This file photo dated June 29, 2022 shows a view of the Nansha Bridge, which links Guangzhou City and Dongguan City, in south China's Guangdong province. (PHOTO / XINHUA)

The Standard Chartered GBA Business Confidence Index (GBAI) revealed an upturn in business confidence in the third quarter, attributed to a rebound in business activity, driven by strong summer holiday demand and policy easing.

However, economists remain cautious about the recovery’s strength and sustainability because of challenges like a sluggish housing market and declining export orders.

In the upcoming years, businesses anticipate that artificial intelligence technology will present more opportunities rather than challenges, particularly in domains such as sales and operational efficiency

In the third quarter of this year, the GBAI saw an upswing, rising to 52.9, which marked the highest level in nine quarters. This growth, as reported in the GBAI survey results released on Tuesday, surpassed the previous quarter’s figure of 50.0.

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“In our view, this is a strong sign that businesses are stabilizing, or even starting to reaccelerate, following the setback in the second quarter,” Standard Chartered senior economist Kelvin Lau Kin-heng said.

“However, future challenges persist, with two prominent examples being the sluggish real estate market and the decline in export orders. Looking forward, the key to strengthening and sustaining the future recovery lies in continued policy stimuli from the authorities,” he added.

Irina Fan, director of research at the Hong Kong Trade Development Council (HKTDC), said: “The survey also found that technology-related developments have had varying degrees of impact on enterprises. It will bring opportunities as well as challenges.”

In the upcoming years, businesses anticipate that artificial intelligence technology will present more opportunities rather than challenges, particularly in domains such as sales and operational efficiency. Fan said this perspective reflects the positive mindset of enterprises as they embrace AI technology and pursue a broader digital transformation strategy.

The GBAI gauges business confidence based on quarterly surveys of more than 1,000 companies operating in the Guangdong-Hong Kong-Macao Greater Bay Area. The surveys are conducted by the Hong Kong Trade Development Council in collaboration with Standard Chartered.

The index comprises two main business indexes — one gauging “current performance”, and the other looking at “expectations”. A reading of 50 is considered neutral, with optimism and pessimism respectively reflected in scores above or below 50.

According to the survey, Standard Chartered is banking on there being more scope for further monetary easing. It is anticipated that the People’s Bank of China will decrease the rate of the medium-term lending facility by 10 basis points in both the fourth quarter of 2023 and the first quarter of 2024.

On top of that, Standard Chartered anticipates a 25-basis-point reduction in the deposit-reserve ratio during the first quarter of 2024, with the aim of ensuring ample liquidity for the expansion of credit in the future.

When it comes to tackling challenges, the survey revealed some responses on how respondents are handling the surge in tech-related trade and nontrade barriers. More than a third of the respondents are opting to explore new sales markets; 34.3 percent are increasing their local tech hiring efforts; and 27 percent are making changes to their products or business models.

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What's even more noteworthy is that a mere 17.4 percent revealed that they’re sitting idle or deem no action necessary, implying a whirlwind of transformation is underway. This transformation may involve a mix of external diversification and domestic sourcing, all in the pursuit of navigating geopolitical risks more effectively.

Additionally, the survey managed to capture the perspectives of GBA companies regarding the rapid development of technology. A notable 46.3 percent of the respondents indicated that they already have some planning or strategizing underway.

However, fewer than 30 percent of the respondents currently have no plans for AI or digital upgrading for now. The survey revealed that the greatest hurdles or obstacles for adopting AI in their future business operations are the expenses associated with upgrading or implementing, which topped the list at 36 percent. This was followed by concerns about the uncertain economic or business outlook to justify investment and the lack of expertise or talents to drive innovation.

Contact the writer at zhoujianxin@chinadailyhk.com