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Bullish Outlook for Hong Kong Exports
Latest TDC Export Index Reveals Confidence Among Exporters

March 13, 2007 - Hong Kong can look forward to strong export sales in the near future, according to the latest TDC Export Index. The index, which reflects the business sentiment of local exporters, was released in the latest issue of Hong Kong Trade Quarterly, published by the Hong Kong Trade Development Council (TDC).

The TDC Export Index climbed to 58.2 in the first quarter of 2007 (1Q07), from 49.3 in 4Q06. A reading higher than 50 indicates quarter-on-quarter improvement in the export outlook. Respondents say strong demand from buyers and effective company strategies are the main reasons for optimism.

"The indices for all major industries edged up in 1Q07," said the TDC's Chief Economist Mr Edward Leung. "The short-term export outlook for electronics, with an index of 60.7, is the most encouraging," he added.

Prospects for toys and jewellery exports are less optimistic, with indices hovering just above 50.

The indices for all major markets registered increases in 1Q07. While the European Union showed the best performance, the indices for the United States and Japan also increased in 1Q07, with readings back into "expansion" territory, following results below 50 in 4Q06.

Mr Leung said that though the slowdown of the housing market in the US would eventually affect consumption, the latest statistics showed that it has had, to date, little impact on Hong Kong's short-term export outlook.

The TDC Export Index helps business people identify breaks or turning points in a boom-bust cycle. It is based on a quarterly business confidence survey covering Hong Kong's six major industries: electronics, clothing, jewellery, timepieces, toys and machinery. Together, these sectors account for 70 per cent of Hong Kong's domestic exports and re-exports.

The index is compiled based on the views of 500 traders and their performance in the prevailing quarter, along with their outlook for the upcoming one. Survey results are summarised and presented as index numbers.

The Offshore Trade Index, which reflects Hong Kong traders' confidence in trade not passing through Hong Kong, has also risen, to 69.6 in 1Q07. It is expected that offshore trade for Hong Kong will continue to outperform Hong Kong exports.

Hong Kong's exports closely correlate with the Chinese mainland's trade performance. In an article published in the latest Hong Kong Trade Quarterly, Mr Leung noted that the mainland's export trade grew at an average annual rate of 30 per cent between 2002 and 2006, reflecting the mainland's remarkable results in the five years since its WTO accession. Mr Leung is optimistic about the mainland's continued export growth, arguing that "China's export mix is expected to move further upstream, presenting new dynamics for growth."

Mr Leung said such a trend would offer Hong Kong companies new opportunities in purchasing and selling high value-added parts and accessories in the mainland.

"China is changing gear. Its workshop-of-the-world phase is giving way to qualitative foreign trade, with cheap goods increasingly replaced by high value-added items," said Mr Leung.

Looking ahead, Mr Leung expected that the Chinese mainland's exports would continue to face challenges, including protectionism, the appreciation of the renminbi and rising labour costs.

"Faced with rising production costs and the gradual move of the mainland's industrial structure up the value-added chain, Hong Kong manufacturers will need to review their own development strategies," said Mr Leung.

Hong Kong companies in the mainland will continue to be subjected to business pressures, including the mainland's policy adjustment on Outward Processing Manufacturing. Taking this into consideration, Mr Leung said that the forecast for the medium term remains cautiously optimistic.

About TDC
Established in 1966, the Hong Kong Trade Development Council (TDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the TDC promotes Hong Kong as a platform for doing business with China and Asia. The TDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, visit www.tdctrade.com

For more information
For media enquiries, please contact the TDC's Corporate Communication Department:

Vivien Chan
Tel: 2584 4395
E-mail: vivien.pk.chan@tdc.org.hk

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