More than one in 10 Hong Kong small and medium-sized enterprises (SMEs) have failed to repay government-backed loans meant to keep them afloat, with no sign that the situation will improve any time soon.
The government now must shoulder HK$14.72 billion (US$1.89 billion) from default cases, almost double the unpaid loans of HK$7.5 billion a year ago.
The default rate for the Special 100 per cent Loan Guarantee Scheme, which provided businesses with low-interest loans from banks, rose to 10.25 per cent as of the end of September, according to data from the Commerce and Economic Development Bureau.
That was up sharply from 5.49 per cent a year ago, and higher than the default rate of 9.2 per cent in August.
“The rise in the bad debt ratio and the trend of businesses going bankrupt may persist for some time,” warned Allen Shi Lop-tak, a former president of the Chinese Manufacturers’ Association.
The number of businesses that closed down rose from 88,232 in 2022 to 94,002 last year, according to official data. In the first eight months of this year, 76,707 SMEs closed.