Standard Chartered and the Hong Kong Trade Development Council (HKTDC) today released the Standard Chartered GBA Business Confidence Index (GBAI) for the first quarter of this year. The survey, conducted between 1 February and 6 March, shows that the “current performance index” for business activity rose to 54.3 in Q1 2024 from 51.4 in the fourth quarter of last year, marking the highest reading in 11 quarters. The GBAI “expectations index” remained largely unchanged in Q1 at 54, compared to 54.1 in Q4 2023. The figures indicate that current business conditions are improving but this did little to lift the outlook.

Guangzhou and Shenzhen outperform

At city level, Guangzhou and Shenzhen were the only two cities that registered improvements in both current performance and expectations sub-indices. Guangzhou’s “current performance sub-index” rose to 57.1 from 51.7 in the previous quarter, while Shenzhen increased to 55.9 from 49.5. Hong Kong fell to 43.3 from 50 in its “current performance sub-index”, the steepest drop among the 11 Guangdong-Hong Kong-Macao Greater Bay Area cities.

Mixed industry-level performance

Industry-category performance was mixed with “manufacturing and trading” (54.7, up 3.2 points), “retail and wholesale” (53.9, up 3.4 points) and “innovation and technology” (57.8, up 3.2 points) improving in Q1. “Innovation and technology” remained in the top spot for a third consecutive quarter. The “current performance indices” for “financial services” (42.4, down 10.2 points) and “professional services” (45.6, down 5.2 points) dropped significantly quarter-on-quarter among the five industry categories, falling below the 50 neutral mark.

Cautious business sentiment persists after solid start to 2024

Kelvin Lau, Senior Economist, Greater China, Standard Chartered, said: “Our GBAI current performance index rebounded in Q1, driven by strong ‘profits’, ‘new orders’ and ‘production/sales’ performance, indicating a solid start to 2024. However, the inability of the expectations index to benefit from better current performance is a clear sign of still-cautious business sentiment. With the prevailing recovery momentum still looking fragile, we see room for more policy support to continue to narrow the output gap and dispel deflation expectations.” 

Rising e-commerce business in China and the rest of Asia

The survey also captured the GBA companies’ current participation and plans in cross-border e-commerce or online sales. A collective 44.6% of respondents said they had online operations, with over half reporting that online sales accounted for 21% to 40% of their total sales. Among respondents that had cross-border online sales, the top three locations of their buyers were Mainland China (86.4%), the rest of Asia (including Japan and Korea, 42.2%) and the United States (32.9%). Furthermore, respondents that already had or will have cross-border online sales expect that the mainland, ASEAN and the rest of Asia would be the three most attractive e-commerce markets in the next two years.

GBA companies favour online expansion

Putting the Index’s findings into perspective, Irina Fan, Director of Research, HKTDC, said: “It is clear that e-commerce is an integral part of the business operation of many GBA companies. As a result, a high proportion of companies are now targeting new markets via cross-border e-commerce.”

“Along the way, they are encountering a range of new challenges, including a lack of online marketing expertise, intense price competition or narrow margins and shortage of appropriate technical support. Against this, we have to balance such obvious plus points as access to additional sales channels and increased revenue, greater brand visibility and enhanced international corporate reputation.”

About the GBAI

The GBAI is the first forward-looking quarterly survey in the market that looks at the business sentiment and synergistic effects in cities and industries across the GBA. It is compiled based on a survey of more than 1,000 companies in the GBA covering the manufacturing and trading, retail and wholesale, financial services, professional services and innovation and technology sectors. The index enables investors and businesses to better understand the current business climate, gauge future performance prospects and formulate their market strategies for the GBA.

Related materials

·Standard Chartered GBA Business Confidence Index Report: https://www.sc.com/hk/gba/gba-index-report/

·HKTDC Research: https://research.hktdc.com/en/article/MTY2MjM4MTg2OQ