Hong Kong Exports Look Promising in 2014

17 December 2013 – Hong Kong exports next year are expected to grow by 5.5 per cent in value and 3.5 per cent in volume, compared with estimated growth of 3.5 per cent and 2.5 per cent, respectively, for 2013, according to the Hong Kong Trade Development Council (HKTDC).

Speaking at a press conference today, HKTDC Director of Research Nicholas Kwan said that global trade should benefit from, among other things, “a synchronised upturn in the developed economies, heightened reforms on the Chinese mainland and the surprisingly positive outcome of the recent WTO trade talks in Bali.” He added that consumer behavior, e-commerce and the development of the Shanghai Free Trade Zone offer both opportunities and concerns for Hong Kong exporters, advising local exporters to rethink their sales channels and tap into e-tailing.

Polarisation and Promise
Turning to Europe, he noted that, because many retailers on the continent are now sourcing directly from manufacturers and suppliers, “it is increasingly important for Hong Kong exporters to establish direct links with low-cost European Union retailers.” He added that there is a favorable sales outlook across Europe for exporters of stylish, environmentally friendly, competitively priced products. “Hong Kong suppliers can capitalise on their ability and flexibility to produce customised designs superior to their competitors elsewhere in Asia.”

Online retailing, said Mr Kwan, is having a global impact, allowing manufacturers and suppliers to sell directly to consumers. US online retail sales are expected to jump from US$262 billion in 2013 to US$370 billion in 2017[1], a nine per cent compound annual growth rate over the next four years. “Hong Kong suppliers can capitalise on this either by selling directly to consumers or by drop-shipping,” said Mr Kwan. “Thankfully, Hong Kong’s air-freight advantages may allow local suppliers to gain United States market share through efficient customer service.”

Stable Growth
HKTDC Principal Economist (Global Research) Daniel Poon said that the major developed economies should expand at a more sustainable pace in 2014. “The US looks the most resilient, against a backdrop of stronger employment, an improving housing market and gains in asset prices.” The EU, he said, “is also showing tentative signs of recovery, given its ultra-loose monetary policies, fiscal consolidation and the structural reforms in a number of countries.” Japan’s stimulus policies, he added, should set it on course for a firmer recovery. “Aggressive monetary easing should keep the yen weak, boosting exports amid a rise in external demand.”

Reform Opportunities
Emerging economies should also fare better, despite an outflow of capital due to worries of tapering US monetary stimulus. Mr Poon believes that the mainland will continue to play a leading role in buttressing growth. “Consumption will be nurtured so as to achieve a more balanced growth between domestic and external demand, as well as between overall consumption and investment-led growth, creating enormous business opportunities for Hong Kong exporters.”

Opening Up Trade
HKTDC Principal Economist (Greater China) Billy Wong said that Hong Kong should benefit from the new opportunities emerging from the launch of the Shanghai Free Trade Zone. But he advised the city to boost its own competitiveness. “Hong Kong needs to improve its global transport links and to ensure that operating costs remain competitive across the region.”

Guangdong, he said, is reportedly looking to establish a Nansha-Qianhai-Hengqin Free Trade Zone. “Hong Kong could play an active role in the zone, given its close ties with Guangdong,” said Mr Wong. He added that Hong Kong “would benefit hugely from integrating its functions as a commercial centre, while serving as the front end of such a globally appealing business region.”

Continuing Concerns
Despite the more optimistic outlook for 2014, Mr Poon said that there are still concerns over a renewed global downturn, protectionism, geopolitical tensions and the risk of a tighter US monetary stance. “Sustained consumer caution will remain a deterrent to conspicuous consumption. As a response to this, importers and retailers will continue to seek out those sources offering well-priced, quality products, with many of these based outside China.” Mr Poon offered the following analysis of individual industries: