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| Hong Kong exporters say they’ve benefited from the swift recovery of the Chinese mainland economy |
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Results of the latest HKTDC Export Index, conducted during the third quarter, show steady improvement, rising to 48.3. Export sentiment improved in all major markets.
“The readings for all major markets struck higher in the third quarter, suggesting a sustained and across-the-board improvement in export confidence,” said Hong Kong Trade Development Council (HKTDC) Chief Economist Edward Leung. “Particularly encouraging, the index for the Chinese mainland rose above 50.”
Mr Leung noted that it’s the first time the mainland market has climbed above 50 since the third quarter of 2008, suggesting expansion in the near term.
The HKTDC has been tracking Hong Kong’s export performance of major industries since December 2006. The index had shown an upward trend for the past two quarters, rising to 42.9 in the second quarter of 2009.
The jewellery sector saw the biggest improvement, with its index rising back to expansionary territory. The procurement index for jewellery also showed a sharp increase, potentially signalling more procurement activities for future exports.
Some 20 per cent of respondents said they benefited from the recovering mainland economy. Out of those, 73 per cent said they gained from stronger consumer demand, while 68 per cent benefited from stronger producer demand.
To counter the effects of the slump in global export, the Central Government has been introducing policies to spur spending and consumer demand. They include subsidies for cars and appliances for rural residents and easier credit for consumer goods purchases.
Worst Over
To better understand the business environment facing Hong Kong companies on the mainland, the HKTDC has been interviewing 500 Hong Kong companies that source, produce and sell across the boundary on a quarterly basis. The latest findings showed companies are looking ahead.
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HKTDC Chief Economist Edward Leung says
export sentiment has seen improvement in all sectors
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With expectations of an improving export environment, the majority of respondents are making aggressive plans to expand their business. More than 80 per cent of respondents said they intend to improve product quality over the next three months, while 70 per cent said they will develop new products or offer higher-end products. In terms of business operations, 59 per cent of respondents said they will increase the use of e-marketing, and 20 per cent said they intend to strengthen promotion through such traditional channels as exhibiting at more trade fairs and placing more ads.
The number of respondents who said they will scale down their operations, cut staff or cease operations on the mainland over the next three months dropped significantly from the previous quarter. The findings suggest that exporters expect that the worst is over. Compared to the previous quarter, the proportion of respondents who said they “probably will” or “definitely will” scale down their operations or cut staff over the next three months was down by six to seven percentage points. The situation, according to Mr Leung, looks set to further improve.
"Most Hong Kong factories on the mainland have seen some increase in orders, as well as increase in production activities,” Mr Leung said, adding that some companies may even be struggling to meet demand after cutting labour during the financial crisis.
Still, the HKTDC survey found overseas buyers remain cautious, with their expectation of price reductions still the most significant operating difficulty for Hong Kong companies.
Mr Leung said that, while the world economy has bottomed out, global trade may be slow to pick up, as recovery in the United States and the European will remain fragile.
For more details on the latest HKTDC Export Index, please see the September issue of the HKTDC Trade Quarterly, which can be ordered at: www.hktdc.com/bookshop.
