HKPC Announces Standard Chartered Hong Kong SME Leading Business Index Q3 2022

SME Business Confidence Rebounds Recording the Largest Double-digit Uplift
Close to 80% Surveyed SMEs are Impacted by Cross-border Travel Restrictions

(Hong Kong, 26 July 2022) The Hong Kong Productivity Council (“HKPC”) announced today the “Standard Chartered Hong Kong SME Leading Business Index” (“Standard Chartered SME Index”) for the third quarter of 2022. The Overall Index recorded the biggest increase of 11.4 points ever to 47.1 after suffering from the biggest drop in the last quarter. The results showed an overall steady recovery of business confidence across industries after being severely hit by the fifth wave of the pandemic.

All five component sub-indices* rebounded simultaneously in this quarter, among which “Investment Sentiment” (51.1) and “Recruitment Sentiment” (50.5) returned to above 50 neutral level. “Business Condition” (up 19.1 to 46.0) and “Profit Margin” (up 18.3 to 43.6) recorded the most significant upturn and exceeded the level prior to the fifth wave of pandemic in Q1 2022. However, “Global Economy” (up 13.7 to 37.5) remained relatively weak and failed to return to the 40 level.

All industry indices saw an increase. Of the three major industry indices, “Retail”, which was most suffered in the last quarter, rebounded remarkably by 17.4 to 48.6 – the largest uplift among all industries. “Manufacturing” recovered by 13.2 to 46.8, while “Import / Export Trade and Wholesale” was the industry with the slowest recovery, up only 7.8 to 43.7 compared with the last quarter. The “Business Condition” of all three major industries registered double-digit rise, with that of “Retail” climbing significantly by 32.1 to 51.7, that of “Manufacturing” increasing 20.0 to 45.0, and that of “Import / Export Trade and Wholesale” up 13.4 to 43.2. Moreover, the “Investment Sentiment” of the “Manufacturing” sector rebounded to 52.8, exceeding the level in Q1 2022.

The proportion of surveyed SMEs expecting an increase in raw material costs in the coming quarter slightly decreased to 70% this quarter, after the consecutive rise over the past seven quarters. More SMEs expected an increase in staff salary and product / service price in the coming quarter when compared with the previous quarter, accounting for 21% and 28% respectively. Regarding the expectation towards overall investment, 92% of SMEs expected overall investment would remain unchanged or increase, up 10%-point from 82% in the previous quarter. “Training Related to E-commerce or Digital Technology”, “Information Technology (IT) System”, “Research and Development (R&D)” and “Online Marketing Promotion” were the top four items that SMEs expected to maintain the same level of or increase investment in the coming quarter.

The featured topic of this quarter’s survey looked into the impacts of cross-border travel restrictions on Hong Kong SMEs. The results indicated that 77% of the surveyed Hong Kong SMEs were impacted by Mainland / international cross-border travel restrictions. Among these impacted SMEs, 67% of them were impacted by both Mainland and international cross-border travel restrictions, while 24% of them were only impacted by Mainland cross-border travel restrictions and 8% of them were only impacted by international cross-border travel restrictions. The top 3 industries most impacted by cross-border travel restrictions were “Import / Export Trade and Wholesale” (88%), “Construction” (86%) and “Retail” (84%).

Looking at the areas impacted by cross-border travel restrictions, 63% of the surveyed SMEs said that their “Sales” was impacted, while “Business Development and Management” (48% of surveyed SMEs) and “Purchasing” (45% of surveyed SMEs) were other areas severely impacted. When asked about how these impacted SMEs respond to the situation if cross-border travel could not resume normal in this year, about three out of ten impacted SMEs would consider “Increasing usage of digital technology” for both “Business Development and Management” and “Purchasing”. For “Sales”, about 30% of the impacted SMEs would like to “Enhance e-commerce”, yet at the same time another 30% of them said they have no plans.

Mr Edmond Lai, Chief Digital Officer of HKPC, said, “The Index marked a double-digit rebound after the sharp fall in the previous quarter, indicating that Hong Kong SMEs have almost overcome the negative impacts brought by the fifth wave of the pandemic. Optimism has returned after the HKSAR Government announced the gradual relaxation of social distancing measures in April and the implementation of Phase II Consumption Voucher Scheme. Many SMEs become more active in their investment outlook this quarter, after a rather conservative cost-cutting approach in the last quarter. Overall speaking, the business sentiment of SMEs has largely returned to the level before the fifth wave of the pandemic, despite a relatively downbeat outlook for ‘Global Economy’.”

Lai continued, “As seen from the survey results, the cross-border travel restrictions affected a wide range of business areas of SMEs, including sales, business development and management, purchasing and so on, at different magnitudes. To address the needs of numerous SMEs who tend to adopt digital technology or e-commerce in response to the recent challenges, HKPC has launched the ‘Digital DIY Portal’ ( offering a selection of affordable and ready-to-use solutions that cover different industries and match the needs of SMEs. Over 200 business digital solutions available at the portal cover e-commerce, smart office management, network security solutions, e-marketing, data analytics, etc. The pandemic has redefined the way how businesses operate and the consumer spending habits. Even after the travel restrictions are lifted and the pandemic is over, it is believed that innovation and digital transformation will continue for SMEs to maintain sustainable development and capture various potential opportunities in this digital-led era where ‘innovation never stops’.”

Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “Our ‘Standard Chartered SME Index’ headline print saw an impressive rebound to 47.1 in Q3 from 35.7 in Q2. Although this fell short of recovering all prior lost ground (the 12.4 points drop from Q1’s 48.1), the 11.4 points rebound was still the biggest quarter-on-quarter jump since our index inaugurated in 2012, suggesting clear economic improvement since Hong Kong started unwinding its social distancing measures as the fifth wave of the pandemic faded. This is particularly reflected in the immediate improvements in ‘Business Condition’ and Profit Margins’ – the two sub-indices most indicative of short-term business performance and worst hit in the prior round of survey. We also take comfort from the fact that all industry sub-indices rebounded quarter-on-quarter, led by the domestically-oriented ‘Retail’ (+17.4), ‘Real Estate’ (+15.3) and ‘Accommodation and Food Services’ (+15.0) industries. More interesting is the strong performance of ‘Manufacturing’ industry (+13.2, pushing it to a seven-year high of 46.8); we see this a tad optimistic considering the lingering inflationary challenges and the growing risk of recession among some of the major western economies. Instead, we believe the more subdued quarter-on-quarter improvements in sentiment among exporters, tech companies and financial service providers are more reflective of more external headwinds on the horizon, supporting our cautious view of 0.2% GDP growth forecast for the whole of 2022.”

Conducted between June and July 2022, the Standard Chartered SME Index survey successfully interviewed 921 local SMEs. The report will be available for download from HKPC website:

*The five Sub-categories are “Recruitment Sentiment”, “Investment Sentiment”, “Business Condition”, “Profit Margin” and “Global Economy”.

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