For struggling Hong Kong firms, rent cuts and return to peace more valuable than latest relief measures

Denise Tsang

Although companies in Hong Kong have welcomed the government’s latest measures to ease the economic pain arising from the combined effects of ongoing protests and the US-China trade war, they also say the benefits are a drop in the bucket.

Three players in the food and catering industry and a retailer the Post interviewed on Wednesday said the sweeteners were insufficient to cushion the loss of business arising from a worsening tourism slump and recession. They called on landlords to cut rents and for peace to return to society.

The government’s latest measures, worth about HK$4 billion (US$512 million), primarily involve subsidies on utility bills and allow qualified individuals and companies to pay tax bills in instalments.

“The relief measures are helpful in the short term, but the largest costs are rent and salaries,” said Samme Cheng Pak-man, who supplies lunchboxes to schools. “The most practical help is to get society back to peace and a normal operating environment.”

The food and beverage industry in Hong Kong has taken a battering. Photo: Nora Tam

On Wednesday, Financial Secretary Paul Chan Mo-po revealed the fourth round of measures, which aim to help ease the cash-flow burden on taxpayers and small and medium-sized enterprises (SMEs).

A key measure will see the government pay 75 per cent of commercial users’ electricity bills for the next four months to March 31, capped at HK$5,000 per month.

Commercial users will also be exempt from paying 75 per cent of their water and sewage charges, with water fees capped at HK$20,000 per month and sewage charges at HK$12,500 per month over the same period.

It is a small favour, but better than none. The industry has been seriously battered

Michael Leung, restaurant owner

For government rents and rates, the waiver for commercial accounts will rise to HK$5,000 compared with HK$1,500 previously.

Michael Leung Chun-wah, who owns four Chinese restaurants with about 300 staff, said each outlet would get about HK$15,000 per month as a result of the sweeteners. However, that was just a fraction of the average HK$2 million to HK$3 million cost of operating a restaurant each month, he said.

“It is a small favour, but better than none,” he said. “The industry has been seriously battered.”

Paul Chan announced a fourth round of measures on Wednesday. Photo: Dickson Lee

The ongoing anti-government protests have rocked Hong Kong for nearly six months, evolving from peaceful demonstrations to violent clashes between radicals and police. Residential, commercial and tourist districts such as Tsim Sha Tsui, Yau Ma Tei, Mong Kok, Causeway Bay and Central have all been affected.

More than 40 regions have issued travel warnings or alerts to travellers heading to the city, with tourist arrivals slumping since August. In October, tourist arrivals were down 43.7 per cent year on year.

Crowds shrink further in lunchtime protests as just a few dozen show up

The city is in a recession and expects to see gross domestic product contract 1.3 per cent in 2019 from last year, when it grew 3 per cent from 2017.

The latest measures are on top of a previous HK$21 billion in incentives the government dished out to help low-income groups, students, the logistics and tourism sectors, and SMEs.

The CEO of a restaurant group with 13 eateries in Hong Kong said, on condition of anonymity, that each outlet stood to benefit by about HK$10,000 a month from the latest relief measures.

“This is a drop in the bucket, but better than having no help,” he said. “We are urgently in need of rent cuts; otherwise, I am not sure how many restaurants will manage to stay afloat in the coming months.”

In the case of this food and catering group, just three restaurants have had a rent cut, of about 10 per cent. The CEO said it had been difficult to lobby landlords for a temporary rent cut.

He succeeded with one only because of special circumstances at the Festival Walk mall in Kowloon Tong.

The mall was closed for repairs on November 13 after radical protesters threw a petrol bomb and set its artificial Christmas tree on fire, and destroyed glass and railings on several floors the night before.

Hong Kong luxury retailers seek rent relief as protests leave malls deserted

The mall was not expected to reopen until the first quarter of next year because of the huge damage.

“Even though we had a rent cut for our restaurant in Festival Walk, we’ve had to forgo its revenue because we can’t do business,” the CEO said. “Dining traffic at our restaurants has been affected because train services were shortened and roads were blocked without notice.”

Radicals blocked roads with bricks and other items during demonstrations and when they clashed with police, rail operator MTR Corporation cut service hours or shut stations temporarily.

Festival Walk is not expected to open until the first quarter next year after being vandalised. Photo: Xiaomei Chen

Pauline Wong, proprietor of stationery shop The Tree in Causeway Bay, watched the financial secretary’s announcement of new measures with a yawn.

“For an independent shop like I run, the utility bills cost a few hundred dollars a month. What I desperately need is lower rent,” she said.

Tree, which relied on local shoppers and tourists, had seen a double-digit decline in revenue since September from the same period last year, she said.

Hong Kong protests bring biggest retail slump on record

Because the shop was losing money there was no tax due, Wong added, meaning the government’s offer of paying by penalty-free instalments for the 2018-19 year did not apply.

Deloitte China tax director Ellen Tong said instalments would effectively help individual or company taxpayers relieve their cash flow pressure.

Any delay in settling tax bills within six months would result in a 5 per cent surcharge and 10 per cent beyond the six-month period.

“To further support individuals and corporates, we propose the government in its next budget waive provisional tax for all taxpayers in 2019-20 and 2020-21,” she said.

She added that the basic allowance and married person’s allowance should be raised 13.6 per cent to HK$150,000 and HK$300,000 respectively.

Lunchbox supplier Samme Cheng did not think the latest measures would help turn around the hostile business environment.

“I unexpectedly had about 20,000 lunchboxes cancelled each day for three schools days last month because of protests. Who would ever have thought the protests would affect this type of business?” he said. “Because of the cancellation of classes, I need to refund the schools while still paying wages for about 100 staff and the rent.

“Nothing can be better than everything getting back to normal.”

This article For struggling Hong Kong firms, rent cuts and return to peace more valuable than latest relief measures first appeared on South China Morning Post

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