The Hong Kong economy is facing headwinds unprecedented in its history. We need to do everything we can to revive the economy. First, let me spell out my worst fears. 

I am worried about an impending fiscal crisis. At the end of March, our fiscal reserves stood at HK$834.8 billion ($106.88 billion), and that included net proceeds of HK$66 billion from green bond issuances. By June 30, the fiscal reserves had fallen to HK$779.5 billion. As we borrow more and more, there is the fear that investment income might disappear, and interest payments or negative investment income might set in. Our recent land sales have been quite disappointing, and the outlook for our fiscal revenue in fiscal year 2023-24 is gloomy.

The July reading for Hong Kong’s Purchasing Managers Index dropped to 49.4. A figure below 50 suggests possible contraction. This weak reading is on top of the minus 1.3 percent seasonally adjusted quarter-to-quarter growth in the second quarter and suggests that we suffer “two consecutive quarters of negative growth”, befitting one definition of “recession”.

These worries are intensified by weak exports and falling land prices. There is little we can do about weak exports. We can assume that our exporters will do all that they can to push sales to new markets. But there are things we can do with our domestic economy. When we are facing headwinds from without, it is even more important to make the most of what we can control.

I am hopeful that with these measures, we would be better able to attract professionals; the Kai Tak Cruise Terminal would come back to life; and transactions of previously owned homes would rise. More business activities could be expected, and the chances of a full economic recovery would be enhanced

For one thing, Hong Kong last week welcomed Royal Caribbean International’s 169,000-ton cruise liner Spectrum of the Seas, which can carry as many as 5,600 passengers. Sadly, the absence of shops in the Kai Tak Cruise Terminal and the poor transportation connections available have seriously tarnished the image of Hong Kong as the host of international visitors. Many visitors complain about the long wait for taxis and buses and the absence of shops at the 10-year-old terminal. I have visited Kai Tak Cruise Terminal a couple of times and found the rooftop park a huge attraction, offering an attractive garden and grand view of Victoria Harbour. I had proposed frequent direct ferries linking the terminal to both Tsim Sha Tsui and Wan Chai, which would vastly improve Hong Kong residents’ access to the terminal and reduce waiting time for visitors to gain access to Hong Kong’s city center. Unfortunately, instead the ferry services now available offer a frequency of a mere 10 to 11 runs a day; the boats are tiny; and they connect to North Point, Kwun Tong and Kai Tak. If the ferry services were more frequent and aimed at directly connecting the Kai Tak Cruise Terminal with Tsim Sha Tsui, and another direct service connecting with Wan Chai, demand for the shopping and dining facilities at the terminal would certainly be much greater. Tourists would love it. Hong Kong residents would love it.

At the moment, all the shopping and dining spaces at the Cruise Terminal are vacant. Why not give reputable lessees one-year rent-free occupancy, and give them priority to lease these spaces after one year if they choose to stay? Without the burden of the rent, the spaces would be filled up quickly, and that in itself would become an attraction to both Hong Kong residents and tourists. We need to understand that empty space is worse than zero rental income.

Another big stimulus to the economy would be to lift the Special Stamp Duty (SSD), which has hampered existing-home transactions. I have written on the subject multiple times. The evidence shows that the SSD has not helped Hong Kong families buy their first homes. Although the SSD did successfully eliminate speculative demand, an unintended effect is that it has also reduced the supply of previously owned starter homes. Statistics show that trading-up activities (selling a starter home and buying a bigger, better one) fell dramatically after the SSD was introduced in 2010 and after it was enhanced in 2012. The reduction in the supply of smaller homes was the main reason why smaller home prices shot up and have continued to outpace prices of bigger homes.

Some commentators referred to Singapore’s recent hiking of the Additional Buyer’s Stamp Duty (ABSD), for foreigners buying any property in Singapore, which doubled from 30 percent to 60 percent. That was a response to the surge in home prices in Singapore. However, Singapore did not hike its equivalent of Hong Kong’s SSD, which is called the Seller Stamp Duty (SSD) and which is a mere 4 percent for those who decide to sell after two years. The lowered Singapore SSD took effect on March 11, 2017, and is not affected by the toughening of the ABSD for foreigners. Hong Kong can keep its Buyer’s Stamp Duty (BSD), which targets foreign buyers. But I continue to support removing the BSD for foreigners who work here. I had proposed that those who decide to leave Hong Kong before they gain Hong Kong permanent resident status must pay the BSD on a pro rata basis reflecting the number of years short of what is necessary to gain permanent resident status.

I am hopeful that with these measures, we would be better able to attract professionals; the Kai Tak Cruise Terminal would come back to life; and transactions of previously owned homes would rise. More business activities could be expected, and the chances of a full economic recovery would be enhanced.

The author is director of the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.

The views do not necessarily reflect those of China Daily.