‘Prepare for the worst’ from US-China trade war, Hong Kong commerce minister Edward Yau warns
Yau unveils relief measures for smaller local businesses, seeing no end in sight to clash over tariffs
Hong Kong must prepare for the worst from the raging US-China trade war by throwing a lifeline to smaller companies appealing for help, the city’s commerce minister said on Thursday.
Secretary for Commerce and Economic Development Edward Yau Tang-wah revealed new relief measures aimed at easing the financial burden on small and medium-sized enterprises (SMEs), with banks tightening credit and no end in sight to the worsening confrontation.
“After discussing with the various chambers of commerce for the ninth time in the last seven or eight months, I think the general consensus is that the dispute between the US and China over trade is unlikely to be resolved in a short period of time,” he said. “We therefore have to prepare for the worst and for this battle to be played long.”
Back in Hong Kong after leading a business delegation to Washington last month to lobby US Secretary of Commerce Wilbur Ross and other officials, Yau said that his American counterparts “understood” the city’s position.
Since firing the first shot of the trade war in July with a series of tariffs, US President Donald Trump has slapped 10 per cent tariffs on another US$200 billion worth of Chinese products, with the rate set to rise to 25 per cent on January 1. China has hit back with tariffs of 5 to 10 per cent on US$60 billion worth of American goods.
Nearly half of Chinese goods shipped via Hong Kong to the US – the city’s second-largest trading partner – will be affected by the tariffs.
The SME Financing Guarantee Scheme for small and medium-sized enterprises to obtain financing from lenders, which offers an 80 per cent loan guarantee, will be extended beyond February.
The maximum loan amount will be increased from the current HK$12 million to HK$15 million, while the guarantee period will be expanded to seven years from five years. Joining fees for SMEs will also be reduced.
Yau said that many small and medium-sized enterprises had applied for relief measures rolled out earlier this year, and they were particularly interested in diversifying into new markets like Singapore, Malaysia and Vietnam.
Those measures, aimed at helping SMEs tap into the markets of the 10-member Association of Southeast Asian Nations, attracted 75 applications in the first month of their launch in August.
Applications for the BUD Fund, which subsidises SMEs investing in the mainland Chinese market, jumped 60 per cent to about 200 from the second quarter to the third quarter, he said.
The SME Export Marketing Fund, which aims to encourage small and medium enterprises to expand their markets outside Hong Kong by providing financial assistance, which was doubled to HK$400,000 on August 1, saw a 30 per cent in applications for the first eight months year over year.
Business chambers such as the Federation of Hong Kong Industries and Chinese Manufacturers’ Association welcomed the new measures, which they said would boost SMEs’ confidence and encourage them to carry on with business.
“Many Hong Kong factory owners in China are racing to deliver goods to the US before the tariffs rise to 25 per cent in January,” federation chairman Jimmy Kwok Chun-wah said. “We don’t know if they will still have orders by then, but the measures will give confidence to keep the business going.”
Manufacturers may also find it harder to sell their products in American markets after the US, Mexico and Canada signed a new trade deal on Monday that has been seen as a means to further shut out China.
“One very clear indication is that the overall global trading environment is not in peaceful water,” Yau said. “With the lack of progress in the bilateral talk between China and the US, I think in a short and medium future, we’ll continue to see a rough sea ahead of us.”
Yau expressed concern that Hong Kong would not escape collateral damage.
“On a wider front as a member of the WTO [World Trade Organisation] and also as a long-term advocate of free trade, we are having a systemic concern on whether protectionist measures in various forms would prevail ... further dampening the advocacy and practice of free trade,” he said.
“These are areas that Hong Kong will not [shy away from] speaking up as a member of the WTO and the vanguard of the multilateral trading system.”