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Hong Kong’s Export Sentiment Turns Negative
While Producers Face Weakening Demand, Services Providers Take Heart

15 September 2011 – Responding to the gloomy outlook in the United States and European markets, Hong Kong’s export sentiment turned negative in the third quarter of 2011. The majority of surveyed exporters said they were worried about the higher costs of production on the mainland. 

Speaking today at a press conference, Edward Leung, Chief Economist of the Hong Kong Trade Development Council (HKTDC), revealed that the HKTDC Export Index had edged down to 49.5 in the third quarter, from 53.8 in the second quarter. (For an interview with Mr Leung, visit http://www.hktdc.com/info/webcast/v/en/en/1X04B4ZP).

The HKTDC Export Index, published in each issue of the HKTDC Trade Quarterly, monitors the performance of Hong Kong traders and gauges their short-term prospects. 

Industry Variations
“While the reading fell to marginally below 50, overall sentiment has turned slightly pessimistic over the short term,” said Mr Leung. “The sentiment in different industries, however, varies. Although clothing and toy exporters are negative, the readings in jewellery, timepieces and electronics remained above 50, signalling short-term stability.”

Beyond Hong Kong, all markets, except for the Chinese mainland, fell under 50. The mainland’s reading of 51.7, however, was down from 53.1 in the second quarter. Export confidence improved slightly for Japan, but was still in contractive territory. For the US and the EU, readings stood at 48.2 and 47.6, respectively. Mr Leung attributed the fall in sentiment to the slower-than-expected recovery in the US and the deepening of the sovereign debt crisis in Europe.

Recovery Remains Fragile
“The findings indicate that the recovery of mature markets is fragile and full of uncertainties,” he said. “With the European debt crisis spreading to Spain and Italy, and looming worries about a double dip in the US economy, Hong Kong exports are expected to grow only at a moderate rate in the coming months.”

Mr Leung added that Hong Kong exporters were facing a double whammy. In addition to export market uncertainties, the pressure on production costs remains high.

Counting the Costs
“With volatile commodity prices now a global phenomenon, particular cost issues are more acute in China,” Mr Leung said. “Manufacturers operating in the Pearl River Delta region continue to face the challenge of rising production costs due to higher wages and increased worker benefits.”

A survey conducted by the HKTDC showed that 88 per cent out of 500 responding Hong Kong companies said they expected higher labour costs on the mainland during the third quarter of 2011. Among exporters surveyed, 87 per cent said mainland’s inflation worried them; among them, 97 per cent said they were concerned about higher costs of production on the mainland.

“Export prices are rising in general, but they are not keeping pace with costs,” Mr Leung said. “This will eventually translate into thinner margins or sales declines for exporters and manufacturers.”

Services Looking Good
The Hong Kong services industry, however, was cheered by Vice Premier Li Keqiang’s comments during his visit to the city in August. Mr Li pledged that the mainland would take further steps to broaden market access for Hong Kong’s services sectors. He added that services-related trade between the city and the mainland would be liberalised by the end of 2015. In addition, the mainland will also encourage its enterprises and Hong Kong companies to go international together.

CEPA Partnerships
“The coming measures are expected to generate tremendous business opportunities for Hong Kong’s services sector, including commercial and consumer services,” Mr Leung said. “Hong Kong’s service providers should fully utilise the privileges offered by CEPA [the Closer Economic Partnership Arrangement] and its supplementary agreements to build partnerships with mainland enterprises. Such partnerships will certainly lead to an expansion of their business.”

Media Enquiries
Please contact the HKTDC's Corporate Communication Department:

Victor George Paddy
Tel: (852) 2584 4517
Email: victor.paddy@hktdc.org

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

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