Two months after the dust of the
Umbrella Revolution settled, the Hong Kong government tabled
its annual budget with measures to tackle the negative impact and
sentiment brought by the event. For the coming year, the city's
administration projects its nominal gross domestic product (GDP) to
grow at 2.5% to 4.5% (real GDP at of 1% to 3%), with 3% to 3.5%
HK Financial Secretary John Tsang expects government revenue to
reach US$61.5bn on the back of US$56.8bn in expenditure. An
estimated surplus of US$4.7bn would mark the twelfth consecutive
balanced budget for the cash-rich city and bring its fiscal
reserves to a staggering US$110.3bn by the end of the next
financial year (sufficient to accommodate 23 months of government
During the budget presentation on 25 February, Mr. Tsang
announced a series of relief measures worth US$4.4bn to deal with
the aftermath of the Umbrella Revolution, the protests spearheaded
by the Occupy Central Movement and the biggest civil movement in
the city for decades. This includes license fees waivers of six to
12 months for the tourism, hotel, food and beverage, and transport
industries affected by the three-month-long protest.
On top of that, the
HK government will spend US$13.7m in global promotional and
publicity works to restore the city's reputation as an
international financial centre and prime tourist destination. An
additional US$193.2m will be pumped into the SME Export Marketing
and Development Funds, with maximum funding for every individual
project to be increased by 250% to US$640,000.
Many observers see the huge public support displayed during the
Movement as a result of uneven wealth distribution and lack of
affordable housing that is happening in the city. The government is
addressing these issues in the budget. The salaries tax will be
reduced to 75% with a ceiling of US$3,500 for financial year
2014-15 and some 1.8 million taxpayers are expected to benefit from
it. Besides the tax cuts, allowances for childcare will be lifted
to US$12,880 (from US$9,020) to lessen household burden.
Additionally, a proposed two extra months of social welfare
payments and a one-month waiver in public housing rental would help
the poorest and most underprivileged in the city. To ease housing
demand, the government has outlined a land sale programme in 29
residential locations that would allow private developers to build
16,000 new homes.
Hong Kong is facing a rapidly-aging population thanks to one of
the highest life expectancies in the world (81 years for men and 87
years for women). In the budget, US$6.3bn (increased by 50% in the
last five years) will be allocated to the Hospital Authority to
cover the operating expenditure of public hospital. Also, existing
hospitals will be expanded or redeveloped to add another 2,800
hospital beds to the city's healthcare system with a funding of
We can also find measures to enhance Hong Kong's
competitiveness as a global financial hub in the budget. After the
successful launch of the
Shanghai-Hong Kong Stock Connect last November, the city is
looking at a linkage with China's second largest stock
exchange, the Shenzhen Stock Exchange. The linkage of the three
exchanges would form the biggest stock market in the world outside
of the US.
Besides that, Mr. Tsang recommended amendments to the Inland
Revenue Ordinance to provide tax concessions for treasury
activities and make the city a preferred jurisdiction for regional
corporate treasury centres. The administration is committed to work
Mainland authorities to loosen the quota for the RMB Qualified
Foreign Institutional Investors (RQFII) Scheme in a bid to
strengthen the city's position as the global offshore renminbi
We can see from the budget that the Hong Kong government has
allocated a substantial amount of resources in increasing social
equality in order to create a more inclusive society. In return,
this will provide a stable business environment for sustainable
economic development. Social stability is utterly important for
Hong Kong as a global city and international business centre, and
there is no one clearer on that than the Financial Secretary.
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