The Standard Chartered Greater Bay Area Business Confidence Index rose to multi-year high levels in the third quarter, reflecting a broad-based recovery in business sentiment following reduced external uncertainty after the extension of the US-China trade truce. The quarterly survey, jointly conducted by Standard Chartered and the Hong Kong Trade Development Council, showed both current performance and expectations indices reaching their highest levels in four and two years respectively.
The current performance index for business activities increased to 54.7 from 53.1 in the second quarter, while the expectations index rose more substantially to 55.7 from 52.0. During the survey period from early August to early September, though US reciprocal tariffs came into effect, the extension of the trade truce by another 90 days to November and multiple trade agreements with major trading partners contributed to diminished tariff uncertainty and a more stable external environment.
Almost all sub-indices showed quarter-on-quarter improvement, with six of the eight current performance components rising. New orders saw the sharpest increase, jumping 8 points to 57.5 from 49.5 in the previous quarter, while prices of finished goods and services rose 4.1 points to 58.8. The optimism in business outlook was even more pronounced, with all expectations sub-indices remaining well above the neutral mark. Production and sales showed the strongest rebound among the eight main sub-indices, increasing by 5.3 points, followed by financing scale (+4.8 points), fixed asset investment (+4.2 points) and profit (+3.9 points).
Irina Fan, Director of Research at HKTDC, noted that nearly all current performance and expectations indices rose across GBA cities, with Hong Kong showing the strongest confidence growth. Hong Kong's current performance and expectations sub-indices increased by 8.3 and 7.3 points respectively to 52.2 and 53.6, supported by continued trade frontloading and robust financial activities. Additional research materials are available at HKTDC Research.
Hunter Chan, Economist for Greater China at Standard Chartered, indicated that the survey findings align with market optimism seen during the third quarter following the trade truce extension and expectations of continued dialogue between the US and China. However, he cautioned that persistent trade uncertainty may again dampen business sentiment. With increasing external uncertainties and competition challenges in mainland China, the trend of diversification continues, with exploring overseas markets remaining a key strategy for 24.5% of GBA corporations to mitigate potential risks.
The survey also examined the impact of excessive competition, or anti-involution concerns, on businesses. Most respondents (63.5%) indicated they had not been affected by excessive domestic competition, while 3.1% reported benefiting from it. Approximately 29% experienced moderate impact and 5% reported significant impact. Among affected businesses, over 70% saw negative effects on profit and sales, while only around 40% indicated disruptions to hiring and investment. Companies are adopting multiple strategies to address involution challenges, including brand building and marketing (36.3%), cost control and inventory management (35.6%), and providing value-added services (29.7%). The full report and supporting materials can be accessed at http://bit.ly/4oiGQDU.
