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Hong Kong Exports Growth Stronger than Expected
Look to ASEAN Markets, TDC Chief Economist Urges Hong Kong

September 13, 2007 - The news is good for Hong Kong exports. A newly revised forecast from the Hong Kong Trade Development Council (TDC) reveals that Hong Kong exports should grow between eight and nine per cent this year, up from an original forecast of six per cent.

In the first seven months of 2007, Hong Kong exports surged 10.1per cent. TDC Chief Economist Edward Leung says the Chinese mainland's demand for Hong Kong exports, up 14.4 per cent during the first seven months of 2007, is largely responsible for the upward trend.

The mainland's stronger-than-expected economic performance, its need of machinery to produce goods for export and its industrial upgrading programme are the chief factors behind the rise in Hong Kong exports to the mainland, says Mr Leung.

Exports to ASEAN countries, up 13.1 percent for the first seven months of the year, account for a six per cent share of Hong Kong's total export market. Mr Leung urges Hong Kong companies to focus more on ASEAN markets, since the China-ASEAN Free Trade Area (CAFTA) is likely to mean closer trade ties between ASEAN and the mainland. Although Hong Kong is not a signatory of the agreement, Hong Kong exports to ASEAN have already benefited.

The opportunities are particularly good in Vietnam, Malaysia and Cambodia, according to Mr Leung. Along with their consumer market potential, the countries, says Mr Leung, can also serve as alternative production bases to the mainland.

The mainland's GDP climbed 11.5 per cent during the first six months of 2007, with exports up nearly 30 per cent in the same period.

As mainland manufacturers expect further changes in the export processing trade arrangement in the second half of the year, they placed more orders for machinery and raw materials to be shipped through Hong Kong in the first few months before the changes took effect. Mr Leung expects a slowing down in exports to follow, as the new rules will likely have an adverse effect on mainland shipments through Hong Kong.

The renminbi may further appreciate, according to Mr Leung. This, coupled with growing protectionism overseas, will have a knock-on effect on exports of Hong Kong products, which are produced mostly in the mainland.

The Central Government may also step up its efforts to cool the economy and rein in inflation, according to Mr Leung.

Hong Kong's exports to the European Union grew by 6.4 per cent in the first seven months of 2007, largely because of the strong euro. The sub-prime mortgage problems in the United States, however, may increase EU financial volatility in the coming months.

Mr Leung advises Hong Kong exporters to keep a close eye on possible changes in EU regulatory measures, pointing out that the EU's textile quota arrangement with the mainland ends in 2007.

Hong Kong exports to the US rose by just 0.9 per cent during the first seven months of 2007. Further corrections in the US housing market, plus the country's sub-prime mortgage problems, are likely to bring about a slowdown in consumer spending, according to Mr Leung. Growing protectionism in the US and the nation's preoccupation with the upcoming presidential election are other obstacles Hong Kong may face.

Exports to Japan, meanwhile, rose by 1.1 per cent. Mr Leung says the country's uneven economic recovery has had an adverse impact on consumption.

Troubled by product recalls, Hong Kong's toy exporters expect a slowdown in business, following a 36 per cent increase in the first seven months of 2007. During the same period, Hong Kong jewellery exports rose 15 per cent, followed by watches and clocks (4.5 per cent), clothing, textiles and footwear (0.9 per cent) and electronics (0.6 per cent).

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About the 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 around the world, including 11 on 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 boost trade between overseas companies and their counterparts in Hong Kong and the mainland, while providing information through trade publications, research reports which are also available on the Internet. For more information, visit www.tdctrade.com

Media Enquiries
Please contact the TDC's Media and Public Affairs Department:

Beatrice Lam
Tel: (852) 2584 4049
E-mail: beatrice.hy.lam@tdc.org.hk

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