Financing Small- and Medium-Sized Enterprises in Times of COVID-19 in Hong Kong

Wai Yee Wan, Linda Chelan Li and Phyllis Lai-lan Mo

Chinese Economy, 2026, vol. 59, issue 2, 115-140

Abstract: COVID-19 had a devastating impact on small and medium-sized enterprises (SMEs) globally and governments around the world have implemented economic measures to prevent them from shutting down permanently. Hong Kong is no exception and has implemented a comprehensive Anti-Epidemic Fund (AEF), which provides subsidies and government-guaranteed loans to SMEs. The subsidy scheme provides cash directly to the businesses in badly affected sectors and the loans are aimed at meeting their liquidity needs. However, through a survey of 487 SMEs, this article provides evidence that SMEs are less likely to receive subsidies or guaranteed loans under the AEF if they have lower revenues and are more financially fragile. The SMEs that did not secure support from the government assistance schemes also report having fewer financing sources and credit support options. These results suggest that, contrary to the declared objective, the AEF is actually skewed toward benefitting financially sound SMEs that could have met their liquidity needs from the market and does not assist the more vulnerable SMEs. Although the reasons for SMEs’ difficulties in accessing the AEF are complex, we suggest that future economic measures be recalibrated to identify purposes more clearly, the design of the subsidy scheme be insolvency-neutral and not dependent on the financial position, and more targeted intervention for the loan guarantee scheme.

Date: 2026
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DOI: 10.1080/10971475.2025.2527492

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