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Hong Kong budget 2026-27
Opinion
SCMP Editorial
Editorial
SCMP Editorial

As Hong Kong’s economy recovers, it must drive Northern Metropolis

While the government’s proposal to dip into the Exchange Fund is unusual, new economic and geopolitical circumstances call for fresh thinking

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A model of the Hong Kong-Shenzhen Innovation and Technology Park, located in the Northern Metropolis of Hong Kong. Photo: Eugene Lee
SCMP Editorial
Editorials represent the views of the South China Morning Post on the issues of the day.
The Exchange Fund has had a stellar investment year, and the government has returned to a consolidated budget surplus after several years in the red. With a revived economy, Hong Kong has recovered its financial mojo. Now is the time to go full steam ahead with Northern Metropolis, the megaproject that will significantly expand the city’s residential space and its business, financial and technological links with Shenzhen, the nation’s tech powerhouse.
In a rare move, to help finance the massive infrastructure project in northern New Territories, the government has proposed to dip into the Exchange Fund, which underpins Hong Kong’s US dollar peg. The move may seem unusual in light of the fund’s history, but new economic and geopolitical circumstances require new thinking. In any case, Hong Kong is in an enviable position. Most foreign governments needing to finance a project of this size would have to borrow heavily rather than using existing funds as a main source of financing.

The latest government budget proposes transferring HK$75 billion from the Exchange Fund to the Capital Works Reserve Fund in each of the coming two financial years to help pay for the Northern Metropolis and other related projects. It will also transfer another HK$15.83 billion consolidated from several smaller public funds with an unspent balance.

While previous financial chiefs were reluctant to make such transfers, Hong Kong is operating in a different world. The fund has roughly HK$4.1 trillion in total assets and achieved record-breaking performance last year, delivering investment income of HK$330 billion. In other words, the government is only dipping into the fund’s income, which is not even half of the total earned last financial year.

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