HONG KONG – Business confidence in the Guangdong-Hong Kong-Macao Greater Bay Area has risen for the first time in more than a year, signaling optimism about the region’s economic expansion on the back of potential policy stimulation.

A survey released by Standard Chartered and the Hong Kong Trade Development Council (HKTDC) on Monday revealed that the expectation index for business activity in the GBA climbed to 54.8 in the second quarter, up from 54 in the previous quarter, logging its first rise in five quarters.

While an index above 50 suggests a positive outlook, a reading below 50 indicates that businesses remain wary of potential headwinds.

The improved expectations were underpinned by upbeat prospects on profits, new orders, as well as production and sales, while the sub-indexes of raw material inventory and financing scale were below 50.

The expectation index for the retail and wholesale sector led the pack at 61.3, followed by manufacturing and trading, as well as financial services, according to a breakdown by sector.

RELATED ARTICLES

• Survey: Business confidence across GBA hit 11-quarter high in Q1
• GBA business confidence, Macao children art festival, Doraemon & Friends Tour

However, simmering geopolitical tensions put innovation and technology companies at odds, with the forward-looking gauge sliding from 54.6 in the first quarter to a mere 38.1 in the second quarter.

“During the survey period, the US hiked tariffs on $18billion worth of imports from China … (and) the European Commission recently decided to impose anti-subsidy tariffs on Chinese electric vehicles,” said Standard Chartered Senior Economist Kelvin Lau Kin-heng at a news conference on Monday.

Some of the surveyed I&T enterprises’ “reliance on external demand could be a lingering concern going into the US elections,” he added.

However, Lau noted the upcoming third plenary session convened by the Political Bureau of the Communist Party of China Central Committee in July could potentially help to weather external and internal challenges for businesses.

The session “may unveil important information that could inject a shot in the arm for mid-to-long-term economic development and boost market confidence,” he said.

Besides, Lau said he expected the People’s Bank of China to further cut the reserve ratio requirement for banks and shave interest rates in the next three months, following a 50-basis points cut in the RRR in January.

The investment bank predicted that the US Federal Reserve would lower interest rates in September and December respectively, which would also benefit the GBA business environment.

The current performance index under the GBA Business Confidence Index remained stable in the second quarter at 54.1, compared to 54.3 in the first quarter, hovering near its highest level since the second quarter of 2021.

At the city level, the expectation index of the Hong Kong Special Administrative Region stayed below the watershed threshold at 49.7, up from 44.2 in the first quarter.

Its current performance benchmark increased to 47.1 during the same period.

Lau said the negative outlook is partly due to weak consumption in the retail sector. “I hope the positive news, such as scrapping extra stamp duties on Hong Kong homebuyers, could translate into real economic performance in the latter half of the year,” he added.

Director of research at HKTDC Irina Fan Yuen-yee said the interest rates cut by the US Federal Reserve would ease the pain for local retail businesses. The HKTDC recently raised its Hong Kong export forecast, reflecting a more stable trend in foreign trade demand.

The GBA business confidence survey polled over 1,000 companies aiming to gauge business sentiment and synergistic effects in cities and industries across the region.

Contact the writer at tianyuanzhang@chinadailyhk.com