Jeffrey Lam, Executive and Legislative Council member, is our guest on Straight Talk this week.

Lam talks about the difficulties currently faced by Hong Kong’s SMEs, and what can be done to improve the credit crunch faced by local businesses while the economy continues to suffer amid global uncertainties.

Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Jeffery Lam:

Chan: Good evening! I'm Eugene Chan, and welcome to Straight Talk. Tonight, we are addressing a critical issue that is affecting the backbone of our economy, our small and medium-sized enterprises. With over 40 years of experience in the commercial and industrial sectors, our guest, the Honorable Jeffrey Lam is no stranger to the challenges businesses face and is here to share with us their distress. Lam was one of the first Hong Kong entrepreneurs to set up factories in the Chinese mainland after the “Open Door Policy” in 1979. He is also a non-official member of the Executive Council and a Legislative Council member as representative of the Commercial (First) Functional constituency. In 2023, he received the Grand Bauhinia Medal for his outstanding contribution in the commercial and industrial sectors. Welcome, Jeffrey!

Lam: Thank you, Eugene.

Chan: Thank you for coming tonight. We have heard a lot of stories in the media and actually amongst the community that the pressure on the Hong Kong SMEs, or small and medium sized enterprises, seems to be increasing. They are facing unprecedented challenges, and from bank tightening and also to a very sluggish property market. So, you are, I think, the most appropriate person to tell us what is the current scenario right now?

Lam: You know, first of all, the situation is not as bad as everybody thinks, but we have to do something about it. You know, first of all, I think our government, led by John Lee Ka-chiu, has done tremendous work in getting Hong Kong out of a difficult situation. He has led delegations to Thailand, Middle East, ASEAN countries, in order to promote businesses. People kind of expect the result will come right away. It's not. Right now, Hong Kong is facing some difficult situations economically. On the social side, I think John has done a good job in settling the local people in regards to housing and etcetera. In the next few months, it's going to be very unexpected. The only certain thing that we can see is uncertainty.

Chan: Right.

Lam: With the geopolitical situation, with the election in the United States, people are holding back on their investments. I'm seeing a lot of investments coming this side, but some are holding back until January because of the election and the geopolitical situation. So, we have to ride over the storm. How?

Chan: Right. So, Jeffrey, it’s very assuring when you say things are not as bad as the media says. But what will you say are the primary challenges we are facing? I mean, you mentioned uncertainty, but what else are they mainly facing right now?

Lam: Okay, so it’s not like no light at the end of the tunnel. What the businesses, especially the SMEs, are facing now, the difficulties are ... they are not getting enough cash flow for their businesses. So, the banks are tightening their lending. That creates a very difficult situation for them. As you know, any businesses without any cash flow, they cannot survive. They have to pay for material. They have to pay for the labor, etcetera etc. And after September, the manufacturing industry will go into the slow season, so, they would even need more cash flow for their businesses. Right now, the banks, I think, they should look at the situation follow the Hong Kong Monetary Authority’s guideline to help the SMEs. If we all work together, we all walk together, we can ride out of this storm. But right now, the situation is not what I have just mentioned. SMEs are facing a very difficult time.

Chan: So, Jeffrey, we all know businesses have ups and downs, and we can expect that. Do you think this toughness that we are facing right now, would it be just a short bump along the road? When will you see it bounce back?

Lam: Well, short or medium bump, I don't know, because the geopolitical situation is so uncertain, a lot of people do not see the situation in the United States, you know who's going to become the new president, what their policy globally and towards China and Hong Kong is going to be, but I don't think it's going to be too long, you know, but six months … three to six months, we should expect some uncertainty. The government needs to come out timely to help the SMEs. Like back in 2008, 2009 the financial tsunami, no banks were lending. So, I urge the banks and the government to come out with a helping hand. Eventually, I worked very closely with the banks and the government came out with a $100 billion SME guarantee loan. The default rate was very low, and it saved many, many companies. But without that, they were expecting over 20 percent of the company would go down. So, you know, this is another tsunami, another crisis. We need to do something about it. We need some policies, or like the banks' helping hand, governments' helping hand in the policy and on the lending side to get the situation better. Right now, the SMEs, they are trying to survive.

