Press Releases
RTHK's Letter to Hong Kong by Financial Secretary Paul Chan
14-03-2021
Good morning, Hong Kong.
Less than three weeks ago, I delivered my fifth Budget as Financial Secretary. I can tell you they haven’t got any easier, though I do seem to be breaking records. In recent years, Hong Kong has contended with a record-high surplus, a record-high deficit and, now, a record-long economic recession.
Each of those Budgets presented singular challenges. None, however, proved more difficult to realise than this one, given two paramount and deeply conflicting necessities – tackling a $250 billion deficit while ensuring that the people of Hong Kong get some desperately needed relief.
There was also the pandemic-driven certainty of another $100 billion deficit in the coming Budget and, with it, an obligation to increase government revenue.
That, and more, had to be juggled while working to maintain market confidence in our public finance and create fiscal space to cater for unforeseen circumstances. Hong Kong’s fiscal reserves have already dropped sharply these past two years – from the equivalent of 23 months of government expenditure to just 13 months.
This is the background in which the 2021-22 Budget was born – a Budget shaped by clear constraints and critical priorities. I believe it has addressed our most pressing concerns. Allow me to summarise the Budget in four broad areas, beginning with resources.
Reviving the economy and relieving the burden on the people of Hong Kong are at the heart of this year's Budget. That’s why I have proposed counter-cyclical measures costing over $120 billion. Given our financial limitations, a judicious allocation of resources is essential, the underlying goal being to create multiplier effects.
With that in mind, and apart from such one-off relief measures as reducing salaries tax, I announced the issuance of electronic consumption vouchers – $5,000 to each eligible Hong Kong permanent resident and new arrival aged 18 or above.
The vouchers should spur consumption while boosting business. Employing the broadest possible base to stimulate the economy and maintain employment.
For those unable to find employment, I announced the Special Loan Scheme for Individuals, with a 100% guarantee by the Government, to provide a maximum loan of $80,000 per applicant. The Scheme is also available to freelancers.
I’m also allocating $6.6 billion to create some 30 000 jobs for a period of up to 12 months.
To increase revenue and reduce the daunting fiscal deficit, I’m raising the stamp duty on stock transfers – from 0.1% to 0.13%.
No one enjoys paying more taxes, but I have chosen an area that I believe will have the least impact on broader society.
Let’s turn now to our business environment. The good news is that Hong Kong’s vaccination programme has started.
That, I hope, will put the worst of the pandemic behind us, getting businesses back to the business of making money.
Ideally, that reset finds real momentum in the second half of the year. In any case, this is not the time to be retooling our profits and salaries taxes. Which is why I have not raised their respective rate and continue to waive them by 100%, with a ceiling of $10,000 each.
The Budget also outlines measures to support businesses in adopting digital economy. For example, over the next 3 years, I’m allocating $375 million to the Hong Kong Trade Development Council to boost its capabilities in organising online activities.
The Government also leads by example in digital transformation. By mid-2022, electronic submissions and e-payment for most government services will be available. Meanwhile, a digital platform for authentication of the identity of businesses is being developed.
We will also continue to stimulate the economy by investing in industries which have huge development potential, in particular financial services and innovation and technology. On the former, the Budget puts bond market, real estate investment trust market, insurance, asset and wealth management, securities, and family office businesses as priority.
Ensuring a green future is the Budget’s third focus. Promoting green and sustainable finance is an important part of it, helping to ensure that our financial services sector remains dynamic and in demand.
To that end, my Budget includes the issuance of Government green bonds totalling $175.5 billion over the next 5 years, along with plans to issue retail green bonds.
A green community goes hand-in-hand with a sustainable economy.
Which is why my Budget offers the city's first road map for electric vehicles. Measures include ending the registration of fuel-driven private cars by 2035.
We're looking at the big picture, too, coming out with a completely updated Clean Air Plan for Hong Kong in just a few months.
I’m setting aside $500 million to enhance our country parks. Our harbourfront enhancement initiatives will also continue, for the enjoyment of all.
The Government is equally committed to arts and culture. My Budget’s arts expenditure this year will exceed $5.7 billion.
Despite the deficit, education, social welfare and healthcare funding will not be cut. Recurrent funding in these livelihood policy areas this year amounts to over $300 billion, accounting for about 58% of the Government’s total recurrent expenditure.
Which brings me to public finance, the Budget’s fourth main area. A budget must balance immediate needs and long-term vision, while keeping a steady eye on expenditure. Since essential public services will not be tampered with, I need to reduce Government's operating expenditure.
That means no growth in the civil service this year. It means cutting Government's recurrent expenditure by 1% in 2022-23, saving nearly $4 billion.
Down the road, Hong Kong will bounce back. This year, I forecast growth between 3.5% and 5.5%. Between 2022 and 2025, I expect average annual growth of 3.3%.
Hong Kong will continue to reap the outsized benefits of our "One Country, Two Systems" framework. By taking part in national development strategies such as the Guangdong-Hong Kong-Macao Greater Bay Area, there will be bountiful business opportunities for us today – and for generations of Hong Kong people, and businesses, to come.
That, in short order, summarises my 2021-22 Budget. It speaks of the Government’s commitment to finding our way past the pandemic and creating a future that rewards us all.
I wish you the best of health and happiness in the Year of the Ox. Thank you.
Your Financial Secretary,
Paul MP Chan
14 March 2021
