70% of SMEs deploy strategies for risks, preparing for possible trade war
In concern of an escalated China-U.S. trade war, the overall business confidence of small and medium-sized enterprises (SMEs) in Hong Kong has declined. The Hong Kong Productivity Council released the "Standard Chartered Hong Kong SME Leading Business Index" for the first quarter of 2025 yesterday (Jan. 23).
The results showed that the Q1 2025 "Standard Chartered SME Index" retreated by 2.9 to 42.8 from the previous quarter, returning to the level observed in Q3 2024. 38% of SMEs stated that their business confidence was affected by the change in the U.S. presidential administration, among which 62% cited potential new tariffs on imported goods by the U.S. as a reason, and 59% attributed it to changes in the economic environment.
Regarding the impact of the U.S. presidential transition on Hong Kong SMEs and their deployment plans, according to the survey, nearly forty percent (38%) of surveyed SMEs indicated that the U.S. presidential transition had posed an impact on their business confidence. Among them, about 60% expressed that "The U.S. Imposing New Tariffs on Imported Goods" (62%) and "Changes in Economic Environment" (59%) were the primary factors influencing their business confidence. Other factors included "Exchange Rate Fluctuations" (34%), "Changes in Interest Rate Trends" (30%), and "Changes in the Scale of Foreign Capital Inflows" (26%).
In light of potential shifts in the business environment, over seventy percent (71%) of the surveyed SMEs indicated that they had implemented strategies to mitigate risks, such as exploring more diverse suppliers, enhancing employees' knowledge and skills, and expanding into new markets.
In terms of business expansion, around twenty percent (22%) of the surveyed SMEs were considering broadening their reach to other regions within the next three years, with a significant number considering expansion into the Chinese Mainland or ASEAN regions.
Standard Chartered's senior economist (Greater China), Lau Kin-Heng, stated yesterday that coupled with potential economic stimulus measures to be introduced by the Mainland after the "Two Sessions," if the magnitude and timing of the tariffs imposed by the US meet expectations, the business confidence of SMEs in the coming quarters may not need to be overly pessimistic, as the period of greatest uncertainty may have passed.
The survey was conducted in December 2024 and successfully interviewed 820 SMEs in Hong Kong.
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