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William Yiu

Hong Kong authorities should increase advance payments for public projects if serious cash flow problems deepen, the construction sector has said, with a business industry leader calling on banks to allow firms to delay interest repayments amid a struggling economy.
A representative for small and medium enterprises also said the poor local environment for operating businesses and the issue of numerous shops being left vacant would last at least until the end of the year.
Godfrey Leung King-kwok, executive director of the Construction Association, said on Friday the cash flow shortage was the biggest problem facing the industry.
He added banks were now cautious about issuing loans to the construction industry as the property market was in the grip of a downturn.
“The interest rate on our loan was higher than before,” he told a radio programme.
Leung, who was the undersecretary for commerce between 2012 and 2017, called for raising the advance payment for public projects to address the cash flow issue.
“I hope the government will increase [the advance payment] or not set the cap of the payment if the future situation worsens,” he said.
In February 2020, the Architectural Services Department announced that contractors of ongoing public works could apply for 2 per cent of the project costs, or up to HK$30 million (US$3.8 million), to increase their cash flow as part of temporary relief measures during the pandemic.
Leung described the special advance payments as a “benevolent policy” which injected liquidity into the construction companies when public projects were still in good shape.

But Leung said the number and pace of private construction projects were decreasing and slowing down, which would bring “clouds” in the coming two to three years.
“We are worrying, though we still have projects,” he said.
He said he expected some construction companies specialising in private projects would switch to compete with public ones to survive.
“The competition will get keener and there will be even cutthroat competition,” he said.
The Hong Kong General Chamber of Commerce, one of the largest business chambers in the city, revealed on Wednesday a survey that found 74.3 per cent of SMEs polled cited cash flow as their biggest challenge in the coming 12 months.
Andrew Kwok Chi-wah, president of the Hong Kong Small and Medium Enterprises Association, confirmed some banks had been reducing credit limits after the depreciation of collateral value and even asked borrowers to repay shortfalls.
“The banks are feeling unsafe when they see the collateral depreciating, as they are also doing business,” Kwok said.
He suggested the banking sector allow SMEs to repay the partial principal and postpone interest repayments for one to two years to give struggling businesses some breathing space.
In March, the Hong Kong Monetary Authority announced banks must offer a transition period of at least six months for credit-limit adjustments under certain conditions and “never demand” early repayment from mortgage customers who pay on time.
But Kwok said the measures were just a guide and that banks were not required to follow them.
“Not all banks are implementing these measures,” he said.
Earlier this week, Financial Secretary Paul Chan Mo-po urged banks to ease the liquidity pressure faced by SMEs and help homeowners with their mortgage obligations, and pledged that authorities would provide help in cases that proved difficult.
Chan said he had met key banks to discuss issues SMEs faced with liquidity, with representatives of lenders agreeing on the importance of supporting businesses.
The minister has been putting pressure on banks since March to help SMEs and mortgage holders amid weak consumption and lacklustre stock and property markets.


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Hong Kong Economy

A business industry leader also calls on banks to allow delays in interest repayments amid a struggling economy


A business industry leader also calls on banks to allow delays in interest repayments amid a struggling economy.


Hong Kong authorities urged to raise public project advance payments to keep cash flowing

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}A business industry leader also calls on banks to allow delays in interest repayments amid a struggling economy

A business industry leader also calls on banks to allow delays in interest repayments amid a struggling economy