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We shall overcome

Thanks to the support of Legislative Councillors, the second round of Anti-epidemic Fund (AEF) was approved by the Finance Committee of the Legislative Council yesterday. This enables the implementation of job-safeguarding and economy-supporting measures totalling $137.5 billion to provide immediate aids to enterprises and employees hard hit by the pandemic. Particularly, the further enhanced SME Financing Guarantee Scheme (SFGS) is going to provide relief to affected enterprises with cash flow pressures.

The second round of Anti-epidemic Fund (AEF) was approved by the Finance Committee of the Legislative Council.

The concessionary low-interest 100% loan guarantee product, which I introduced in the Budget, will be open for application tomorrow. Through the second round of AEF, we have increased Government's total commitment from $20 billion to $50 billion, with a view to benefitting more enterprises. As at now, 10 banks are ready to receive applications, while some others engaging in SME loan businesses are also interested in joining the scheme. On processing time, the Hong Kong Mortgage Corporation Limited has pleged that in general, upon the banks' receipt of all necessary documents from applicant enterprises, it will only take 10 to 14 working days for an application to be approved.

The concessionary 100% loan guarantee scheme is applicable to companies of all sectors. Eligible enterprises should have been operating for at least three months as at end-December 2019, and have suffered at least a 30 per cent decline in sales turnover in any month since February 2020 compared with the monthly average of any quarter in 2019. An interest rate of the Prime Rate minus 2.5 per cent per annum, i.e. current interest rate at 2.75 per cent, will be charged. All guarantee fee will be waived. The maximum amount of loan per enterprise is the total amount of employee wages and rents for six months, or $4 million, whichever is lower. Enterprises may also apply for an optional principal moratorium for the first 12 months, so as to alleviate instant burden on repayment.

In addition, we have increased the maximum facility amount per borrower of the existing 80% and 90% loan guarantee products under the SFGS to $18 million and $8 million respectively. A subsidy up to equivalent of 3 per cent of the interest rate will also be provided, so that the actual interest rate will be largely the same as that of the 100% loan guarantee product.

Moreover, the Hong Kong Monetary Authority (HKMA) together with the Banking Sector SME Lending Coordination Mechanism has just launched the Pre-approved Principal Payment Holiday Scheme. All corporate customers that have an annual sales turnover of $800 million or less with no outstanding loan payments overdue for more than 30 days are eligible for the Scheme, covering more than 80 per cent of all corporate borrowers in Hong Kong. This is one of our measures which serves to relieve the cash flow pressure of enterprises by leveraging the power of the banking sector.

All loan principal payments of eligible customers falling due within a 6-month period between 1 May 2020 and 31 October 2020 will be pre-approved for deferment. Principal payments of loans (including revolving facilities) will generally be deferred by 6 months, whereas trade facilities, given their short-term nature, will be deferred by 3 months. Banks will begin informing eligible customers of the pre-approval under the Scheme as soon as practicable. Eligible customers do not need to apply. They only need to contact the bank within 14 days of the bank's notice to confirm the detailed arrangements of the principal payment holiday.

Pre-approved Principal Payment Holiday Scheme has been rolled out, covering more than 80 per cent of all corporate borrowers in Hong Kong.

The Banking Sector SME Lending Coordination Mechanism may not be familiar to some of you. The Mechanism was established in last October to serve as a communication platform to strengthen the banking sector's support to SMEs. Under the HKMA's leadership, the Mechanism has rolled out four rounds of relief measures for corporate and retail customers, including principal payment holidays for SMEs and residential mortgages, loan tenor extensions, and the conversion of trade financing lines into temporary overdraft facilities. The measures have shown effects. For instance, nearly 9 000 applications for relief measures have been approved by major banks engaging in SME loan businesses, involving over $57 billion.

As shown in the measures above, one of our major directions in supporting enterprises and safeguarding jobs is to leverage the power and resources of the market as far as possible in order to maximise the effect of the measures and benefit more business sectors. In the second round of AEF, some $90 billion, including the $80 billion Employment Support Scheme, will be spent on safeguarding jobs, which can benefit more than 2 million people.

In fact, the growth of new confirmed COVID-19 cases in Hong Kong has recently shown a slowdown. Until yesterday, the number of new cases has dropped to single-digit level for seven consecutive days, a much slower increase than several weeks ago. If we could keep up our anti-epidemic efforts and sustain this positive trend, hopefully our daily life could gradually resume normal, and local consumption and different business sectors, such as catering, could gradually recover. By safeguarding jobs, we would be in a better position to grasp the opportunities of the upcoming economic recovery.

Fighting against the pandemic and stabilising the economy are the two major challenges facing us. Over the past year, social incident, violent attacks, together with the recent pandemic have dealt a severe blow to our economy. Businesses in many sectors like retail and tourism have been frozen, and the situation of unemployment is getting worse. In just eight months (June 2019 to February 2020), the unemployment rate has hiked almost one percentage point from 2.8% to 3.7%. The Census and Statistics Department will announce the latest unemployment rate up to March tomorrow. The situation of unemployment and underemployment is expected to further deteriorate at a faster rate. Although the second round of AEF may not be a perfect solution to all, still it could help slow down the increase of the unemployment rate to a certain extent, enabling us to safeguard jobs, support the enterprises and preserve the vitality of our economy.

April 19, 2020


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