The Standard Chartered GBA Business Confidence Index (GBAI) for the third quarter of 2024, jointly released by Standard Chartered and the Hong Kong Trade Development Council (HKTDC), reflects a modest improvement in business sentiment across the Greater Bay Area (GBA). The “expectations” index rose slightly to 55.2 from 54.8 in Q2, indicating optimism among firms. However, the “current performance” index decreased to 50.6 from 54.1, pointing to a slowdown in economic momentum following a challenging first half of the year.
Hong Kong Leads Growth Among GBA Cities
Hong Kong led growth among GBA cities, showing significant gains in both “current performance” and “expectations.” The city’s “expectations” score jumped to 58.8 from 49.7 in Q2, marking the largest increase among all 11 GBA cities. Hong Kong’s “current performance” also saw a modest uptick of 0.2 points to 47.3. Dongguan and other cities similarly reported improvements, reflecting positive business sentiment across the region.
Manufacturing Sector Faces Pressure Amid Trade Concerns
The manufacturing sector in the GBA showed resilience, maintaining confidence at 54.1, but trade-related uncertainties remain a concern. The potential for increased tariffs, especially if former U.S. President Donald Trump wins the upcoming election, has impacted manufacturing sentiment. Despite these challenges, the sector’s performance stayed above the neutral mark. Kelvin Lau, Senior Economist, Greater China at Standard Chartered, remarked, “The data aligns with the economic trends observed in August, with slower growth in industrial production, retail sales, and fixed asset investments. The impact of China’s recent stimulus package and potential Federal Reserve rate cuts are not yet reflected in Q3, but these may improve sentiment in the near term.”
Key Risks: Interest Rates, Economic Growth, and Trade Barriers
Businesses in the GBA face several notable risks. Nearly 60% of respondents cited concerns over “higher global inflation and interest rates” (47%), “China’s growth slowdown” (46%), and “trade tariffs and sanctions” (42%) for the coming year. Trade barriers are also impacting business, with 47.2% affected by tariff hikes, 44.2% by sanctions, and 34.6% by non-tariff barriers. In response to potential trade disputes between China, the U.S., and the EU, 88% of respondents involved in external trade reported plans to front-load export orders, while 81% plan to front-load imports as a risk mitigation strategy.
GBA Manufacturers Cautiously Optimistic
Irina Fan, HKTDC Director of Research, noted that while GBA manufacturers remain cautious about potential U.S. tariffs, about 50-60% of respondents do not anticipate significant negative impacts on their business.
About the GBAI
The GBAI is the first forward-looking quarterly survey of business sentiment across the Greater Bay Area. Covering over 1,000 companies across sectors including manufacturing, retail, financial services, and technology, the index provides critical insights for investors and businesses, helping them gauge the GBA’s business climate and formulate informed strategies.
