Hong Kong exports are expected to shrink by 2% next year, according to the latest forecast by the Hong Kong Trade Development Council (HKTDC), which is attributed to the general slowdown in the global economy and the reeling impact of the US-China trade dispute.
HKTDC also noted that the Export Index for the final quarter of 2019 hit a record low of 18.8, down 8.6 points from the previous quarter, indicating that Hong Kong exports are expected to remain sluggish in the coming months.
“The proliferation of protectionism into the broader economic and geopolitical arenas suggests a growing risk of a deep and protracted global slowdown,” said Nicholas Kwan, HKTDC Director of Research.
Speaking at a press conference to announce the forecast, Kwan said Hong Kong exporters are facing unprecedented pressure amid the current uncertainties. “Our survey found that 65% of local exporters anticipated a drop in their total sales in 2020. The softening of global demand (37.3%) has overtaken Sino-US trade tensions (31.5%) to become their primary concern,” he added.
The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. HKTDC Assistant Principal Economist (Greater China) Alice Tsang said the readings for all major industries stayed well below the watershed score of 50, indicating that local exporters are increasingly pessimistic about the city’s export outlook.
This was particularly marked in the electronics and timepiece sectors where the indices fell to 18.2 and 15.5 respectively – the lowest figures ever recorded, she added.
On the outlook for specific markets, HKTDC said in a statement that Japan was the most promising, followed by Mainland China and the United States. The European Union ranked last, with the lowest figure for this market since the global financial crisis in 2008-09.
Buyers bargain harder
“The trade conflict between the mainland and the US has adversely affected more than half of the exporters surveyed,” Tsang said. “Most of them have suffered from fewer orders, while a growing number of exporters experienced tougher price bargaining with buyers.”
To cushion the adverse effects of the US-China trade tension, she noted that more than one-third of respondents have explored business opportunities in alternative markets to reduce their reliance on the US, with half of them shifting their focus to the Asian market, and nearly one-fifth specifying an expansion into countries in the Association of Southeast Asian Nations (ASEAN) bloc – which includes Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Laos, Myanmar, Cambodia and Vietnam.
Eye on East Africa
Against the backdrop of the Sino-US trade conflict, manufacturers are seeking alternative manufacturing bases, with East Africa emerging as an option.
HKTDC Assistant Principal Economist (ASEAN and Emerging Markets) Wenda Ma said enhanced regional integration, continued urbanisation, improved infrastructure and technology development are all supporting the region’s industrialisation and structural transformation.
Ma said the rise of East Africa is being led by Ethiopia, with the country’s strong growth being driven mainly by the development of its light manufacturing industry, as well as a growing consumer market and continued public investments.
Kenya, she said, is widely recognised by multinational companies as a launchpad into the East African market.
“In addition to reducing red tape for businesses, Ethiopia has, with assistance from Mainland China, invested heavily in industrial parks and road, rail and air infrastructure to facilitate its exports. In particular, the Addis Ababa-Djibouti Railway has greatly increased the landlocked country’s attractiveness as a manufacturing hub,” Ma noted.
Mainland elderly market in focus
HKTDC also said many Hong Kong firms are striving to develop new markets and diversify their existing businesses to help cushion the impact of lingering tensions between the world’s two largest economies as it cited ageing population in the mainland coupled with a more independent lifestyle which has stimulated the demand for products and services related to the senior citizen market.
“Apart from garments and accessories, health supplement tablets such as calcium, vitamins and fish oil, as well as smart electronic products are also popular among the elderly, while children will buy functional goods such as living aids, rehabilitation products and health monitoring equipment for their parents,” said HKTDC Economist Doris Fung.
“Many elderly people on the mainland are also active travellers, spending thousands of yuan on each trip.”
