Hong Kong exports will grow by 8% in value in 2022, down from the 25% expansion experienced in 2021, said the Hong Kong Trade Development Council (HKTDC) when releasing the results of its latest HKTDC Export Index survey.
An uneven recovery, lingering threats from the pandemic, global supply chain disruptions and logistics bottlenecks, as well as rising concerns over inflation, are expected to restrain growth, according to HKTDC Director of Research Nicholas Kwan.
- More local exporters (87%, up 20.4 percentage points from the previous quarter) said the pandemic had negatively affected their business. Soaring transport costs (60.2%), disruptions to logistics and distribution (53.2%) as well as difficulties in sourcing raw materials/parts and components (41.4%, up 16.8 percentage points) were cited as major impacts.
- More than 70% of Hong Kong exporters said they expect 2022 sales will decrease (42.6%) or just be on par (29.1%) with sales this year.
- In the first 10 months of 2021, Hong Kong exports surged 26.7% year-on-year, albeit from a low base.
- The impact of COVID-19 (32.5%) remains local exporters’ top concern, followed by a stuttering economic recovery (15.7%) and borders remaining closed (11.6%).
- While 71.3% of respondents reported pandemic-related delivery delays, 39.8% experienced production schedule disruption and 38.4% passed extra shipping costs on to customers.
- Many exporters (62.4%) expect logistics costs to continue rising in the first quarter of 2022, with 39.8% anticipating an increase in the range of 10-30%.
New products, new markets
Despite the setbacks, the Regional Comprehensive Economic Partnership (RCEP) agreement that will take effect on 1 January 2022 is expected to bring positive impact, according to HKTDC.
“With its phased tariff elimination, the RCEP is set to further develop and integrate regional supply chains, as well as encourage production specialisation in Asia,” said Kwan. “This will provide a fresh impetus for Hong Kong to fortify its role as an international trading hub.”
Considering business strategies in 2022, almost half of the exporters surveyed (46.4%) indicated they planned to develop other product categories, with some opting to develop domestic markets in Mainland China (33.8%) or diversify sales to other overseas markets (30.5%), survey results indicate.
Sector highlights: Toy sector bearish
- The HKTDC Export Index dropped 1.8 points to 37.2 in the final quarter of 2021, “indicating that growing market uncertainties triggered by COVID-19 variants may continue to undermine local exporters’ confidence in the near term,” said HKTDC Assistant Principal Economist (Greater China) Alice Tsang.
- A total of 500 local traders from six major industry sectors including clothing, electronics, jewellery, machinery, timepieces and toys were interviewed for the HKTDC Export Index survey in mid-November. Readings above 50 indicate a positive sentiment, while below 50 is negative.
- Machinery (44.1, up 0.3 points) was the most promising sector, jewellery (40.7. up 0.8) and clothing (39.6, up 3.5) improved, while toys, down 19.0 points to 25.0, was the least optimistic sector.
- Exporters were equally cautious on major markets. Mild growth was expected in the Association of Southeast Asian Nations (ASEAN) bloc (45.8, up 1.3) and Japan (48.7, up 0.8), while the mainland market remained stable (47.6, down 0.2) and the United States fell 1.4 points to 42.9.
- The Procurement Index and the Employment Index were more or less the same as the previous quarter, at 36.9 and 44.0 respectively. The Trade Value Index (57.0) remained in expansionary territory.