Continuous interest rate hikes will further threaten Hong Kong’s small businesses, experts say, urging government to offer more support
- ‘Unless the government rolls out more supportive measures, I’m worried we will see more people going bankrupt in the coming months,’ economist says
- Four of city’s largest banks are set to increase their prime rates for the first time in four years
A continuous rise in interest rates will threaten the operation of small businesses in Hong Kong and lead to a further reduction in trade deals next year, industry leaders and an economist have warned, as they urge the government to provide more support to struggling firms.
Four of Hong Kong’s largest banks on Thursday said they would increase their prime rates for the first time in four years, in a move that followed the US Federal Reserve raising its key interest rate by 75 basis points to tame its runaway inflation.
The best lending rate of HSBC, Bank of China (Hong Kong) and Hang Seng Bank will rise by 12.5 basis points to 5.125 per cent starting on Friday, Monday and Tuesday respectively, while Standard Chartered’s prime loan rate will increase to 5.375 per cent.
Michael Hui Wah-kit, chairman of Hong Kong’s Small and Medium Enterprises Committee, said: “The interest rate has been low for a long period of time, but repeated increases this year means that the operational costs of small companies have become higher and higher.”
“Manufacturers which borrowed money from banks to purchase machinery or raw materials have been hard hit,” he added, saying that the interest rate hike had contributed to existing woes for businesses in the city, including those that have been repaying their mortgage loans.
The Fed’s interest rate increase marks the third consecutive rise in the past four months, with the latest figure ranging from 3 to 3.25 per cent. Officials said the rate was expected to further jump by at least another 1.25 percentage points by the end of this year, adding that a median projection of 4.6 per cent by the end of 2023 was “likely”.
Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, said that the change meant that for every HK$10 million (US$1.3 million) borrowed, businesses would now need to repay an additional HK$12,500 per year.