Global economic activity is expected to strengthen over the next year, supported by robust growth in the US and UK along with a gradual recovery in the Eurozone. Nevertheless, rising geopolitical tensions could present downside risks to the near-term outlook. Growth in emerging markets – while still relatively rapid – looks most vulnerable, reflecting a combination of structural challenges in the BRICs and fallout from the geo-political situation in both Eastern Europe and the Middle East.

Yet despite the near-term challenges facing emerging markets, longer-term development patterns in these countries are likely to be an important driver of global economic and trade growth over the coming decades.

  • When businesses were surveyed for the Trade Confidence Index (TCI) between May-July 2014, the cross-country findings showed that the majority still expected trade volumes to rise over the next six months. Nevertheless, these findings should be placed in the context of a rapidly changing geopolitical situation.
  • Our survey evidence confirms that the renminbi is increasingly being used for trade and invoicing. We expect this to continue in the years ahead as China’s exchange rate liberalisation continues.
  • After two years of sluggish growth in 2012-13, global trade is forecast to regain its momentum in the years ahead. We project growth in the value of traded goods (amongst the 25 economies in the HSBC trade forecast) to pick up from 2.5% in 2013 to around 8% by 2016, with this trend rate of expansion being maintained over the medium term. Of the six economies projected to see the fastest export growth, five are from emerging Asia, with average growth of 8-11% a year between 2014 and 2030.


This report also includes special sections on key industries – including agriculture, energy, pharmaceuticals, technology and textiles. Demographic trends, increasing urbanisation and rapid economic growth in large emerging markets mean that pressures on natural resources continue to grow, implying an ongoing need to boost productivity in these sectors and develop new supplies. In China, for example, wealthier consumers will demand a richer diet, leading to an increased dependency on food imports.

Meanwhile, rising costs are encouraging some economies to move further up the product value chain. In Singapore, the government is providing firms with incentives to invest in labour saving technology, which should support its ICT export market. And in general, higher value goods are likely to account for an increasing share of global trade going forward.

Our special country focus is on India. Economic growth in the world’s second most populous country has slowed to less than 5% a year in the past two years, driven primarily by weak domestic conditions. However, there is scope for India to rebalance away from the domestic economy towards exports. For now, India’s goods exports are dominated by labour intensive, low value-added sectors. But looking ahead, we expect more capital and skill-intensive sectors like pharmaceuticals and transport equipment to emerge as major contributors to overall exports.

Global trade by sector (2014-30)

Simon Cooper, Chief Executive of HSBC Commercial Banking.

“Businesses can’t afford to fixate on the risks posed by today’s geopolitical problems and uneven rates of growth at the expense of their future planning. Conditions have undoubtedly been tough for trade recently, but we are now turning a corner. The medium and long term prospects look significantly better for businesses that have prepared themselves for recovery in both developed and developing markets.”

Short-term snapshot

HSBC Trade Confidence Index

Confidence regarding near-term trade prospects among businesses across the world were mixed, with an upturn in sentiment across much of Asia contrasting with a moderation in confidence levels in North and Latin America.  The most marked improvements were in emerging Asia, especially Bangladesh, India and Indonesia. But there were also large gains in Turkey and Egypt, the latter rebounding in light of a more settled local economic climate. Nevertheless, we also need to acknowledge that the rapidly evolving geo-political situation may have negatively affected sentiment since the survey was conducted in May - July 2014.

Cross-border business

Amongst survey respondents, an increase of demand in key markets was the main reason cited for the improved trade outlook, though fewer businesses than before cited an improvement in overall global demand as a determining factor – possibly linked to concerns over a near-term slowdown in growth in emerging markets. There was also an increase in the number of businesses securing a rise in large orders. 

HSBC Trade Confidence Index

Trade Networks of Choice

  • Nearly 42% of all respondents saw Asia as having the best opportunity for business growth in the next six months, virtually unchanged from last time. The proportion of respondents that saw Europe and North America as having the best prospects for business expansion increased slightly from before, reflecting the recovery in economic conditions in these regions.
  • The US dollar was cited as the main trade settlement currency for 64% of survey respondents, followed by the euro, at 20%. Use of the renminbi was still comparatively minor, but it was the most popular emerging market currency.
  • Exchange rate volatility was seen as a constraint on trade growth by 41% of respondents, though this was the lowest figure for some time. Other factors cited as significant constraints included insufficient profit margins and the cost of essential services such as shipping.

