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HKTDC Export Index 3Q21: Threat of Covid-19 Variants Triggers Decline in Exporter Confidence Over the Near Term
14 September 2021
- The HKTDC
dropped by 9.7 points to 39.0 in 3Q21, an indication that growing market uncertainties triggered by the Covid-19 variants may be undermining the confidence of Hong Kong exporters in the near term.
- In line with this, exporter confidence was down in all the major industry sectors on a quarter-on-quarter basis. Overall, the most positive sector was toys (down by 1.1 points to 44.0), followed by machinery at 43.8 (down by 12.1 points).
- Exporters were similarly cautious with regard to the near-term prospects of Hong Kong’s major markets. The most promising markets remained Japan (47.9) and mainland China (47.8), while the EU, the least promising market, suffered the largest drop in confidence, with its reading failing by 5.1 points to 44.1.
- Continuing the downward trend, the Procurement Index fell by 9.3 points to 36.2. Perhaps more reassuringly, the Trade Value Index (54.1) remained in expansionary territory despite a 2.9 point drop in its readings, while the Employment Index actually rose by 3.1 points to 44.7.
- In the face of the still-evolving Covid-19 outbreak, 66.6% of exporters indicated they had been adversely affected in the past three months, a 9.7% increase on the previous quarter. This saw reductions in order sizes (59.5%) again cited as the most common downside.
- With regard to digital transformation, almost two-thirds (63.6%) of participating exporters reported significant progress. Of these, the majority have developed their online sales channels (56.3%), promoted their product portfolios via digital channels (56.0%), enhanced their cybersecurity (50.2%) or upgraded their online management systems (47.7%).
- By a considerable margin, the pandemic remained the key issue for Hong Kong exporters (up 4 points to 45.5%). This was more than double the 20.3% of respondents concerned about softening global demand (up by 3.6 percentage points).
- With uncertainties lingering, 41.1% of exporters anticipated a notable year-on-year decline in 2021
and a further 38.7% expected no material change.
In addition to the ongoing pandemic, the China-US relationship was also seen as likely to have a negative impact on Hong Kong’s export industry in the near term. Taken together, these two factors saw the HKTDC drop to 39.0 in 3Q21, a decline of 9.7 from the 48.7 recorded in 2Q21. With the index falling further into contractionary territory, continuing market uncertainties look set to undermine the confidence of Hong Kong exporters in the near term.

In line with the overall sentiment, exporters in all of the major sectors have become notably more cautious in recent months. At 44.0, toys (down by 1.1 points) was the most optimistic sector, while machinery saw the most substantial drop, falling by 12.1 points to 43.8. Accorded the least positive reading overall was the clothing sector (down by 7.2 points to 36.1).
Period |
HKTDC |
Electronics |
Clothing |
Toys |
Jewellery |
Timepieces |
Machinery |
3Q21 |
39.0 |
38.9 |
36.1 |
44.0 |
39.9 |
38.2 |
43.8 |
2Q21 |
48.7 |
48.8 |
43.3 |
45.1 |
40.7 |
44.6 |
55.9 |
1Q21 |
39.0 |
39.0 |
36.1 |
44.7 |
42.2 |
36.5 |
42.9 |
4Q20 |
36.2 |
36.4 |
32.9 |
35.9 |
33.0 |
33.5 |
39.5 |
Turning to the major markets, the best prospects were seen as lying within Asia. At 47.9, Japan was regarded as the most promising market, with mainland China a close second at 47.8. Exporters, however, were decidedly less confident when it came to the growth prospects of the US (44.3) and the EU (44.1).
HKTDC |
US |
EU |
Japan |
Mainland China |
ASEAN |
3Q21 |
44.3 |
44.1 |
47.9 |
47.8 |
44.5 |
2Q21 |
49.0 |
49.2 |
49.8 |
50.3 |
49.1 |
1Q21 |
46.1 |
42.9 |
47.3 |
48.0 |
45.2 |
4Q20 |
44.4 |
44.0 |
47.3 |
48.4 |
47.2 |
With regard to the prospects of offshore trade (i.e. shipments not passing through Hong Kong, but handled by the city’s businesses), exporters were also relatively downbeat, a sentiment that saw the fall to 35.1 from 48.4 in the previous quarter.

