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Mid-Sized Companies in California See Greater Potential for Opportunities Overseas

21 July 2010

New HSBC Survey Examines Business Sentiment in California

Local Companies Expect International Business to Outpace Domestic

U.S. mid-sized companies based in California are showing greater confidence in the prospects for international growth, according to a new HSBC survey of senior financial decision makers. The risks associated with doing business in unfamiliar markets have not deterred their interest in expanding internationally, particularly in continuing to do and increase business with mainland China.

The latest International Business Survey, released annually by HSBC's Commercial Banking division, polled U.S. senior financial executives from companies with annual sales between US$20 million and US$5 billion on the challenges and opportunities they face when growing their businesses internationally. The 2010 survey also sampled 125 California companies conducting international business, and uncovered findings that were both common and widely different when compared to the attitudes revealed in the national trends.

According to the HSBC International Business Survey, more than half (58%) of California mid-sized businesses have seen their international revenue grow faster than domestic revenues, roughly on par with the national average (56%). California respondents also revealed optimism similar to the nationwide correspondents on the outlook for international business activities, with 70% expecting increased revenue in the coming years. A large majority of the respondents (73%) from California also indicate that they plan to increase their international revenue objectives in 2010.

Nearly half of California mid-sized businesses (45%) identified Canada as the most popular cross-border business destination, followed by mainland China (38%) and the United Kingdom (35%). Interestingly, respondents nationally cited Canada (45%) and the United Kingdom (38%) as the most attractive markets for international business, with mainland China (30%) rounding out the top three markets. California companies also selected mainland China (49%) as the market with the greatest growth potential.

California mid-sized businesses are interested in conducting business with mainland China; however, these respondents still expressed a high level of concern about China's economy with nearly half (46%) citing an overheating of the economy as a concern, followed by currency revaluation (45%).

"California mid-sized businesses seem secure in the fact that economic conditions will ease despite a rather difficult past 12 months, which is likely fueling their focus toward overseas growth in the long term," said Dominic O'Hagan, executive vice president and regional president for the West Coast region at HSBC Bank USA, N.A. "They understand that knowing the ins and outs of these international markets will be critical to their success, and having advisors with in- depth knowledge is essential. This year's findings demonstrate significant opportunities for us to support California businesses in expanding their operations in new markets, while helping to mitigate some risks."

Possessing knowledge of foreign markets (43%) was identified as the most important aspect of doing international business and having a financial partner with intimate knowledge of foreign markets was almost equally as important (42%). California mid-sized companies also mirrored the rest of the country in their perceived risks of doing business internationally, selecting local regulations and legal complexities (49%), complexity of certain international markets (39%) and sovereign (country) risk (30%) as the most weighted concerns.

Additional findings on California mid-sized companies from HSBC's U.S. Survey on International Business include:

  • Despite signs of a slow economic recovery, over half (53%) of mid-sized California companies are still looking to cut costs. The survey also found that 45% of respondents are more aggressively collecting receivables and 36% are closely monitoring the financial strength of their suppliers. Still, California businesses are refraining from making excessive cuts that might harm the long-term health of their business, and those surveyed feel that they may be forced to reduce their headcount (27%) or cut benefits for their existing employees (23%) to stay competitive.
  • Based on the survey, nearly half (48%) of respondents experienced reduced access to their revolving lines of credit, compared with 40% nationwide. However, these same companies also expressed greater confidence that credit conditions would recover. The survey revealed that 42% of these businesses expect their access to credit to ease over the next 12 months.

Methodology

From April 9-21, 2010, senior financial decision-makers (CEOs, CFOs, corporate treasurers, senior partners or other senior financial executives) from 899 companies were polled for their responses. These respondents were divided in two categories: 649 U.S. businesses that currently conduct international business (including 125 businesses in California); and 250 U.S. businesses that do not currently conduct international business. The survey included a nearly even distribution of companies along a spectrum of annual sales ranging from US$20 million to US$5 billion.

HSBC's Commercial Banking business in the U.S. has sponsored this survey for the past three years. In 2010, the Global Commercial Banking business unit added Hong Kong, India, mainland China, United Arab Emirates, France, UK, Canada, Brazil, and Mexico. Please note the categorization for annual turnover of respondents varies by region.

Note to editors:

About HSBC Bank USA, N.A.

HSBC Bank USA, National Association offers a full range of banking products and services to individuals, small businesses, corporations, institutions and governments. Its network extends to over 475 branches, with more than 370 in New York State as well as towns and cities across Florida, California, Washington, D.C., Pennsylvania, New Jersey, Delaware, Oregon, Washington, Maryland, Illinois, Connecticut and Virginia.

HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc., one of the largest bank holding companies in the United States by assets. Member FDIC. HSBC Bank USA, N.A., with total assets of $187 billion as of 31 March 2010, serves its 3.8 million customers through its personal financial services, commercial banking, private banking and global banking and markets segments.

HSBC in California

Through its network of 35 branches located across the Greater Los Angeles, San Francisco and San Diego Metropolitan areas, HSBC Bank USA, N.A. offers a full range of banking products and services to individuals, small businesses, corporations and institutions. It leverages HSBC Group's international network to provide market leading product and services to meet its clients growing international needs.

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 8,000 offices in 88 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of US$2,364 billion at 31 December 2009, HSBC is one of the world's largest banking and financial services organisations. HSBC is marketed worldwide as 'the world's local bank'.

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