CPA Australia: 44 Per Cent of Small Businesses in Hong Kong Sought External Funds for Survival Before Covid-19 Pandemic

HONG
KONG, CHINA – Media OutReach –
2 April 2020 – The 11^th APAC Small Business Survey conducted by
CPA Australia reveals that 44 per cent of small businesses in Hong Kong had
sought external funds for survival in 2019, while 25 per cent of respondents experienced
difficulties in paying debts last year and 29 per cent expected the difficulty to
continue. This suggests that nearly three in ten of small businesses in Hong
Kong expect to have immediate and severe liquidity issues in 2020 even before the
COVID-19 pandemic.

Only
37 per cent of surveyed small businesses in Hong Kong reported that they grew
in the past 12 months, the lowest on record and down by 19 per cent from 2018.
However, 61 per cent of small businesses had sought external funds with 44 per
cent for survival, which is the only surveyed market where the percentage of
businesses that required external finance was higher than the percentage of
businesses that reported growing.

Mr.
Janssen Chan, CPA Australia’s Deputy Divisional President 2020 and Chairperson
of SME Committee in Greater China indicated that according to the survey
findings the challenges for Hong Kong small businesses were very difficult in
2019, “We have seen that the businesses in Hong Kong had experienced a lot of
challenges last year, but the situation was worse than I expected. 25 per cent
of respondents experienced difficulty in paying debts in 2019, while 29 per
cent expected these difficult circumstances to continue in 2020. This implies
nearly three in ten of Hong Kong small businesses expect to have cashflow
problems this year. In addition, since the COVID-19 outbreak, we foresee a higher
percentage of small businesses may collapse in the next 3 to 6 months as a
result of a sharp decline in business turnover and the lack of positive cash
flow to stay afloat.”

“While
small businesses in all surveyed markets were most likely to access external
finance for the purpose of business growth, the percentage of Hong Kong’s
respondents accessing external funds for survival was the highest amongst all
markets in the APAC region. Political instability (44 per cent) and poor
overall economic environment (37 per cent) were the biggest negative factors
impacting Hong Kong businesses last year. Coupled with the COVID-19 pandemic
this year, the present situation for Hong Kong small businesses has become even
more severe, and many will struggle to survive this crisis.”

Chan
commented, “We note that the Hong Kong Government has introduced a series of
relief measures to address local SMEs’ financial burden including low-interest
loan schemes, reduction of profits tax, introducing utility subsidies and cash
handouts to incentivise domestic consumption.

These
measures are very timely and will relieve the financial burden of many SMEs – particularly
those carrying bank loans. The Hong Kong Monetary Authority’s recent cutting of
the CCyB rate, the principal moratorium policy launched by various banks in
Hong Kong and the recently launched 100% loan guarantee under the SME Financing
Guarantee Scheme may also relieve current debt pressure on SMEs.”

Considering
only 26 per cent of respondents expect their business to grow and 73 per cent
of all surveyed respondents have intentions to access finance in the next 12
months even before the COVID-19 pandemic, CPA Australia recommends that the small
business owners should consider evaluating the existing corporate leverage
ratio and forecasting sales revenue before accessing new external finance.

Like
other countries globally, small businesses in Hong Kong have been severely affected
by the COVID-19 pandemic. In particular, small businesses in the retail,
catering and tourism industries have been facing many challenges in operating brick-and-mortar
businesses.

 “Given the results of profitability from the
investment of technology and doing businesses online in Hong Kong are below the
average amongst the surveyed markets in 2019, there is a significant room for
improvement. It is time for the Hong Kong small businesses to consider transforming
their business to respond to changing consumer behaviour and technological
trends.” Chan said.

Only
43 per cent of respondents in Hong Kong said they had generated more than 10
per cent of their income from online sales last year, compared with 82 per cent
in neighbouring Shenzhen and 86 per cent in Guangzhou. Further, compared to
only 30 per cent of respondents in Hong Kong, over 60 per cent of respondents
in Shenzhen and Guangzhou stated that their investment in technology had made
their business more profitable.

“Small
business owners in Hong Kong should consider learning from the experience of
doing businesses online in these cities in the Greater Bay Area and exploring investment
in technologies that are helpful to boost business growth. In the long term,
they should also consider cooperating with business partners in these cities
and expanding the businesses outside the Hong Kong market. With a viable new
business plan, small businesses in Hong Kong would have a higher chance to gain
finance and investment.” Chan suggested. 

For
small business owners in need of financial support to sustain their business, Chan
recommends “utilising technology and digital tools to improve cost control and
increase sales revenue, and at the same time, prioritise adjusting business
models to prepare for external challenges. In addition, the launch of virtual
banks in Hong Kong provides a new channel for SMEs to seek external finance.
Small businesses with resilience and flexibility under adverse economic
conditions will remain competitive and eventually manage through these tough
times” Chan said.

About CPA Australia

CPA Australia is one of the world’s largest
accounting bodies with more than 165,000 members working in 150 countries and
regions around the world, and with more than 25,000 members working in senior
leadership positions. It has established a strong membership base of more than
19,000 in the Greater China region.

About CPA Australia Asia-Pacific Small Business Survey

The CPA Australia Asia-Pacific Small Business Survey provides annual
insights into the views of small businesses across the region and forms part of
a longitudinal study that began in 2009. The 11^th CPA Australia
annual survey comprised extensive surveying of 4,193 small business operators
in eleven markets, including Hong Kong, Mainland China (Beijing, Guangzhou,
Shanghai, Shenzhen and Chongqing), Taiwan, Malaysia, Vietnam, Indonesia,
Singapore, the Philippines, India, Australia and New Zealand. The survey was
conducted between 18 November and 12 December 2019 before COVID-19 pandemic.