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Foreword

China has maintained steady growth of outward investment in the past two years and continues to be a major source of global investment. The latest statistics show China’s outward foreign direct investment (FDI) increasing 16.3% year on year to reach US$178.8 billion in 2021, ranking second globally only to the US and exceeding that year’s foreign investment inflow (actual use of foreign investment) of $173.5 billion to become a net capital exporter.

Indeed, many mainland enterprises are continuing to make use of international resources in their “going out” efforts as well as China’s huge market development potential to create a new growth model and ultimately achieve more robust and sustainable business development. However, in view of the global economic downturn, many enterprises are turning their eyes from the traditional advanced economies of the west to the constantly developing Asian region. In particular, considering the positive effect of RCEP, they are focusing their attention on RCEP investment destinations and overseas markets such as ASEAN and Northeast Asia (Japan and South Korea).

Notably, Hong Kong has for years been the main destination for mainland outward FDI because many mainland enterprises are choosing the city as their main channel for investing overseas.  In order to grasp a clearer picture of the situation, the China business advisor seconded from the Shanghai Municipal Commission of Commerce to Hong Kong and HKTDC Research interviewed in the fourth quarter of 2022 and the first quarter of 2023 mainland enterprises that have invested and set up footholds in Hong Kong to find out how they operate in the city under the impact of the domestic and international situation.

According to the interviews, compared with growing US‑China trade friction and global geopolitical developments, mainland enterprises in Hong Kong are more concerned about the global economic downturn and problems such as rising US dollar interest rates, insufficient funds and recruiting Hong Kong talent. Also, the pandemic and international developments have slowed down the global economic recovery, resulting in the deferral or shelving of projects planned by mainland enterprises that have gone global in the past two years. Nevertheless, many of them consider Hong Kong to be the top service platform for investing in overseas markets as it can help them deal with trade and investment issues. They also regard Hong Kong as an important offshore base for finding professional services to develop new BRI and RCEP markets.