Fear of the needle? The future of Hong Kong business

Business Horizons, Jan-Feb, 1996 by H.L. Chan

Those from poor families tended to be more confident about confronting any possible hardship in the future. Those who had lived through the difficult times in China were particularly indifferent. They felt they would be better off than many people in Hong Kong if the nightmare of the Cultural Revolution were to be repeated in Hong Kong, because they had already experienced it before. One respondent asked, "If more than 1 billion people can survive in Communist China, why should we fear staying in Hong Kong after 19977"

After all, the respondents were not unfamiliar with uncertainties. To compete for contracts, small business owners often had to provide credits even though their own liquidity position was very low. The impact of any bad debt or payment delay could be devastating. But they were obliged to stay in the game, because retiring early and doing nothing involved similar pressure from people around them in a society where hard work and the drive for material acquisition were highly valued.

It is unprecedented for a territory to be allowed more than 15 years of transition before its takeover by another regime. Since 1982, when the return of Hong Kong to China was announced, adjustments may have allowed many Hong Kong entrepreneurs to recover from their initial shock and reshape their perceptions so as to become more optimistic about their future after 1997. This study, being non-longitudinal, could not trace the details of the changes. Yet sufficient clues were found about what was currently on their minds and the possible judgmental bias as a result of their psychological adjustment.

The respondents were confident of their own ability to cope with any possible setbacks and adversities, and they believed Hong Kong would overcome any difficulties and perform economic miracles, just as it had done in the past. Such optimism was not surprising, given the personality and role of entrepreneurs. Still, it is well known that the high failure rates of small businesses result largely because many entrepreneurs tend to be overconfident in assessing their probability of success.

Respondents also thought they knew a lot about China and were possibly unaware of the distortion of their perceptions. They were probably not only influenced by experts' rosy forecasts about Chinese prospects, but had experienced--either themselves or through relatives and friends--the economic progress and business opportunities there in contrast to the gloomy prospects in other countries. In their observations about China, they were in fact using a very low reference point. Remarkable improvements were visible and impressive, such as the skyscrapers in Shenzhen where a scant 10 years before crops had grown. Given such speed of advancement, it was not difficult to infer that in another 10 years' time China would come even closer to Hong Kong's standard of living. Lessons and examples abounded from the experience of the economy' in the last decade. For one thing, those respondents who had ignored the political risks and invested heavily in Hong Kong had easily increased their wealth many times.