The latest Standard Chartered GBA Business Confidence Index (GBAI) for Q2 2024 reveals a varied performance across industries in the Greater Bay Area (GBA). The "current performance" index for business activity remained steady at 54.1, slightly down from 54.3 in Q1 but maintaining a strong level since Q2 2021. The "expectations" index rose to 54.8 from 54.0, marking its first increase in five quarters and reflecting sustained expansionary momentum.
At the city level, Hong Kong showed notable improvements with its "current performance" rising to 47.1 from 43.3, and "expectations" nearing the neutral mark at 49.7, up from 44.2. In contrast, Guangzhou experienced declines, with "current performance" falling to 53.6 from 57.1 and "expectations" dropping to 56.6 from 60.6. Shenzhen led the region with the highest "current performance" at 57.3 and "expectations" at 57.1, demonstrating robust economic activity and optimism.
Sector-wise, there was significant quarter-on-quarter improvement in "retail and wholesale" (+3.9 points for "current performance" and +2.6 points for "expectations"), "financial services" (+15.0 points, +10.7 points), and "professional services" (+7.6 points, +12.3 points). The May Labour Day holidays and the early start to the "618" online shopping festival likely boosted household demand, allowing "retail and wholesale" to outperform "manufacturing and trading" (-0.9 points, +0.7 points), despite the latter's strong start to the year.
The "innovation and technology" (I&T) sector faced challenges due to tariff concerns, with its "current performance" sub-index plunging to 43.9 from 57.8, and "expectations" falling sharply to 38.1 from 54.6 in Q1. Confidence levels varied significantly across key cities, with Shenzhen showing 42.0 for "current performance" and 33.7 for "expectations," Guangzhou at 50.0 and 59.4, and Hong Kong leading with 63.2 and 76.0. This disparity highlights differing vulnerabilities to external tariff hikes.
Kelvin Lau, Senior Economist, Greater China, Standard Chartered, commented on the impact of US and European tariff hikes on Chinese imports and the resulting uncertainty for I&T respondents, particularly those in the EV and lithium battery supply chains. However, he noted Hong Kong's I&T outperformance, attributed to the city's recent innovation and technology initiatives.
Despite potential risks, GBA companies remain committed to investment. The term "new quality productive forces" reflects China's push to modernize its economic growth model through technological innovation. While 11.7% of respondents saw "a very high risk" of overinvestment, a substantial 36.7% described it as "only a low risk." Notably, 26.1% of respondents plan to increase investment in the next 12 months, indicating confidence in future growth.
Irina Fan, HKTDC Director of Research, highlighted the solid economic pace in Mainland China and the expected greater role of Hong Kong in industrial transformation. The GBAI provides valuable insights for investors and businesses, helping them understand the current business climate and future performance prospects across the GBA.
For more detailed insights, you can access the full Standard Chartered GBA Business Confidence Index Report and HKTDC Research.