Godfrey Leung King-kwok Calls for Increased Advance Payments to Alleviate Liquidity Pressure in Hong Kong's Construction Industry
The Cash Flow Crisis in Hong Kong's Construction Industry
Godfrey Leung King-kwok, executive director of the Construction Association, has voiced concerns about the severe liquidity pressure faced by small and medium enterprises (SMEs) in Hong Kong. He argues that the government must take action to raise advance payments for public projects, particularly as the construction sector grapples with cash flow shortages exacerbated by the economic downturn.
Request for Increased Advance Payments
Leung emphasized that the current cash flow shortage is the most pressing issue for the industry. He pointed out that banks are increasingly cautious when lending to construction firms, considering the downturn in the property market. “The interest rate on our loans has risen, putting further strain on our financial situation,” he stated during a recent radio program.
- Historically, in February 2020, the Architectural Services Department had permitted contractors to apply for 2% of project costs or up to HK$30 million as part of pandemic relief measures.
- These advance payments were labeled as a “benevolent policy” that could help stabilize cash flow for construction companies.
The Broader Impact on SMEs
Andrew Kwok Chi-wah, president of the Hong Kong Small and Medium Enterprises Association, confirmed that liquidity pressure is palpable. Many SMEs are struggling as banks tighten credit limits due to depreciating collateral values.
- Kwok suggested allowing partial principal repayments while postponing interest payments to help businesses in distress.
- Financial Secretary Paul Chan Mo-po has echoed these concerns, pressuring banks to alleviate liquidity challenges for SMEs and ease mortgage obligations for homeowners.
As a crisis looms, both industry leaders emphasize that immediate action is critical to ensure the survival of businesses within the construction sector and the broader economy. Failure to address these challenges could lead to a sustained economic downturn in Hong Kong.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.