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Ambrose Li

Hong Kong’s commerce minister has ruled out reintroducing a pandemic-era special guaranteed loan scheme to help small and medium-sized enterprises (SMEs) despite the economic downturn, highlighting the huge burden it would put on the public purse.
Secretary for Commerce and Economic Development Algernon Yau Ying-wah said on Saturday the latest default rate of the “Special 100% Loan Guarantee Scheme” stood at 9.2 per cent since its launch in 2020. The government was shouldering a loan guarantee amount of HK$13.2 billion (US$1.7 billion), he added.
The government stopped accepting applications for the scheme at the end of March.
“The scheme was introduced in Hong Kong during the pandemic when the economy almost ground to a halt because of the closing of borders. It was a special measure to help SMEs,” Yau told a radio programme.
“As the economy gradually recovers, it’s a heavy burden on the government if we maintain a 100 per cent loan guarantee.
“We will keep a close eye on the situation, but as it stands, there is no decision to reintroduce the scheme.”
The Hong Kong Monetary Authority, the city’s de facto central bank, on Friday set up a new task force to help SMEs that face pressure to repay loans and nearly a dozen banks have promised to provide fair and quicker access to borrowing.
Concerns about problems faced by such businesses resurfaced after property industry representatives met authorities earlier this month to discuss the tightening of mortgages by banks amid a stuttering post-pandemic recovery.
Yau said HK$143.2 billion was approved under the special scheme introduced during the pandemic for about 67,000 cases that helped 40,000 businesses with a total of 400,000 employees.

The latest default rate of 9.2 per cent, as well as the loan guarantee amount from the defaults, saw a sharp increase from 5.49 per cent and HK$7.5 billion respectively by the end of October 2023.
George Leung Siu-kay, a senior adviser in the CEO’s office at Hang Seng Bank, said on the same programme that coming interest rate cuts in the United States might improve the market.
“When there are interest rate cuts, the cost of loans for enterprises would be relatively lower. If we are taking that into consideration alone, that could help stimulate market sentiments and business volume might go up,” said Leung, a former chief executive of the Hong Kong General Chamber of Commerce.
He added he expected two rounds of interest rate reductions in the US totalling 0.5 per cent by the end of the year, with a 0.25 per cent cut likely to happen next month.
“Usually, economic performances are better during periods of interest rate cuts,” he added, but cautioned that Hong Kong was not only affected by interest rates but also by trends in trade and investment.
On the issue of business owners facing cash flow problems, Leung said the likelihood of banks recalling loans from SMEs was “absolutely minuscule” if they made their repayments on time and that there were very few precedents, even during the Sars crisis.
He added that banks would help businesses check their loan or asset status if repayment difficulties arose or would suggest certain financial proposals, which might give SMEs the impression that they were hoping to recall loans.
A recent survey by the Hong Kong General Chamber of Commerce found that 74.3 per cent of SMEs said cash flow would be their biggest problem in the next 12 months.
Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, said the decision not to reintroduce the 100 per cent guaranteed loan scheme “made sense” as the government was “not rich right now”.
Government estimates suggested a deficit of HK$48 billion will be recorded in 2024-25, after debt ballooned to HK$101.6 billion (US$17.4 billion) in the previous financial year.
“Ideally, the scheme could be put into practice again, but for targeted industries that are struggling, especially those who have insufficient cash flow,” Lau said.
But he was sceptical about how much interest rate cuts would mean to SMEs in Hong Kong and argued it would only be helpful for those which had taken out a loan.
He added that it would be helpful if the government could help bring some business back, because that would tackle the cash flow problem and reduce the pressure on many SMEs.
“The emigration wave had a lasting impact,” Lau said. “How could we attract these people to return? It would be great even if half came back.
“They are the middle class, the group with high spending power. People are still leaving.”
Lau also suggested that a more relaxed political environment would make people “feel better”.


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Hong Kong economy

No plans to revive pandemic-era guaranteed loan scheme for SMEs: Hong Kong commerce chief

A quiet bar in Lan Kwai Fong, Central. The government has stopped accepting applications for the “Special 100% Loan Guarantee Scheme”. Photo: Robert Ng

Commerce chief Algernon Yau says HK$143.2 billion has been approved under the special scheme rolled out during the pandemic, Photo: Eugene Lee

HK$19 billion in loans approved since 2020 to help Hong Kong’s retail SMEs hit by pandemic

Customers choose souvenirs at a shop in Tsim Sha Tsui. Photo: Edmond So

Secretary for Commerce and Economic Development Algernon Yau Ying-wah said over 6,000 companies with nearly 53,000 employees had benefitted from the government’s special loan guarantee scheme. Photo: Jonathan Wong

Struggling Hong Kong SMEs’ defaults surge six-fold to HK$2.46 billion on loans guaranteed by government in 2022

SMEs struggled during the pandemic as many stayed away from malls and businesses because of social-distancing measures. Photo: May Tse

Hong Kong Chinese Manufacturers’ Association president Allen Shi. Photo: Sam Tsang

Hong Kong’s John Lee pledges support for SMEs, says economy expected to improve in 2025

City leader John Lee (centre) says government policies will take the public’s views into account. Photo: ISD

Many of the attendees spoke during the two-hour meeting; Photo: Handout

News

Hong Kong

‘As the economy gradually recovers, it’s a heavy burden on the government if we maintain a 100 per cent loan guarantee,’ Algernon Yau says


‘As the economy gradually recovers, it’s a heavy burden on the government if we maintain a 100 per cent loan guarantee,’ Algernon Yau says.