Opportunities for business

The TCI survey highlights growing confidence in global trade conditions, with some 55% of respondents expecting trade levels to rise (either slightly or significantly) over the next six months. Our forecasts suggest that the large and fast-growing emerging markets in Asia present the most promising opportunities for trade over the medium term.

Most promising regions for Trade over the next 6 months

Longer-term outlook

Expectations for the global economy

Global growth is set to gather steam in 2015 on the back of improved conditions in the US and to a lesser extent, Europe. Growth in emerging markets – while still relatively strong – looks more vulnerable, reflecting a combination of structural challenges in the BRICs and fallout from geo-political situations in both Eastern Europe and the Middle East. Meanwhile, the tightening of monetary policy expected in the US and UK expected over the next year has the potential to unsettle global financial markets, though increases in interest rates will be gradual and well-signalled. Monetary policy in the Eurozone, by contrast, is likely to remain loose.

Despite the near-term challenges facing emerging markets, longer-term development patterns in these countries are likely to be an important driver of global economic growth and trade over the coming decades. Standards of living are still much lower than in the developed world, providing continued scope for catch-up growth; globalisation is facilitating cross-border investments and the use of global supply chains; demographics are generally favourable and underpin future growth in demand; emerging markets are in a much stronger financial position than in the past and policy setting has improved – both of which should make long-term economic performance more stable and robust.

Commensurate with this broadly encouraging economic outlook, general trade conditions are expected to be positive in the years ahead. After two years of sluggish growth (reflecting weak demand in both industrialised and developing economies), global trade is now forecast to gain renewed momentum. We project growth in the value of traded goods (from the 25 economies in the HSBC trade forecast) to pick up from 2.5% in 2013 to around 8% in 2016, with this trend rate of expansion being maintained over the medium term.

Growth in merchandise exports

Of course, even with improved economic growth, a more rapid expansion in trade growth is not without its potential obstacles. Geopolitical events in places such as Iran and Ukraine have seen the imposition of economic and financial sanctions and counter-sanctions. Moreover, improved growth in developed countries could exacerbate trade deficits and feed protectionism. Finally, higher interest rates in the US and UK could cause global financial and exchange rate volatility, undermining the broader climate for trade.

But in the broader context of increasing globalisation, communication and travel, these challenges seem quite small. Even the risks of excessive restrictions to international trade are better understood now than in the past, making their implementation somewhat less likely. Indeed, countries suffering from long-term weaknesses in domestic demand – such as in Europe – ought to have an especially clear incentive to avoid the imposition of additional barriers to export growth.

Evolving Trade Networks

The medium-term trade outlook is brightest for emerging market economies in which, despite a potential moderation in economic performance and structural challenges, growth should remain relatively rapid. In particular, growth in trade is forecast to be strongest in emerging Asia, where huge domestic markets, infrastructure investment and rising consumer purchasing power driven by an expanding middle class are supportive of a long-term expansion in trade.

China is projected to account for an ever increasing share of world trade, reflecting its position as an export powerhouse and a giant target market for foreign sellers. Its share of world exports (among the 25 countries in the survey) is projected to climb from 18% in 2013 to 29% by 2030. It alone will account for a third of the anticipated increase in global trade over the period.  

The changing composition of Chinese economic growth will also have a significant bearing on trade flows, with a shift towards consumption as opposed to investment-led growth generating increased demand for consumer durables and big ticket items such as cars. More broadly, China’s ever growing stature could alter the global trading system – not least as its currency, the renminbi, is increasingly used for trade and invoicing. Indeed, our survey evidence suggests that this process is gradually getting underway and we expect it to go further in the years ahead as China’s exchange rate liberalisation continues.

