Economic downturn Helping businesses to cope with the economic slowdown

Many businesses in China are facing serious cash flow problems. Due to the lockdown, they could not earn any revenue to pay their workers and other expenses. Their credit lines have been exhausted.

The govt asked the banks to reduce their interest rate. But this does not help. The businesses need credit lines to continue operating.

The govt also ask the banks to give financing to the businesses. But the banks hesitate because the businesses may not go bankrupt anyway and cannot pay back their borrowings.

The only way to get the banks to give credit to the businesses is for the govt to guarantee the borrowings. But this is not happening.

So, slowly and slowly, many of the businesses have to fold up and the workers will be retrenched.

Businesses in Singapore will face the same problem. We can expect many of them to go bankrupt and workers to be retrenched.

Did our Budget 2020 provide sufficient help to the businesses. I think it is too little. It will not help the businesses to tide over the difficult times.

Let us see if China or Singapore realize the seriousness of the problem and start to give a guarantee to the banks to extend liquidity to these businesses.

One way is for the govt to guarantee the wages paid to workers for the next few months, until the economy recovers. The businesses will still have to take care of the non-wage expenses.

Tan Kin Lian

 

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