Despite a decline of 2.9 points, however, the Trade Value Index remained in expansionary territory at 54.1, indicating that unit prices in most sectors will continue to face upward pressure in the near term. By this particular metric, electronics (54.9) came out as the most highly rated, while timepieces (up by 8.9 points to 52.5) rallied impressively. Three other sectors – machinery (50.3), jewellery (48.1) and toys (47.9) – also remained in or adjacent to the expansionary zone. Performing less well was clothing (42.8), with its reading indicating a clear possibility of lower unit prices in the sector.
Period |
Trade Value Index |
Electronics |
Clothing |
Toys |
Jewellery |
Timepieces |
Machinery |
3Q21 |
54.1 |
54.9 |
42.8 |
47.9 |
48.1 |
52.5 |
50.3 |
2Q21 |
57.0 |
58.1 |
45.3 |
48.9 |
47.5 |
43.6 |
51.5 |
1Q21 |
46.3 |
47.5 |
35.1 |
44.7 |
44.6 |
38.5 |
41.4 |
4Q20 |
36.5 |
36.9 |
30.9 |
37.3 |
33.5 |
29.5 |
41.0 |
The Procurement Index, however, painted a less optimistic picture, with its reading tumbling to 36.2 from 45.5 in 2Q21. Up by 4.9 points to 52.1, toys was the most positive sector here, with its readings staying in expansionary territory. In a number of other sectors, though, the procurement sentiment was down markedly. This saw machinery show the biggest drop (down by 15.5 points to 40.1), while clothing (33.7) and jewellery (32.7) were seen as the most subdued sectors.
Period |
Procurement Index |
Electronics |
Clothing |
Toys |
Jewellery |
Timepieces |
Machinery |
3Q21 |
36.2 |
36.0 |
33.7 |
52.1 |
32.7 |
38.2 |
40.1 |
2Q21 |
45.5 |
45.9 |
35.6 |
47.2 |
33.3 |
28.4 |
55.6 |
1Q21 |
33.6 |
34.7 |
23.3 |
31.0 |
27.5 |
27.9 |
26.5 |
4Q20 |
34.6 |
35.0 |
31.7 |
33.8 |
30.2 |
34.0 |
30.9 |
Striking a relatively rare positive note, the Employment Index rose by 3.1 points to 44.7 in 3Q21, suggesting that recruitment activities in most sectors will remain stable in the near term. Digging deeper into individual industries, employment sentiment took a turn for the better in electronics (up by 3.3 points to 44.8), toys (up by 3.6 points to 44.4), timepieces (up by 1.9 points to 43.1) and clothing (up by 1.5 points to 42.6). Only two sectors – machinery (down by 0.7 points to 44.4) and jewellery (down by 0.8 points to 42.3) – showed a decline but by such a small degree that redundancies seem unlikely in the near term.
Period |
Employment Index |
Electronics |
Clothing |
Toys |
Jewellery |
Timepieces |
Machinery |
3Q21 |
44.7 |
44.8 |
42.6 |
44.4 |
42.3 |
43.1 |
44.4 |
2Q21 |
41.6 |
41.5 |
41.1 |
40.8 |
43.1 |
41.2 |
45.1 |
1Q21 |
43.2 |
43.5 |
41.6 |
44.4 |
37.3 |
39.4 |
42.6 |
4Q20 |
41.5 |
42.0 |
38.1 |
38.0 |
35.8 |
35.0 |
42.6 |
With regard to the surge in the number of Covid-19 variants in recent months, this was a source of major concern for many exporters, with 66.6% reporting that this had already negatively impacted their business. This is a significant rise on the 56.9% of participants citing a similar experience in 2Q21. Correlating with this, fewer respondents (down by 9.6 points from the previous quarter) indicated that their businesses had been unaffected or boosted by the pandemic.

Among those negatively affected, reductions in order sizes continued to be the key problem for 59.5% of such businesses. Other challenges cited included disruptions to logistics and distribution operations (58.6%) and an increase in transportation costs (53.6%), with the latter mainly due to the Covid-19-related reduction in air and ocean freight capacity.

Among the 9.3% of respondents (n=47) to report a positive effect, the majority (93.6%) had benefitted from increased product demand, with this particularly evident in the electronics and toys industries. This can be partly attributed to the Covid-inspired acceleration of the digital transformation process, which saw businesses obliged to invest heavily in electronics products as they sought to upgrade their operational resources.

Nearly two-third of respondents (63.6%) indicated that they have adopted digital business strategies. Among these, developing an online sales operation (56.3%) was the most popular option, followed by promoting products via a digital channel (56.0%), enhancing their cybersecurity (50.2%) and developing a cloud computing / online management system (47.7%).

Looking more to the future, the two strategies most favoured by Hong Kong exporters as a means of riding out the pandemic this year are ‘developing sales in the mainland China market’ (47.9%) and ‘developing online sales channels’ (45.8%). Other widely adopted options saw 44.9% of respondents indicate they were looking to expand their product portfolios, while 35.5% were planning to diversify into new overseas markets – with 29.5% looking to Europe and 20.5% seeking fresh opportunities within the ASEAN bloc.

Above all, the two primary concerns for Hong Kong exporters remain Covid-19 (up 4 percentage points to 45.5%) and weakening global demand (up 3.6 points to 20.3%). Beyond this, 10.4% of participants highlighted the ongoing problems created by border closures, while 10.0% singled out prolonged China‑US trade tensions as their major worry.

Looking towards the year end, 41.1% of exporters expect 2021 to be well down on 2020, and 38.7% believe sales levels will be broadly unchanged. From this, it can be concluded that the retail-business environment will continue to be challenging in the next six months at least.

The HKTDC is designed to gauge the prospects of the near-term export performance of Hong Kong traders. The business confidence survey is conducted on a quarterly basis, with 500 participating Hong Kong traders from six major industry sectors interviewed. Any Index reading above 50 indicates an upward trend and an optimistic outlook, while any Index reading below 50 indicates a downward trend and a pessimistic outlook.
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