Chan: Jeffrey, I want to give some information to the viewers, if that's okay. According to the Commerce and Economic Development Bureau, we have over 360,000 SMEs, which accounts for 98 percent of the companies employing 45 percent of the workforce. That means any distress among this sector would have a huge impact on the overall economic growth. And a few days ago, I mean, you made an emotional plea to the Hong Kong Monetary Authority and to ask the banks to continue to lend to SMEs to avoid a sort of bank property crisis. Do you think your tears have made a difference?

Lam: I was emotional because I felt for Hong Kong. I started working here after I got out of school, university, and I've been working with all walks of people in Hong Kong. I know people in Hong Kong care for Hong Kong. You know, like back in 2019, we faced a very difficult situation, and then the few years after we had the COVID, businesses were down. Why did they … ? They are still in Hong Kong. They are still running the businesses, even though they are not making any money, because they want to contribute again to the recovery of Hong Kong. But if they cannot survive at this critical time, don't you feel sorry? You see, this is the time they need some oxygen. The government, somebody has to give it to them. After they die, the oxygen is no longer good enough, no use.

Chan: So, do you think this kind of advocacy will lead to tangible changes in the bank policy?

Lam: Well, I hope everybody realizes this is not a situation for a single person or a single sector or business. It’s everybody, it’s a chain reaction. If one sector does not survive, it's going to affect another sector. You know, it goes top down, north to west, south to east.

Chan: So Jeffrey, as you know, in the Chinese saying, do we say the banks will “kick away the umbrella on the rainy day”, lok yu sau jeh? So, the financial secretary said that he has urged banks to ease liquidity pressures on the SMEs. Has this been implemented? I mean, is it enough to alleviate the struggles?

Lam: Well, in March, the Hong Kong Monetary Authority issued nine guidelines to the banks. One is, if the borrower continues to make timely payments, they will not call the loan to ask them for early payment or to reduce their loan limit. But I have heard, I've received a lot of complaints that some banks are doing that. So, that's hurting the running of the companies. So, if those banks continue to follow the strict guidelines of the MA, I think there won’t be so many situations.

Chan: I must say, I've heard from friends that they have similar telephone calls as well, asking them to either cash in more money as a deposit or make a tiny repayment of the loan which they're already paying for very high interest on time. So, this is not right, is it?

Lam: Well, first of all, there is a guideline from the government, and if they don't follow it, something is wrong, especially during this critical and serious situation. So, I think I repeat myself many, many times, we have to walk hand in hand, shoulder to shoulder together. If we don't, nobody's going to survive.

Chan: So, what are the specific actions would you like the banks to do, if they can, to ensure the SMEs will receive the necessary financial relief?

Lam: Well, this is on the lending side, on the ... you remember the harsh policy in regards to the property market. Now it's lifted. For a short period of time, the transaction went up, okay, but now it came down a little bit. Why? Because the buyers cannot get a mortgage from the banks. As you know, the high interest rate situation makes the bank not profitable in this area, so they don't want to do business in the sector. So, that hurts the real estate transaction, the buy-sell situation. But you know, a lot of factories, a lot of small-, medium-sized enterprises, they need to sell their property to get money to survive.

Chan: Let's take a short break now, and viewers, stay tuned. We will be right back.

Chan: Thank you for staying with us. The honorable Jeffrey Lam, Executive and Legislative Council member and representative of the commercial functional constituency, is with us this evening, to share with us the crisis many Hong Kong SMEs are facing, and discuss potential solutions to help them. So, Jeffrey, thank you very much for telling the viewers that things are not as bad as it looks, but it will be uncertain for the next few months. But the most important thing is we are all on the same boat, we must help each other and sort of helping hand in hand, especially the banks, making sure the cash flow issue will not be affected to overall health of Hong Kong economy. That will be a good summary, isn’t it, Jeffrey?

Lam: Definitely. We have to cross the river in the same boat, okay? We don't want to leave anybody behind.

Chan: No.

Lam: And this is a situation that, I think, we can work out.

