| Issuance of Government Bonds |
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| 95.
In order to enhance Hong Kong's competitiveness, it is incumbent on the Government to continue investing in capital projects. To provide greater flexibility in the management of our liquidity, I propose issuing government bonds to fund infrastructure or other investment projects which will bring long-term economic benefits to Hong Kong. Another advantage of raising funds through issuing bonds is the increased flexibility in the Government's asset sale and securitisation programme, obviating the need to sell government assets at low prices under unfavourable market conditions. |
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| 96.
The issuance of government bonds will also help promote the development of our bond market. At present, deposits in local banks exceed $3,600 billion. The returns on these deposits are very low because of the current low bank interest rates. Quality bonds are an investment option that can provide a steady and higher return. The issuance of government bonds could offer retail and institutional investors such an option. |
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| 97.
The present low interest-rate environment is favourable for the issuance of government bonds. I propose that the Government issue bonds not exceeding $20 billion in 2004-05. We will shortly provide further details to this Council. We will decide whether to issue additional bonds in future in the light of market conditions, the amount of funds required for our investment projects and the implementation of our asset sale and securitisation programme. |
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| 98.
I must stress that the Government will not issue bonds for the purpose of meeting operating expenditure. On the contrary, our principle is that operating expenditure should be covered by operating revenue. We will definitely not live on credit. We will continue to maintain strict fiscal discipline and control of expenditure with a view to restoring fiscal balance. |
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