• Wed
  • Sep 17, 2014
  • Updated: 11:13am

Headwinds blow exporters' way

PUBLISHED : Friday, 17 June, 2011, 12:00am
UPDATED : Friday, 17 June, 2011, 12:00am

The Hong Kong Trade Development Council has revised upwards the city's projected growth in exports for the year, but it may not be good news for exporters: the gains are likely to come from rising prices rather than rising orders.

The TDC forecasts exports will grow 12 per cent, up from its earlier estimate of 8 per cent. This will largely be due to 6 per cent to 8 per cent growth in the value of exports as manufacturers seek to lift factory-gate prices to offset fast-rising labour and raw material costs and the yuan's appreciation against the US dollar, said TDC chief economist Edward Leung Hoi-kwok.

However, the slow economic recovery in the core export markets - the United States and the European Union - means exporters will not be able to pass on all the extra costs to overseas buyers, he said.

'They have to swallow some of the extra costs,' Leung said yesterday, 'as their profit margins continue to be squeezed.'

In its latest quarterly survey of 500 Hong Kong manufacturers and exporters, the TDC found all but 2 per cent of those polled expected wages to rise, with most recording at least a 10 per cent increase in labour costs from April to June.

The survey pointed to sharp inflation in prices of commodities such as gold, which has jumped 32 per cent since August, and cotton, which has soared 158 per cent since July.

The yuan has risen by 4.6 per cent against the US dollar in the past year, which has contributed to an erosion of exporters' bottom lines. However, nearly 63 per cent of the respondents said they were able to 'partly' pass on extra costs to customers in the second quarter of this year - up from 49 per cent in the first quarter. Only 8 per cent of the exporters polled were able to pass on all their cost increases to customers.

'I will not use the word optimistic to describe the prospects for Hong Kong's exports even with the upgraded forecast,' Leung said. 'Exporters face more headwinds.'

The survey shows exporters' confidence in the US and Japan markets has dropped to a level that implies an expectation they will shrink.

Leung said the impact of the March 11 earthquake and tsunami in northeast Japan was worse than expected, spreading through the supply chain and to the US and Europe. About 1 per cent of Hong Kong's exports have exposure to Japan.

Leung said Hong Kong's electronics sector was the most vulnerable to repercussions from the disaster, as the city re-exports about 70 per cent of the Japanese-made goods it imports. Over 54 per cent of these re-exports are electronics. He said the disaster had hit market sentiment in Japan, which, in turn, had affected the appetite for consumer goods shipped from Hong Kong.

The TDC survey is consistent with a poll by the Chinese Manufacturers' Association, in which 90 per cent of 213 respondents reported that operating costs had grown 19.4 per cent on average between March and May. Most of them were forced to share the additional costs with customers.

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