This was one of the most challenging budgets since the birth of the Hong Kong Special Administrative Region. The reason is apparent to anyone who has lived in Hong Kong for at least one year as a permanent resident. We have witnessed more than six months of social unrest before the novel coronavirus epidemic reached our city earlier this year. Many people expect the economy to deteriorate significantly and a lot of jobs to be lost. The budget plan, as such, is more than a financial and accounting “to-do” list. It is a critical mission statement of the government on how it is going to tackle the challenges in the new fiscal year. It gives us the vision and assessment of Financial Secretary Paul Chan Mo-po. This year it took some people by surprise. In a nutshell, Chan has let us see his tactics for saving Hong Kong in three ways.

First of all, the 2020-21 budget has responded positively to public expectations for vital and much-needed financial relief. Handling public expectations is an art, which relies on a political sense of balance and timing. It contains decisive steps to tackle outstanding challenges and reassure Hong Kong society that the SAR government will stand firmly by the public. It will implement countercyclical measures on a massive scale involving over HK$120 billion (US$15.4 million) in financial assistance. The most eye-catching measure is undeniably a one-time cash handout of HK$10,000 for all Hong Kong permanent residents aged 18 or above. The fact that the details are not yet available in the budget suggests that it is still being carefully considered at the moment, even though numerous citizens as well as political parties expect no less.

The budget plan, as such, is more than a financial and accounting “to-do” list. It is a critical mission statement of the government on how it is going to tackle the challenges in the new fiscal year. It gives us the vision and assessment of Financial Secretary Paul Chan Mo-po

The other relief measures, on the other hand, appear far less “controversial” than the proposed cash-handout program. All of them are designed to serve their purpose in a timely fashion. For instance, there will be a low-interest concessionary loan under the SME Financing Guarantee Scheme. What makes it special is that recipients will have up to three years to repay the low-interest loans and, on an opt-in basis, a principal moratorium is available for the first six months — during which only interest payments have to be made. It is apparently aimed at helping small and medium-sized enterprises cope with the current cash crunch. Such loans are vital to the recovery of our consumer and labor markets when the COVID-19 epidemic is technically over.

Secondly, the budget is based on a vision. It offers not only short-term remedies but long-term planning as well. For instance, the reindustrialization plan is further substantiated with infrastructure, financial, technological and talent support. For the always tough issue of land supply, the budget introduces the concept of a “land reserve”, scheduled to be announced in the second quarter of this year. This will be vital in stabilizing Hong Kong’s land supply in the long term. Furthermore, the reform of the Future Fund to set up the “Hong Kong growth portfolio” for direct investments in projects with a “Hong Kong nexus” is also beneficial to the long-term sustainable development of the economy.
Thirdly, the financial secretary did not shy away from the contentious “tax regime” issue in the budget. Based on his experience as an accountant, Chan acknowledged a global minimum tax rate proposed by the Organization for Economic Cooperation and Development (OECD). The imposition of such a global minimum tax rate may undermine the attractiveness of Hong Kong’s low tax policy to multinational corporations, thus posing challenges to our territorial-source-based tax regime. Chan said he will invite academics, experts and members of the business community experienced in international taxation and economic development to offer advice on the matter. It is his objective to “ensure that Hong Kong’s tax regime is not only in line with new developments in the international tax scene but also helps us maintain our premier business environment and competitiveness”.
Above all, the budget is not just about money. It also attempts to restore the faith we have all but lost for months, to say the least, as shown in its title: “Riding Out the Crisis Together”. The keyword is “together”. All Hong Kong residents, regardless of social stratum, occupation and political stance, are on the same boat. The financial secretary’s vision goes beyond one-time measures. Hong Kong’s economy has teetered on negative growth since the second half of 2019. The government has announced four rounds of relief measures to help SMEs and individuals so far. To contain the COVID-19 epidemic, a HK$30 billion fund has been established for the purpose of easing the financial burden on those industries and employees.
The great French philosopher Voltaire told us, “We never live; we are always in the expectation of living.” What the people of Hong Kong have expected is not so much a SAR’s latest countercyclical budget is bold and timely HK$10,000 cash handout as hope that can rekindle their faith. It is fair to say that the financial secretary, unexpectedly, has responded to these expectations.

The author is senior research officer of the One Country Two Systems Research Institute.

The views do not necessarily reflect those of China Daily.