18 June 2013
Hong Kong’s Offshore Trade Surging: HKTDC Study
Export Index at Two-Year High; Prospects Remain Challenging
Changing Export Picture
At a media conference today, Nicholas Kwan, who joined the HKTDC as Director of Research in May, noted that there have been substantial changes in the way Hong Kong’s export companies operate over the last two decades. “Many Hong Kong trading companies have set up factories on the Chinese mainland and are exporting their products directly overseas without going through Hong Kong,” said Mr Kwan. “Such exports are not included in Hong Kong’s export data.” In addition, some local manufacturers are producing goods on the mainland for domestic sales, according to Mr Kwan. “All these offshore trade activities play a decisive role in Hong Kong’s economy, yet its achievements in this respect are not borne out by ordinary statistical data.”
Offshore Trade: Major Sectors
According to the Offshore Trade Survey, offshore trade accounts for more than 70 per cent of Hong Kong exports in clothing/textiles, gifts/ornaments/imitation jewellery, toys and household items/lightings. In the stationery/paper products/packaging material sector alone, more than 91 per cent of exports are carried out through offshore trade and are not, therefore, included in Hong Kong Government figures.
Hong Kong has developed into a key regional trade and logistics hub, according to Pansy Yau, HKTDC Deputy Director of Research (Greater China), who also spoke at the press conference. “Hong Kong’s trading sector is expanding, and the volume of goods it’s handling is increasing,” she said. “Though the processes, from production to export of these goods, are not carried out in Hong Kong, the companies’ corporate management, sales, marketing and trade financing, as well as the handling of trade and customs documents, are all responsibilities of their Hong Kong offices.” Given this, said Ms Yau, it is apparent that such offshore trade activities are important to the economy of Hong Kong. She added that, if Hong Kong hoped to maintain its trade prominence, it must upgrade its trade and logistics infrastructure, control costs and increase investments in personnel training.
Export Index Up
At the press conference, Daniel Poon, HKTDC Principal Economist (Global Research), revealed that the HKTDC Export Index for the second quarter had climbed 3.9 points, to 53.4, a two-year high. In addition, the index had broken through the watershed mark of 50, returning to expansionary territory. Nevertheless, Mr Poon’s response was measured. “While there has been an overall improvement in the export sentiment, there is no clear direction among the various industries,” he said. He noted that, while electronics had been the best-performing sector, and jewellery and timepieces had also improved markedly, the clothing, toys and machinery sectors had weakened. In general, the surveyed companies were still upbeat about the mainland market, so much so that the mainland’s second-quarter index was 52.7, indicating an expansion in the short term. The indices for the United States, European Union and Japanese markets were all hovering around the 50 mark, reflecting more or less neutral views from exporters.
The second-quarter purchase index jumped 10 points, to 65.8, year-on-year, underlining the optimistic mood in purchasing. Mr Poon said that, as Hong Kong businesspeople expect a rise in input costs, they might restock more raw material or goods for future use.
Mr Poon said that, while the second-quarter export indices had improved, Hong Kong’s export prospects still faced challenges. He noted that demand from such traditional trading partners as the EU and the US had been slipping, though the negative impact was partially offset by growth in exports to the mainland and a number of emerging economies.
The HKTDC Research Department forecasts that Hong Kong’s total exports this year will grow by four per cent, year-on-year. Mr Kwan added, however, that adverse factors could hurt that forecast. The most obvious risks, he said, are that the global economy might slide back into recession, along with the rising prospects of protectionism and sustained geopolitical tensions.
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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.