Many Greater Bay Area businesses, including those in technology-hub Shenzhen, are boosting their digital operations
Businesses in the technology-heavy Guangdong-Hong Kong-Macao Greater Bay Area (GBA) are paying close attention to digitisation and AI, with 29% anticipating they will incorporate AI into their business models.
The quarterly Standard Chartered GBA Business Confidence Index for the third quarter this year, released by Standard Chartered and the Hong Kong Trade Development Council (HKTDC), showed that many firms were enthusiastic about adopting AI.
The Index survey found that 29.1% of respondents expressed optimism about AI development and believed it would change their business models. Furthermore, 46.3% already had some planning or strategising under way.
Just under 30% had no for plans for AI or digital upgrading at present. The biggest hurdles for adopting AI were “too costly to upgrade or implement”, which topped the list at 36%, followed by “uncertain economic or business outlook to justify investment” at 29.4% and “lack of expertise or talents to pursue innovation” at 29%.
Current performance for the business confidence component of the Index improved to 52.9 in the third quarter from 50 in May-June, marking the highest reading in nine quarters. This reflected a rebound in GBA business activity after a second-quarter slowdown, likely helped by strong summer holiday demand and earlier rounds of policy easing measures implemented in Mainland China.
Two core GBA cities – Guangzhou and Shenzhen – outperformed peers in terms of the current performance index. Guangzhou rose to 54.9 from 48.6 in the previous quarter, while Shenzhen increased to 54.8 from 51.9, a sign that the post-COVID-19 reopening boost still had legs.
Innovation and technology as well as retail and wholesale achieved the highest industry scores in the current performance index. The current performance and expectations index for I&T showed the biggest rebound among sectors, rising by 15.1 points and six points, respectively, quarter-on-quarter.
The expectations sub-index for Financial Services also improved from the second quarter, reaching 57.1, to almost as strong as the 57.5 for retail and wholesale.
Kelvin Lau, Senior Economist, Greater China at Standard Chartered said: “The GBAI surprised positively for a second straight quarter. For the Q3 GBAI prints, we are pleasantly surprised by the quick rebound in the current performance component, which increased to 52.9 in Q3 from 50 in Q2. In our view, this is a strong sign that businesses are stabilising, or even starting to reaccelerate, following the setback in Q2. Looking forward, the key to the strengthening and sustaining the future recovery lies in continued policy stimulus from the authorities.”
Irina Fan, Director of Research at the HKTDC, noted the I&T sector’s contribution to the acceleration: “The survey also found that technology-related developments have had varying degrees of impact on enterprises. It will bring opportunities as well as challenges. In the next few years, enterprises expect the impact of AI technology to be more of an opportunity in areas, like sales and operational efficiency, than a challenge. This reflects the positive attitude of enterprises towards the adoption of AI technology or a more comprehensive digital transformation strategy."
The GBAI is the first forward-looking quarterly survey in the market that looks at the business sentiment and synergistic effects in cities and industries across the GBA. It is compiled based on a survey of more than 1,000 companies in the GBA covering the manufacturing and trading, retail and wholesale, financial services, professional services and I&Tsectors.
The Index enables investors and businesses to better understand the current business climate, gauge future performance prospects and formulate their market strategies for the GBA.