Long-term trade prospects in other key emerging Asian economies also appear promising. Of the six countries expected to see fastest export growth between 2014 and 2030, five are in the Far East: Vietnam, China, India, Malaysia and Indonesia – in each of which average growth is expected at 8-11% a year. Indeed, the entire top ten is comprised of emerging market economies. By contrast, the seven countries in which exports will rise by least are all developed markets, where growth will average less than 6% a year. Increased economic competition from emerging markets implies the need for developed markets to continue to move up the product value chain in order to maintain their export growth potential.

As the global economy recovers, it is likely that cyclical sectors such as transport equipment and metals will be amongst the greatest beneficiaries of the upturn. Over the longer term, however, we expect machinery and transport (including cars) to be the fastest growing sector. Trade in this area is projected to grow by around 8% a year from 2014-30, reflecting the ongoing evolution of global supply chains and strong demand for both consumer and capital goods from emerging Asia. Despite rising interest in global energy issues, growth in trade in mineral fuels is forecast to expand by a relatively modest 6% a year, and account for less than 8% of the increase in overall goods trade. 

Sector contribution to increase in total goods exports

India – Special Focus

The Rise and Rise of India’s Global Trade

India is expected to be the world’s fastest growing exporter between 2014 and 2030, and has the potential to move from the 14th largest exporter of goods by value to the world’s 5th largest. In order to explore this significant trend in more detail, this report places a special focus on India.

India is currently struggling with a number of structural impediments to growth…

India’s economy has expanded by less than 5% for the past two consecutive years, after growing by almost 8% a year in the previous decade. The slowdown was driven primarily by weak domestic demand. With exports accounting for just 25% of GDP, there is scope for India to rebalance away from the domestic economy towards exports.

India’s goods exports are currently dominated by labour intensive, low-skilled sectors. According to the Ministry of Commerce’s latest data, mineral fuels, lubricants and related materials; and jewellery, precious stones and semi-precious stones accounted for around 35% of India’s total goods exports in 2013/14.

… but prospects for medium-term growth in trade remain strong

Looking ahead however, we expect more capital and skill-intensive sectors like pharmaceuticals and transport equipment to emerge as major contributors to overall exports. With a lot of potential to leverage India’s raw material strength in textiles such as cotton, jute and silk; textiles exports are likely to contribute strongly as well. Our forecasts suggest that exports of mineral fuels, lubricants and related materials will rise at a rate of just below 8% a year in 2014-30, lower than the average growth rate of around 11% a year for total exports over the same period. 

Indian exports by sector (average annual growth, 2014-30)

The country has the potential to become an export hub for autos…

Transport equipment accounts for less than 7% of India’s total goods exports. However, with a lot of oversupply in the Indian market, there is potential for India to become an auto export hub. Global car companies such as Volkswagen, Ford and Renault-Nissan have invested heavily in India, amid hopes that the fast-growing market will soon rival China. With these hopes faltering over the past couple of years amid falling car sales and rising costs due to the rupee depreciation, these companies are now targeting vehicle shipments abroad, such as the Europe and the US, as well as other emerging markets. This is likely to be supported by the weaker rupee and availability of skilled labour in India at a cheap cost. The recent decline in China’s competitiveness will provide a further boost to India’s automobile and related exports. We expect exports of transport equipment to increase by close to 15% a year in 2014-30, far outpacing the 11% a year growth of total exports.

… and it is well-placed to further develop its textile industry

Textiles exports accounted for more than 20% of India’s total exports in 2001. Since then the share has fallen to less than 10%, but India is still the world’s second largest textiles exporter, second only to China. A number of factors, not least India’s strength in raw materials such as cotton, jute and silk, suggest that the textiles sector will continue contributing strongly to overall exports in the coming years. The Ministry of Textiles in India has formulated numerous policies and schemes for the development of the industry, aiming to diversify both the product base as well as export markets, enhancing textile oriented technology and investing in innovative marketing strategies. Furthermore, a weaker rupee, rising labour costs in China and safety compliance issues for factories in Bangladesh (another major textiles producer) give India the ideal opportunity to increase its market share. India’s textiles exports are forecast to increase by 12% a year in 2014-30.

