Hong Kong bankruptcies climb

Hong Kong bankruptcies climb

Unemployment is rising

Bankruptcies are rising again in Hong Kong, where the Sars virus has added to the problems facing its struggling economy.

In March, 3,199 people in Hong Kong were declared bankrupt, a rise of 18.1% on the previous month and close to January's all time record.

Hong Kong's government has already admitted the outbreak of a potentially fatal flu, known as Sars, will dampen economic growth this year and has ditched its goal of a 3% increase.

Personal bankruptcies have been riding high for months, hitting a record 3,193 in January.

But the trend seemed to go into reverse in February, when bankruptcies dipped by 17%.

Job fears

The Sars virus has disrupted commerce and raised fears of job cuts as thousands of tourists and business travellers have cancelled visits to Hong Kong.

Tourist bookings have shrunk by about 80%, leading one Hong Kong-based travel agent to warn that tour firms could start folding soon after Easter unless the industry receives government aid.

"If the situation is prolonged for another month, I'm sure many agents will be closing down," said Ray Lau, Asia manager of Miki Travel.

Hong Kong has been struggling with an uncertain global economy which has hurt its export markets for the last couple of years, whilst competition from mainland China has sucked away investment.

Economic woes

The government has pledged to cut public spending and raise taxes to fix the economy, as well as to remove regulations that hamper business.

Unemployment in Hong Kong was running at 7.5% in the three months to 31 March.

Since the Sars outbreak, trade unions have warned joblessness could rise to 8% for the three months ending in June.

"We are concerned that the higher unemployment rate could translate into higher individual bankruptcy," UBS Warburg warned in a research note, trimming its earnings estimates on the Bank of East Asia, the city's fifth biggest.

Sars has killed 61 people in Hong Kong, and about 1,200 are thought to be infected.