Assessing the Resilience of Hong Kong SMEs Amid Global Trade Uncertainty

Hong Kong's small and medium-sized enterprises (SMEs) have long been the backbone of its economy, accounting for 98% of all businesses. In 2025, as global trade tensions persist and geopolitical risks loom, these firms are navigating a fragile landscape. Yet, within the contractionary trends of the business services and logistics sectors, signs of strategic resilience are emerging. For investors, understanding how SMEs are adapting to these challenges—and which sectors are best positioned for recovery—offers critical insights into where to allocate capital.

The Business Services Sector: Digital Transformation as a Lifeline

The business services sector, which includes finance, insurance, and professional services, has faced headwinds. The diffusion index (DI) for business receipts in this sector fell to 43.5 in June 2025, down from 45.2 in May, signaling ongoing contraction. However, the outlook DI for July 2025 rose to 45.4, suggesting cautious optimism. This divergence highlights a key trend: SMEs are leveraging digital tools to offset declining revenues.

Digital transformation is no longer optional but a survival strategy. Over 86% of SMEs in Hong Kong now prioritize technology adoption, with 40% embracing remote work and 37% expanding overseas. Tools like cloud-based ERP systems (e.g., Odoo) and AI-driven analytics are enabling firms to streamline operations, reduce costs, and access new markets. For example, financial services firms are using AI-powered platforms like PostHog to predict market trends, while CRM systems are boosting customer retention in retail.

Investors should focus on SMEs that integrate these technologies effectively. Companies with robust digital infrastructure—such as those adopting low-code platforms or AI automation—are better positioned to scale efficiently. The Hong Kong government's Technology Voucher Programme (TVP) and BUD Fund further incentivize such investments, making these firms attractive for long-term growth.

Logistics and Trade: Navigating Uncertainty with Agility

The logistics sector, a critical component of Hong Kong's trade-dependent economy, has shown mixed signals. The DI for new orders in import/export trades improved to 45.0 in June 2025, up from 44.0 in May, while the outlook DI for July 2025 hit 47.6. This suggests that SMEs in this sector are adapting to volatile trade policies by diversifying routes and embracing innovation.

IoT sensors and 5G-enabled technologies are transforming logistics operations. For instance, IoT devices are optimizing delivery routes and reducing carbon footprints, while AI-powered predictive analytics help firms anticipate supply chain disruptions. The adoption of sustainability-focused tools, such as cloud computing and paperless systems, is also gaining traction, aligning with global ESG trends.

Investors should prioritize logistics SMEs that leverage these technologies. Firms integrating AI for route optimization or blockchain for supply chain transparency are likely to outperform peers. Additionally, the sector's exposure to the Mainland and ASEAN markets—where demand for efficient logistics is rising—presents growth opportunities.

Strategic Sector Positioning for Investors

While both sectors face contractionary pressures, their recovery trajectories hinge on strategic positioning. For business services, the key lies in digital adoption and government support. For logistics, agility in supply chain management and regional expansion are critical.

Investors should also consider macroeconomic factors. The Mainland's steady growth and Hong Kong's role as a gateway to ASEAN markets provide tailwinds. However, risks such as U.S. tariff hikes and geopolitical tensions remain. Diversifying portfolios across sectors that prioritize resilience—such as digital-first business services and tech-enabled logistics—can mitigate these risks.

Conclusion: A Cautious but Optimistic Outlook

Hong Kong's SMEs are demonstrating adaptability in the face of global uncertainty. While contractionary trends persist, the strategic adoption of digital tools, government incentives, and regional diversification are laying the groundwork for recovery. For investors, the business services and logistics sectors offer compelling opportunities, particularly for firms that align with technological innovation and market expansion.

The path to resilience is not without challenges, but for those who recognize the potential in these sectors, the rewards could be substantial. As the global economy evolves, Hong Kong's SMEs are proving that survival—and even growth—is possible through innovation and strategic foresight.