Worse than financial crisis, deadlier than Sars: coronavirus to push Hong Kong bankruptcies to decade high

Hong Kong is poised to see the biggest jump in more than a decade in personal bankruptcies and companies winding up this year, as individuals and firms are overwhelmed by “multiple problems” that are far worse than any crisis seen previously, according to the Hong Kong Institute of Certified Public Accountants.

“I expect the situation will be worse than previous crises such as Sars (Severe Acute Respiratory Syndrome) in 2003 because we are facing multiple problems which have been dragging on for more than a year, ranging from the US-China trade war, social unrest and now the coronavirus outbreak,” Johnson Kong Chi-how, the new president of HKICPA, which represents more than 45,000 accountants.

“We have seen a lot of potential restructuring and liquidation inquiries from many companies since last year as the US-China trade war and the social unrest have hit hard the local and mainland economies,” Kong said in a telephone interview last week.

In 2019, personal bankruptcies in Hong Kong rose 9 per cent year on year to 8,151, while company winding-up petitions jumped 14 per cent to 419, according to data from the government’s Official Receiver’s Office.

The sharp rise in company collapses will push the unemployment rate higher than the 3.4 per cent for the three months to the end of January, already up from 2.8 per cent in the year-earlier period. The unemployment rate during Sars was 8 per cent.

Analysts said this was worrying because unlike many countries such as the US and Europe that have comprehensive unemployment benefits, Hong Kong hardly has any protection for jobless people. This will further cut down local consumption while banks may face higher levels of bad debt.