HKPC Announces Standard Chartered Hong Kong SME Leading Business Index 2019 Q4 Result - 86% SMEs Agreed Digital Technology Deployment as Business Development Trend with Insights Shared at SME Conference to Industry

(Hong Kong, 24 October 2019) 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 2019, recorded a drop of 7.6 points to 31.4, which showed that SMEs are facing greater challenges. Yet, the survey found that 86% of SMEs agreed digital technology deployment as business development trend, revealing that SMEs are proactively implementing digital transformation under tough business environment. To this end, HKPC and Standard Chartered Hong Kong co-organised “Enterprise 4.0: Heading Towards Digital Economy to Drive Business Development” SME Conference on the same day, aiming to provide more market insights for SMEs.

The “Standard Chartered SME Index” of 2019 Q4 dipped 7.6 points from last quarter’s 39.0 to 31.4, while all the five sub-indices* of the Overall Index also dropped simultaneously, indicating that SMEs’ confidence towards the business environment remained weak. This is echoed by the drop of all three major industry sub-indices as well. Among them, Retail Industry recorded the sharpest decrease by 7.2 to 27.3; Manufacturing Industry (29.3) retreated 6.2 points from last quarter while its Global Economy sub-index (6.8) edged up due to seasonal factors but still kept at a lower level. The Import/ Export Trade and Wholesale Industry sub-Index slightly reduced 3.8 to 29.9, and its Recruitment Sentiment sub-index of the industry bounced back to 47.4.

The survey also looked into SMEs’ views about the trend of international trade disputes and corresponding response reacting to current business environment. 51% of surveyed SMEs expressed cautiousness towards the international trade negotiation, which was higher than last quarter’s 48%; while number of SMEs showing pessimism slightly decreased, reflecting a small improvement in outlook over last quarter. Besides, over 50% of SMEs said they have corresponding response plans to combat current business challenges, such as exploring new markets for sales and operations, and reducing investment, etc. Moreover, around 70% of surveyed SMEs agreed that tapping into new market could be a breakthrough to the current situation, while there were respectively 29%, 27% and 26% responded SMEs said they are planning or have developed new markets in Southeast Asia, Greater Bay Area or other regions in the Mainland. The survey also found that 86% of SMEs agreed that digital technology deployment is the future trend in business development.

Dr Lawrence Cheung, Chief Innovation Officer of HKPC, said, “The Index shows that SMEs continue to be impacted by the global and local economy, and the featured topic revealed that some SMEs are proactively exploring new markets and utilising digital technology to find a way to tackle the current business situation. As a trusted partner for SMEs, HKPC launched eight supportive measures and four concessions for SMEs, enabling them to make better use of resources to sustain their business development. Furthermore, HKPC published a series of guidebook of “Guide to ASEAN - Opportunities and Limitations in Manufacturing”, providing SMEs with necessary market information of ASEAN markets for extending the production line.”

“To ease SMEs’ financial burden as soon as possible, HKPC’s SME One provides information on various government funding schemes and joins force with the other three SME centres in town to offer one-stop services to SMEs. With the expertise in digital technologies, Industry 4.0 and Enterprise 4.0, HKPC endeavours to furnish advisory services, training courses as well as diverse plus cost-effective technologies for SMEs to achieve digital transformation as a means to tackle the current business situation,” Dr Cheung added.

Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “We knew Q3 was a very challenging quarter, and our latest survey confirms that SMEs do not see a quick turnaround in Q4, with headline and most sub-indices falling to record lows. The re-escalation of trade tensions and the rising risk of further US-China decoupling beyond trade since August remain a key drag to sentiment, as evident by the single-digit Global Economy reading.”

“Even more pessimistic is the domestic demand outlook, where the sub-index for retailers has a Q4 print that is even lower than those for our manufacturing and external trade respondents, most likely due to the local social events. Information and Communications Industry remains the highest industry sub-index, but even then it dropped a sizeable 26% quarter on quarter, indicating broad-based economic slowdown. Our respondents expect material contraction in sales and profit margins in Q4, and SMEs’ appetite to hire appears more resilient to such challenging business conditions compared with their willingness to invest,” Mr Lau continued.

Aiming to help SMEs with more market insights, HKPC and Standard Chartered Hong Kong co-organised “Enterprise 4.0: Heading Towards Digital Economy to Drive Business Development” SME Conference on the same day, focusing on the digital transformation progress and strategy of SMEs. It also analysed the latest trend of technological development and applications to help SMEs to cope with internal and external challenges and embrace the new era of digital economy.

The conference kicked off with opening remarks by Mr Edward Yau, Secretary for Commerce and Economic Development of the HKSAR Government. Mr Willy Lin, Chairman of HKPC and Ms Mary Huen, Chief Executive Officer, Hong Kong, Standard Chartered Bank (Hong Kong) Limited, delivered welcome speeches at the event. The conference also featured Mr Edmond Lai, Chief Digital Officer of HKPC, together with various business and industry leaders, representatives from SMEs, economists and academia to share how SMEs can grasp new opportunities through digital transformation from four aspects of gold, people, logistics and information flows.

Conducted during mid to late September 2019, the survey successfully interviewed 801 local SMEs. The “Standard Chartered Hong Kong SME Leading Business Index” report will be available at www.smeone.org soon.

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

- Ends -

Dr Lawrence Cheung, Chief Innovation Director of HKPC (Left) and Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited (Right), announced the Overall Index as 31.4 at a press conference of the“Standard Chartered Hong Kong SME Leading Business Index 2019 Q4”, and 86% of SMEs agreed digital technology deployment as business development trend, revealing that SMEs are proactively implementing digital transformation under tough business environment.

Mr Edward Yau, Secretary for Commerce and Economic Development of the HKSAR Government (front row, centre); Mr Willy Lin, Chairman of HKPC (front row, third from left); Ms Mary Huen, Hong Kong, CEO of Standard Chartered Hong Kong (front row, third from right); Mr Mohamed Butt, Executive Director of HKPC (front row, second from left); Dr Lawrence Cheung, Chief Innovation Director of HKPC(front row, first from left); Ms Vicky Kong, Managing Director, Head, Retail Banking, Hong Kong, Standard Chartered Bank (Hong Kong) Limited (front row, second from right) and Ms Winnie Tung, Managing Director, Head, Business Banking, Retail Banking, Hong Kong, Standard Chartered Bank (Hong Kong) Limited (front row, first from right) officiated the opening of “Enterprise 4.0: Heading Towards Digital Economy to Drive Business Development” SME Conference, and posed for a group photo with various business and industry leaders, representatives from SMEs, economists and academia.

Mr Willy Lin, Chairman of HKPC gave the welcoming speech at “Enterprise 4.0: Heading Towards Digital Economy to Drive Business Development” SME Conference.