HKPC Announces Standard Chartered Hong Kong SME Leading Business Index Q2 2023 Overall Index Rose to 52.8 First Time Surpassing the 50 Neutral Line since the Outbreak of the Pandemic One-third of Local SMEs Have their Turnover Returned to or Exceeded Pre-pandemic Level

(Hong Kong, 25 April 2023) The Hong Kong Productivity Council (“HKPC”) today announced the “Standard Chartered Hong Kong SME Leading Business Index” (“Standard Chartered SME Index”) for the second quarter of 2023. The Overall Index rose by 6.1 to 52.8 this quarter, surpassing the 50 neutral line for the first time since the outbreak of the pandemic. This reflected that Hong Kong has embarked on the road to normalcy, and SMEs have regained confidence in the local business environment. All five sub-indices¹ registered uplifts, with the “Profit Margin” (51.1, +12.3) and “Business Condition” (56.0, +12.0) showing the most significant increments. Additionally, “Recruitment Sentiment” (54.4) and “Investment Sentiment” (51.9) picked up by 2.7 and 1.8 respectively. Although “Global Economy” (+1.3) was up to 48.3, it was the only sub-index that did not exceed the 50 neutral line, indicating that SMEs remained cautious about the prospects of the “Global Economy” with certain pressures and challenges facing the global economic environment.

Standard Chartered SME Index Survey Results

Among the 11 industry indices, ten of them, except “Financing and Insurance” which remained stable, recorded an increase while seven of them surpassed the 50 neutral line, including: “Accommodation and Food Services” (67.2), “Information and Communications” (58.9), “Social and Personal Services” (55.5), “Construction” (55.0), “Retail” (54.0), “Professional and Business Services” (53.6), and “Financing and Insurance” (53.0). Although “Real Estate” (49.7), “Import / Export Trade and Wholesale” (49.2), “Manufacturing” (46.3) and “Transportation, Storage and Courier Services” (43.1) industries did not surpass the 50 neutral line this quarter, all of them recorded increments of 10.2, 5.9, 2.4 and 4.7 respectively.

In terms of overall investment trends, 93% of surveyed SMEs indicated that they would maintain or increase investment this quarter, which is on par with the previous quarter, with “Training Related to E-commerce or Digital Technology”, “Overall Staff Training”, “Online Marketing Promotion”, “Facility and Equipment”, and “IT System” being the areas that most SMEs expected to maintain or increase investment. In addition, the proportion of surveyed SMEs expecting to increase their manpower this quarter increased by 3%-point from the previous quarter. Such increase was mainly seen in “Accommodation and Food Services” (32%), “Information and Communications” (28%), “Construction” (22%), and “Social and Personal Services” (19%).

Mr Edmond LAI, Chief Digital Officer of HKPC, said, “Since the full reopening of Hong Kong's boundaries in early February and the resumption of several international events, the city has embarked on the road to normalcy, with the economy regaining its growth momentum and providing more stable and favourable conditions for business development. The latest Budget also predicts a significant rebound in Hong Kong’s economy in 2023, with real economic growth rate ranging from 3.5% to 5.5%. The survey results also align with market expectations, with SMEs from over half of the industries expressing optimism towards the business development, among which the ‘Accommodation and Food Services’ industry index even surpassed 60 points and is expected to increase its manpower this quarter to meet market demand. In addition to increasing manpower, many SMEs also plan to increase investment in operational and marketing-related projects this quarter, indicating various industries are eager for development and they have regained confidence in Hong Kong's investment outlook.”

Mr Kelvin LAU, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “Following its rapid reopening since late 2022, China’s economy had a firm start to the year as a swift recovery from COVID infections boosted consumption. This, along with Hong Kong’s own reopening, helped push our Overall Index to 52.8 in Q2-2023 -- the first reading above 50 points over eight years and the second highest since the index inaugurated in 2012. This encouraging result also came despite looming external headwinds, as confirmed by the underperformance of the ‘Global Economy’ sub-index compared with other key sub-indices. The latest survey period, conducted in mid-March, likely captured some of the early fallouts from the global banking sector turmoil, further clouding an uncertain global interest rate and growth outlook. All these echo our belief that, with the risk of the novelty of reopening bounding to wear off over time, domestic consumptions should remain key to anchoring SME confidence, supported by the tight labour market. It is therefore good to see most of the domestic-oriented industry indices (excluding ‘Real Estate’) rising strongly quarter on quarter and standing comfortably above 50 this quarter.”

