HKPC Announces Standard Chartered Hong Kong SME Leading Business Index Q2 2021 Results - Overall Index Rebounds to a Two-Year High; SMEs Plan Ahead with Government Budget Measures

(Hong Kong, 29 April 2021) The Hong Kong Productivity Council (HKPC) today announced the “Standard Chartered Hong Kong SME Leading Business Index” (“Standard Chartered SME Index”) for the second quarter of 2021, which recorded the largest quarter-over-quarter surge of 9.8, standing at a two-year high of 42.2. It reflected an uptrend of SMEs’ business confidence against the backdrop of COVID-19 vaccination programme being launched in various countries, as well as gradual relaxation of social distancing measures in Hong Kong. 

All five component sub-indices* went up simultaneously in Q2, among which “Global Economy” recorded the most significant surge from 19.9 in last quarter to 43.6. With regard to industry indices, “Information and Communications” performed the best among the 11 industries surveyed as it was the first industry sector reaching a level above 50. All three key industry indices, namely Manufacturing Industry, Import / Export Trade & Wholesale Industry, and Retail Industry, also recorded an uplift. Meanwhile, 62% of SMEs surveyed expected the sales to increase or remain unchanged in the coming quarter, representing a climb of 25% from the last quarter. The survey also revealed that “Information Technology”, “R&D” and “Product & Marketing Promotion” were the top 3 categories that most SMEs indicated to increase investment in.

Mr Edmond Lai, Chief Digital Officer of HKPC, said, “During the survey period, major developed economies have started the vaccination programme. In addition to the relaxation of social distancing measures in Hong Kong, SMEs are more optimistic in their confidence on the economy and business situation. 59% of SMEs surveyed hold a positive or neutral perspective over the global economy, recording a significant quarter-over-quarter surge of 31%. Even though the overall index has remained below 50, this quarter has seen a sharp upturn when compared with the last quarter. Many SMEs plan to increase investment in order to grasp the opportunities brought by the economic recovery. We are particularly delighted to see SMEs willing to increase their R&D investment, indicating that local enterprises are attaching more importance to R&D with an aim to enhance productivity and competitiveness through innovative technologies and services. HKPC is committed to leveraging technology development to drive industry 4.0 and enterprise 4.0, also advancing Hong Kong’s reindustrialisation. HKPC has been sparing no efforts in smart production technologies, plant layout design, product testing, R&D commercialisation and nurturing future talents. In the future, HKPC will be more proactive in offering all-round technologies and training support to Hong Kong SMEs, assisting them in digital transformation and technology upgrade.” 

Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “The latest set of results were very encouraging, with the overall index jumping almost 10 points to a two-year high of 42.2, reflecting a clear reduction in contractionary pressure on the economy. A big lift to sentiment came from an improving ‘Global Economic’ sub-index, fuelled by a strong resumption in China production after Lunar New Year, but also swift vaccine rollout and strong fiscal spending in the US. This helps explain the impressive quarter to quarter improvements in industry sub-indices for the more externally-oriented respondents such as manufacturers, exporters and those in transportation. That said, the more domestically oriented respondents also felt more upbeat over the past quarter, possibly due to the unwinding of social distancing measures since February. In particular, the index was able to capture the recent warming up of the residential property market, as evident by the 16-point rise in the ‘Real Estate’ sub-index.”

“All the positive observations just mentioned has translated into better sales and profits expectations, echoing our call for more economic recovery ahead, albeit one that is likely to still be shallow at best given that most sub-indices stayed below the 50-neutral mark for now across industries. Rising cost pressure also looks to remain a key challenge for most SMEs, with 58% of them expecting an increase of ‘Raw Material Cost’ in Q2 2021,” Mr Lau added.

The survey also looked into SMEs’ planning in response to the HKSAR Government’s 2021-22 Budget. The reduction items that most SMEs deemed as beneficial were “Waiver of Business Registration Fees”, “Profit Tax Reduction” and “Rates Concession”. 48% of SMEs surveyed planned to use the amount saved to enhance company’s cash flow. Nearly half (49%) have applied or are interested in applying the loan or funding schemes mentioned in the Budget. In the coming year, the top 3 digitalisation items that most SMEs wished to develop were “Online Businesses”, “Online Working or Conference Platform” and “Digital Payment”.

The survey also showed that as to loan schemes, “Construction” industry had been the most active in making the applications, with “Special 100% Loan Guarantee” being chosen by most of them; while “Manufacturing” was the industry expressing the most interest in filing applications, with “Pre-approved Principal Payment Holiday” being the favourite option. As to funding schemes, “Manufacturing” industry came top in the submission of applications, with “Technology Voucher Programme” being the hottest choice; while “Financing and Insurance” was the industry which showed the most interest in filing applications, with “Technology Voucher Programme” and “Patent Application Grant Scheme” being the preferred funding schemes. 

Mr Lai said, “HKPC is delighted to see about half of the surveyed SMEs having already applied or expressed interest in applying the loan or funding schemes mentioned in the Budget. Indeed, the HKSAR Government has injected HK$4.75 billion annually into the ‘Innovation and Technology Fund’ for two consecutive years to sustain its 17 funding schemes and the work of over 50 R&D laboratories in the next three years. Besides, the Government has allotted extra funds for schemes to nurture innovation and technology talents and has proposed to increase funding for the ‘Dedicated Fund on Branding, Upgrading and Domestic Sales’ (‘BUD Fund’). All these measures will enable Hong Kong SMEs to grasp the opportunities brought by the improved global economic outlook and the national ‘14th Five-Year Plan’. HKPC strives to help local enterprises keep abreast of the latest market trends and information on technology development, plus introducing world-class technologies to improve the production processes. Meanwhile, ‘SME ReachOut’ will continue to support SMEs through face-to-face meetings, helping them identify the appropriate funding schemes and addressing their application-related questions.”

Conducted in March 2021, the survey successfully interviewed 805 local SMEs. The “Standard Chartered SME Index” report is available at HKPC website: https://u.hkpc.org/scbi-en.

For more details about HKPC’s intelligent manufacturing solutions to help SMEs leverage i4.0 and advanced technologies to enhance productivity and “Make Smart Smarter”, please visit the dedicated website: https://smarter.hkpc.org/en/index.html.

*The five component sub-indices are "Recruitment Sentiment", "Investment Sentiment", "Business Condition", "Profit Margin" and "Global Economy".

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Mr Edmond Lai, Chief Digital Officer of HKPC (left); and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (right), announced the Q2 overall Index standing at a two-year high of 42.2 at the press conference of “Standard Chartered Hong Kong SME Leading Business Index 2021 Q2”, plus 59% of surveyed SMEs holding a positive or neutral perspective over the global economy, reflecting an uptrend of SMEs’ business confidence.