The Standard Chartered Greater Bay Area Business Confidence Index (GBAI) reached multi-year highs in the third quarter, reflecting a broad-based recovery in business sentiment following reduced external uncertainty after the extension of the US-China trade truce. The quarterly survey, jointly conducted by Standard Chartered and the Hong Kong Trade Development Council, showed significant improvement in both current business performance and future expectations across the region.
The current performance index for business activities increased to 54.7 from 53.1 in the second quarter, while the expectations index rose more substantially to 55.7 from 52, marking four-year and two-year highs respectively. This improvement occurred during the survey period from early August to early September, when the US extended its trade truce with China by another 90 days to November while also reaching multiple trade agreements with major trading partners.
Irina Fan, Director of Research at HKTDC, noted that nearly all current performance and expectations indices rose quarter-on-quarter across GBA cities. Hong Kong demonstrated the strongest confidence growth among all cities, with current performance and expectations sub-indices increasing by 8.3 points and 7.3 points to 52.2 and 53.6 respectively, supported by continued trade frontloading and robust financial activities. Additional research materials are available through HKTDC Research.
The recovery showed broad-based strength across multiple indicators. For current performance, six of the eight index components improved quarter-on-quarter, led by a sharp 8-point increase in new orders and a 4.1-point increase in prices of finished goods and services. The optimism in business outlook was even more pronounced, with all expectations sub-indices remaining well above the neutral mark. Production and sales saw the strongest rebound among the eight main sub-indices, followed by financing scale, fixed asset investment, and profit expectations.
Hunter Chan, Economist for Greater China at Standard Chartered, explained that the survey findings align with market positivism observed during the third quarter following the trade truce extension and expectations of continued dialogue between the US and China. However, he cautioned that persistent trade uncertainty could potentially dampen business sentiment again. With increasing external uncertainties and competition challenges in mainland China, the trend of diversification continues, with exploring overseas markets remaining a key strategy for GBA corporations to mitigate potential risks.
The survey also examined the impact of excessive competition, known as anti-involution, on businesses in the region. Most respondents indicated they had not been affected by excessive domestic competition, while approximately 29% reported moderate impact and 5% indicated significant impact. Among affected businesses, over 70% experienced negative impacts on profit and sales, while only around 40% indicated disruptions to hiring and investment. Companies are adopting multiple strategies to address these challenges, including brand building and marketing, cost control and inventory management, and providing value-added services. The full report and supporting materials can be accessed at this link.
This surge in business confidence matters because the Greater Bay Area represents one of China's most economically dynamic regions, serving as a crucial indicator of the country's economic health and business sentiment. The improved confidence levels suggest that reduced trade tensions can quickly translate into tangible business optimism, potentially driving increased investment, hiring, and economic activity across multiple sectors. For global markets and investors, these indices provide critical insights into how Chinese businesses are responding to evolving trade policies and economic conditions, influencing investment decisions and market strategies throughout the region.
