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City's SMEs see bullish prospects in Greater China

Updated: 2009-06-04 07:18

By Joey Kwok(HK Edition)

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HONG KONG: Small and medium-sized enterprises (SMEs) in Hong Kong regard Greater China as the most promising region in which their businesses can achieve positive growth over the next three months, according to an HSBC trade confidence survey.

Almost half of the survey respondents in Hong Kong engaged in export and import trade expect their businesses in the Greater China region to report much better earnings in June through August this year, as the global economic recession seriously hampered trading activities in the US and Europe.

Lawrence Webb, HSBC's global head of trade and supply chain, said more companies in Hong Kong are now looking for business opportunities in developing economies, including the mainland, India and Vietnam.

"Asia is relatively more resilient," Webb said at a press conference yesterday. "The $700 billion stimulus package across Asia will help stimulate trade in the region."

He added that it would be a good opportunity for the city's companies to diversify their business portfolios, as demand in the US and Europe remains sluggish.

Conducted in April and May, the survey asked 2,100 trade-oriented SMEs in seven markets across the world about their outlook on cross-border trade and business growth over the next three months.

Among all respondents, Hong Kong traders were the most bearish in their outlook on trade volumes. Nearly 46 percent of Hong Kong traders expect trade volumes to decline over the next three months.

About a third of respondents in Hong Kong expect the risk of payment default by their buyers to jump in the near term.

To avoid non-payment risks, traders in Hong Kong and Singapore said they will ask for advance payment from their buyers.

Webb said suppliers are now "anxious about getting paid on time", while buyers are less likely to make payments before they are certain that all terms in the trade agreements are met.

Fluctuating foreign exchange rates is also a major concern for Hong Kong companies engaged in cross-border trade, with around 54 percent expecting foreign exchange rate fluctuations as a potential top barrier to trade.

Webb said current foreign exchange risks are greater as businesses contend with a highly volatile exchange market.

They acknowledge, however, that the upcoming establishment of a yuan trading settlement scheme will help traders to reduce their risks.

On the subject of trade confidence, Webb said Hong Kong firms were the most pessimistic among seven markets covered in the survey, as the city's economy is deeply entrenched in the global economy.

Webb said the level of trade confidence in developed markets, such as Hong Kong, Singapore and Australia, is lower compared with that in developing economies of the mainland, Vietnam and India.

"Developing economies are not heavily reliant on the western markets," he said, "They are expected to recover faster from the downturn and continue to grow in 2010."

City's SMEs see bullish prospects in Greater China

(HK Edition 06/04/2009 page4)

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