Debut Greater Bay Area Index points to optimism

Standard Chartered and the Hong Kong Trade Development Council (HKTDC) have released the inaugural Standard Chartered GBA Business Confidence Index, the first forward-looking quarterly survey in the market that looks at business sentiment and synergistic effects across cities and industries in the Guangdong-Hong Kong-Macao Greater Bay Area. The index, released on 23 July, indicates respondents expect contractionary pressure to ease perceptibly in the third quarter (Q3) of 2020 after the COVID-19 outbreak created a challenging second quarter.

The survey put the Greater Bay Area’s Current Performance Index for business activity at 37.0 for the second quarter, below the neutral line of 50. This reflects the impact of a COVID-related global recession on the export-oriented region. However, the Expectations Index stood at a much better 47.0, suggesting respondents anticipated a broad-based improvement in the third quarter. Underlining the optimism, the New Orders sub-index stood above the neutral 50 mark, reflecting hopes for more activity in the third quarter. The Greater Bay Area’s Current Performance Index for Credit was at 45.3 but the sub-components indicate lower borrowing costs from both banks and non-bank financial institutions as well as improvement in banks’ attitudes towards lending.

“The survey result indicates that companies in the Greater Bay Area expect a better Q3, likely a reflection of the continued normalisation of activity within China, boosted by aggressive monetary and fiscal policy easing. This pick-up is driven by domestic more than external demand, matching the general perception that China is the first country to begin recovering from COVID-19,” said Kelvin Lau, Senior Economist, Greater China, Standard Chartered.

The Greater Bay Area Index also includes industry and city sub-indices – by industry, Innovation and Technology is expected to improve the fastest, followed by Financial Services; by city, Guangzhou and Shenzhen are seen to lead the way in the post-COVID rebound, while Hong Kong is expected to recover more slowly. Among companies that plan to expand to other Greater Bay Area cities, Shenzhen, Zhuhai and Hong Kong are the preferred destinations.

“Shenzhen proved the most resilient in Q2 and is expected to return to economic expansion in Q3 along with Guangzhou. These cities’ encouraging performance may be because these finance- and technology-centred cities provide a base for larger companies with greater sustainability and more cash flow,” Mr Lau added.

“For intra-Greater Bay Area expansion, Shenzhen and Hong Kong are favourable because they are well-established core cities with high spending power, and Zhuhai is the closest city to Macao and well connected to Hong Kong via the Hong Kong-Zhuhai-Macao Bridge,” he analysed.

The Greater Bay Area Index is compiled based on a quarterly survey conducted by the HKTDC in collaboration with Standard Chartered. Every quarter, at least 1,000 enterprises in key business sectors across the Greater Bay Area provide valuable feedback on a range of subjects, including their current business situation and credit conditions as well as their outlook on these subjects for the coming quarter. The survey also asks respondents thematic questions about what drives their business decisions and plans, and how this might shape the Greater Bay Area’s future.

“We are seeing strong policy support from the central government for turning the Greater Bay Area into a global business and innovation centre, by expediting infrastructure connectivity, building advanced manufacturing and modern services industries, and developing a high-quality ‘living circle,” said Nicholas Kwan, Director of Research, HKTDC.

“We expect demand for information on this region to continue to ramp up and the Greater Bay Area Index seeks to fulfil this need by offering timely and valuable insights into the region’s transformation, which will better equip businesses and policy makers for future planning,” he added.

To download the report of the “Standard Chartered GBA Business Confidence Index”, please visit the website or access from the HKTDC Research Portal.

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