HK launches new ambitious budget

Hong Kong’s Financial Secretary Paul Chan announced a HKD 761 billion (USD 97 billion) budget on Wednesday aimed at reviving the pandemic-hit economy and repairing the city’s image. The budget includes tax cuts, spending vouchers, and programmes designed to entice businesses and tourists. The government will also offer cash handouts of up to HKD 5,000 to millions of adult residents while cutting taxes on salaries and corporate profits. Hong Kong’s economy contracted by 3.5% last year and is expected to rebound by between 3.5% and 5.5% in 2023, according to Chan.

Hundreds of millions will be spent on initiatives to draw back tourists and business travellers after the city’s strict virus curbs kept it off-limits for nearly three years. The new budget includes a local spending campaign following a global promotional campaign that was rolled out this month. While big Covid bills and fiscal support measures cost the government more than HKD 600 billion, a slump in the property and stock market led to a deficit of HKD 140 billion, nearly three times the government’s initial estimate. Chan expects a deficit of HKD 54.4 billion for the coming fiscal year.

The Financial Secretary warned that the slowing external demand, tepid growth in mainland China, geopolitical tensions, and the war in Ukraine are all headwinds for Hong Kong’s recovery, despite the optimistic 2023 economic forecast. Since 2019, the population has decreased by almost 190,000, leading to a brain drain that was sparked by harsh anti-coronavirus measures, a crackdown on civil liberties and the pro-democracy movement, and a Beijing-imposed national security law. The government has launched a new Capital Investment Entrant Scheme to attract talent and capital but has excluded real estate investment.

Chan also announced plans to earmark HKD 50 million to develop Hong Kong’s Web3 ecosystem, as the city positions itself as a virtual asset hub and looks to establish a research centre to promote the development of microelectronics and artificial intelligence. The government is also planning to implement a global minimum effective tax rate of 15% on large multinationals. Hong Kong’s top financial official is proposing a tax on profits booked by companies selling equity interests, along with a possible HKD 2.4 billion annual levy on soccer betting over the next five years. The government has identified eight plots of land for light public housing and will reduce the stamp duty for first-time homebuyers to tackle the city’s notorious housing shortage.