London Daily

Focus on the big picture.
Thursday, Dec 25, 2025

Online services leading growth economy

Unknown and unnamed a few months ago, Covid-19 has since upended much of the world economy and dictated a new set of norms for everyday life. People have had to adapt to the realities of working and studying from home, while social distancing rules have brought a major shift in consumer behaviour, spending patterns and general outlook.
The result is that online services have come of age. Necessity, combined with technology and convenience, has been the driver. And though some resetting is likely as the pandemic winds down, it is clear a new ecosystem is taking shape and, overall, there is no turning back.

“In terms of changes, this is very significant,” says Edmond Huang, managing director, head of Hong Kong/China research and head of China equity strategy at leading investment bank Credit Suisse. “Online services are growing fast. It’s not only e-commerce and delivery; online education and entertainment are also much more important than before. The virus outbreak has been a wake-up call for many businesses and investors. But the corporate world should be confident about developments and ready to throw more resources into this area.”

At one level, Huang notes, investment is needed in data centres, AI and 5G networks to improve connectivity and provide the infrastructure to support growth. At another, executives should be finding ways to give traditional offline businesses an online presence to avoid missing out on the opportunities available.

“All of a sudden, people in sectors which have taken a hit from this trend can see it’s a question of survival, not just a matter of cash flow,” Huang says. “Everything will not just be ‘back to normal’ when the virus is over. The wider impact is huge.”

As an example, he notes that online sportswear sales are now recovering, but offline they continue to struggle. That is a clear enough sign: businesses must adjust to meet changing consumer demand. And investors should be alert to the knock-on effects – positive or negative – in related sectors and the broader economy.

For instance, there are easily foreseeable consequences for retail facilities, rental rates and renewals. The switch to online meetings and more working from home is sure to affect the office sector, with implications too for the wider property market. And, as users lean more towards online delivery of education, entertainment, health care and medical services, there will be a further shift in needs for advanced IT infrastructure, apps, capital, and specialist employees with relevant skills.

With any luck, that will spur all kinds of innovation, start-ups and a surge in economic growth. However, such a scenario also raises a number of questions, not least about data privacy, effective regulation, tax liabilities, and the risks of control and influence being exercised by just a few dominant players.

“In a capitalist system, big companies want to get bigger and more powerful,” says Huang, who doubles as head of China equity strategy for Credit Suisse. “And people now want to invest in the market leaders in e-commerce because they deliver strong results. But when such companies grow to a certain scale, it becomes a global issue. Society will raise questions on what these companies give back and look at how to find a balance.”

Huang does not claim to have all the answers. But with online services and the internet economy set for further rapid expansion, he wouldn’t be surprised to see tighter regulation and antitrust initiatives. The best-known names may talk about the interests of stakeholders and bringing benefits to all. However, more stakeholders need to be consulted in order to facilitate such a concerted move.

“We will see more regulation and, hopefully, more balance between growth and responsibility towards society,” he says. “You cannot stop the overall trend, but Europe, for instance, will argue that big companies have to pay more tax and that some people are not exactly benefiting. You need to share the growth more fairly.”

In general, though, such issues are unlikely to deter local investors. Instead, judging by recent events, they will be lining up to back “new economy” listings and looking to cash in on any float helped by current stimulus plans or excess liquidity.

“From the regulatory point of view, Hong Kong and Shanghai are very much ready to welcome these companies for listing, hoping this will trigger a virtuous circle,” Huang says. “The weighting of the Hang Seng Index is still too much towards old economy stocks. You will see a move to the growth economy of e-commerce, online education and biotech. It is the same for the Shanghai index which has pretty much been banks, commodities and industrials. In the next five to 10 years, the trend will be from physical to online. People in Hong Kong were ready to invest in physical assets and earn 5 per cent a year, but they now see the game changers.”
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