Business sentiment across the Greater Bay Area (GBA) was broadly flat in the first quarter, with companies balancing geopolitical shocks against still‑resilient domestic demand, according to the latest Greater Bay Area Business Confidence Index (GBAI) from Standard Chartered and the Hong Kong Trade Development Council.
The composite “current performance” index for business activity slipped 0.4 points to 49.9, just below the 50 neutral line, while the “expectations” index eased to 50.4, remaining slightly expansionary.
The survey of more than 1,000 companies, conducted between 23 February and 23 March, captures the early economic fallout from the Iran conflict and related oil‑price spike, as well as new US tariffs and investigations targeting major trading partners.
Weaker risk appetite showed up in falling readings for fixed‑asset investment and financing scale, with the latter dropping 5.1 points as respondents reported tighter bank lending and higher borrowing costs. Credit and liquidity conditions deteriorated further: the overall credit index declined to 47.9, banks’ attitudes to lending weakened, and “surplus cash” and “receivables turnover” both remained in contractionary territory.
Under the surface, however, production and domestic demand continued to hold up. The production/sales sub‑index stayed firmly in expansion at 53.2, and firms were able to raise selling prices as the finished‑goods price index climbed to 58.2. Profits moved back into positive territory at 51.1, even as new export orders fell to 47.5, highlighting the drag from external demand.
[See more: Shenzhen’s high-tech exports and foreign investment drive first quarter surge]
Standard Chartered’s economists argue this split reflects policy support on the mainland and in Hong Kong, which is helping offset weaker trade flowing from higher energy and freight costs.
Sector‑by‑sector, manufacturing and trading remained marginally in contraction, with both current and expected activity below 50, while most other industries stayed in the black. Retail and wholesale continued to expand, though momentum slowed, and financial services outperformed, posting current and expectations readings close to 60.
Professional services also remained comfortably above 50, and expectations for innovation and technology jumped back into expansion, helped by the new 15th Five‑Year Plan’s emphasis on R&D and digital upgrading.
The city breakdown offers a nuanced picture. Hong Kong’s current and expected indices both stood at 52.7, signalling steady, if slower, growth, with notable gains in financial services and innovation. Shenzhen’s current index remained just below 50 but its expectations sub‑index ticked up to 50.1, pointing to improving sentiment in finance and tech even as manufacturing and trading stay under pressure. Guangzhou slipped below 50 amid a contraction in retail and wholesale, while Foshan and Dongguan held in expansionary territory; Macao and other GBA cities stayed in mild contraction.
Meanwhile, some 54.9 per cent of respondents named labour costs as their biggest operating pressure, ahead of rents and market competition, even as many firms said they planned to prioritise spending on talent recruitment, market promotion and staff training. More than a third also expect Beijing’s new loan‑interest and equipment‑upgrade subsidies to support domestic demand by boosting online sales and cutting operating costs.
