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Hong Kong warns of more severe economic hit from coronavirus

The impact of the coronavirus outbreak has spread to almost all parts of Hong Kong’s economy, the city’s finance chief said, as officials increase measures to try to slow a second wave of the disease in the Asian commercial hub.

Hong Kong officials in recent days have implemented new social distancing measures as well as temporary closures of bars, gyms and restrictions on restaurants, in a move that poses a new threat to businesses in these industries.

The move to lock down more parts of the economy comes as Hong Kong faces a growing threat from a so-called second wave of coronavirus cases, many of which have been imported from outside the city. As of Sunday Hong Kong had recorded a total of 890 confirmed Covid-19 infections, with four deaths.

The closures have piled new pressure on Hong Kong’s fragile economy, which was already in the doldrums prior to the pandemic due to months of anti-government protests and the US-China trade war.

“The rapid spread of the epidemic has hit the economy and has expanded from the initial individual industries such as retail and tourism to almost all industries, ” Paul Chan, financial secretary, wrote in a blog post on Sunday.

Many Hong Kong companies faced a sudden halt in payments due from their European and North American customers, Mr Chan added. Overseas clients had refused to pay for goods and had cancelled orders, worsening cash flow problems for many Hong Kong companies, he said.

The Hong Kong government has provided billions of dollars of assistance including loan guarantees to industries ranging from restaurants to retailers and travel agents, but workers’ unions say officials have not done enough to protect businesses and employees in the city from the outbreak. 

Authorities have also offered cash handouts to residents in an attempt to offset the economic impact of the crisis. 

Banks in the city have approved nearly 9,000 applications — worth more than HK$57bn ($7.4bn) — from small to medium-sized businesses for relief loans or extensions of repayment terms, according to the Hong Kong Monetary Authority. 

The city’s de facto central bank said on Friday that it would halve the amount commercial banks were required to hold in reserve against bad loans, in a move that could unlock a further HK$200bn of lending capacity.

Mr Chan said the government would seek to broaden economic support measures, but urged landlords in the city to provide relief for commercial tenants affected by the crisis. 

“We believe that this is the time for the property owners, including many large developers, to take on more social responsibilities,” he said. “Owners should actively respond to the community’s strong demand for rent reduction.”

Recent data have illustrated the extent of the havoc Covid-19 has wrought on Hong Kong’s economy. The IHS Markit Purchasing Managers’ Index for March signalled the second-sharpest deterioration of private sector conditions since the survey started in July 1998.

Retail sales in February plunged 44 per cent to HK$22.7bn compared with a year ago, according to the most recent data, marking the 13th consecutive monthly drop. In the three months ending February unemployment rose to 3.7 per cent, or its steepest rate in almost a decade.

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