Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Tuesday, Jun 18, 2024

No perks for expats as Paul Chan's budget looks inward

No perks for expats as Paul Chan's budget looks inward

Hong Kong Financial Secretary Paul Chan laid out a cautious plan on Wednesday for a return to economic growth this year, disappointing those who had hoped the city would take a more ambitious swing at reclaiming its international hub status.
Chan’s over two-hour long speech outlining the budget for the 2023-2024 fiscal year failed to address expectations about how the government will help execute Chief Executive John Lee’s vision of encouraging foreign talent to come to the city.

Instead, Chan focused on stimulating domestic demand, including a surprise decision to issue more cash vouchers to eligible residents — a divergence from other major economies that have shifted away from handouts with the end of the pandemic.

“The city has lost its appeal with foreign investors over Covid restrictions and the national security law,” said Lloyd Chan, senior economist at Oxford Economics Ltd., referring to Hong Kong’s pandemic policies and a Beijing-led crackdown on local dissent. When it comes to attracting talent, he added, “the budget is disappointing on this front.”

The finance chief hasn’t had it easy. Hong Kong’s fiscal deficit ballooned during its isolation from the world and the economy shrank in three of the last four years. The budget shortfall for the 2022-2023 fiscal year hit a whopping HK$140 billion (US$17.8 billion), Chan said Wednesday, about three times higher than his original estimate.

That meant his latest budget proposal not only needed to please an audience looking for a quick economic recovery, but also provide clear measures on how Hong Kong can avoid being overtaken by Singapore as Asia’s top destination for business, talent and capital.

“The fiscal position has really deteriorated over the past two years,” said Chan of Oxford Economics. “The budget is striking a balance between charting a course for a stronger recovery and proper investment in fiscal areas, while taking being mindful of its fiscal position.”

Yet several proposals suggested by economists or other experts — such as exempting “strategic” employees from paying salary taxes or making the city a more attractive location for secondary listings by reducing the stamp duty rate for transferring Hong Kong stock — were not part of the budget.

Investors showed little enthusiasm following the budget address. The Hang Seng Index closed down 0.5 percent to a seven-week low.

The return of consumption vouchers wasn’t expected by most economists surveyed by Bloomberg, who thought instead the city would end the program after doling out HK$10,000 cash vouchers last year.

This year’s handout was reduced by half to HK$5,000, a sign the financial secretary was wary of allowing stimulus to drive up the deficit too much. Even so, some experts struggled to make sense of the move, given the city’s borders have reopened and social distancing curbs have been removed.

“More vouchers at a time of a large increase in retail sales from visitors can be counterproductive,” said Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis SA. “It can only fuel inflation.”

She suggested officials should instead spend the money on building a social safety net to protect the city’s elderly, or take other steps to not only attract talent, but keep it.

Other stimulus announced on Wednesday was modest in size. Chan said the city would reduce the cap on its salaries tax rebate to HK$6,000 from HK$10,000, as he stressed the need to adopt a “moderately liberal fiscal stance” to spur growth.

A proposal to lower the tax rate for first-time buyers of properties worth HK$9 million (US$1.1 million) or less was also met with a lukewarm response from investors. Property stocks ended the day flat.

“Nothing groundbreaking has been announced,” Garcia-Herrero said. She said the stamp duty reduction was the “most positive” step but added that it was “clearly not enough.”

The stimulus measures in total will result in a deficit, Chan said, estimating the gap to be HK$54.4 billion for the 2023-2024 fiscal year.

That should still be manageable, given the city has enough in reserve to cover itself from any shortfall for now. It’s a prolonged drop in reserves that would put future government spending at risk.

Chan made it clear his goal was to spread some cheer through a city that’s endured a lot in recent years, saying in his concluding remarks it was his idea to come up a ‘Happy Hong Kong’ campaign. He forecast growth this year of as much as 5.5 percent and said the city should be able to expand an average of 3.7 percent each year through 2027.

Economists, though, are looking for what can sustain the city’s growth past the sugar high of cash giveaways and street parties.

“Anyone who looks at Hong Kong’s finances and the massive wall of contingent liabilities due to aging knows that taxes can only increase in the future,” Garcia-Herrero said. “It would be important to build other advantages beyond the tax haven story.”
Newsletter

Related Articles

Hong Kong News
0:00
0:00
Close
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
'I am not your servant': IndiGo crew member, passenger get into row over airline meal
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
BMW driver…
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
×