The West Kowloon Cultural District Authority (WKCDA) said on Wednesday that it welcomes the Hong Kong Special Administrative Region government’s permission to dispose of residential projects within the district.

The government approval will provide the authority with ample cash flow to meet its operational and projected capital expenditures for the next decade, without requiring direct government funding, officials said.

In response to its financial difficulties, the authority submitted a financial proposal to the government last year that requested it be allowed to sell titles of certain residential projects within the WKCD to get funding

The WKCDA also said it will remain steadfast in its commitment to strengthening Hong Kong’s position as a hub for art and cultural exchanges between the Chinese mainland and the rest of the world.

READ MORE: Cash-strapped WKCDA may grind to a halt after March 2025

In May, the authority said that it is facing an operating deficit, and its capital chain might break in June 2025. In response to its financial difficulties, the authority submitted a financial proposal to the government last year that requested it be allowed to sell titles of certain residential projects within the WKCD to get funding.

On Tuesday, the Executive Council granted conditional approval for the relaxation of the enhanced financial arrangements for the WKCD.

These arrangements were initially approved in 2016, outlining the development rights for the hotel, office, and residential sections of the WKCD site. The total floor area covered by these rights amounted to 366,620 square meters, with 170,280 square meters designated for residential development. Under these arrangements, the authority was entrusted with the responsibility of managing these projects exclusively through the “Build-Operate-Transfer (BOT) only” model, with revenue generation primarily derived from rental operations.

The new conditions passed on Tuesday lift the restriction of “Build-Operate-Transfer (BOT) only” for residential developments within Zone 2 of the WKCD, allowing these residential units to be sold. However, there is no change to the maximum total residential area of 170,280 square meters.

Under these new arrangements, the authority must adhere strictly to several key performance indicators on financial discipline set by the government.

For example, there is a cap on operating deficits over a three-year period. Also, there is a restriction on the percentage of staff costs in the total annual operating expenditures. Moreover, before new capital projects are considered committed, the authority must provide the government with satisfactory evidence that the cost estimates are reasonable.

The new proposal is expected to provide sufficient funds for the WKCDA to operate for the next 10 years, during which the authority can take advantage of its expertise, assets, and the economy to create commercial measures

During a media brief on Wednesday afternoon, Secretary for Culture, Sports, and Tourism Kevin Yeung Yun-hung said that the self-financing model of the WKCDA will remain unchanged.

The new proposal is expected to provide sufficient funds for the WKCDA to operate for the next 10 years, during which the authority can take advantage of its expertise, assets, and the economy to create commercial measures, Yeung said.

WKCDA Chairman Henry Tang Ying-yen expressed his gratitude to the government for relaxing the arrangements.

This decision will create favorable conditions for the WKCD to address its capital chain issues without burdening public finances, Tang said.

READ MORE: Cultural summit showcases Hong Kong's cultural excellence

The authority’s long-term objective is to maintain control over operating costs and achieve self-financing by leveraging resources provided by the government and implementing innovative revenue-generation strategies, Tang said.

Tang said that numerous exhibitions and performances from the WKCD will be showcased in Shanghai and abroad, which will increase the authority’s intellectual property rights income.

The authority will make full efforts to establish the WKCD as a hub for cultural and creative industries, enhancing the city’s position as a center for cultural exchange between China and the rest of the world, Tang added.