No festive cheer: Hong Kong factory owners bemoan shrinking year-end exports as inflation, recession bite
- Intermittent factory closures in mainland China have hit output, taking their toll on exports too
- ‘A particularly miserable festive season’ as manufacturers see exports plunge by over 30 per cent
Hong Kong manufacturers and exporters of everything from toys to home decor items, electronic goods and children’s pyjamas are staring at their bleakest festive season in years.
Industry leaders reported business dropping sharply as overseas buyers have reduced or cancelled orders in the face of belt-tightening, high inflation and recession in their countries.
On-again, off-again factory operations in mainland China, resulting from its stringent zero-Covid policy over almost three years, have also caused production delays and taken a toll on Hong Kong exports.
“This festive season is particularly miserable for us,” said Dennis Ng Kwok-on, managing director of Hinasia (HK) Industrial Company, which makes gift items such as photo frames, souvenirs and home decor products.
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He said that in 2020 and last year, in the midst of the Covid-19 pandemic, the company managed to hit at least 50 per cent of its pre-Covid level of business over the Christmas season, which usually accounted for close to half its annual revenue.
“But this year, we’ve barely made it to 40 per cent,” he said, adding that his major clients in Europe and the United States had ordered less or cancelled.
With more than 500 workers at two factories in Shanghai and Dongguan, he said the losses over the past three years made him struggle to decide if it was time to shut the business he has run since 1988.
“If I give up now it will be a waste of all my hard effort, so I’ve decided to bite the bullet and persist. I hope we can ride out this storm,” he said.
Hong Kong exports for October fell 10.4 per cent from the year before to HK$374.7 billion (US$48.1 billion) due to a worsening external environment and continued disruptions to cross-boundary land transport.
Exports to mainland China, the US and the European Union posted double-digit declines.
In the US, prices rose 7.7 per cent year on year in October, while Europe posted an inflation rate of 10 per cent last month.
A Hong Kong government spokesman said the city’s export performance would stay under immense pressure as elevated inflation and further tightening of monetary policy in major advanced economies would continue to suppress global demand in the near term.
Simon Wong Ka-wo, vice-president of the Chinese Manufacturers’ Association of Hong Kong, said the exports sector had suffered from a mix of factors as well as growing US-China tensions.
“This year’s winter peak season is the most difficult for the city’s exporters as overall business has dropped by more than 30 per cent with the export of toys and electronic products diving by more than 50 per cent,” he said.
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The intermittent suspension of factory operations on the mainland had disrupted production to such an extent that many companies had been slapped with penalties by clients.
He estimated that Hong Kong exporters ran more than 10,000 factories on the mainland. “Some factories have been forced to close down, while those still struggling to survive need to cut staff,” he said.
Robert Lok Pak-keung, managing director of Shun Tat Enterprises, which has 2,500 workers and makes children’s pyjamas for export to Europe and the US, said the tension between the US and China had made him change strategy early, with the decision paying off.
In 2018, he moved 70 per cent of his operations to Vietnam, leaving only 30 per cent in Fujian and Guangdong provinces.
Although this year’s Christmas orders were down by a fifth, he said he might not have survived if he had not moved the bulk of his operations before Covid-19 struck and China imposed its harsh pandemic measures.
“In Vietnam, production has totally resumed with workers not even required to wear masks, a contrast with the mainland where factories have had to suspend operations from time to time,” he said.
“If I had not relocated a major part of the operations to Vietnam, our production would have become very unstable and we would continue to face shrinking business.”
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Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, said many exporters facing a glum Christmas season had decided to let their workers take early Lunar New Year long holidays because there was little work to do.
“Production delays in China also caused a shortage in the supply of raw materials, resulting in decreased orders. This is a vicious cycle,” he said.
With Beijing finally easing some of its tight pandemic restrictions this week, some manufacturers are hoping China might follow up with some stimulus initiatives to reboot the economy.
Manufacturers’ association chief Simon Wong said: “I am not too pessimistic about the economic outlook next year.
“I believe Beijing is concerned about people’s livelihoods. There must be some initiatives to resuscitate the economy.”
