Trade tensions between China and the US remain high, seven months after US President Donald Trump unveiled plans for sweeping global tariffs in April.
Nonetheless, many business owners across Guangdong, Hong Kong and Macao are feeling more optimistic about the future, following initial shock earlier in the year, according to a recent market survey.
The Q3 edition of the Standard Chartered Greater Bay Area Business Confidence Index (GBAI) shows business performance and outlook for the surveyed companies both climbing to multi-year highs.
The current performance index for business activity rose to 54.7, its highest level in four years.
The expectations index, meanwhile, increased to a two-year peak of 55.7, suggesting a broad-based recovery in business confidence.
“The survey findings are in line with the positivism we have seen across the markets in the third quarter, following the extension of US-China trade truce and expectation of continued dialogue between the two countries during the survey period,” noted Hunter Chan, Economist, Greater China, Standard Chartered.
However, persistent trade uncertainty may rein in business sentiment again, Mr Chan warned.
The latest survey for this quarterly study took place from early August to early September, polling more than 1,000 companies in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
The GBA Index is jointly published by Standard Chartered and the Hong Kong Trade Development Council (HKTDC).
The buoyant mood captured in Q3 is reflected across nearly all GBA cities, highlighted Irina Fan, Director of Research, HKTDC.
Hong Kong fared especially well, as traders continued to fast-track shipments and orders to avoid unforeseen disruptions later.
Ms Fan said: “Hong Kong saw the strongest rise in confidence among all cities, with the current performance and expectations sub-indices edging up a respective 8.3 points and 7.3 points to 52.2 and 53.6 in the quarter, underpinned by the continued trade frontloading and robust financial activities.”
New strategies
Faced with sometimes fierce competition at home and enduring uncertainties abroad, many GBA corporates are looking for new growth opportunities that can offset possible risks.
Around one in four companies polled for the latest GBAI are exploring overseas markets, for example.
Most surveyed companies (63.5%) said they had not been affected by excessive domestic competition, while around 3% felt they had benefited.
However, 29% reported a moderate impact and a further 5% a significant impact, representing around a third of the sample.
Curbing cutthroat competition has become a major priority for China’s policymakers, to reorient the economy towards more sustainable growth.
Intense rivalries in some key sectors have limited corporate profits and innovation – a phenomenon known as involution.
Among the GBA businesses affected by involution in the latest GBAI, more than 70% saw a negative impact on profit and sales, while around 40% experienced disruptions to hiring and investment.
While two‑thirds of respondents stated that they have not been impacted by involution, most were still increasingly cautious about domestic expansion.
GBA companies also appear to be adopting multiple strategies to navigate the current business environment.
These include: brand building and marketing (cited by 36.3% in the Q3 survey); cost control and inventory management (35.6%); and providing value-added services (29.7%).
The full Q3 GBAI report is available on the HKTDC’s research portal.
The index, which has been running since 2020, spans five major sectors: manufacturing and trading; retail and wholesale; financial services; professional services; and innovation and technology.
It enables investors and businesses to better understand the business climate, helping them to gauge future performance prospects and formulate GBA market strategies.