Bad debt burns hole in pockets of city's exporters

The number of Hong Kong exporters carrying bad debt climbed sharply to as much as 45 per cent this year from just 32 per cent last year, according to the findings of a new survey by the University of Hong Kong.

The mainland carried more bad debt than any other country for the fourth consecutive year, and it contributed to 42 per cent of the overdue money owed to Hong Kong exporters.

Cobe Tsang, managing director of financial service provider and debt collector EOS Hong Kong, which was the organisation that commissioned the survey, said the city urgently needs a buyers' database to track those with poor payment records.

"The government or trade associations may consider setting one up, so as to relieve us of problems and inhibitions regarding bad debts," said Tsang, noting the recent increase in the payment deferral period to 69 days from 50 days. "The longer the payment deferral period, the higher the risk of bad debts."

These debts account for 2.5 per cent of the revenue of exporters. The overdue period of bad debt on average is 174 days, which is 26 days shorter than last year. Most exporters classify a debt as bad when the payment is overdue for more than 120 days.

The percentage of bad debt from the mainland, Hong Kong's biggest trading partner, has slightly decreased by 2 percentage points from last year, but mainland Chinese companies remain the largest source of bad debt for Hong Kong exporters.