not without obstacles. Around 40 percent of businesses have encountered regulatory hurdles, compliance challenges, a talent shortage, and difficulties in securing partnerships.

The study identified several key challenges impeding full-scale implementation of digital transformation, citing high costs associated with new infrastructure and software

The UOB survey also shed light on sustainability, indicating that while eight of 10 companies are aware of its importance, only 43 percent have conducted related practices. They called for assistance through tax incentives and easier access to funding and grants to overcome barriers hindering sustainable implementation.

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“By integrating ESG (environmental, social and governance) considerations into their business strategies, businesses can enhance their ability to capitalize on growth opportunities and fortify their long-term resilience,” Ng said.

Moreover, there’s increasing emphasis on digitalization among Hong Kong businesses, with nearly 90 percent having implemented digital transformation in at least one department. More than one-quarter have fully digitalized their operations. Close to 70 percent of businesses plan to ramp up their digitalization expenditure.

The study identified several key challenges impeding full-scale implementation of digital transformation, citing high costs associated with new infrastructure and software, concerns over cybersecurity risks, as well as a shortage of digital skill sets as the main obstacles.

Contact the writer at irisli@chinadailyhk.com