HONG KONG – Businesses across the Guangdong-Hong Kong-Macao Greater Bay Area were optimistic before the US reciprocal tariff hikes, as shown by the Standard Chartered GBA Business Confidence Survey on Tuesday.

The quarterly survey, conducted by Standard Chartered Hong Kong and the Hong Kong Trade Development Council, revealed that the GBAI expectations index for business activity rose to 54.3 for the second quarter from 52.9 in the fourth quarter of 2024.  But the survey was conducted before the US announced the so-called “reciprocal tariffs”.

A GBAI above 50 suggests a positive outlook, while a reading below 50 indicates that businesses remain wary of potential headwinds.

The rise of the “expectations” index was led by a 3.1 percentage-point increase in the sub-expectation index for profits and a 2.8 percentage-point increase in raw-material inventory. The subindex of production or sales dropped 1.3 points to 57.1 points quarter-to-quarter.

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According to the survey, the increase showed that companies in the Greater Bay Area weathered the initial US tariff hikes. DeepSeek’s artificial intelligence breakthrough and growing expectations for additional stimuli from Chinese policymakers also lifted market sentiment.

The Greater Bay Area current performance index for business activity during February and March, which was before the US “reciprocal tariffs”, rose to 53.5 in the first quarter from 50.7 in the previous quarter, the highest since the second quarter of 2024.

The survey, which interviewed over 1,000 companies across various sectors in the Greater Bay Area, aims to gauge business sentiment and economic prospects in the region.

Kelvin Lau, senior economist of Greater China and North Asia at the Standard Chartered, said, “Given the urgency to stabilize market sentiment following the tariff-induced sell-off, the likelihood of China cutting the reserve requirement ratio and the seven-day reverse repo rate in April has materially increased.

“We expect that both monetary and fiscal policies on the mainland will stay supportive. Meanwhile, Hong Kong would need to ramp up short-term support to small and medium-sized enterprises and continue to diversify its trade to facilitate,” he said.

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The survey showed that 41 percent of respondents saw a positive effect from the consumption-boosting initiatives announced by China in January. Meanwhile, 38 percent said the consumer goods trade-in program will have a positive effect on their businesses.

Wing Chu, principal economist of the HKTDC’s Greater China research team, said, “Boosting domestic demand is one of the government’s top priorities, as highlighted in the government work report delivered by Premier Li Qiang in March. More than 50 percent of respondents have indicated that they are either already well-positioned to tap into the mainland consumer market or are currently expanding or planning to expand their operations to do so. Additional supportive measures from the government could further bolster their businesses.”

Contact the writer at tianyuanzhang@chinadailyhk.com