The impact of the United States' subprime crisis on small- to medium-sized enterprises (SMEs) has been minimized by their increased presence in emerging markets, a new HSBC survey indicates.

The lender's commercial banking arm polled 500 SMEs, 68 percent of which said the plagued US economy hasn't negatively impacted their business.

Nixon Chan, a senior executive at the HSBC arm, called the results surprising, as so many SMEs deal in international trade.

"This survey shows Hong Kong's small-business sector is becoming increasingly diversified on the mainland, as well as in other Asian markets whose economies remain robust," he said, adding that the result is more businesses are able to survive despite the US downturn.

The survey says that more than 67 percent of Hong Kong SMEs regard Hong Kong as a key market.

In terms of cross-border destinations, 59 percent believe the mainland to be of strategic importance. More than 36 percent of the responding companies said the rest of Asia is their major market.

The US is a key overseas market for fewer than 30 percent of those polled, closely followed by Europe and the Middle East.

Around 30 percent of survey respondents stated that they have been affected by the US slowdown, most in terms of fewer or smaller volume orders from US buyers.

"The research shows that if you are doing business with the US, you are almost certainly doing less of it than you were three months ago," Chan said.

Of those firms suffering from the US slowdown, 44 percent are experiencing fewer or smaller volume orders from US buyers. And 15 percent are getting less money for their products.

The SMEs that call the US a key market say the demand is falling. But those businesses with interests on the mainland say demand there is robust, with 73 percent of respondents experiencing either the same or greater demand compared with a year ago.

As a result, about 13 percent of US-focused companies say they are shifting to other markets.

Not doing anything?

When asked about the extent to which businesses are striving to improve cost efficiency, nearly half of all respondents replied on the survey that they are "not doing anything".

Fewer than 30 percent say they plan to change suppliers to reduce costs. More than 12 percent say they may move their factories to less- expensive locations. And 10 percent may relocate to their home offices to save on commercial rent.

Generally, the majority of Hong Kong SMEs said they expect to be doing the same or an increased level of business in the next 12 months.

The survey was, however, conducted between April and May, before the Sichuan earthquake. Chan noted that companies with operations near the epicenter may now have a different outlook.

(HK Edition 06/05/2008 page2)