Debate is raging around the ethics and prospects for AI, but the field is proving a boon for at least one group – Hong Kong’s exporters.
Exports are expected to grow by 4% to 6% next year – a sharp contrast to the 11% decline recorded from January to October this year.
This optimistic outlook is driven by the significant increase in demand for electronic components as demand for AI-enabled devices and other finished products grows.
Commenting on the likely uptick in Hong Kong’s export performance , Hong Kong Trade Development Council (HKTDC) Director of Research Irina Fan said: “The unique properties of Hong Kong’s electronics-orientated export economy make it almost ideally positioned to take full advantage of the imminent rebound in demand for high-tech components.”
The Hong Kong Export Outlook forms part of the review of the city’s export prospects HKTDC Research conducts annually. This wide-ranging review takes into account a wide array of factors, including many key global, regional and local economic indicators.
Light at the end of the tunnel
Despite many of the factors restraining Hong Kong’s 2023 export growth likely to remain in place next year, HKTDC Research’s confidence is based on widespread acknowledgment that the electronics sector – which accounts for 70% of Hong Kong exports – is expected to enjoy rapid growth in 2024, partly on account of growing consumer and business demand for AI-enabled PCs.
“Demand in this sector is certain to bolster the local economy overall, ensuring that Hong Kong’s wide exporter base will be fully ready and adequately resourced to take advantage of wider global economic recovery, which is expected to come to fruition over the course of 2025,” Ms Fan noted.
The recovery will come after export sentiment continually softened this year. The HKTDC Export Index contracted 5.5 points to 35 in the fourth quarter, indicating exporters had become more cautious amid rising geopolitical tensions, especially the Israel-Gaza conflict, and sluggish external demand.
Exporter sentiment has declined across four of the six major industry sectors. Machinery at 40.3 (up 0.9 points) was one of the better-performing sectors, followed by electronics at 34.8 (down 6.0 points). Less optimistically, toys suffered the most substantial decline, falling 12.8 points to 29.4.
Based on a quarterly HKTDC survey of 500 exporters from six major industries – clothing, electronics, jewellery, machinery, timepieces and toys – the index above 50 indicates an optimistic outlook and below 50 pessimistic.
Sentiment in all key export markets remains below 50. However, sentiment towards India (42.7, up 10.1 points) is the most positive, followed by Taiwan (42.5, up 4.8 points) and Mainland China (39.5, up 0.9 points). Exporters were less confident when it came to EU (34.6, down 2.6 points) and US (33.6, down 2.8 points) prospects.
Economic risks remain the top concern for next year, with most respondents (84.7%) seeing economic slowdowns or recession risks in overseas markets as the major challenge, followed by geopolitical tensions (62.5%) and rising transport costs / disruption to logistics and distribution obstructions (41.8%).
Ensuring sufficient cash flow stood out as the focus for next year, with over half of exporters intending to adopt cash flow management. .
HKTDC Research Principal Economist Wing Chu said in addition to the common strategy of cash flow management, different industries favoured various approaches. “For example, businesses in the electronics, timepieces and machinery sectors are keen to increase marketing, promotion or business matching in the coming year. Those in jewellery and clothing sectors, meanwhile, are more inclined to prioritise the use of e-commerce to drive sales growth,” he added.
