Published: 21:18, February 29, 2024 | Updated: 09:36, March 1, 2024
Hong Kong has what it takes to weather the storm
By Oriol Caudevilla

On Wednesday, Hong Kong Financial Secretary Paul Chan Mo-po delivered the government’s 2024-25 Budget at the Legislative Council. If the main goal of last year’s budget was to boost the recovery momentum in the aftermath of the COVID-19 pandemic, the new budget aims to spur growth now that Hong Kong has returned to normalcy after the pandemic.

This year’s budget was themed “Advance with Confidence. Seize Opportunities. Strive for High-quality Development” and included a series of measures to boost growth.

“Society and the daily lives of our people are back to normal … Visitors are returning, and our economy is regaining positive growth.  A series of mega events has helped to restore a buoyant mood in the community … Amid a complicated and ever-changing international environment, and with our economy and society constantly evolving, more strenuous efforts are required to strengthen momentum of our economic recovery,” said Chan in his budget speech.

READ MORE: Hong Kong’s economy is doing much better than many depict

Indeed, Hong Kong has been through the Asian financial crisis, SARS, the global financial crisis and also the COVID-19 pandemic without diminishing its role as one of the world’s most important financial centers. And this was so because of Hong Kong’s strength, because of its resilient nature but also because of how stable Hong Kong has proved to be throughout the years, from an economic perspective.

Even though some voices recently suggested that Hong Kong is not what it used to be, or even that it is “over”, Hong Kong’s attractiveness has not diminished at all, to the point that the city remains one of the world’s most important financial centers

Even though some voices recently suggested that Hong Kong is not what it used to be, or even that it is “over”, Hong Kong’s attractiveness has not diminished at all, to the point that the city remains one of the world’s most important financial centers. Furthermore, even though many people all over the world nowadays associate Hong Kong with finance, the truth is that Hong Kong excels in many more areas, such as arts and leisure, culture, excellent facilities, infrastructure, and low crime rates, which makes it a very attractive location.

In my opinion, the 2024-25 Budget is a step in the right direction to boost economic development.

Among other measures, first, all of the cooling measures aimed at curbing speculation were scrapped with immediate effect to revive Hong Kong’s depressed property market. 

It is a fact that property prices remain depressed: Hong Kong’s housing market woes persist, amid a chronic supply shortage and falling property demand caused by the continuing affordability crisis and surging interest rates in the city.

The cancellation of all property cooling measures will prove to be very beneficial, since these measures had had no impact on local property prices; all they did was kill market liquidity, prompting buyers into the primary market instead of creating and fostering a secondary one (the secondary market has been frozen for years). With all property cooling measures cancelled, transaction volumes will probably go up.

Second, tourism will be energized, while salary and profit taxes were reduced to ease the financial burden on the public and small and medium-sized enterprises.

Third, Chan pledged to take a more targeted approach to government spending this year as the city’s deficit is estimated to have increased to HK$101.6 billion ($12.9 billion) in fiscal year 2023-24, potentially leaving Hong Kong’s fiscal reserves at their lowest in a decade. 

Chan estimates that government expenditure for the next fiscal year will increase by about 6.7 percent to HK$776.9 billion, with revenues of HK$633 billion. He estimated a deficit of HK$48.1 billion for fiscal year 2024-25 after taking account of bond issuances.

Also, Chan announced that the government will consult the public on stablecoin issuer regulations this year and boost law enforcement on the city’s virtual assets market.

The budget also focused on other important Hong Kong topics such as green future, digital economy, international innovation and technology center and the East-meets-West center for international cultural exchange.

Despite the negative external economic circumstances, Hong Kong had a moderate 2023 and is expected to have a better 2024, which will see the city consolidating its status as an international financial center

As for the estimates for fiscal year 2024-25 and final conclusions, Chan stressed that, “Looking ahead, the external environment will remain complicated in the coming year. As a small and externally-oriented economy, Hong Kong’s economic growth will inevitably be affected ... In the short term, we need to reinforce the momentum of our economic recovery, while in the long run, we have to adjust our economic growth model with enhancements to both ‘quality’ and ‘quantity’.”

While the external circumstances this year may be complicated, Hong Kong, as Chan noted, has always managed to turn challenges into opportunities.

Despite the negative external economic circumstances, Hong Kong had a moderate 2023 and is expected to have a better 2024, which will see the city consolidating its status as an international financial center.

This is indeed because of Hong Kong’s resilient nature. Hong Kong scores high in finance-related rankings. For example, Hong Kong maintained fourth place in the Global Financial Centres Index 34 report published on Sept 28 by Z/Yen from the UK and the China Development Institute from Shenzhen, and the city is also an innovation hub, as was demonstrated by the Global Innovation Index 2023, published a few months ago by the World Intellectual Property Organization.

Moreover, Hong Kong now is embracing opportunities from the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) development, and, by playing a proactive part in China’s 14th Five-Year Plan (2021-25), the Hong Kong Special Administrative Region is unleashing its potential thanks to unreserved support from the central authorities for advancing key strategies to upgrade its superconnector role, including the digital yuan and environmental, social and governance.

In addition to the huge role that the GBA will play in Hong Kong’s future, we can also focus on other opportunities such as fintech development in Hong Kong, the HKSAR’s anticipated entry into the Regional Comprehensive Economic Partnership, and the connect schemes.

Regarding fintech, Hong Kong and the rest of the GBA are indeed increasing their roles as fintech hubs. The Fintech 2025 blueprint aims at pivoting the HKSAR toward a friendlier regulatory regime for digital assets, proving that the city is positioning itself to become a virtual assets center/crypto hub. Hong Kong has also stepped up efforts to develop itself into one of the world’s most important Web3 hubs.

READ MORE: Government work report heralds new opportunities for Hong Kong SAR

Talent shortage is also another challenge that Hong Kong will be facing. A few months ago, in his 2023 Policy Address, Chief Executive John Lee Ka-chiu announced several measures to trawl for and retain talent. Among the many measures, in October, the HKSAR government established the physical office of Hong Kong Talent Engage (HKTE), following the launch of the online platform for the HKTE in December 2022, which will provide support for incoming talent and follow up on their needs after arrival.

To sum up, while Hong Kong will undoubtedly face challenges in 2024, the city remains and will continue to be one of the most important financial centers in the world, and offers many opportunities to companies and individuals, both local and international.

The measures introduced in the 2024-25 Budget seem logical and look to be a step in the right direction. While external circumstances may be complicated, Hong Kong has the right elements to weather the storm and keep growing while not only maintaining but enhancing its role.

The author is a fintech adviser and researcher. He holds a Master of Business Administration and a doctorate in Hong Kong real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company.

The views do not necessarily reflect those of China Daily.