December 6, 2007 -
Hong Kong's export growth will slow in 2008, according to a trade forecast report
released today by the Hong Kong Trade Development Council (TDC).
According to the report,
Hong Kong's exports are forecast to rise by seven per cent in 2008, compared
to the TDC's estimated growth of 8-9 per cent for 2007.
This moderating expectation
is already evident in the TDC's Export Index, developed to monitor the export
performance and prospects of Hong Kong traders. The index is based on a quarterly
business confidence survey covering Hong Kong's major industries.
For the fourth quarter of
2007, the index stands at 48.8, much lower than the first three quarters' average
of 57.7. A reading below 50 indicates a contraction in exports, according to
the TDC.
Export market prospects
"The United States market will be less promising in 2008," says the
TDC's Chief Economist Edward Leung. "A stronger euro and the European Union
economy may help buffer against the slowdown in the US to some extent."
Mr Leung expects Hong Kong
exports to Japan to be steady, but not particularly impressive, in 2008.
Hong Kong exports to the
US recorded a negative growth of 0.7 per cent in the first 10 months of 2007.
Exports to Japan also recorded a negative growth of 0.9 per cent. Exports to
the EU in the same period, however, registered an encouraging growth of 5.7
per cent.
Mr Leung says that Hong
Kong's export growth will also be determined by the degree to which emerging
markets are affected by the US slowdown. (See table, in appendix,
showing the impact of the US slowdown on Hong Kong exports.)
Hong Kong exports to emerging
markets rose across the board in the first 10 months of 2007: ASEAN, up 14.3
per cent; the Chinese mainland, up 14.1 per cent; Commonwealth of Independent
States and Central and Eastern European countries, up 28.5 per cent; the Middle
East, up 20 per cent.
According to Mr Leung, Hong
Kong exports will benefit from the dynamic growth taking place among oil-producing
economies and emerging markets in Asia, as they will be less affected by a US
slowdown.
Hong Kong manufacturers
and exporters are advised to expand their emerging market sales, particularly
to the Chinese mainland, which has sustainable domestic demand. Half of Hong
Kong's exports now go to the mainland.
Production environment
challenges
Hong Kong manufacturers and exporters are expected to face some big challenges
ahead, including changes in the rules governing export processing trade in the
mainland. The associated risk - disturbing the smooth operation of Hong Kong's
supply chain in southern China - is a cause for concern. Mr Leung says the Central
Government is now aware of the impact of its policies, and is more willing to
consult the industry beforehand.
Rising production costs
in the mainland, however, particularly in the Pearl River Delta (PRD) region,
still present a challenge to Hong Kong manufacturers. Labour costs in the PRD
have increased by some 25 per cent over the past two years. A new Labour Contract
Law, which goes into effect in January 2008, may further exacerbate the situation.
The strengthening renminbi,
which has appreciated by up to 10 per cent against the US dollar since mid-2005,
meanwhile, has translated into a 2-4.5 per cent rise in production costs.
The mainland's promise to
reduce greenhouse gas emissions and to adopt more environmentally friendly manufacturing
processes also has implications for Hong Kong factories operating in the mainland.
Hong Kong manufacturers
are advised to review their operations, including their use of technology, source
of raw materials and factory locations, in future.
Mr Leung adds that Hong
Kong manufacturers and exporters should manage their supply chains better to
stay competitive. He also believes they should consider shifting from their
basic methods of processing and product assembly to higher value-added production
methods, thereby creating higher value-added goods.
They also need to monitor
more closely new regulations in overseas markets aimed at protecting the environment
and ensuring that products entering those markets are safe.
Export performance by industry
Hong Kong's electronics industry, which accounts for nearly half the territory's
total exports, will remain the growth leader, according to the TDC report. Toy
sales will be clouded by the spate of recent recalls. Exports of clothing, timepieces
and jewellery are expected to be steady.
The report also notes that
services exports should moderate slightly, in tandem with the slower growth
of merchandise exports. The export of trade-related services and travel services,
however, should continue to be bright.
Regarding the IPO (Initial
Public Offering) business, the report says reasonably large-size IPOs should
take place frequently in 2008.
To view a webcast interview
of TDC Chief Economist Edward Leung offering further commentary on today's trade
forecast, please visit:
http://webcast.tdctrade.com/071130_01/e_100.htm
About the TDC
Established in 1966, the Hong Kong Trade Development Council (TDC) is the international
marketing arm for Hong Kong-based traders, manufacturers and service providers.
With more than 40 offices worldwide, including 11 in the Chinese mainland, the
TDC promotes Hong Kong as a platform for doing business with China and Asia.
The TDC also organises trade fairs and business missions to connect companies
with opportunities in Hong Kong and the mainland, while providing information
via trade publications, research reports and online. For more information, please
visit www.tdctrade.com
Media Enquiries
Please contact the TDC's Media and Public Affairs Department:
Lawrence Yau Tel: (852) 2584 4510 Email: lawrence.yau@tdc.org.hk
.