The growing middle class in India also presents opportunities for businesses

Meanwhile, on the imports side, we expect India’s rapidly expanding middle class to drive growing demand for consumer goods from abroad. By 2030, India is forecast to emerge as the world’s largest middle class consumer market, surpassing both China and the US. This is likely to be accompanied by a shift away from primary food articles, which currently dominate consumer goods imports, towards more technology-intensive items such as computers and mobile phones. This presents opportunities for exporters in advanced economies, especially those who are able to capitalize on existing brand awareness; but they will face strong competition from companies in China, which are likely to grab a significant share of India’s demand for technology intensive goods. Indeed, India’s mobile market is already an important source of revenue for Chinese companies, accounting for more than 11% of turnover at Shenzen-based Huawei technologies, for example, one of the world’s leading telecoms equipment makers.

Economy to rebalance towards exports in the medium term

There is scope for India to rebalance away from the domestic economy towards exports to drive growth. At the moment, low-skilled and labour-intensive sectors dominate India’s goods exports. However looking ahead more capital and skill-intensive sectors such as pharmaceuticals and transport equipment are likely emerge as major contributors to India’s total exports. The textiles industry, in which India already competes globally, is likely to continue contributing strongly as well. 

About the HSBC Trade Forecast – Modelled by Oxford Economics

Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC’s own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries. Oxford Economics produces a global report for HSBC, as well as country specific reports on the following 23 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, and Egypt. The analysis also includes trade with Japan and Korea for a total sample of 25 key trading nations.

Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter’s competitiveness. Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2014-16, 2017-20 and 2021-30. Sectors are classified according to the UN’s Standard International Trade Classifications (SITC) system at the two-digit level and grouped into 30 sector headings. More information about the sector modelling can be found on

About the HSBC Trade Confidence Index:

The HSBC Trade Confidence Index is conducted by TNS on behalf of HSBC in a total of 23 markets, and is the largest trade confidence survey globally. The current survey comprises six- month views of 5,200 exporters, importers and traders from small and mid-market enterprises on: trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses. The fieldwork for the current wave (11) was conducted between May - July 2014 and gauges sentiment and expectations on trade activity and business growth in the next six months.

Sector Focus – Methodology

This report also includes special sections on key industries – agriculture, energy, metals, pharmaceuticals, technology and textiles. Based on the same underlying forecasts used for the existing analysis of trends in bilateral trade flows, the report examines how exports/imports of these groups of products are expected to evolve over time. The definitions used in the report for each of these sectors are below:


·Live animals (SITC code 00)

·Meat and meat preparations (SITC code 01)

·Dairy products and birds' eggs (SITC code 02)

·Fish, crustaceans, molluscs (SITC code 03)

·Cereals and cereal preparations (SITC code 04)

·Vegetables and fruit (SITC code 05)

·Sugars, sugar preparations and honey (SITC code 06)

·Coffee, tea, cocoa, spices (SITC code 07)

·Feeding stuff for animals (SITC code 08)

·Other edible products (SITC code 09)

·Beverages (SITC code 11)

·Tobacco (SITC code 12)


·Coal, coke and briquettes (SITC code 32)

·Petroleum and petroleum products (SITC code 33)

·Gas, natural and manufactured (SITC code 34)

·Electric current (SITC code 35)


·Metalliferous ores and metal scrap (SITC code 28)

·Iron and steel (SITC code 67)

·Non-ferrous metals (SITC code 68)

·Other manufactures of metals (SITC code 69)


·Medicinal and pharmaceutical products (SITC code 54)


·Office machines and automatic data-processing machines (SITC code 75)

·Telecommunications equipment (SITC code 76).

·Electrical machinery and appliances (SITC code 77)

·Professional, scientific and controlling instruments and apparatus (SITC code 87)

·Photographic apparatus and optical goods (SITC code 88)

Textiles and Garments

·Textile fibres (SITC code 26)

·Textile yarn, fabrics, made-up articles (SITC code 65)

·Travel goods, handbags and similar containers (SITC code 83)

·Articles of apparel and clothing accessories  (SITC code 84)

·Footwear (SITC code 85)

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