HKPC Announces 2018 Q4 Standard Chartered SME Index Business Confidence Undermined with Escalating Global Trade Tensions

(Hong Kong, 18 October 2018) The Hong Kong Productivity Council (HKPC) today released the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the fourth quarter of 2018, recorded a drop of 6.7 points from last quarter’s 49.7 to 43.0. “Global Economic Growth” has seen a sweeping decline in sentiment. Enterprises shared a gloomy future business outlook amid rising uncertainty surrounding the global trade tensions.

The quarterly survey featured an Overall Index comprising five areas*, and all the Sub-indices dropped in this quarter. The “Global Economic Growth” Sub-Index slid drastically by half from 41.8 last quarter to 21.4. The Sub-indices for “Profit Margin” and “Sales Amount” read at 37.0 and 40.7 respectively, while the Sub-Indices for “Staff Number” (51.3) and “Investments” (50.1) remained positive.

For sectorial findings, all the three major Industry Sub-Indices dropped as well, due to the industries’ fragile confidence in “Global Economic Growth”. The Manufacturing Sub-Index (41.1) failed to sustain the growth momentum from the past three quarters and recorded a drop of 3.7 points. The Import, Export & Wholesale Sub-Index fell below 40, reading at 36.8. Despite the Retail Sub-Index slid 2.9 points to 45.3, positive sentiments of “Staff Number” and “Investments” prevail. 

Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Hong Kong, said, “The SME Index not only helps us confirm but also quantify the impact of escalating Sino-US trade tensions on local sentiment. We can now say with confidence that SMEs are expecting genuine business deterioration in the foreseeable future, based on the much weaker sales and profit margins Sub-indices. This is in line with our macro observations, where Sino-US trade outlook uncertainty has already exacerbated market volatility and weakened local confidence, even though real activities have largely remained resilient for now. We believe the impact of trade tariffs and tensions on the Hong Kong economy will become more evident next year, prompting us to recently lower our 2019 GDP forecast to 3.0%.”

This survey also gauged the views of SMEs to the recent global trade tensions. Nearly half (49%) of the respondents expected the trade conflicts to last more than one year. Among the industries surveyed, the Import, Export & Wholesale sector felt the heat from the trade issue the most, with around 40% of the companies in this sector recorded lowered sales - way higher than the overall industry average of 24%. In view of the escalating trade tensions, 46% of the Import, Export & Wholesale SMEs surveyed considered to reduce investment (84%) or layoffs (30%).

In addition, the survey also explored SMEs’ opinions on the “Guangdong-Hong Kong-Macao Greater Bay Area” (GBA). The respondents regarded Shenzhen (73%), Guangzhou (61%) and Zhuhai (35%) as the top three most competitive cities in the region. Though so, most of them (82%) do not have a GBA development plan in the pipeline. The main reasons included “focus on local business development” (43%), “difficulty in managing cross-border business” (30%) and “consideration of the available facilitation measures” (21%).

Mr Gordon Lo, Director (Business Management) of HKPC, said, “The impact of the escalating trade tensions on local businesses, in particular the Import & Export trade, are gradually emerging. The HKSAR Government recently launched various support measures to help the industry cope with the challenges. While SMEs can make use of these schemes to address their imminent needs, they should proactively consider expanding overseas markets and production lines. For instance, to apply for the ‘BUD Fund – ASEAN Programme’ to tap the ASEAN markets to mitigate business risks. Being the Secretariat of the ‘BUD Fund – Mainland Programme’ and the ‘BUD Fund – ASEAN Programme’, HKPC is glad to see that both Programmes are receiving overwhelming responses from the industry. Interested enterprises are welcome to contact HKPC for the BUD Fund application.”

HKPC and Standard Chartered Hong Kong today co-organised a free seminar for SMEs themed “Capture Greater Bay Area Market by Leveraging Economic Strengths of Hong Kong”, to offer expert insights on successful business practices, and how to put these experience into capturing new opportunities in Hong Kong and the Mainland.

Graced by Mr Edward Yau, Secretary for Commerce and Economic Development of the HKSAR Government; Mr Willy Lin, Chairman of HKPC; and Ms Mary Huen, CEO of Standard Chartered Hong Kong, the event also featured business and industry leading experts, representatives from SMEs, economist and academics.

Conducted during the second half of September 2018, the survey successfully interviewed 823 local SMEs. “Standard Chartered Hong Kong SME Leading Business Index” report is available online at www.smeone.org.

*The five Sub-Indices include “Staff Number”, “Investments”, “Sales Amount”, “Profit Margin” and “Global Economic Growth”.

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Mr Gordon Lo (centre), Director (Business Management) of HKPC, announces the survey results of the "Standard Chartered Hong Kong SME Leading Business Index" for the fourth quarter of 2018, accompanied by Mr Wilson Wong (left), General Manager (Information Technology) of HKPC; and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Hong Kong.