HSBC Commercial Banking Hong Kong Small Business Hot Issues Survey May 2008

The HSBC Commercial Banking Hong Kong Small Business Hot Issues Survey Survey of small and medium-sized enterprises on how their business is affected by the US slowdown, how is buyer demand from the key markets compared to 12 months ago, how companies are managing the risk of non-payment and how companies are increasing cost efficiency in today’s environment. 500 SMEs surveyed by telephone in April and May 2008, including HSBC customers and non-customers For HSBC Commercial Banking, understanding the issues facing small businesses is essential for our business strategy. HSBC commissioned Hong Kong University’s Public Opinion Programme to conduct this survey of 500 small and medium sized enterprises in Hong Kong in January 2008. The survey asked SMEs what they consider to be the most pressing concerns at the moment, including key cost driver, the US economic slowdown and the tight job market in Hong Kong and mainland China.

US Economic Slowdown 68% of SMEs surveyed are unaffected Figures may not total 100% due to rounding. Graph base=501

Impact of US Slowdown Of the 32% of firms who said they were affected, 44% are experiencing fewer or smaller volume orders from US buyers Figures may not total 100% due to rounding. Graph base=501

Key Markets The majority of SMEs (68%) say that Hong Kong is a key market, followed by mainland China (59%) Under 30% believe the US to be of strategic importance to their business Note: Multiple responses allowed. Graph bas=503

Demand in Key Markets 58% of SMEs which call the US a key market (representing a third of sample) say demand is down Figures may not total 100% due to rounding. Graph base=501

Credit Quality 55% of Hong Kong SMEs ‘not concerned’ about credit quality in the current environment Figures may not total 100% due to rounding. Graph base=503

Risk Management Strategies Over a quarter of Hong Kong SMEs using trade services provided by banks to manage risk of non-payment Figures may not total 100% due to rounding. Graph base=501

Cost Efficiency Nearly half of all respondents ‘not doing anything’ to increase cost efficiency Figures may not total 100% due to rounding. Graph base=502

Industry Outlook Majority feel they will see more or the same amount of business in 12 months time Figures may not total 100% due to rounding. Graph base=503

Summary US slowdown not impacting most Hong Kong SMEs Small business sector increasingly diversified into markets across Asia whose economies remain robust Hong Kong and mainland China are key markets for local SMEs Most of those who do trade with the US are suffering Many SMEs are engaging banks to help them manage trade risk Hong Kong’s small business sector has weathered turbulence before and can adapt to changing economic conditions