The latest Standard Chartered Greater Bay Area Business Confidence Index (GBAI), released jointly by Standard Chartered and the Hong Kong Trade Development Council (HKTDC), reveals that business sentiment among companies in the Greater Bay Area (GBA) remained stable in the first quarter of 2026 despite geopolitical and trade headwinds, including oil price shocks and the ongoing Middle East conflict.
The Q1 findings largely captured activity and business sentiment since the Middle East conflict began in late February, which has remained highly uncertain and weighed on overall business and market sentiment. Despite a reduced appetite for expansion amid persistent geopolitical uncertainties, business sentiment stayed steady across the GBA. The “current performance” index for business activity in Q1 edged down marginally to 49.9 from 50.3 in the previous quarter, while the “expectation” index moderated to 50.4 from 51. Both indices hovered around the 50-neutral mark, indicating GBA corporates’ resilience, supported by favourable policies announced by the Chinese Government aimed at boosting the domestic economy, partially offsetting the fallout of the Middle East conflict.
The “current performance” index came down mainly driven by “raw material inventory”, “fixed asset investment”, and “financing scale”. The latter two readings were believed to reflect more cautious sentiment among businesses in light of the Middle East conflict. Meanwhile, “production/ sales”, “prices of finished goods/ services”, and “profits” all experienced quarter-on-quarter expansion. The “expectations” index remained modestly positive, despite heightened external uncertainties. “New orders” held steady at 51.5, while “prices of finished good/ services” rose to 58.5. However, “profits” fell below the 50-watershed level, implying surveyed companies did not view price increases as sufficient to offset a likely rise in energy and material costs.
By city, Hong Kong is expected to maintain a solid performance going forward. Although both the “current” and “expectation” sub-indices edged down to 52.7, these readings still comfortably stayed in expansionary territory, supported by improvements in “financial services” and “innovation and technology” sectors. Tommy Wu, Senior Economist, Greater China and North Asia, Standard Chartered, said: “In addition to the initial impact of surging global energy and freight costs, there are concerns about second-round impacts, such as higher input costs and weaker global demand. This is aligned with the latest reading, which shows a 2.3-point decline in “new export orders” to 47.5 for “current performance”, indicating a more cautious outlook for export demand. With the prolonged Middle East conflict, we anticipate global energy prices to be higher for longer and the second-round effects to become more visible in the coming months. These will likely weigh on business sentiment and appetite on making fixed investment. Nevertheless, Hong Kong has once again demonstrated its resilience amid market turbulence, and such resilience is expected to attract more global capital into HKD and Renminbi assets as safe-haven allocation.”
The survey also investigated the impacts of a series of supportive policies from the Chinese government aimed at stimulating domestic demand. Among the new policy measures introduced by the Ministry of Finance in January, most respondents cited “loan interest subsidies for small, medium and micro-sized enterprises” (38.4%), “large-scale equipment upgrade subsidies” (36.9%), and “consumer goods trade-in subsidies” (31.7%) as the top domestic demand-boosting policies likely to have the most positive impact on their business. Wing Chu, Deputy Director of Research, HKTDC, said: “Demand-boosting stimulus is generating tangible benefits for GBA companies, helping to cushion external challenges amid the Middle East conflict. Targeted support, including loan interest subsidies, alongside measures aimed at stimulating consumer spending, is underpinning demand and supporting business activity across the GBA.”
While many respondents believe stimulative policies could benefit their businesses by boosting online sales (36.6%) and reducing operating costs (33.8%), challenges faced by GBA corporates remain. Specifically, 54.9% of respondents identified labour costs as the biggest pressure point, followed by rental costs (41.7%) and market competition (33.3%). For Hong Kong respondents, market competition was viewed as a more pressing challenge than rental costs, likely due to increased cross-border travel and changes in consumption behaviours. In these circumstances, 38.7% would prioritise investment in talent recruitment, followed by market promotion (38.1%) and personnel training (36.7%). The full report is available at Standard Chartered GBAI Report and additional insights from HKTDC Research can be found here.
