This undated file photo shows Luohu district in Shenzhen. (LUO HAIMING / CHINA DAILY)
The Standard Chartered GBA Business Confidence Index declined 6.3 points to a seven-quarter low of 43.3 in the second quarter, according to a survey released on Wednesday.
The quarterly survey of more than 1,000 companies in key business sectors across the Guangdong-Hong Kong-Macao Greater Bay Area cited COVID-19-related supply-chain disruptions and the complex external environment for the drop. But businesses also expressed modest optimism that the environment will improve in the following quarter.
The quarterly survey of more than 1,000 companies in key business sectors across the Guangdong-Hong Kong-Macao Greater Bay Area cited COVID-19-related supply-chain disruptions and the complex external environment for the drop. But businesses also expressed modest optimism that the environment will improve in the following quarter
An index reading above 50 suggests respondents’ growing confidence in the business environment, while a score below 50 indicates pessimism. The index is run by Standard Chartered Bank and the Hong Kong Trade Development Council.
Kelvin Lau Kin-hang, Standard Chartered Hong Kong’s senior economist for Greater China, said the current index performance fully captures a confluence of external and domestic headwinds, such as global inflation, strict COVID-19-related measures, and short-term disruptions to production, sales and logistics across many GBA cities.
The retail and wholesale sector bore the brunt of the drop, as its subindex weakened more than 10 points to 37.7 in the second quarter. The financial-services subindex also fell below 40 points. Meanwhile, business confidence among innovation and technology respondents outperformed other sectors with a reading of 50.3, given the easing regulatory worries.
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Hong Kong’s latest performance in business activities dropped to marginally below 40 from 41.1 in the first quarter, though the city’s overall economy has been on the mend after the unwinding of stringent social-distancing rules and travel bans imposed during the fifth wave of the pandemic.
Lau attributed Hong Kong’s lower-than-expected business confidence to the sluggish sentiment among other cities in the GBA that could likely weigh on Hong Kong’s atmosphere. “The survey sample was dominated by small and medium-sized companies, which may also have contributed to the weak survey result,” he added.
Looking ahead, businesses in the GBA expect some form of recovery, as evidenced by the expectations index for the coming quarter standing above the dividing line at 52.5 despite a slight drop from the previous quarter.
This indicates a general perception among respondents that business will start to improve, albeit modestly, after a challenging first two months in the second quarter, Lau said.
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Most respondents, nonetheless, identified rising commodity prices, weak global demand, and a resurgence of COVID-19 outbreaks as potential risks.