HKPC Announces “Standard Chartered Hong Kong SME Leading Business Index” Q1 2025 Overall Index Retreated by 2.9 to 42.8 Nearly 40% of SMEs Reported the U.S. Presidential Transition Impacted Their Business Confidence HKPC Offers Comprehensive Support Services to Empower Enterprises to Go Global

(Hong Kong, 23 January 2025) 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 (Q1) of 2025. The Overall Index retreated by 2.9 to 42.8 from the previous quarter, returning to the level observed in Q3 2024, reflecting that the overall business confidence of local SMEs has become more conservative under the uncertain global economic outlook. Three of the five component sub-indices1 registered downfall, including “Global Economy” (29.6, -6.6), “Profit Margin” (35.5, -6.4) and “Business Condition” (37.9, -6.4), falling back to the level recorded in Q3 2024. “Recruitment Sentiment” (50.8, +0.2) and “Investment Sentiment” (49.6, +0.7) showed slight increases and have hovered around the 50 neutral line over the past two years, indicating relatively stable performance.

“Standard Chartered SME Index” Survey Results
Among the 11 industry indices, only “Real Estate” showed a slight increase (+0.8), with the remaining 10 industry indices recorded declines. Notable drops were observed in "Manufacturing" (39.1, -5.9), “Transportation, Storage and Courier Services” (38.7, -5.8), “Construction” (37.9, -5.6), “Accommodation and Food Services” (43.5, -5.5), and “Import/Export Trade and Wholesale” (40.7, -4.5).

In terms of overall investment trends, 93% of surveyed SMEs intended to maintain or increase investment this quarter, which is on par with the previous quarter. Key areas that most SMEs expected to maintain or increase investment included “Training Related to E-commerce or Digital Technology”, “IT Systems”, “Research and Development” and “Online Marketing Promotion”.

Regarding the changes in cost components, the proportion of local SMEs expecting an increase in raw materials costs and staff salary has risen this quarter, with an increase of 7 percentage points to 57% and an increase of 8 percentage points to 27%, respectively, compared to the previous quarter, returning to the level observed in Q3 2024, reflecting that SMEs are facing the pressure of rising costs again. On the other hand, 20% of SMEs planned to raise the prices of their products or services, an increase of 4 percentage points from the previous quarter.

Ms Karen FUNG, Chief Marketing Officer and General Manager, InnoPreneur and FutureSkills of HKPC, said, “Entering 2025, the China-U.S. trade tension is once again intensifying, capturing attention from both political and business sectors regarding its impact on Hong Kong's economy. As the Government will announce the ‘2025-26 Budget’ next month, we anticipate additional local business-friendly measures in supporting SMEs. This quarter, SMEs are focusing their resources on three key areas: ‘Training Related to E-commerce or Digital Technology’, ‘IT Systems’, and ‘Online Marketing Promotion’, highlighting the importance of digital transformation in enhancing business competitiveness. HKPC has launched six key support services, including Cyber Security Guidelines and Education, vLearn Programmes, Digital DIY, and Easy Manage Government Funding, to comprehensively equip SMEs for digital transformation and address operational pain points.”

Mr Kelvin LAU, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “The ‘Standard Chartered SME Index’ in Q1 2025 gave up almost all the ground it gained in Q4 2024, reflecting still cautious business sentiment. This is of little surprise, given uncertainties not only around Trump’s tariffs, but also the scaling back in U.S. Fed cut expectations. A further breakdown, however, shows some silver-linings – companies’ appetite for hiring and investment actually improved quarter-on-quarter, offsetting strong drags from the ‘Global Economy’ sub-index, and the ‘Business Condition’ and ‘Profit Margin’ sub-indices that are more reflective of immediate business performance. Few industries were spared from this rise in cautiousness, with all but one of the 11 industry indices falling quarter-on-quarter. We take comfort from the fact that some of the more domestic oriented sectors (e.g. -0.9 q-o-q for ‘Retail’) did not fall as much as those externally oriented (e.g. -5.9 q-o-q for ‘Manufacturing’); in fact, ‘Real Estate’ rose 0.8 in Q1, and has climbed to the fourth highest score behind the usual outperformers in ‘Information and Communications’, ‘Social and Personal Services’, and ‘Financing and Insurance’. All this echoes our view of growth momentum is likely to stay modest in the coming quarter, supporting our 2.2% full year GDP growth forecast which is slightly down from last year’s estimated 2.6%.”

Thematic Survey Results 
The thematic survey results of this quarter explored the impact of the U.S. presidential transition on Hong Kong SMEs and their deployment plans. Nearly forty percent (38%) of surveyed SMEs indicated that the U.S. presidential transition had posed impact on their business confidence, with about 60% of them expressed that “The U.S. Imposing New Tariffs on Imported Goods” (62%) and “Changes in Economic Environment” (59%) were the primary factors influencing their business confidence. Other factors included “Exchange Rate Fluctuations” (34%), “Changes in Interest Rate Trends” (30%) and “Changes in the Scale of Foreign Capital Inflows” (26%). In light of potential shifts in the business environment, over seventy percent (71%) of the surveyed SMEs indicated that they had implemented strategies to mitigate risks, such as exploring more diverse suppliers, enhancing employees’ knowledge and skills, and expanding into new markets. In terms of business expansion, around twenty percent (22%) of the surveyed SMEs were considering broadening their reach to other regions within the next three years, with a significant number considering expansion into the Chinese Mainland or ASEAN regions.

The survey also examined the opportunities and challenges brought by the “Belt and Road Initiative” for SMEs. Among the surveyed SMEs, half (50%) believed that the “Belt and Road Initiative” could bring opportunities to their companies, primarily through “Market Expansion” (29%) and “Gaining New Partners” (25%). However, nearly seventy percent (68%) of the surveyed SMEs reported facing different challenges in expanding into new markets along the countries and regions of the “Belt and Road Initiative,” including “Differences in Regulations and Product/Service Standards across Countries” (34%), “Unfamiliarity with the Plans or Policies of the ‘Belt and Road Initiative’” (32%), and “Cultural Differences” (24%).

Ms Karen FUNG continued, “In the face of an ever-changing business environment and the challenges of exploring new markets, HKPC stands as a steadfast partner for SMEs, leveraging Hong Kong's role as a ‘super value-adder’. HKPC is committed to assisting SMEs in overcoming difficulties and seizing new opportunities. We actively facilitate enterprises in aligning with international standards, leveraging Hong Kong's ‘international platform’ advantages, and providing comprehensive support to empower SMEs for global expansion. HKPC actively engages with consulates and chambers of commerce from ‘Belt and Road’ countries and regions in Europe, Asia, and the Middle East, as well as local industry leaders. By offering advanced technology development and support, organising study tours, and participating in exhibitions, HKPC delves deep into ‘Belt and Road’ markets to enhance the competitiveness of enterprises.”

Conducted in December 2024, the Standard Chartered SME Index Q1 2025 survey successfully interviewed 820 local SMEs. The report will be available for download from HKPC website: https://www.hkpc.org/en/about-us/hkpc-publication/industry-insight/scbi.

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

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At the press conference of Standard Chartered Hong Kong SME Leading Business Index Q1 2025, Ms Karen FUNG, Chief Marketing Officer and General Manager, InnoPreneur and FutureSkills of HKPC (left) and Mr Kelvin LAU, Senior Economist, Greater China, Global Research, Standard Chartered Hong Kong (right) announced that the Overall Index decreased by 2.9 to 42.8.