The world is evolving at an unprecedented pace, accelerating even faster than in the past decade. In just the first 100 days of Donald Trump‘s second presidency, his policies have significantly influenced the global trade landscape.
Recently, the World Trade Organization revised its forecast, projecting a 0.2% decrease in the volume of world merchandise trade for 2025 – nearly three percentage points lower than it would have been without the ongoing trade tensions.
In this dynamic global environment, the adage “Don’t put all your eggs in one basket” holds particular relevance. Diversification remains a cornerstone of strategic planning, enhancing resilience against economic fluctuations and supporting sustainable, long-term growth.
From Specialization …
Over the years, with the notable growth of Hong Kong’s services sector, domestic exports have significantly declined. The share of total exports fell from 55% in the early 1980s to 35% in the early 1990s, now standing at just 1.3% in 2024. With China‘s rise as the world‘s largest exporter, Hong Kong has established itself as a key re-export hub in the region.
Despite this, its export markets are increasingly concentrated in a few major destinations. In 2024, the city‘s top five export destinations accounted for 74.8% of its total merchandise exports.
The export product concentration reflects a similar trend. An index value closer to 1 indicates that a country‘s exports or imports are highly concentrated on a few products. Hong Kong’s product concentration index of exports stood at 0.363 in 2023, compared to below 0.1 in the 1990s. This suggests the city’s export basket has become more concentrated compared to other leading exporters in the region, including Singapore (0.25), South Korea (0.168), Japan (0.157) and Mainland China (0.084).
Through export specialization, Hong Kong has excelled in targeted markets to drive growth, establishing itself as a significant global exporter. The city has emerged as one of the world’s largest exporters of gold, jewellery, computer accessories, watches, toys and more.
… To Diversification
Amid evolving supply chains, rising geopolitical tensions and the uncertainties under Trump, new opportunities have emerged for all economic stakeholders to reconsider their business models and ensure their relevance in the future business environment. In response, Hong Kong has been actively reshaping its export market structure, focusing on trade diversification.
Following the 2018-19 trade war, the share of Hong Kong’s exports to traditional markets, including the United States and the European Union, has decreased. Conversely, the share of Hong Kong's exports to emerging markets, such as ASEAN and the Middle East, has increased.
With the new rounds of U.S. tariffs, it would not be surprising if the diminishing share of traditional markets is accelerating. Hong Kong should seize the opportunity to diversify its export base to gradually drive economic growth.
Future-proofing Trade
In navigating the current turbulence, the city must diversify its export portfolio and trading relationships by searching for new trading partners and exploring new trading corridors. With the rising middle class and rapid urbanization in emerging markets, Hong Kong will benefit from shifting its trade focus from traditional markets to these dynamic regions.
Trade diversification not only helps to stabilize export revenues and mitigate adverse terms of trade shocks but also plays a vital role in fostering higher economic growth by increasing competition, boosting productivity, and driving structural transformation. The sector must exhibit innovation throughout this diversification process to pave the way for a more robust and resilient economy.
Doris Fung, dfung@chamber.org.hk