Thematic Survey Results

The thematic survey of this quarter explored the recovery status of SMEs. Although about 70% of the surveyed SMEs were negatively affected by the pandemic, with “Accommodation and Food Services” (86%), “Real Estate” (84%), “Retail” (77%), and “Social and Personal Services” (77%) being the hardest hit industries, the survey found that the pandemic has changed SMEs’ operations and sales models. For instance, physical meetings have been replaced by virtual meetings and remote working in terms of operations; or services are provided through digital channels and more payment methods are accepted in terms of sales. Most SMEs that have made these changes indicated that they would maintain these changes even after the pandemic.

In terms of the post-pandemic business conditions, about one-third (32%) of the surveyed SMEs that were affected by the pandemic indicated that their current turnover has returned to or exceeded the pre-pandemic level, with “Construction” (60%), “Information and Communications” (53%), and “Accommodation and Food Services” (41%) recovering faster than other industries. As for the remaining two-thirds that are still recovering from the pandemic, their current business turnover has, on average, returned to about half of that before the pandemic.

In terms of post-pandemic development plans, over 60% (62%) of the surveyed SMEs indicated they would have new development plans this year due to the resumption of normal business operations, with “Information and Communications” (82%), “Retail” (80%), “Social and Personal Services” (67%), “Financing and Insurance” (66%) and “Manufacturing” (65%) being the top five industries. Their main new development plans for this year include research and development or provision of new products / services, customer base recovery / expansion, increasing online sales channels / e-commerce development, and increasing digital adoption in operations.

Mr Edmond LAI continued, “The survey findings reflected that the pandemic has posed long-term impacts on business operations and employees’ workflows, including adopting remote work and online collaboration by more enterprises to improve business efficiency and flexibility. To assist all industries in adapting to new business models, HKPC has launched the ‘Digital DIY Portal’ one-stop platform, which allows businesses to connect with different digital transformation (DX) solution providers, gathers affordable and ready-to-use solutions that cover different industries and match SMEs’ needs. The platform also offers the latest information on digital and I&T activities, DX and technology-related training courses to increase SMEs’ overall competitiveness and business growth potential so as to seize the opportunities during the economic recovery. Meanwhile, we have extended our series of special relief measures for SMEs to accelerate their recovery by offering half-price concessions measures². Diversified consultancy and support services are provided to encourage SMEs to accelerate their recovery. They can then overcome market challenges through leveraging on advanced technologies and innovative services to realise business transformation and upgrade.”

Mr LAI added, “The results also showed that part of the SMEs affected by the pandemic have indicated that their current turnover has returned to or even exceeded pre-pandemic levels, mainly benefiting from the Government lifting all social distancing measures and the public regaining confidence in consumption. At the same time, over 60% of the SMEs indicated that they would have new development plans this year. As the secretariats of Government’s funding schemes, HKPC strives to provide professional one-stop services to stakeholders, supporting business expansion in industries amid leveraging Government’s funding. Our ‘SME ReachOut’ team offers free one-on-one consultation services to help SMEs identify appropriate funding schemes to enhance their understanding of the Government's funding schemes and to encourage better utilisation of the support provided by the Government to drive business growth. Besides, we have launched the ‘BIZ Expands Easy (BEE)’ funding portal as well as ‘BEE@HKPC’ mobile application, providing SMEs with another medium to understand Government’s funding programmes and streamline the application process. By encouraging SMEs to make good use of Government’s funding to accelerate the implementation of new development plans this year, we can help foster the recovery of the industry.”

Conducted in the mid of March 2023, the Standard Chartered SME Index Q2 2023 survey successfully interviewed 809 local SMEs. The report will be available for download from HKPC website: https://www.hkpc.org/en/about-us/hkpc-publication/industry-insight/scbi.

To learn more about HKPC’s smart solutions to help enhance the productivity of SMEs with advanced technology in achieving Make Smart Smarter, please visit the dedicated webpage: https://smarter.hkpc.org/en.

¹ The five sub-indices include “Recruitment Sentiment”, “Investment Sentiment”, “Business Condition”, “Profit Margin” and “Global Economy”.

² To help Hong Kong SMEs leverage advanced technologies and innovative services to realise business transformation and upgrade, HKPC extends its series of special relief measures for local SMEs until 31 December 2023, for details, please visit https://www.hkpc.org/en/sme-concessions

- Ends -

At the press conference of the “Standard Chartered Hong Kong SME Leading Business Index” for the second quarter of 2023, Mr Edmond LAI, Chief Digital Officer of HKPC (left), and Mr Kelvin LAU, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited (“Standard Chartered Hong Kong”) (right), announced the Overall Index rose by 6.1 to 52.8 this quarter, surpassing the 50 neutral line for the first time since the pandemic. The findings reflected that Hong Kong has embarked on the road to normalcy, and SMEs have regained confidence in the local business environment.