Chan: Right. So, Jeffrey, let’s look on the other side of the coin. While Hong Kong has been doing so well in the past because we have very good regulations and our banks and the HKMA are very professional that they always want to ensure financial stability within the banking sector. So, how do we sort of deal with this, especially this sort of timely period, to make sure the balance between helping the SMEs and maintaining the stability, will be sort of in the balance field? How will you go about that?

Lam: You know, first of all, I am not asking the government to give money to the SMEs, I am asking the government to give support to the SMEs. A lot of people are saying that we are … look at our reserve, we are dropping every day, so where do we get the money? Again, I repeat, I am not asking the government to give out money to everybody, but to give some good measures, good policy, and a helping hand to the SMEs. You know such as … I introduced the 100 percent Financing Guarantee Scheme, they take it away, they took it away in March. I think they should restart that again.

Chan: Right.

Lam: For a period of time. On the approved principal payment holiday, they took it away again, okay? But I think it is time to relaunch like for 12 months, it will help the situation.

Chan: Definitely.

Lam: Yeah, the banks, with all those guarantee, they will do business more aggressively, they would give a bigger helping hand to the SMEs.

Chan: I am sure the banks would want to have more businesses as well because they need to have the profit as well.

Lam: Right, right.

Chan: So, with all the current challenges faced by the SMEs, do you think or do you see the Greater Bay Area as a potential lifeline for these businesses?

Lam: Of course. Greater Bay Area, I think, is the number one future for Hong Kong, other than the Shanghai area and the Beijing area. This is part of us, the Greater Bay Area. And I have come across many friends from the ASEAN countries, from the Middle East to Europe, they have expressed to me, coming to Hong Kong, and as a matter of fact, two companies have already set up in Hong Kong. But again, due to the geopolitical situation, they want to wait for a little while, but they have already rented a space, getting a home here. That we cannot change. Why are they here? Why are they here to set up their family office? Why are they here to set up their regional headquarters? Because of Greater Bay Area. There is a lot to go for. Research. What is the result of research? It is something that is good for everybody, but how can we make those results commercialized? How can we commercialize those results? Hong Kong is a good place, so this is what they are looking for. And of course, some want to sell their products into mainland, and the GBA would be a fantastic area to get started.

Chan: Right. Jeffrey, we are told regularly to capitalize on these opportunities, as you just mentioned brought about by the development of the GBA. And Shenzhen has certainly become a very popular destination for Hong Kong people to eat and shop. And this seems to be kind of making things a bit … I mean I would say a little bit worse, not better for some of the businesses for the time being. So, what are your thoughts on that?

Lam: Don't try to stop people from going to Shenzhen every weekend, we can't stop them. But on the other hand, we should see how we can attract more people to Hong Kong. You know, people talk about this and that, and we are losing all the businesses on the weekend. But how can we make our like business environment better? Like one thing: carbon trading. That's one thing that we are talking every day. If we can make Hong Kong a carbon trading center, that will attract businesses and people to come to Hong Kong. How we can make Hong Kong a stronger offshore R&B center, okay? The central government has been giving us a lot of helping hand, so it's not that policy given to us. How we can make it work?

Chan: Right.

Lam: I think that is more important, just giving you some good policies.

Chan: Right. So Jeffrey, I can see where you are coming from. But some have also suggested Hong Kong should focus on catering to the high end of the market, rather than the basic sort of things that Shenzhen is providing at a much lower cost because of the rental and for the salaries. But all these will take time. I mean what can we do in the meantime? I mean a lot of restaurants are not full, a lot of the retails are suffering, look at the markets in the northern part of Hong Kong are basically empty. I mean a lot of people are really suffering right now. So, while are you saying that things will be better, what can we do in the meantime?

Lam: Survive.

Chan: How do they survive?

