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Alleviating cash flow problem and helping tide over with hope

Small and medium enterprises (SMEs) are a major pillar of the Hong Kong economy. There are more than 300 000 SMEs in Hong Kong, employing around 1.3 million people. However, in the past year, due to slow growth of the global economy, uncertain external environment and local social unrest, many SMES are facing tremendous operational difficulties and even pressure to cut jobs. For more than a year since the China-US trade conflict, we have introduced rounds of measures, hoping to alleviate the difficulties faced by SMEs, and also to stabilize employment.

In November last year, we introduced enhancements under the 80% Guarantee Product of the SME Financing Guarantee Scheme (SFGS). The maximum facility amount was increased from HK$12 million to HK$15 million, the maximum guarantee period was lengthened from five years to seven years, and the guarantee fee was halved. As a result, in the first 11 months this year, the number of loans approved increased by 64% to over 2 500, and the amount of additional loans involved nearly doubled to $12.7 billion. With a view to relieving SEMs' cash flow pressure, we introduced a new relief measure in August this year under which SME borrowers may apply to their lenders under the SFGS for principal moratorium of up to 12 months in total. During such period, only interest payments have to be made.

In September, we launched a 90% Guarantee Product of the SFGS through the HKMC Insurance Limited. With the 90% guarantee from the Government, each company can borrow up to $6 million from banks with a maximum guarantee period of up to 5 years. The guarantee fee rate is the same as the 80% Guarantee Product. Taking a loan of $1 million with an annual interest rate of 5% as an example, the relevant annual guarantee fee is approximately $2,250.

The above products aim to help SMEs to obtain financing. With the approval of the Finance Committee of the Legislative Council earlier this month, the product was officially launched last week. In just one week, banks have received dozens of applications. Some companies submitted applications on the first day, and the loans were approved three days later. It was reported that the first company obtaining the loan is a typical micro-enterprise with only five employees. I am glad to learn the market’s positive initial response to this new product. More than 20 lenders have expressed interest in participating the scheme and some even offer rebate of guarantee fee, waive handling fee and account opening fee, etc.

In addition to the credit guarantees, the past four rounds of support measures, which involve a total of more than $25 billion, include reduction of various license fees and rents of government properties, fee review moratorium, electricity charge subsidy, rates concessionary, water and sewage charges waiver, etc.

The trade shared that many companies are gritting their teeth to maintain their businesses. They hope that social tension will ease, violence will stop, and consumer sentiment will rise for Christmas and New Year. They all worry that if the market conditions do not improve in short term, there may be waves of shop closure after the New Year. Looking back at the past 12 months, the Protection of Wages on Insolvency Fund has received a total of around 3 000 applications. The five industries with the largest number of applications are construction (1 158 cases), catering services (716 cases), retail (233 cases), import and export trade (220 cases) and other personal service activities (80 cases).

Violent attack and vandalism targeting shops and shopping malls, etc. have caused substantial damage to Hong Kong's society and economy and also harmed the job market. The latest unemployment rate in Hong Kong deteriorated to 3.2% (September to November), an increase of 0.4 percentage points from the second quarter. The number of unemployed persons increased by about 11 200, bringing the total number of unemployed to 125 400. The retail, accommodation service and food service industries were hard hit, with the total unemployment rate rising significantly from 3.9% in the second quarter to 5.2%, the highest level in three years. The number of unemployed surged by 6 000 to 31 600, accounting for about 25% of the total number of unemployed. Among them, the unemployment rate in catering sector alone is as high as 6.2%, which is equivalent to about 15 000 people unemployed, the highest in eight years.

That is the reason why I have repeatedly emphasized the work direction of "supporting enterprises and safeguarding jobs". In the past few weeks, social tension has loosen a bit and restaurants have regained popularity. However, there are still scenes that we do not want to see: gathering and wandering in shopping malls, nuisance and vandalising shops, destroying facilities in shopping malls, and even roughing up and spraying paint on citizens with different opinions. Condoning violence means tolerating crime. These violent acts not only disrupted public order and freedom of the public, but also ruin many workers' jobs, hurting the elderly and the children in their families.

Christmas and New Year are approaching. No matter what differences have happened in the past, I hope everyone can give themselves and the society some breathing spaces. No matter how big the differences are, only through dialogue, mutual understanding, forward looking and joint exploration can we find a way out. One of the important meanings of Christmas is peace, love and hope. I wish you and your loved ones a peaceful, joyful and warm holiday. We also hope that our society can move forward with mutual understanding and find a way through dialogue, making all businesses to thrive.

December 22, 2019