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Hong Kong Export Growth Forecast to Moderate
TDC Launches New Quarterly Export Index


Hong Kong, December 11, 2006 - Hong Kong's exports will continue to grow in 2007, but at a more moderate pace, according to a trade forecast report released today by the Hong Kong Trade Development Council.

According to the report, Hong Kong's exports are forecast to rise by six per cent in 2007, two percentage points lower than expected export growth for 2006. Re-exports are expected to rise by 6.5 per cent, but domestic exports are likely to dip by 10 per cent.

This moderating expectation is reflected in the Council's newly launched TDC Export Index, developed to monitor the export performance and prospects of Hong Kong traders. The new statistical tool is based on a quarterly business confidence survey covering Hong Kong's major industries. For the fourth quarter of 2006, the index stands at 49.3. A reading below 50 indicates that proportionally fewer respondents expect their export business to grow in the near term. (See appendix for details of the new index.)

TDC's Chief Economist Edward Leung says that while the US is leading a slowing global economy, Hong Kong should benefit from a more dynamic Asia, led by the Chinese mainland.

"The Chinese mainland now accounts for nearly half of the territory's total exports and is projected to chalk up further robust economic growth in 2007," said Mr. Leung. "Domestic demand, which has been galloping along at an estimated nine per cent annually in recent years, will remain the bastion of growth on the mainland."

Mr. Leung, however, advises Hong Kong manufacturers and exporters to prepare for new challenges, in particular the Chinese regulatory system. In September 2006, the mainland changed its regulations on export processing trade. This affected tens of thousands of Hong Kong manufacturers in the Pearl River Delta.

Other challenges include rising labour costs and stricter environmental protection requirements in the PRD, along with growing protectionist sentiment in the US, following the recent congressional election results there. The European Union is also in a protectionist mood because of its record-high trade deficit with China.

Hong Kong's electronics industry, which accounts for nearly half of the territory's total exports, has its own concerns. There are signs that the global electronics cycle has peaked, according to the report. And new regulations forcing manufacturers to adopt more environmentally friendly production methods may also affect the industry.

Clothing, another big export item, is not immune to the expected global slowdown. The report adds, however, that American and European buyers are likely to return to Hong Kong and the mainland to replenish their stocks to take advantage of the expected relaxation of quotas on the mainland.

Hong Kong's financial services, says the report, are expected to ease somewhat in 2007, following record-breaking fund-raising activities this year, fuelled by the IPOs of major mainland banks and enterprises.

For press enquiries, please contact Lawrence Yau of TDC's corporate communication at 852-2584 4510 or lawrence.yau@tdc.org.hk

About TDC
Established in 1966, the Hong Kong Trade Development Council creates opportunity for Hong Kong companies and delivers value by promoting trade in goods and services, connecting China and the world through Hong Kong's business platform. TDC has more than 40 offices worldwide, including 11 in mainland China. Trade publications and sector-specific research reports, featuring a wealth of research and investment information, are available online or at the TDC Business InfoCentre. For more information, visit http://www.tdctrade.com


Appendix 1

From The Editor-In-Chief

Gold Mining

For years, traders have capitalised on Hong Kong as the one place in Asia where so much market information moves so fast and so freely.

Now, of course, a great deal of market intelligence is available online. In a world awash with content, so much of it unsubstantiated, the winners are those able to sift the gold from the grit - and act on it first.

Hong Kong Trade Quarterly aims to uncover those hidden nuggets in the form of select research insights that can enhance your company's competitiveness.

"TQ", as we call it, flies the flag for the HKTDC's Research Department. We are market pathfinders for small- and medium-size enterprises. We are also critical thinkers on trade and development from a Hong Kong perspective. The magazine highlights crucial intelligence from the research team's vast output, summarising and supplementing the in-depth reports we produce regularly on markets, industries and sectors.

In each issue, we invite guest columnists - leading thinkers on global business - to write about developments that are reshaping the international marketplace. These will certainly include perceptive views on the Asian region, in particular on Hong Kong and the Chinese mainland.

For this inaugural issue, HKTDC Chairman Peter Woo shares his vision of a technology alliance between Hong Kong and Shenzhen that could well drive Hong Kong's future growth. We also examine how trade can still generate wealth and employment in Hong Kong when 90 per cent of its manufacturing base has decamped across the boundary. Our much-travelled economists introduce readers to the fascinating emerging markets of Turkey and India.

Each edition of TQ will also carry the findings of our newly created, quarterly TDC Export Index. This set of statistics monitors the confidence levels of our exporters to indicate how Hong Kong trade is performing.

Please let us know what TQ can do to help you discover where the gold is buried.

Edward Leung
Hong Kong Trade Quarterly


Appendix 2

TDC Export Index
A New Measure of Confidence

As a regular feature of Hong Kong Trade Quarterly, HKTDC Research will publish a new measure of Hong Kong exporters' confidence. The TDC Export Index, as we've called it, is designed to monitor the export performance of Hong Kong traders and gauge their near-term prospects. The Index is also designed to provide a timely and resource-rich guide to manufacturers and traders, to help them plan for the future.

We've designed our Index to measure the contribution of trade components through Hong Kong as well as offshore. (The latter accounts for about half the activities of Hong Kong traders.) Which means that our measure is not affected by where a product is made or how it arrives in the hands of importers overseas. It need only be traded by Hong Kong-based companies.

This new set of statistics 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 exports and re-exports. Each time we produce the Index, it will reflect the views of 500 traders concerning their performance in the prevailing quarter as well as their outlook for the upcoming one.

Survey results are summarised and presented as index numbers. Our headline index, the TDC Export Index, can be interpreted as a barometer of exporters' business sentiment to help identify breaks or turning points in a boom-bust cycle. Based on our survey, we will also provide supplementary information, including trends in offshore trade, unit prices, new orders placed with suppliers, and the employment outlook for corresponding sub-indices.

The headline index and its sub-indices gauge data from 0 to 100. A reading above 50 indicates that more than half the respondents expect their export business to grow in the near term. One note of caution, however: the Index does not reflect or measure the rate of expected change.

We would like to thank our survey respondents for taking the time to contribute to the study. We hope that you and the rest of our readers will find the TDC Export Index a useful indicator, providing insights into the short-term trends of Hong Kong's major export markets and industries.

This new report is available at TDC's Retail Outlets. It can also be purchased through the TDC Bookshop section in the TDC's trade portal: www.tdctrade.com.

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Content provided by Hong Kong Trade Development Council