Lam: Okay, right now, we talked earlier about how the government can have some new policies to help us, how the banks can go easy on their lending to help the SMEs. And during this time, how we can go abroad to get more businesses to come to Hong Kong? Back in 1967, three organizations were formed –the Trade Development Council, the Hong Kong Productivity Center; and the Export Credit Insurance Corporation. Maybe we can give a helping hand to those companies that try to go abroad, try to get business or back here to Hong Kong. But the ECIC, their duty is to help on the insurance side. When we go into a new market, there are certain uncertainties. We don't know the business over there, we don't know the people over there, we don't know the products over there. So, if the insurance company can offer a wider and higher premium to the Hong Kong exporters or Hong Kong importers, that would help tremendously.

Chan: Right. Jeffrey, I think I keep on asking you the actually the same question. I am sure the viewers would want the answers from you as they view you as the expert. I think people know that Hong Kong has to change, we have to go to the high end, even carbon trading or even all the things you have just mentioned. However, not everybody can do that. So, what is going to happen to the rest of Hong Kong? I mean a niche market we need sort of very smart people, diligent people to do it. And sometimes, Hong Kong, we have that, but then not 100 percent will be able to deliver. What do you suggest to those who won't be able to improve themselves?

Lam: Okay, high tech area definitely we have to improve. We have to attract more high-tech companies, whether they are from the mainland or from Europe, from the ASEAN countries, to come to Hong Kong. Attracting them here, telling them the big market on this side of the globe, that is very important. The policy to support all these industries coming to Hong Kong is also very important. Now everything is slow. To set up a company takes too many days, even to open a bank account.

Chan: This was exactly what I was going to bring up.

Lam: Right. So, we need to do something about it. But I don't think we should just concentrate on the high end. We are also good at the low end. We can make things very, very efficiently. Hong Kong, for example, is a very safe city, food, etc.

Chan: True.

Lam: Why people come here to buy, like, remember a few years ago, milk powder? You know, because the powder that is sold here is good and safe. So we can attract food company to come here to set up a food center or even a manufacturing plant.

Chan: Right.

Lam: So, there are many, many things, from top, middle, to low end, it can all be here, it can all be here.

Chan: Right. Jeffrey, you mentioned repeatedly that the business community remains confident about Hong Kong's economy, despite the current challenges. So, what more can we do to sustain this confidence and support businesses through this tough time? You said survive, but then what else can the government or chambers can do to help to maintain the confidence? It's very important.

Lam: Well, the Hong Kong general Chamber of Commerce just recently released a report saying that 75 percent of the SMEs, they are worried. But they still trust Hong Kong.

Chan: Right.

Lam: They are concerned, they said one of their biggest challenge is, again, cash flow.

Chan: Exactly what you said.

Lam: Exactly.

Chan: Right. Jeffrey, since you mentioned the Hong Kong General Chamber of Commerce, I've read that the government has put in like 40 funding schemes to help businesses, but a survey run by the chamber said that only 54.1 percent, meaning just over half, has applied for them, and around 3 quarters surveyed saying the process was too long and too bureaucratic. So, how can you get the government to streamline these processes, so as to making this financial aid more accessible?

Lam: Any government funding, they have to be very stringent, that I understand. But if it takes too long, then it become, maybe to some people, useless. Some get the money beforehand to get their business started, some get the money afterwards, after the project finished. I heard some don’t get the money until a year after the project has ended. So, where do they get the new money, the money to start the next project? This is something that I think we have to work out. But surprisingly, you know, after my call for government to help the SMEs, they reacted very, very quickly this time. Financial Secretary Paul Chan Mo-po came out right away, talking to the Hong Kong Monetary Authority, talking to the banks. I hope something will come about.

Chan: Right.

Lam: I hope this is a sign of Hong Kong is being quicker, Hong Kong is turning to a very efficient government. Responsive government.

Chan: Right. So, Jeffrey, thank you very much for your tears, I am sure that has helped to wake up a lot of people. So in brief, what message can you give the SME owners in Hong Kong that's currently struggling, in brief?

Lam: Well, we have to stand shoulder to shoulder together, to ride out of this difficult time together.

Chan: Right. I think we have to leave it here, Jeffrey. I mean the challenges facing Hong Kong businesses are significant, but with the right support and the collaboration between the government, banks, and the business community, is hope for recovery and growth. Thank you for joining us and have a good evening!