HONG KONG, Dec 18, 2019 - (ACN Newswire) - The value of Hong Kong exports is expected to shrink by 2% next year, according to the latest forecast by the Hong Kong Trade Development Council (HKTDC). Meanwhile, the HKTDC Export Index for the final quarter of 2019 hit a record low of 18.8, down 8.6 points from the previous quarter, indicating that Hong Kong exports are expected to remain sluggish in the coming months.

Announcing the Hong Kong Trade Development Council (HKTDC) Export Index for the fourth quarter of 2019 along with the HKTDC export forecast for 2020 are (from left): HKTDC Economist Doris Fung, HKTDC Assistant Principal Economist (Greater China) Alice Tsang, Director of Research Nicholas Kwan and HKTDC Assistant Principal Economist (ASEAN and Emerging Markets) Wenda Ma

HKTDC Director of Research Nicholas Kwan attributed the decline of the city's exports to a slowdown in the global economy compounded by the impact of the Sino-US trade dispute. "The proliferation of protectionism into the broader economic and geopolitical arenas suggests a growing risk of a deep and protracted global slowdown," Mr Kwan said.

Speaking at a press conference to announce the forecast, Mr Kwan said Hong Kong exporters are facing unprecedented pressure amid the current uncertainties. "Our survey found that 65% of local exporters anticipated a drop in their total sales in 2020. The softening of global demand (37.3%) has overtaken Sino-US trade tensions (31.5%) to become their primary concern," he said.

Export Index hits record low

The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. HKTDC Assistant Principal Economist (Greater China) Alice Tsang said the readings for all major industries stayed well below the watershed score of 50, indicating that local exporters are increasingly pessimistic about the city's export outlook. This was particularly marked in the electronics and timepiece sectors where the indices fell to 18.2 and 15.5 respectively - the lowest figures ever recorded.

Regarding the outlook for specific markets, Japan was the most promising with the index standing at 47.4, followed by Mainland China and the United States (US), tied at 40.1. The European Union ranked last, falling 4.5 points to 36.8, the lowest figure for this market since the global financial crisis in 2008-09.

Buyers bargain harder

"The trade conflict between the mainland and the US has adversely affected more than half of the exporters surveyed (56.5%)," Ms Tsang explained, "Most of them have suffered from fewer orders (70.8%), while a growing number of exporters (58.1%, up from 44.1% in the last quarter) experienced tougher price bargaining with buyers."

Ms Tsang added that more than one-third of respondents (37.9%) have explored business opportunities in alternative markets to reduce their reliance on the US, with half of them shifting their focus to the Asian market, and nearly one-fifth specifying an expansion into countries in the Association of Southeast Asian Nations (ASEAN) bloc. Other tactics include lowering unit prices (17.9%) or the minimum quantity per order (15.4%), diversifying production or sourcing bases (14.4%), increasing the added value of products (12.8%) or, more pessimistically, downsizing the company (17.9%).

Eye on East Africa

Against the backdrop of the Sino-US trade conflict, manufacturers are seeking alternative manufacturing bases, with East Africa emerging as an option. HKTDC Assistant Principal Economist (ASEAN and Emerging Markets) Wenda Ma said enhanced regional integration, continued urbanisation, improved infrastructure and technology development are all supporting the region's industrialisation and structural transformation.

Ms Ma said the rise of East Africa is being led by Ethiopia, with the country's strong growth being driven mainly by the development of its light manufacturing industry, as well as a growing consumer market and continued public investments. "In addition to reducing red tape for businesses, Ethiopia has, with assistance from Mainland China, invested heavily in industrial parks and road, rail and air infrastructure to facilitate its exports. In particular, the Addis Ababa-Djibouti Railway has greatly increased the landlocked country's attractiveness as a manufacturing hub."

Being the largest and most advanced economy in the region, Kenya is widely recognised by multinational companies as a launch pad into the East African market. "With a growing young population, a dynamic private sector and improved infrastructure, Kenya offers a wealth of trade and investment opportunities across various sectors including infrastructure development, manufacturing, tourism, as well as information and communications technology (ICT). It is also a leader in financial innovation in Africa," she added.

Mainland elderly market shines

Many Hong Kong companies are striving to develop new markets and diversify their business to help cushion the impact of lingering tensions between the world's two largest economies. HKTDC Economist Doris Fung said that an ageing population in the mainland coupled with a more independent lifestyle has stimulated the demand for products and services related to the senior citizen market, bringing new opportunities for Hong Kong traders.

"Chinese society is ageing fast and the 'silver hair' market is expanding rapidly," she said, "The middle-class senior group on average spends around 90% of their personal pension or monthly income, which equates to Rmb 5,090 per person."

"Apart from garments and accessories, health supplement tablets such as calcium, vitamins and fish oil, as well as smart electronic products are also popular among the elderly, while children will buy functional goods such as living aids, rehabilitation products and health monitoring equipment for their parents," Ms Fung added: "Many elderly people on the mainland are also active travellers, spending thousands of yuan on each trip."

References- HKTDC Research website: http://research.hktdc.com/ - Hong Kong Export Index 4Q19: Lingering China-US Trade Tensions Push Export Sentiment to Record-Low: https://bit.ly/2M0OgfD- Hong Kong Export Outlook for 2020: Strong downside risks as protectionism proliferates and global economy slows: https://bit.ly/36DlwRL- Djibouti: an Emerging East African Trading Hub: https://bit.ly/2LwKryv- Guide to Manufacturing in East Africa: https://bit.ly/36xJxtw- China's Elderly Market: Survey Summary and Recommendations https://bit.ly/36CgOnj - Podcast: https://bit.ly/2PRDAkw- Photo download: https://bit.ly/2rOzAcI

About HKTDC

The Hong Kong Trade Development Council (HKTDC) is a statutory body established in 1966 to promote, assist and develop Hong Kong's trade. With 50 offices globally, including 13 in Mainland China, the HKTDC promotes Hong Kong as a two-way global investment and business hub. The HKTDC organises international exhibitions, conferences and business missions to create business opportunities for companies, particularly small and medium-sized enterprises (SMEs), in the mainland and international markets. The HKTDC also provides up-to-date market insights and product information via trade publications, research reports and digital news channels. For more information, please visit: www.hktdc.com/aboutus. Follow us on Twitter @hktdc and LinkedIn.

Contact:Beatrice Lam, Tel: +852 2584 4049, Email: beatrice.hy.lam@hktdc.org

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