Hong Kong Trade Finance Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Hong Kong Trade Finance Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The Hong Kong trade finance market is poised to grow at a CAGR of greater 5% by 2027. Trade finance is the financing of goods or services in a trade or transaction from a supplier to the final consumer. 3% of the $3 trillion in annual global trade comes from it. "Trade finance" refers to a large class of financial instruments that can be used by an importer or exporter. These include Finance for Purchase Orders, Stock Trading, Finance for Structured Commodities, Account Finance (Discounting & Factoring), Chain Supply Finance, Letters of credit.

Trade financing aids business growth by providing the capital required to purchase inventory and goods. The success of any company depends on its capacity to efficiently manage its working capital. A corporation can use trade finance as a tool to expand its financing options based on its trade cycles or to free cash from its present inventory or receivables. One of the best places in the world to conduct business in Hong Kong. Hong Kong ranks fourth internationally for business ease in the World Bank's Doing Business 2019 Report. Hong Kong came in fifth place out of 190 economies in terms of how simple it is to launch a firm. The process of starting a business in Hong Kong is rather quick, straightforward, and inexpensive.

The COVID-19 epidemic exacerbated Hong Kong's economic issues in 2020, compounding the deterioration brought on by the turmoil in 2018. The government is anticipated to use its substantial financial reserves to stabilize the economy in the medium term, but the US-China trade war and China's expanding influence in the nation will contribute to the country's unpredictable geopolitical situation. Hong Kong is expected to continue serving as an intermediary between East and West but to a reduced extent.

Hong Kong pursues a free trade policy and does not maintain trade barriers. The right to manage the import and export of products is unrestricted. However, there are still rules and clearance processes that must be followed while importing and exporting commodities.

Every cloud has a bright spot, as the saying goes. We must search for and seize any silver linings while the globe navigates the deteriorating US-China ties, the technology-driven trade war, and the far-reaching effects of COVID-19. One such silver lining is the quickening adoption of digital technologies. The pandemic scenario has spurred a great deal of good change, with digitization playing a key role in many of these. Digital is playing a big part in meeting the need for funding, involving customers, and assuring transparency.

The requirement to involve regulators and the trading community in the development of uniform rules of conduct is another crucial shift brought about by COVID-19. Nearly all banks are established institutions; there is no liquidity problem. To aid enterprises, the trade finance community must band together.

Small and medium-sized firms (SMEs), which make up the majority of businesses and employment in Asia and are the backbone of many economies, have been ignored by global finance. Before the pandemic, the trade finance deficit was anticipated to be USD 1.5 trillion; by 2020, it had grown to USD 1.7 trillion. Covid's persistence, digitization's accelerating pace, and the skills gap all portend poorly for SMEs, especially in emerging economies. The technology is available to completely restructure and broaden the scope of trade finance. In this new ecosystem, there is unmistakable potential for Hong Kong, Asia, and the entire world.

All people have been impacted by the pandemic, but some are more susceptible than others. Smaller companies often lack access to financial facilities that larger corporations can use to help them weather difficult times, therefore they have been most hit. Although the government has taken several relief measures to aid SMEs, many still face difficulties. The significance of banks helping SMEs with liquidity is, critical supply chain anchors must now use supply chain financing initiatives to give SMEs access to operating cash. Since SMEs are the backbone of the majority of ASEAN economies and employ almost 97% of the population in the region, it is in everyone's best interest to support their survival and growth in the new normal.

The report covers the major players operating in the Hong Kong trade finance market. In terms of market share, the major traditional players are currently dominating the market. Here is a list of some of the top companies now ruling the market, Bank of China, Standard Chartered, Bank of Communications, Hang Seng Bank, and HSBC, among others.

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