Hong Kong extends payment holidays until April 2021 to give struggling small businesses a lifeline out of worst recession

The scheme covers small companies with annual turnover of less than HK$800 million (US$103 million)

There are 130,000 companies qualified under the scheme, and 15,000 of them have applied for the payment holiday break since May

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Pedestrians in front of a closed business in Mong Kok on 22 August 2020. Photo: EPA-EFE

Published: 5:22pm, 2 Sep 2020Updated: 11:25pm, 2 Sep 2020

Hong Kong’s monetary authority has instructed banks to extend their loan repayment holidays for small businesses for another six months until April 2021, providing more breathing space for some of the biggest job providers as they struggle to crawl out of the city’s worst recession on record.

All banks have to allow qualified corporate borrowers to waive the repayment of their corporate loans or mortgages until April 2021, extending the waivers from October 31, according to a statement by the Hong Kong Monetary Authority (HKMA). During the extended holiday period, companies will only need to pay the interest but not the principals on their loans.

The de facto bank’s latest move is aimed at helping the city’s struggling retail, property and service industries amid the lockdowns and consumption slumps caused by the coronavirus pandemic.

“The extension of the repayment holidays for six months is very important to help the many SMEs solve their financial problems due to the pandemic,” said Peter Shiu Ka-fai, a lawmaker representing the wholesale and retail sector. “Companies have had no income or have seen their revenue slashed substantially during the past two months. They simply do not have cash to repay their mortgage or other loans. Without the extension, many firms may not be able to repay their loans.”

The business sector had lobbied the HKMA for the extension. A third wave of Covid-19 infections forced the government to introduce its toughest social distancing rules in mid-July. These included gatherings of no more than two people and stopping dine-in services at restaurants in the evenings. These moves pummeled Hong Kong’s retail sales in July, which shrank 23.1 per cent year on year, continuing its contraction for the 18th straight month.

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