2019 Q3 Standard Chartered Hong Kong SME Leading Business Index: Global Economy still Glooms - HKPC 8 Tips Sooth Impact on Local SMEs

(Hong Kong, 25 July 2019) The Hong Kong Productivity Council (HKPC) today announced the third quarter result of the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index). Compared with last quarter, the Overall Index of this quarter decreased by 7.0 points, reading at 39.0 and reached its three-year-low, indicating a significant drop in SMEs’ confidence in the business environment.

This quarter, all the five sub-indices* of the Overall Index dropped simultaneously, with only “Recruitment Sentiment” (50.6) maintained positive. “Investment Sentiment” (43.6), “Business Condition” (36.4) and “Profit Margin” (34.8) respectively decreased by 6.1, 9.2 and 7.5 points; while “Global Economy” recorded a relatively large decrease of 14.4 points, reduced to 12.1.

As for industry, the three key sub-indices, namely “Import/Export Trade and Wholesale Industry”, “Retail Industry” and “Manufacturing Industry” were all seen to drop. However, in spite of the three key industries, the drop of the “Information and Communications Industry” sub-index was relatively mild - decreased by 1.9 points to 56.5 when compared to that of last quarter (58.4).

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong said, “US-China trade tensions have materially deteriorated since the announcement of the Q2 SME Index. It is therefore as expected that the index fell to the lowest level on record in Q3. We welcome the agreement between the United State and Mainland China at the latest G20 meeting to resume trade negotiations and not raise tariffs further; we believe this should reduce further downside risk from trade tensions. However, so long as existing punitive tariffs remain, global growth and inflation expectations are likely to stay weak, meaning little momentum for the Hong Kong economy to recover in the coming quarters.”

When being asked about the trend of international trade negotiation, 44% of surveyed SMEs expressed pessimism, which was much higher than last quarter’s 17%. To cope with business challenges brought by fluctuating global economy, 55% of SMEs said they increase staff capability; followed by developing new products or services (44%), and expanding in current market (43%). The survey also asked their preference on receiving support - most of them (36%) would like to have more support related to “Marketing and Promotion”; 35% of them wished to receive more support on “Talent Acquisition and Training”.

Dr Lawrence Cheung, Chief Innovation Officer of HKPC, said, “HKPC has launched eight measures to ease the risks to local SMEs posed by the global economic headwinds. SMEs are encouraged to expand their business in the domestic market of Mainland China and ASEAN countries, leveraging ‘Dedicated Fund on Branding, Upgrading and Domestic Sales’ (BUD Fund) provided by HKSAR Government. To facilitate SMEs upgrading and transforming their businesses, HKPC Academy and The HATCH are fully ready to assist local enterprises to evolve from original equipment manufacturer (OEM) to original brand manufacturer (OBM). As an effort to help SMEs get more government funding information locally and among the Greater Bay Area, HKPC is going to organise a Fund Fair on 16-17 September, which will be a great platform allowing fund information exchange.”

This survey further discussed staff training and retaining deployment of SMEs. Despite providing “Staff Benefits” (82%), 69% of SMEs believed that “Staff Training & Development” was also very important. The survey also found that most SMEs that were providing trainings adopted “Internal Knowledge Sharing” and “On-the-Job Training” as training modes; while “Online Learning”, “Lecture Seminar” and “Activity-based” are less adopted.

“Talents are important asset to a company. HKPC puts great emphasis to staff training and career development. In view of such mission, talent development related measures including ‘Reindustrialisation and Technology Training Programme’ (RTTP) and the offer of ‘Buy-3-Get-1-Free Corporate Training Incentive’ are also introduced to supplement rest of the supporting measures. By nurturing more talents, SMEs can retain and enhance their competitive and productivity edges,” Dr Cheung added.

“The record low ‘Investment Sentiment’ component reflects poor appetite among SMEs to expand their business. Also worrying is the sub-index for ‘Retail Industry’ is almost as weak as ‘Import/Export Trade and Wholesale Industry’, confirming negative spill over from external trade headwinds to domestic demand. One rare bright spot from this quarter’s survey is the resilience of the ‘Information and Communications Industry’ sub-index, reflecting the importance of technology-driven growth in areas such as Fintech, e-commerce, industrial upgrading, Smart City and Greater Bay Area development,” Mr Lau said.

This survey was conducted in June 2019 and interviewed 812 local SMEs successfully. The report can be downloaded from the SME One Website (www.smeone.org).

*The five Sub-Indices are "Recruitment Sentiment", "Investment Sentiment", "Business Condition", "Profit Margin" and "Global Economy".

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Dr Lawrence Cheung, Chief Innovation Director of HKPC (Centre); Mr Clement Li, General Manager of Management Consulting of HKPC (Left), and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (Right), announced the Overall Index decreases by 7 points to 39.0 at a press conference of the “Standard Chartered Hong Kong SME Leading Business Index 2019 Q3”, which reached its three-year-low, indicating a significant drop in SMEs' confidence in the business environment.