Financial Secretary Paul Chan Mo-po came up with a raft of measures to accelerate Hong Kong’s economic and tourism development, slash public expenditure by reducing sweeteners and scrap all decade-old property cooling measures to arrest the decline in home prices in the government’s 2024-25 Budget.
Amid external uncertainties posed by a sluggish global economy and geopolitical tensions worldwide, Hong Kong, as a small and open economy, has been affected and posted slower economic recovery. It is paramount for the Hong Kong Special Administrative Region government to expend strenuous efforts in boosting economic development and enhancing residents’ livelihoods continuously after the anticipated completion of the Article 23 legislation later this year.
The HKSAR government is on the right track to adhere to free-market principles in scrapping those decade-old property curb measures, which are outdated given the market conditions. The purpose of those demand-side management measures was to rein in skyrocketing property prices by curbing speculation. Now that residential property prices have significantly cooled over the past few years, those measures have become outdated. Property prices in some areas have dropped by more than 20 percent from their peak to their levels in 2016. Scrapping all property cooling measures may not revive the faltering property market immediately, but it will contribute to healthier market development.
It is to be welcomed that the Hong Kong Monetary Authority has eased stringent mortgage rules, including suspension of a stress test for applicants of property mortgage loans. The stress test — which entailed assessing homebuyers’ ability to repay if interest rates were to rise by 2 percentage points from their current level — is regarded as unreasonably conservative amid widespread expectation of a US interest rate reduction later this year. To help more first-time homebuyers get on the property ladder, the HKSAR government should consider launching a special loan program to financially support them after local economic conditions improve further and the government’s fiscal position becomes stronger.
Hong Kong’s economic outlook remains bright. Despite a wide array of prevailing economic challenges, the city is in a stronger position now than in recent years and the economy will hopefully regain vibrancy and robust growth soon
Many young people and families have sufficient incomes to make mortgage repayments but they cannot afford the down payment for a home purchase. Such a loan program would help first-time homebuyers fulfill their aspiration to have a home of their own.
Meanwhile, the HKSAR government has announced in the budget its decision to postpone the reclamation project of Kau Yi Chau Artificial Islands while prioritizing the Northern Metropolis, which is a well-thought-out decision.
Reclamation is not the best option for creating land sites amid a fiscal deficit, along with the long timespan and huge construction costs that it would incur. The implementation of the Northern Metropolis project — which is divided into four zones, including a high-end professional services and logistics hub and an innovation and technology zone — will provide huge land sites for Hong Kong’s development. There have been concerns about the financial impacts of the Kau Yi Chau reclamation project on public coffers. Amid slower-than-expected economic recovery, it is crucial for the government to strategically utilize its fiscal resources to improve residents’ livelihoods.
Hong Kong needs to step up trawling for more talent from the Chinese mainland and overseas, individuals who are crucial to further elevating Hong Kong’s international status and boosting local economic development. During a recent high-level inspection trip to Hong Kong, Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, emphasized the great importance the central government attaches to Hong Kong’s status as an international city when meeting with local and foreign chambers of commerce and economists.
He reiterated the central government’s staunch support for the HKSAR. Wooing more global talent will cement Hong Kong’s role as an international metropolis and further stimulate growth in retail, catering and residential property sectors. Based on the HKSAR government’s statistics, nearly 70,000 applications have been received under the Top Talent Pass Scheme, which was launched in December 2022. The average age of top-notch talent is 35 and over half of them have families, whereas their median monthly income is HK$50,000 ($6,394). It is estimated that imported talent will add HK$34 billion to the economy, accounting for 1.2 percent of Hong Kong’s annual GDP. The Hong Kong Talent Engage program should speed up enticing talent from the mainland and overseas to underpin Hong Kong’s talent hub status and further inject impetus to the city’s economy.
Having adhered to the principle of exercising fiscal prudence in the budget, the government can mull initiating more cross-border welfare for Hong Kong people living in other cities in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
The flow of people, along with capital, goods and information, is crucial to foster closer connectivity between Hong Kong and other GBA cities. Without a seamless people flow, all previous investment made in building cross-border infrastructure in the bay area would not be well-utilized. The HKSAR government can consider allocating cross-border welfare on healthcare and housing to Hong Kong people who live across the border. It is worthwhile considering whether a policy to subsidize school fees for Hong Kong children who study in other GBA cities can be rolled out. In recent years, more Hong Kong workers have opted to move to Shenzhen due to lower housing prices and living costs and commute to Hong Kong to work. With the implementation of the Northern Metropolis project, it will become more appealing to Hong Kong workers to choose cross-border commuting to work in the city in the near future.
Above all, the HKSAR government needs to step up slashing the budget deficit in implementation of comprehensive fiscal consolidation program mentioned in the budget. As stated in Article 107 of the Basic Law, Hong Kong needs to follow the principle of keeping the expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficit and keep the budget commensurate with the growth rate of its GDP. The government has forecast a consolidated deficit of HK$101.6 billion for the current fiscal year, with fiscal reserves falling to HK$733.2 billion. For fiscal year 2024-25, the fiscal reserves are forecast to fall further to HK$685.1 billion. Fiscal balance must be restored at the earliest to guarantee the provision of various social services to society and for the promotion of economic development.
Hong Kong’s economic outlook remains bright. Despite a wide array of prevailing economic challenges, the city is in a stronger position now than in recent years and the economy will hopefully regain vibrancy and robust growth soon.
The author is a member of the Beijing Municipal Committee of the Chinese People’s Political Consultative Conference, and founder and chairman of the One Country Two Systems Youth Forum.
The views do not necessarily reflect those of China Daily.
