SMEs feel pinch as loans shrink

Updated: 2008-10-28 07:39

By Teddy Ng(HK Edition)

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The majority of Hong Kong enterprises are seeing their bank loans significantly slashed, and it's likely to lead to operation problems amid the declining domestic export values, business representatives have said.

The Federation of Hong Kong Industries Deputy Chairman Cliff Sun said yesterday that 10 percent of the 85 small and medium-sized enterprises (SMEs) surveyed have had their bank loans canceled and are being asked by the banks to settle loans.

In addition, 40 percent of the companies said their loan amounts have been slashed by between 4 and 60 percent by financial institutions. About 20 percent of the companies said they are in financial difficulties, and 40 percent of those firms say its due to tighter bank loans, while the remainder say it's because of operational problems.

"Even companies with a good record cannot escape from the tightening bank loans problem," Sun said during a special meeting of the Legislative Council's Commerce and Industry Panel.

A government spokesman said the deepening financial crisis has increased markedly the downside risks to global economies and the recent strengthening of the US dollar does not bode well for the performance of Hong Kong's exports in the period ahead.

Sun urged the government to work with banks to provide more loans.

Hong Kong and Kowloon Electrical Appliances Merchants Association Chairman Peter Chu said financial institutions are not only tightening loans, but also delaying the clearing of credit card transactions.

Hong Kong Optical Manufacturers Association Executive Committee member Max Cheung expects the sector will be worst hit by the downturn in the United States and Europe, which are the company's two largest markets. Cheung urged the government to help the sector explore the mainland market to offset the impact caused by the sales drop abroad.

Acting Secretary for Commerce and Economic Development Gregory So said the government is concerned for the SMEs and will implement supportive measures.

The LegCo's Finance Committee will discuss today a government proposal to amend the existing fund scheme to assist SMEs.

(HK Edition 10/28/2008 page2)