Hong Kong Exports Tipped to Grow 6% in 2018

18 December 2017 – The Hong Kong Trade Development Council (HKTDC) expects Hong Kong exports to increase in value by six percent, while the volume of exports is anticipated to grow by four percent in 2018. HKTDC Director of Research Nicholas Kwan attributed the rise to broad-based expansion in investment, trade and consumption, coupled with strengthening consumer and business confidence.

“Overall demand will remain sturdy with the expansion in both developed and emerging economies,” said Mr Kwan. “This year’s positive export trend will likely carry on to next year, though the pace of growth is expected to slow. But there are formidable challenges facing Hong Kong exporters, such as rising Sino-US trade tensions, the possibility of a faster-than-expected tightening of US monetary policy and escalating geopolitical tension.”

Exporters’ confidence level improved in 2017

The latest HKTDC Export Index, published today, shows the confidence level of Hong Kong exporters has improved substantially compared to the previous year.  The Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. Reading above and below 50 indicate positive and negative sentiment, respectively. Overall, the average HKTDC Export Index level in 2017 was 47, significantly higher than last year’s 36.8. 

In the fourth quarter of 2017, the Index dropped by 1.6 points from the previous quarter to 44.6, with only the toy sector showing improvement, at 43.3, up from last quarter’s 41.2. “This indicates exporters’ conservative sentiment towards Hong Kong’s short-term export performance. But, they are optimistic about the year ahead: 76 per cent of the exporters surveyed expect their sales to increase or remain unchanged in 2018,” said Mr Kwan.

Meanwhile, the Trade Value Index recorded a 14-quarter high of 52.1, indicating that unit prices are expected to rise across key industries.

Developed economies continue to improve
Growth in the United States has been driven by both private consumption and equipment investment.  “Another positive development is the rise in business investment, making US economic expansion increasingly broad-based across sectors,” said HKTDC Principal Economist (Greater China) Billy Wong. “The promised pro-growth tax overhaul is making headway and is expected to provide an additional boost.”

Mr Wong added that economic growth has surpassed expectations in the European Union, propelled by private consumption amid lowering unemployment, while investment has also showed signs of picking up, thanks to low borrowing costs.

Developing Asia remains vibrant
Mr Wong said rising consumption in the developed nations will boost export-oriented emerging economies. “The Chinese mainland is expected to maintain its current growth level,” he said. “Supply-side reforms will continue to be a priority to improve the efficiency of the economy. As part of the strategy to rebalance the economy, using private consumption as a growth driver appears to be gaining ground. China is also adopting policies to bring in more imports to help satisfy domestic consumer demand.”

He added that, spurred by a decent global trade environment, robust domestic demand and growing foreign investment, the pace of growth among ASEAN economies has quickened, with the momentum expected to continue. “Rising export production should fuel demand for imported intermediate and capital goods.” Mr Wong added.

Favourable prospects for Hong Kong Exports in 2018
Electronics and toys outperformed other sectors and the new-tech products are in the spotlight. Mr Wong identified some bright spots in several industries:

·         Electronics: Emerging technologies, such as cloud computing, the Internet of Things and, big data, are likely to boost demand for semi-conductors and related parts and components. Prospects for AR/VR applications, robotics, as well as wearable electronics, especially those with smart home/smart living applications, remain positive.

·         Clothing: The development of fast-fashion and simple-style clothing will benefit lower-end exporters, while the higher-end market will also pick up when shoppers start to look for more fashionable items as their incomes rise.

·         Toys: Demand for educational toys is expected to continue, led by blockbuster licensed toys, STREAM (science, technology, engineering, arts, maths and robotics) toys and those that incorporate VR and AR applications.

·         Timepieces: Sales of luxury watches should hold steady while demand for fashionable watches is on the rise.  Smart watches with functions such as fitness tracking, smart notifications and mobile connectivity are likely to remain popular.

·         Jewellery: Platinum jewellery is expected to be popular because of the metal’s sluggish price, while demand for gold jewellery remains stable. Sales of fine jewellery are also likely to pick up, especially those with fine design and craftsmanship.

UK Businesses Target non-EU Markets
To gauge the impact of the impending departure of the UK from the European Union on business, HKTDC Research recently conducted a survey during the Council’s flagship event Think Asia, Think Hong Kong, in London. The study sought to learn more about how UK companies perceive the impact of Brexit on their business, and assess their Brexit readiness, as well as their plans to explore future non-EU business opportunities.

The survey results found that most of the UK enterprises interviewed had either adopted a “wait and see” approach (30%) or intended to focus/invest more in non-EU markets in the future (35%), with developing Asia (including the Chinese mainland, India and the ASEAN bloc) high on their agenda. “This is in line with the finding that 75 per cent of respondents were interested in capitalising on the opportunities emerging from the Belt and Road Initiative,” said Louis Chan, HKTDC Assistant Principal Economist (Global Research). “Of those companies looking to explore new markets, securing the appropriate professional service support and researching their target overseas markets were key strategies for their post-Brexit business development.”

Nearly half of the respondents indicated they would seek professional services support from Hong Kong (24%), the Chinese mainland (15%) or Singapore (10%) as an initial step.  Thirty-seven per cent of the respondents considered establishing a regional office or regional headquarters in Hong Kong as a way to access and service their chosen overseas markets. More than 80 per cent acknowledged that Hong Kong’s professional services sector – including companies providing financial, legal or marketing support – could contribute significantly to accessing the emerging business opportunities in many of the Belt and Road countries. As such, those respondents said they were open to learning more about Hong Kong’s pivotal role in the Belt and Road Initiative.

Reference

• HKTDC Research webpage: www.hktdc.com/research
• Hong Kong Export Prospects 2018: http://goo.gl/w3fDnX
• HKTDC Fourth Quarter 2017 Export Indices: http://goo.gl/YuYs1U
• Brexit Survey: UK Businesses Already Targetting Non-EU Markets: http://bit.ly/2jLijcQ
• HKTDC Business-Stat Online: http://bit.ly/1ITG8bs

Podcast

Hong Kong Export Outlook 2018: http://goo.gl/X87pvp

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About the HKTDC
Established in 1966, the Hong Kong Trade Development Council (HKTDC) is a statutory body dedicated to creating opportunities for Hong Kong's businesses. With more than 40 offices globally, including 13 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China, Asia and the world. With 50 years of experience, the HKTDC organises international exhibitions, conferences and business missions to provide companies, particularly SMEs, with business opportunities on the mainland and in international markets, while providing business insights and information via trade publications, research reports and digital channels including the media room. For more information, please visit: www.hktdc.com/aboutus.