Exporters look past COVID-19

Hong Kong exporters reported a sharply lower direct impact from the COVID-19 pandemic in the first quarter of this year but expressed anxiety over a possible resurgence, as well as knock-on effects such as softening global demand.

Exporters responding to the Hong Kong Trade Development Council’s (HKTDC) quarterly survey for the HKTDC Export Index, which rose a further 2.8 points to 39.0 in the January to March quarter, generally showed a more positive outlook but the index remains below 50, which indicates contraction.

“Although the index has risen for four consecutive quarters, it remains in contractionary territory, suggesting a cautiously optimistic export outlook,” said HKTDC Director of Research Nicholas Kwan. “The city’s export performance will be affected by several uncertainties such as whether there is a revival in consumer and business confidence, and whether the economic stimulus packages implemented in major economies are effective.”

Meanwhile, resurgence of the COVID-19 pandemic (46%) and softening global demand (28.4%) remained local exporters’ key concerns, according to the survey.

“As the impact of COVID-19 begins to diminish and business operations gradually return to normal, the Hong Kong economy is expected to regain the momentum for growth,” Mr Kwan said.

The survey also found the proportion of exporters who were hard hit by the pandemic dropped significantly, from 56.7% in the previous quarter to 33.1% this quarter. “Reduction in order sizes [ 53.9% ] has been the most common adverse impact but more and more local exporters have experienced challenges brought by the disruptions to logistics and distribution [20.7%, up almost 8 percentage points] such tight container supply and soaring shipping costs,” he added.

Exporters go online

To weather COVID-19-related challenges, nearly half of the exporters surveyed planned to develop other product categories (45.7%) or build up online sales channels (45.4%) in 2021. The most popular channels for those going online included proprietary websites/applications/social commerce (77.3%) and third-party e-commerce platforms (64.9%). Some respondents also indicated they used online sourcing platforms (36.1%) or online exhibitions (19.1%).

However, many exporters encountered difficulties when developing online sales, including intense competition in the e-commerce market (56.7%) and ineffective digital market strategies (52.6%), while some were not ready to take small orders (37.6%) or establish long-term relationships with buyers on a virtual basis (32.0%). Other commonly identified issues included potential cybersecurity risks (26.3%) and the need to train e-commerce staff (25.3%).

Mr Kwan said many companies now offer a basket of value-added services as a way to stay competitive in the market. The most common free service offered is product design and development (67.9%), followed by preparing trade documentation (56.6%), logistics arrangement (56.6%), facilitating the attainment of quality-certification or product-testing reports (56.6%), and managing production including outward processing and quality control (52.8%).