Banks need more government help to backstop SMEs’ finance needs: HSBC co-CEO

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The logos of HSBC and Standard Chartered adorn their buildings in Central, Hong Kong. Photo: Nora Tam

Mia Castagnonein Shanghai

Published: 6:30pm, 20 Jun 2024Updated: 6:44pm, 20 Jun 2024

Banks need better government backing to support the financing needs of small and medium-sized enterprises (SMEs), particularly during difficult economic times, according to HSBC’s co-CEO for the Asia-Pacific region.

“The operations of the government financing guarantee agencies need to be further improved, such as promoting the collaboration of guarantee agencies at all levels, improving the re-guarantee mechanism and enhancing the efficiency of risk-compensation funds,” David Liao said.

If the government can provide credit and guarantee to cover risks, then banks like HSBC can be more flexible in giving loans to SMEs, he said during a panel discussion about financial inclusivity at the Lujiazui financial forum in Shanghai on Thursday.

SMEs represent more than 90 per cent of all businesses in China, according to the government, contributing more than 60 per cent of gross domestic product, more than 50 per cent of tax revenues, 80 per cent of employment and 70 per cent of innovation.

China’s SMEs have “yet to display a strong trend of rebound” despite showing slight improvement in business sentiment in March, according to the CKGSB Business Conditions Index, an independent survey by the Cheung Kong Graduate School of Business.

In Hong Kong, confidence among SMEs improved slightly in April, but remained well below a year earlier when it soared on the back of the border reopening, according to a survey from the Hong Kong Productivity Council.

China has a thriving SME environment, but it is facing challenges such as the complexity of cross-border trade, Standard Chartered CEO Bill Winters said in the same discussion.