Title: Standard Chartered Survey Reveals Weakening Economic Recovery in the Greater Bay Area
Date: July 3, 2023
The Standard Chartered Greater Bay Area Business Climate Index (GBAI) for the second quarter of 2023 has revealed a decline in business confidence compared to the previous quarter. The survey, conducted by the Hong Kong Trade Development Council and Standard Chartered Bank, also assessed global supply chain issues in the Greater Bay Area.
According to the GBAI data, business confidence in the second quarter has fallen to a neutral level due to a normalizing base effect and the softening of national macro data. However, the index has not yet entered contraction territory, indicating that the setback is expected to be short-lived.
Liu Jianheng, senior economist for Greater China at Standard Chartered Bank, stated, “The Greater Bay Area is the epitome of China’s diversified economic engine and the weathervane of overall growth. China should continue to move forward on the road of moderate recovery.”
The survey also found that 42% of the respondents believed that the migration of global supply chains is accelerating. However, despite considerations of moving production overseas, there has been no mass relocation of Greater Bay Area companies out of China.
The GBAI report highlights that while the overall index fell back in the second quarter, it remained at a neutral level. The willingness to invest has also shown resilience. The report also noted a decline in certain sub-indices, such as raw material inventory, new orders, and profits, but they remain just shy of the neutral line.
On a positive note, the “Prices of Goods/Services” index remained in expansionary territory, suggesting benign inflationary pressures amid a negative output gap. The “Fixed Asset Investment” index scored the highest, indicating optimism regarding long-term business prospects in the Greater Bay Area.
Looking ahead, the report revealed that the overall expectation index remains at the second-highest level in two years. However, the growth forecast for China’s GDP in the second quarter and 2023 has been revised downward to reflect weaker-than-expected conditions.
The report also highlighted challenges faced by the technology industry due to macro and geopolitical factors, such as the down cycle in the global semiconductor industry and declining demand for Chinese electronic products.
Regarding the transfer of production capacity, the survey showed that 22% of the respondents considered it to be an important part of their supply chain management strategy. Additionally, labor shortage and wage pressures in the Greater Bay Area were identified as influential factors in the decision to relocate factories overseas.
Despite considerations of production capacity transfer, the survey revealed that the majority of companies in the Greater Bay Area have not yet taken action, indicating a lack of large-scale relocation out of China.
In conclusion, the Standard Chartered survey indicates a weakening economic recovery in the Greater Bay Area, but it is seen as a temporary setback rather than the end of the post-epidemic recovery.
Disclaimer: This article is based on the original work of Economic Observation Network reporter Zhang Rui and is subject to copyright protection.