Survey: Over 90% of HK SMEs intend to innovate products for overseas expansion

Fewer Hong Kong small companies expect their businesses to grow in 2025, with over 90% of them intending to innovate their products or services to expand into overseas markets.

While over 60% of Hong Kong businesses reported growth in 2024 nearly half of them heavily invested in artificial intelligence (AI), fewer companies expect their businesses to grow in 2025, with a sharp drop from 69% to 57%.

Conducted by CPA Australia, the annual “Asia-Pacific (APAC) Small Business Survey 2024-25” collected views from 4,236 small businesses in 11 markets across the Asia-Pacific region including Singapore, Mainland China and Australia, to understand their business performance and outlook.

According to the survey, 65% of the businesses reported business growth in 2024, a notable rise from 57% in 2023, while 42% increased employee numbers.

However, only 57% of respondents expect their business to grow in 2025, marking a sharp decline from last year’s 69% growth projection. Confidence in Hong Kong's broader economy mirrors this trend, with 68% expecting economic expansion this year, down from 73 % in 2024.

The challenging financing conditions are noteworthy. In 2024, over 80% of Hong Kong's SMEs required external finance. However, 37% found it difficult to access funds, up from 8% in 2023. Additionally, the number of small businesses struggling to repay their debts rose from 9% in 2023 to 22% in 2024. The financing and solvency issues are likely to persist this year. In 2025, 40% anticipate difficulty accessing finance, while 26% expect they may struggle to repay debts.

The survey also revealed that Hong Kong SMEs are keen to innovate and expand into overseas markets in 2025, with 94% of respondents intending to innovate their products or services, surpassing their regional counterparts for the second consecutive year. Additionally, 79% expect revenue growth from overseas sales this year, the highest among the markets surveyed.

Meanwhile, many businesses are focusing on innovation and increasing their investment in AI, with 41% of the surveyed companies saying AI is the technology they most heavily invested in 2024, while 24% used AI tools as a source of business advice.

In terms of other technology adoptions in 2024, 80% of businesses sold their products or services online, 83% provided digital payment options, and 95% made use of social media. Surprisingly, 72% of SMEs endured financial or operational losses as a result of cyberattacks.

Cliff Ip, a councillor on CPA Australia’s Greater China Divisional Council, said: "2024 was a positive year for most Hong Kong SMEs, thanks to an improving economy and various government support measures. However, this year, many SMEs are facing multiple challenges, including economic pressures, tightening financing conditions and increased market competition. As a result, business sentiment has become more cautious.

"To sustain growth, SMEs should continuously innovate to stay competitive, closely monitor their cash flow, focus on high-growth business opportunities, diversify revenue streams, and seek professional advice on cost-saving measures. These strategies will help businesses navigate economic uncertainties and strengthen their long-term competitiveness."

Davy Leung, deputy chairperson of CPA Australia's Small and Medium Enterprises Committee – Greater China, said: "Hong Kong SMEs are facing labour shortages and talent competition issues, especially because many business owners are keen on hiring. This might be prompting them to invest heavily in advanced technologies such as AI and conversational platforms to interact with potential customers, improving efficiency and saving costs.

"It's interesting that AI tools have become a popular source of advice for many SMEs in Hong Kong. There are pros and cons of consulting AI in doing business. While leveraging advanced technologies like AI reflects a positive attitude and open mindset towards trying new methods, it also increases cyber risks. Additionally, SMEs should not rely solely on AI and should seek advice from reliable professionals, especially on technical issues such as financing and taxation.”

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