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Moderate Growth for Hong Kong Exports Expected in 2011
New HKTDC Report Predicts Challenges Ahead for Hong Kong

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HKTDC Chief Economist Edward Leung expects Hong Kong exports to moderate in 2011 after a strong rebound this year

16 December 2010 – After a strong rebound in 2010, Hong Kong exports are set to moderate. Eight per cent growth is expected in 2011, reflecting slower global economic recovery and easing demand for electronics, according to a new Hong Kong Trade Development Council (HKTDC) report, “Hong Kong Export Outlook for 2011.” 

HKTDC Chief Economist Edward Leung addressed the report in a press conference today, noting that the inventory-rebuilding cycle in developed markets had almost been completed and that consumer demand was not expected to be as strong in 2011. “Hong Kong’s export growth will not remain at such a high level, as the outstanding figures recorded in 2010 were amplified by the low comparison base, as well as the hearty appetite for high-tech and discretionary products,” he said. 

This year was bolstered by the stronger-than-expected global economic recovery and consumption. Mr Leung said demand in 2010 was particularly strong for electronics products. The resulting expansion of regional trade benefited Hong Kong, he said. Hong Kong’s re-exports of electrical and electronics equipment between the mainland and Asian economies rose 37 per cent in the first ten months of 2010. During the same period, Hong Kong’s total exports increased 25 per cent, year-on-year. 

Export Confidence
Mr Leung also highlighted the latest HKTDC Export Index, which is included in the current issue of the HKTDC Trade Quarterly. The Export Index, based on a quarterly business confidence survey covering Hong Kong’s major industries, reflects Hong Kong’s current export performance. Prospects for local traders in the fourth quarter of this year fell to 53.6, signalling a slower rate of export expansion in the near term. While still in expansionary territory, the Index has edged down for two consecutive quarters. Exporters, however, were optimistic about sales to the mainland, with related figures up more than two points, to 54.1. The indices for the United States and the European Union, however, were at about 50, indicating that sales to these major markets are likely to remain flat. 

The Frugal Consumer
“While recovery in the developed world will continue in 2011, households in those countries remain cautious about spending, despite a general quantitative easing of government policy,” said Mr Leung. “Most households in developed countries have yet to restore their balance sheets.” Mr Leung said frugal buying habits are likely to prevail in the US, boosting sales prospects for products that are well-priced, stylish and safe. A number of surveys also show a gradual consumer shift to green products.

US Export Drive
“Hong Kong traders may be able to cash in on the US National Export Initiative, a programme that aims to double American exports over the next five years,” Mr Leung said. “Technology products are expected to play an important role in the programme, and Hong Kong is an effective entry point for US companies seeking to expand their reach into mainland and other Asian markets.”

As for the EU, Mr Leung said that while fiscal tightening will increasingly hinder economic growth, prospects for individual EU member states are diverse. Among larger member states, Germany will remain a bright spot, benefiting from the sustained recovery of its trading partners, said Mr Leung, noting that the country relies on capital goods’ exports.

Japan’s backlash against rampant consumerism is expected to continue. The HKTDC report indicates that the general public bears the brunt of the country’s economic malaise. Retailers and importers are likely to remain selective in the near term, sticking to sources that can offer quality goods at low prices.

Emerging Opportunities
In contrast to lukewarm demand from developed markets, good opportunities are seen in a number of emerging markets. The HKTDC report singled out commodity exporting nations such as Chile, Brazil and Russia, as well as oil exporters in the Middle East, which are slated to benefit from sustained growth in developing Asia.

Mainland Consumer Demand
Of more importance are countries with huge domestic markets, such as China and India, which may serve as a cushion against slowing demand elsewhere. “Mainland initiatives to encourage income redistribution and consumption, coupled with efforts to transform and upgrade industry structure, will spawn huge demand for consumer goods, as well as technology, including green technology, which may not be available on the mainland,” said Mr Leung. This, he emphasised, should be of interest to Hong Kong companies.

Challenges Ahead
Hong Kong exporters must take note of the challenges as well as the opportunities ahead, Mr Leung said. “Consumer conservatism in overseas markets will translate into downward price pressure on Hong Kong exports. And the juxtaposition of a sustained revaluation of the renminbi, skyrocketing labour and related costs on the mainland, and stubbornly high commodity prices will make the business environment more difficult for Hong Kong’s exporting industries.”

Mr Leung advised Hong Kong exporters to adjust their business strategies to cater to changing consumer behaviour in the developed markets and to diversify into emerging markets. For the mainland market, he suggested that companies capitalise on government efforts to promote high-tech sectors such as environmental protection and new energy, by acting as a partner to match overseas technology suppliers and mainland enterprises.

Leaving the Comfort Zone
With regard to soaring production costs, Mr Leung said Hong Kong companies should explore the possibility of relocating part of their manufacturing activities to areas beyond the Pearl River Delta region – even outside the mainland. “More important, they should upgrade their product structure, shifting from simple processing to high value-added activities and high technology,” he said. “It is time for them to step out of their comfort zone to avoid being crowded out.”

For the full text of “Hong Kong’s Export Outlook for 2011,” please click:http://www.hktdc.com/info/mi/a/ef/en/1/Economic-Forum/Hong-Kong-S-Export-Outlook-For-2011-Challenges-Amid-A-Flooding-Of-International-Capital.htm 

Webcast
For a webcast summary of Mr Leung’s remarks, visit: http://www.YouTube.com/watch?v=PUFQwiASnYc

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

Joe Kainz
Tel: (852) 2584 4216
Email: joe.kainz@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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