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Archive for the ‘Business in Hong Kong’ Category


Hong Kong government’s SME Loan Guarantee Scheme

Friday, July 3rd, 2009

Although the government has the best of intentions; it’s SME Loan Guarantee seems to have more discernible benefits to its participating banks than SMEs.

The government loan guarantees guarantee 80% of the loan; however all banks still require the owners of SME’s to personally guarantee 100% the loans and the government guarantee only applies when the owner is unable to repay the loan and is forced into bankruptcy. The interest charged on the SME loans by the banks are the same as what they were charging without the SME Loan guarantee. So in effect the SME owner; with or without the government loan guarantee is receiving exactly the same deal with the banks except they have to fill in more forms.

The banks on the other hand benefit in everyway; guaranteed return, guaranteed profitability, guaranteed no loan default and guaranteed retention of the same interest rates and bank charges.

The most obvious argument is that the government has helped give confidence to the banks to lend money to SMEs that they may not have had otherwise. However this is inherently flawed, because the banks’ primary business is lending money and if they chose not to do that they will go under; therefore it is as much in the bank’s interest to lend money as it is in the SME’s interest to borrow money with or without government aid.

If the government genuinely wants to help SME’s; they should lend money directly to the SME’s without the banks’ involvement This would reqiure a separate department be setup for handling these affairs and this department would actually serve a useful purpose.

So instead of the an SME Loan Guarantee Scheme it should be called a Banks’ Profitability Guarantee Scheme.

PCCW Vote Rigging

Sunday, March 15th, 2009

This house hopes that the SFC will investigate thoroughly the alleged vote-rigging activity in the recent privatisation deal and tender a detailed report of what happened. Clearly so many new holders with voting rights, many of which were Fortis insurance agents, suddenly coming into the equation just ahead of the privatisation proposal would recommend something abnormal going on.

It’s about time SFC actually did something useful with itself; the debacle with the Lehman Brothers Minibonds was essentially to do with SFC not having carried out proper risk assessment of financial products and this house sincerely hopes that a plausible explanation will become of the PCCW vote-rigging investigation.

Hong Kong Bank Scam

Monday, March 2nd, 2009

Unbeknownest to many in Hong Kong….

If you have 2 bank accounts in the same bank (Account A and account B) and you write a cheque (withdrawing from Account A) to your other account (receiving at Account B)  and have deposit it with your bank on Friday. On Saturday and Sunday - the funds will not be available in Account A and yet it would not be available in Account B. Apparently the funds are sent to a centralised banking facility that keeps the funds whilst it’s being transferred… This doesn’t seem logical and what happens to the interest during these two days?

Hong Kong’s Mandatory Provident Fund

Sunday, November 9th, 2008

The Mandatory Provident Fund was setup by the Hong Kong government as a means to tackle the aging population problem which indicates that in a few decades time the ratio of retirees to workers will be much greater than it is now. Each worker contributes a mandatory 5% of their monthly salary to the fund and their employer contributes the other 5% to total a 10% in monthly contribution. The logic behind the scheme is understandable and is sound in its thinking.

However, this house believes that the government should not have given control of the funds to corporations; because the funds effectively become capital for banking corporations to invest in any way they deem. Even though the funds are held in vehicles called trust funds the investment decisions are ultimately dictated by corporations. This house believes that the government should have taken the responsibility of managing the fund themselves. The national insurance in the UK which is a similar fund which is managed by the British government and the system works.

This house believes that by appropriating workers’ hard earnt cash to corporations it further consolidates the corporations’ power in policies that govern Hong Kong. The government is therefore becoming more and more reliant of corporations and less and less able to manage affairs by herself.

Hong Kong’s Property Quagmire

Friday, October 3rd, 2008

Hong Kong’s single-most-serious problem is its inordinately high property price which impacts negatively many far-reaching social and economic issues that the government should try to address. Traditionally property prices have always been closely linked to income; however in the last 30 years or so the increases in property prices have far outstripped income growth. This causes a higher proportion of the working class not to be able afford to purchase property and moreover it increases the overall cost of living.

It can be argued that the low birth rate and the negative growth in population is caused by the high property prices; the rationale being that young couples can no longer afford to purchase an apartment to start a family - in many instances they wait until they are financially-abled or abandon the idea completely because the financial burden of having a family is so great. Without families, there are no children and hence the population falls.

The high property prices also causes high living costs; every retail commodity will be more expensive because all businesses will pay rent for the premises in which they operate, be it retail or commercial. All expenses will be factored into the final product or service sold.

Hong Kong’s property market is quite well-organised and is effectively controlled by the 5 developers who together own all of the Hong Kong prime commercial and residential buildings and complexes. The developers have been instrumental in driving up prices and maintaining them at these artificially-high rates; understandably for commercially -motivated reasons. A prime example of artificially-controlled property pricing is the high end residential complex Sorrento (in Jordan) completed in 2004; hitherto, only 50% of apartments within this complex have been sold and this is 4 years after the completion of the complex. The developer is offering the apartments at around HK$ 10,000 / sq. ft. which is considered very high in view of location and other factors. Instead of lowering the selling price to attract more buyers, the developer has chosen to maintain the original pricing level even though it’s not being absorbed by the market; in so doing, this props up the property prices of all new developments and all the property prices in the vicinity. If all developers behaved in the same way; Hong Kong can be assured to maintain higher than market price property rates everywhere.

This practice is very beneficial to developers and property investors, however it negatively impacts our society as a whole and reduces the competitiveness of businesses operating in Hong Kong.

The solution to fix this problem is for the government to levy expensive taxes on properties that are empty so it becomes economically not viable for property developers to sit on vacant premises for prolonged periods of time.

Any thoughts?

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