Trade Outlook

2016 Trade Outlook Forum

Amid global economic volatility, HSBC and Hong Kong Trade Development Council (HKTDC) organised a luncheon seminar in January 2016 to provide forward-looking trade market insights.

“According to HSBC Trade Forecast Survey published in December 2015, Hong Kong’s Trade Confidence Score fell to 102 in the second half of 2015, from 124 in the first half of the year. Despite the uncertainty that abounds in global trade, the Asian region remains the key driver of global economic growth.” Rachel Wei, Head of Global Trade & Receivables Finance, Hong Kong and Macau, HSBC, said.

Loretta Wan, Director of Publications & E-Commerce of HKTDC, said that the HKTDC promotes external trade and market development for enterprises, helping them to become more competitive and adaptive to changing trends in the global markets and the Mainland. The annual Hong Kong Export Outlook published by HKTDC at the start of the year helps enterprises get a feel of the latest global economic pulse.

Global Economic Outlook

Daniel Poon, Principal Economist (Global Research) of HKTDC, pointed out that Hong Kong’s exports recorded a 1.9 per cent year-on-year drop in the first 11 months of 2015. As for prospects for this year, he mentioned that the US is expected to be the best performer among traditional markets. “A low unemployment rate, stable salary increase, and an improving real estate market all boost consumer confidence in the US.” Continually high unemployment rates and intensifying pressure of deflation, unresolved debt problems, geopolitical disturbances and security concerns all represent risks to the European economy. Japan’s economy remains sluggish and relies on stimulus from the nation’s quantitative easing programme; however, a weak Yen will undercut the import of consumer goods to Japan. As for exporters’ sentiments, he referred to the HKTDC Export Index that dropped to 31.4 in the fourth quarter of last year, denoting the lowest level of trade confidence since the first quarter of 2009, yet Hong Kong enterprises maintain a somewhat neutral view on Hong Kong’s exports in 2016 and predicted that the value of Hong Kong’s exports to remain unchanged.

Hong Kong as a platform for mainland China

The “13th Five-Year Plan” include policy objectives such as the building of an overall well-off society by 2020, maintaining an annual GDP growth of at least 6.5 per cent, creating sufficient employment, accelerating industrial transformation and upgrade, and overcoming the middle-level income gap.

Billy Wong, Principal Economist (Greater China) of HKTDC, mentioned that the transformation of the Chinese economy would be propelled by innovation, which includes the development of emerging industries, the launch of the “Internet+”, and the promotion of research and development. “Hong Kong enterprises may serve as intermediaries in introducing them to the Mainland,” he said.

A focal point of the Belt and Road Initiative is strengthening the “connectivity” between the countries along the Silk Road economic belt and the 21st century Maritime Silk Road. Infrastructure development involves investment, project contracts and demands for materials, all of which are conducive to trade. He believed that Hong Kong will play a key role in such areas as international finance, investment, infrastructure services integration, logistics and aviation, regional trade and dispute resolution.

Supply Chain Management Solutions

Roy Ng, Division Head of Business Development, Global Trade & Receivables Finance at HSBC, said that many overseas enterprises lower costs by reducing the use of letter of credit, and increasing their working capital by obtaining extended credit periods from suppliers. Some buyers will make use of “just-in-time” manufacturing to lower inventory. However, all of these solutions put cash flow pressure on suppliers.

Roy pointed out that in response to rising demand, HSBC has launched a buyer-led trade financing program. The stand-out feature is that upon a buyer’s approval of the invoice, the supplier receives early payment from the bank for the amount that remains trade payable of the buyer. All finance charges are to be borne by the supplier, and the financing cost is charged by the prevailing rates in the country where the program is set up. Meanwhile, the bank may be able to provide pre-shipment financing services to the buyer’s strategic suppliers through our local network. On the other hand, supplier-led financing programs are also common in the market. Such programs allow suppliers to receive funds prior to a buyer’s approval, and they provide financing for a portfolio of buyers. It is, however, subject to the credit appetite of the bank over the suppliers, the pricing may be higher than buyer-led program and may entail a higher risk of recourse.

E-Commerce in China

Jacky Chung, Regional Director of Eastern & Central China of HKTDC, stated that the Mainland e-commerce enterprises are blazing the trail to business success. On the policy front, the central government has launched various measures to remove policy barriers for cross-border e-commerce for exporters. Major e-commerce platforms are aggressively competing for customers and there have been marked changes in consumers’ online shopping habits. “Last year, 80% of online shoppers used mobile phones for making their purchases, while only 20 per cent used the computer.” With e-commerce being a prominent trend, he suggested that Hong Kong enterprises should create comprehensive channels for their businesses that include physical stores and online sales platform, employing both to target domestic sales in the Mainland. Meanwhile, industries such as information technology services, logistics, call centres and financial services are set to benefit from the demand propelled by the growth of e-commerce.

Important Notes:

  • The Hongkong and Shanghai Banking Corporation Limited (the "Bank") neither endorses nor is responsible for the accuracy or reliability of, and under no circumstances will the Bank be liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this event.
  • The opinions expressed are those of the featured speakers, and except where a speaker is specifically identified as a representative of the Bank, do not represent the Bank's views. The opinions are subject to change without notice and should not be construed as a recommendation of any individual holdings or market sectors.

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