Paul Chan defends budget strategy as Hongkongers slam lack of ‘sweeteners’

Hong Kong’s finance chief has defended his budget against public criticism over the lack of “sweeteners”, stressing the government must balance its finances with long-term investments for the city’s benefit. Financial Secretary Paul Chan Mo-po said during a radio forum on Thursday he would brief credit-rating agencies and the International Monetary Fund next month on his budget, including a proposed HK$150 billion (US$19.2 billion) transfer from the Exchange Fund to support infrastructure projects. The transfer has raised concerns about the city’s financial stability. In his budget speech on Wednesday, Chan said billions of Hong Kong dollars would be devoted to further supporting innovation and artificial intelligence while the city would redouble efforts to solidify its status as a global financial centre to align with the country’s latest five-year plan. But callers to the radio forum said the blueprint failed to offer enough help for the public and criticised the decision to end tax breaks for private electric cars. “I am disappointed that giving out money or consumption vouchers has fallen off the radar. You hold a consultation every year, but you never listen … the budget consultation is meaningless,” a resident surnamed Tang said. Chan explained that the government had used different approaches to put more money back into people’s pockets, including increasing tax allowances, offering tax reductions and organising more events to attract tourists to the city. He said events could boost business, creating more job opportunities and higher incomes for residents. “We remain committed to that, as it also brings long-term benefits,” he said. Chan added that the tax relief measures could help a family with two children save about HK$10,000 a year. A resident surnamed Chan, who has a child and a combined monthly income of about HK$70,000 with his wife, said he hoped the government would offer more support to families not eligible for many of the city’s welfare benefits. “We cannot buy subsidised housing as we have passed the asset limit, so we bought a private flat. After deducting all the expenses, we can only save about HK$10,000 to HK$20,000 per month,” he said. Chan responded that the government had proposed a significant increase in the basic and child tax allowances and would support residents as much as possible within its capacity. “At the end of the day, we’re still in the stage of economic recovery. We’ll need to issue bonds in the future, so we have to strike a balance,” he said. Chan added that the government’s relief measures totalled HK$22 billion and that it must remain financially cautious. Some callers also questioned the decision to scrap first registration tax concessions for private electric cars from April 1, which prompted prospective buyers to rush to showrooms. Chan reiterated it was time to end the offer given the increase in choices of electric vehicle models and reduced prices. Another resident, surnamed Tsang, asked why the government chose to invest in the Northern Metropolis megaproject, which he claimed would mainly benefit the other side of the border, instead of supporting the public. Chan stressed that it was “worthwhile” to invest in the project, which aims to transform 30,000 hectares (74,131 acres) of land near the city’s border with mainland China into an economic powerhouse and housing hub. “Previously, when we invested in research and development and universities for technology and innovation development, all the commercialised production went to mainland China. Shenzhen and the Greater Bay Area pocketed all the economic benefits,” he said. “Now, the Northern Metropolis is the future innovation and technology hub. We will attract enterprises to Hong Kong. The tax return is ours, employment is ours, commercialisation is ours.” Asked whether bond issuance was no longer sufficient to cover infrastructure expenses, prompting the government to seek finance from the fund, Chan said he was considering both options to support the development of the metropolis. “We have many money pockets … Last year, the Exchange Fund investment return was very good, with more than HK$330 billion,” he said. “Whether the money is in the Exchange Fund or used for infrastructure in the Northern Metropolis, both are investments.” Later in the day, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu also defended the plan, insisting the transfer fully aligns with established policy objectives. “The primary functions of the Exchange Fund are to defend the Hong Kong dollar peg and maintain financial stability,” Hui said. “Any transfer of funds to the government must ensure these core principles are not compromised.” He stressed that the move had been carefully assessed. The Exchange Fund, the government’s main investment arm and de facto sovereign wealth fund, is traditionally used to defend the Hong Kong’s currency peg to the US dollar. The impending transfer will be the first since 1984. “This transfer has been considered on the major premise that we have sufficient capacity to ensure financial stability,” Hui said. “The returns generated will only be used for infrastructure investment and will not be applied to recurrent expenditure – this approach is entirely consistent with previous practice.” Addressing concerns over potential bond issuance and its impact on Hong Kong’s credit rating, Hui pointed the city’s reputation. “People genuinely see us as very prudent and sustainable,” he said. He added that strict oversight mechanisms were in place. “The government has mechanisms to monitor each bond issuance and set ceilings,” Hui said. “Five years from now, government debt is projected to reach 19.9 per cent of GDP [gross domestic product]. Compared with other economies, this remains a controllable level.”

Paul Chan defends budget strategy as Hongkongers slam lack of ‘sweeteners’

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}‘I am disappointed that giving out money or consumption vouchers has fallen off the radar,’ resident says

‘I am disappointed that giving out money or consumption vouchers has fallen off the radar,’ resident says