On Wednesday, Hong Kong Financial Secretary Paul Chan Mo-po delivered the budget for the upcoming fiscal year at the Legislative Council. The main goal of the 2023-2024 Budget is to boost the recovery momentum in the aftermath of the COVID-19 pandemic.

More specifically, Chan said the special administrative region government will cut total spending by 6 percent to HK$761 billion ($97 billion) in the 2023-24 fiscal year. The government expects to record a deficit of HK$140 billion in 2022-23, more than double the HK$56 billion initial estimate. Chan also forecast a HK$54.4 billion deficit for the 2023-24 fiscal year.

The estimated government income for 2022-23 was HK$638 billion, 15.7 percent lower than the finance chief’s original prediction last year. Meanwhile, the total government expenditure of HK$809.6 billion in 2022-23 was 16.8 percent more than in the previous year.

Chan admitted that the financial position for this year is worse than expected. However, he predicted a visible rebound, saying that Hong Kong´s economy will grow by 3.5 to 5.5 percent this year. Moreover, Chan said Hong Kong can expect to see a strong rebound in visitor arrivals in 2023 as normal travel to and from the Chinese mainland has resumed and all quarantine requirements have been removed.

Related to this, the Hong Kong Tourism Board estimated that Hong Kong will record 25.8 million visitor arrivals this year, or 41 times more than last year’s count, but less than half of the 55.9 million in 2019 before the pandemic.

Focusing on the specific measures, on the consumption side, the financial secretary announced another round of consumption vouchers: The latest amount for each user will be HK$5,000 and delivered in two tranches, compared with HK$10,000 for the previous round.

Chan also unveiled the Happy Hong Kong campaign, under which the government will work with the city’s two theme parks and other partners to organize a series of activities to boost domestic consumption.

Chan also flagged a reduction in salaries tax by 100 percent, capped at HK$6,000, lower than the HK$10,000 for the previous budget. He said the government will also introduce a new capital investment entrant program to attract talent.

Also, the budget will focus on opening up new horizons, betting on the digital economy, Web 3.0, promoting high-quality development, international green tech, attracting enterprises and pooling talent.

While it is not possible in such a short article to analyze in detail all the measures, I would like to focus here on Web 3.0 and attracting talent.

Hong Kong will earmark HK$50 million for developing its Web 3.0 ecosystem, according to the budget.

Chan also announced the setting up of a task force dedicated to the development of virtual assets, composed of members from policy bureaus, regulatory bodies and industry.

Moreover, the Securities and Futures Commission has just issued a Consultation Paper on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the SFC. It’s undoubtedly another step for Hong Kong to become a virtual asset hub.

This all comes after the announcement made during Hong Kong FinTech Week in early November last year, in which I had the pleasure to participate as a speaker, regarding cryptocurrencies and other virtual assets: Hong Kong will allow exchanges and other intermediaries to sell assets directly to retail investors. This change comes four years after the city limited exchanges to serving only those with portfolios of HK$8 million or more, who are considered professional investors, thus excluding retail investors.

The Financial Services and the Treasury Bureau, in its Policy Statement on Development of Virtual Assets in Hong Kong, recognized the potential of distributed ledger technology (DLT) and Web 3.0 to become the future of finance and commerce, and “under proper regulation they are expected to enhance efficiency and transparency, which in turn will reduce or resolve existing frictions across clearing, settlement and payments. Hong Kong shows signs of a vibrant virtual-assets ecosystem, as demonstrated by non-fungible token (NFT) issuance in our market, the presence of metaverse developers, and the use of DLT in trade, finance, etc. Further opportunities can be realized if we cast our sight further on more use cases, e.g., trading arts and collectibles, tokenizing vintage goods, or in the case of financial innovations, tokenizing a wide spectrum of products such as debt securities”.

In regard to attracting talent, the city has unfortunately lost thousands of residents since the pandemic started (some perhaps because of the pandemic restrictions), which puts Hong Kong at risk of a talent shortage. This issue was already addressed by the chief executive in his 2022 Policy Address, where, among other measures, he announced that the government will set aside HK$30 billion to attract businesses to the city, and launch a top talent pass program to entice professionals to pursue their careers in Hong Kong. According to Lee, “Over the past two years, the local workforce shrank by about 140,000. Apart from actively nurturing and retaining local talents, the government will proactively trawl the world for talents”. People who earn an annual salary of HK$2.5 million or more, and graduates from the world’s top 100 universities who have three years of work experience over the past five years, will be eligible for a two-year pass for exploring opportunities in Hong Kong. Non-locals who enter Hong Kong under talent attraction programs, buy a residential property, and become permanent residents will be able to apply for refunds of the Buyer’s Stamp Duty and New Residential Stamp Duty for their first property, as Lee explained.

To sum up, this is to me a half-empty or half-full glass situation. As per the data provided by the financial secretary, the economic situation is indeed worse than expected. However, Hong Kong has the potential to not only remain one of the world´s most important financial centers, but to even enhance its status.

The author is a fintech adviser, researcher and a former business analyst for a Hong Kong publicly listed company.

The views do not necessarily reflect those of China Daily.