The Hong Kong Trade Development Council (HKTDC) projects that Hong Kong’s exports will grow 5% in 2023 – a recovery from the 6% decline this year. HKTDC Director of Research Irina Fan said: “Hong Kong’s exports will gradually regain growth momentum amid the receding pandemic, easing of COVID-19 restrictions and resumption of cross-border land transportation.”
Exports to Asian markets bucked the declining trend in the first 10 months of this year, with sales to the Association of Southeast Asian Nations (ASEAN – main picture) bloc increasing 12.6% year-on-year.
The latest HKTDC Export Index survey shows that significantly more exporters indicated businesses were no longer suffering from pandemic-related problems (up 10.6 percentage points from the previous quarter to 32.7%), with progress made towards resolving the challenge of high transport costs and logistics bottlenecks.
More respondents said buyers haggled over prices (25.7%, up 9.3 percentage points) and reduced order sizes (40.1%, up 5.0 percentage points). Most respondents said they expected sales in 2023 to decrease (49.4%) or remain on a par with sales this year (28.3%). “Lingering geopolitics, coupled with the risk of global stagflation, has dampened consumer sentiment and business confidence,” Ms Fan explained.
The risks of an economic slowdown or recession in major markets (36.2%) and difficulties in cross-border travel (21.1%) have become exporters’ key concerns. Most said they would develop new products (50.0%), stabilise cash flow (34.6%) and cut costs (30.5%) in the coming year. Other business strategies to be adopted included lowering minimum order quantities, increasing the use of e-commerce for sales and purchases as well as enhancing marketing, promotional or business matching activities.
”High inflation and high interest rates will weaken purchasing power and consumers’ desire in the European and American markets. Meanwhile, ASEAN has become the bright spot for the city’s exports. Local exporters should also pay more attention to the opportunities in the Mainland China market. Product-wise, toys and timepieces related to smart and intellectual property (IP) will have a higher chance,” Ms Fan said.
Sentiment edges down
The HKTDC interviewed some 500 Hong Kong exporters in the middle of last month for the survey to gauge business confidence about near-term export prospects. Respondents come from six major industries – clothing, electronics, jewellery, machinery, timepieces and toys. Readings above 50 indicate a positive sentiment, while below 50 is negative.
The HKTDC Export Index dropped 3.1 points from the previous quarter to 29.7. “The uncertainties led by slowing global demand has affected exporters’ sentiments,” said HKTDC Assistant Principal Economist (Greater China) Alice Tsang.
Machinery, watches outperform
Ms Tsang added that machinery (38.3, up 3.4 points) was the most upbeat sector, followed by timepieces (36.8, up 3.0 points), while jewellery recorded a sharp fall of 13.4 points to 30.8. Other sectors, such as toys (28.9, down 8.1 points) and fashion (23.8, down 7.4 points), also dropped significantly.
It is worth nothing that all major markets recorded declines. Exporters have more confidence in Asian countries, with Japan topping the table at 47.2, followed by Mainland China (44.4) and the ASEAN bloc (43.5). They, however, remained less optimistic about the European Union (40.4) and United States (40.2) markets, as persistent inflationary pressures and the likelihood of recession were set to hamper demand.
Growth in Asia
In the first 10 months of 2022, Hong Kong exports fell 4.4% compared with the same period last year. This was mainly due to pandemic disruption on cross-border trade flows between the =mainland and Hong Kong. Meanwhile, the city’s exports to key major Asian markets saw double-digit growth, as the intra-regional supply chain expanded. For instance, Hong Kong’s exports to the ASEAN bloc increased 12.6% year-on-year, while they surged 15.0% and 13.5% to Taiwan and Korea, respectively.
However, Hong Kong’s exports to the US showed no growth and shipments to the EU fell 2.9% during the same period, as aggressive central bank monetary tightening, high energy and food inflation as well as the lingering Russia-Ukraine conflict dampened consumer and business sentiment.
Looking ahead, it is expected toy exports will benefit from new 3D live-action games and other peripheral products derived from film, TV and video games. Household electrical appliance exports will also pick up next year, as many restaurants, hotels and offices resume normal operations.
New products, such as robot vacuum cleaners and sound-activated light switches, also appeal to consumers. Moreover, smartwatches with more advanced health and wellness functions, such as electrocardiogram (ECG) sensor and blood oxygen readouts, are becoming more popular.