June 14, 2023
BEIJING – The Hong Kong Trade and Development Council on Tuesday slashed its full-year forecast for the city’s export growth to between zero and 2 percent, down from its earlier estimate of 5 percent, as heightened world trade frictions soured markets while exporters wrestled anew with worries about a global slowdown.
The HKTDC’s downgrade followed its flagship export index, released on the same day, showing that Hong Kong exporters have regained some business confidence — a consequence of the lifting of anti-pandemic measures and the resumption of regular business activities — although their outlook is still pessimistic overall.
The index was created by the HKTDC to gauge local traders’ outlook on near-term export performance. Five hundred Hong Kong exporters from six major industry sectors, including clothing, electronics, jewelry, machinery, timepieces, and toys, were interviewed for the index survey.
The survey noted that only 13.4 percent of respondents expected an increase this year, down 23.1 percentage points from the previous quarter
In the second quarter, the confidence headline figure surged by 8.8 points to 47.8, a two-year high.
Nevertheless, the reading of less than 50 still suggests an overall pessimistic outlook, with concern stemming principally from the challenging external backdrop.
In terms of total exports, Hong Kong’s performance has been weaker than anticipated in 2023 to date. For the first four months of 2023, total exports decreased by 16.5 percent over the same period last year due to the slow recovery in land cargo capacity, the electronics downcycle, and semiconductor-related trade frictions, data from the Census and Statistics Department show.
According to the HKTDC’s survey, nearly two-thirds of respondents see “the risk of an economic recession” or “weakened demand in their overseas markets” as their primary concern. The figure is significantly higher than the 36.2 percent singling out the same issue in the fourth quarter last year.
Also, around 10.7 percent of exporters regarded “trade friction” as a key business challenge.
Last month, the Japanese government announced its updated list of regulated exports, which requires local companies to receive a license before selling 23 types of semiconductor equipment to China. The move, which mimics similar restrictions imposed by the US, is expected to take effect on July 23.
“The risk of escalating geopolitical tensions may create uncertainties for electronics trade flows throughout the region, especially those relating to the semiconductor industry,” said Irina Fan, HKTDC director of research.
An additional challenge is a slower-than-expected recovery of cargo routed through Hong Kong.
The survey noted that only 13.4 percent of respondents expected an increase this year, down 23.1 percentage points from the previous quarter.
“This has led many respondents to take a wait‑and‑see stance, given how gradually Hong Kong’s cross‑boundary land transportation capacity is rising,” said Cherry Yeung, HKTDC senior economist.
On a positive note, export sentiments toward the European Union and the United States have both swung to positive for the first time in five years.
In terms of business sectors, exporters in the toy and machinery industries turned optimistic as the subsector index reading surpassed 50 into expansion territory.
Fan expects that the recovery of exports will gather momentum in the second half of the year if constraints in cargo capacity ease as exporters are more upbeat about new orders in the upcoming quarter.