HKPC Reveals Standard Chartered Hong Kong SME Leading Business Index Q1 2021 Results - Business Confidence Stricken SMEs Are Suggested to Grasp New Development Pattern

(Hong Kong, 26 January 2021) The Hong Kong Productivity Council (HKPC) today announced the “Standard Chartered Hong Kong SME Leading Business Index” (“Standard Chartered SME Index”) for the first quarter of 2021, which recorded an overall index at 32.4, down 5.1 compared to the previous quarter, reflecting that local SMEs’ business confidence has been weakened under the fourth wave of epidemic outbreak.

All five component sub-indices* of the Q1 went down simultaneously. Among which “Profit Margin” recorded the most significant drop, indicating that SMEs are encountering a relatively difficult business environment. Also, 38% surveyed SMEs expected an increase or unchanged turnover in the coming quarter, showing a decrease of 10% as compared to last quarter. All three key industry indices - Import / Export Trade and Wholesale Industry, Manufacturing Industry and Retail Industry - saw a fall, whereas “Recruitment Sentiment” of “Social & Personal Services”, “Financing & Insurance” and “Information & Communications” industries stood above 50 despite the downtrend.

Mr Edmond Lai, Chief Digital Officer of HKPC, said, “The survey was timely conducted at the time when the fourth wave of epidemic occurred in Hong Kong. Hence, the results reflected an undermining SME business confidence, resulting in the overall industry indices remaining at low level. Yet, some industries achieved above 50 in ‘Recruitment Sentiment’ component sub-index, which can be interpreted as these industries still having grasped the development opportunities under the gloomy global and domestic business environment.  HKPC successfully hosted the large-scale ‘Foresight 2021’ webinar in November last year, drawing upon industry heavyweights and experts to share their insights on the business prospect of Hong Kong for this year, analyse future talent and industry trends, and join forces with SMEs to dive deep into using new technologies to create new economy and unveil more business opportunities.”
 
This survey also featured a topic on the market opportunities arising for SMEs amid the new development pattern. Over 34% SMEs were interested in or have been entering the Mainland market. However, when asked if they have heard of the Chinese Government’s “Dual Circulation” national policy, about 46% said they “have heard but without much understanding”, and that 13% said they were “familiar with” it. Industry sectors that claimed to have relatively more understanding on the policy were ranked as “Information and Communications”, “Financing and Insurance” and “Manufacturing”. In addition, China, Japan, South Korea, Australia, New Zealand and 10 member states of Southeast Asian Nations (ASEAN) signed “The Regional Comprehensive Economic Partnership” (RCEP) in mid-November 2020. About 10% and 43% surveyed SMEs said they were “familiar with” and “have heard but without much understanding” of the RCEP agreement respectively, believing that it can bring positive impacts, in terms of “enhancing liberalisation on trade in services”, “removal of tariff barrier”,  “increasing the possibility of trade expansion”, etc.

Mr Lai added, “Along with the enactment of the Chinese Government’s new national policy and its signing of RCEP agreement with other countries, this new development pattern will undoubtedly offer Hong Kong SMEs new opportunities. The survey unveiled that many SMEs are tapping into the Mainland market, while there are many who lack understanding on the national policy. To seize the market opportunities, it is of utmost importance for SMEs to understand the policy and boost self-competiveness through industry and technology transformation. HKPC, as a trustworthy partner to SMEs, has not been standing down from bolstering SMEs with various measures, ranging from Industry 4.0, future skills training to other services such as symposiums, GBA Seminars and Mainland office, rendering full support to SMEs for developing the Mainland and Free Trade Agreement (FTA) markets. What’s more, the HKSAR Government also provides different funding schemes, like the “Dedicated Fund on Branding, Upgrading and Domestics Sales” (the BUD Fund), helping SMEs to get a foothold in those markets”.

Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “Our latest readings suffered a setback after improving two straight quarters. The headline drop this time is broad based, with all eight of its main industry sub-indices contributing to the deterioration. This is somewhat of a surprise, given that the survey was conducted in early- to mid-December, when news around impending vaccine rollout and a new Biden administration in the US should have lifted sentiment.”

“One possible explanation is that the expected improvement to global growth prospects remains too far off to offset linger immediate challenges, be it further disruptions from fresh waves of COVID-19 outbreaks, or in the case of exporters the strengthening of the Renminbi. This is confirmed by the more sizeable drops in the ‘Profit Margin’ and ‘Business Condition’ sub-components, which are more reflective of short-term business performance as opposed to longer term business confidence. The latest readings is a timely reminder that while 2021 as a whole is still likely to be a year of recovery, we believe it will be a bumpy ride,” Mr Lau added.    

Conducted in December 2020, the survey successfully interviewed 814 local SMEs. The “Standard Chartered SME Index” report is available at HKPC website: https://u.hkpc.org/scbi-en 

*The five component sub-indices are "Recruitment Sentiment", "Investment Sentiment", "Business Condition", "Profit Margin" and "Global Economy".

- Ends -

Mr Edmond Lai, Chief Digital Officer of HKPC (Left); and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (Right), announced the overall Index recorded at 32.4, down 5.1 compared to the previous quarter at the press conference of “Standard Chartered Hong Kong SME Leading Business Index 2021 Q1”, reflecting that local SMEs’ business confidence has been weakened under the fourth wave of epidemic outbreak.