2024-25 Budget live: HK economy expected to grow 2.5%-3.5% in 2024, residential property demand-side management measures abolished (Updated: 1.39pm)

Paul Chan

28th February 2024 – (Hong Kong) Hong Kong’s Financial Secretary, Mr Paul Chan, delivered a speech on the 2024-25 Budget to the Legislative Council on February 28th. The speech focused on the economic situation in 2023, the economic outlook for 2024 and the medium term, and the government’s plans to strengthen Hong Kong’s economic recovery.

After a challenging year due to the pandemic, Hong Kong has returned to normalcy. The society and daily lives of the people have resumed, and visitors are returning, leading to positive economic growth. However, geopolitical uncertainties and high interest rates have impacted capital flows, and various factors such as changes in consumption patterns and competition from other economies have weighed down economic confidence.

To strengthen the momentum of economic recovery, the government emphasizes the importance of innovation, technology, and data empowerment. These factors will catalyse the emergence of new business models but also pose challenges to enterprises. Hong Kong has made significant progress in innovative research and digital transformation, which will help navigate these changes.

Mr Chan expressed confidence in Hong Kong’s future, highlighting the city’s institutional advantages under “One Country, Two Systems” and its highly international characteristics. Hong Kong is expected to attract more talent, capital, and enterprises, contributing to its economic development.

Despite the positive outlook, the Financial Secretary acknowledged the need for fiscal consolidation. As the epidemic subsides, the government plans to adopt a fiscal consolidation strategy to narrow the fiscal deficit progressively and restore fiscal balance.

The theme of the Budget is “Advance with Confidence. Seize Opportunities. Strive for High-quality Development.” This theme reflects the government’s commitment to advancing Hong Kong’s economy, seizing opportunities for growth, and pursuing high-quality development.

In 2023, the Hong Kong economy showed improvement following the removal of anti-epidemic measures and the resumption of normal travel. The economy grew by 3.2%, and the general public’s incomes recorded real growth. Private consumption expenditure and overall investment expenditure also increased, supported by government initiatives and the recovery of household income. Visitor arrivals bounced back, and exports of travel and transport services experienced notable growth.

However, the challenging external environment, characterised by geopolitical tensions and high interest rates, affected Hong Kong’s export performance. Global economic growth slowed, and Hong Kong’s total goods exports fell significantly. Despite these challenges, the labour market improved, and inflation remained moderate.

The local stock market experienced consolidation, and residential property market sentiment became cautious due to rising interest rates and uncertainties in the external environment.

Looking ahead to 2024 and the medium term, the external environment remains complicated, with geopolitical tensions impacting international trade and capital flows. The Hong Kong economy’s export of goods may continue to face pressure, but easing global monetary conditions could benefit export performance. The government expects visitor arrivals to increase further, driven by the revival of handling capacity and the promotion of mega events. Rising incomes among the general public and government measures will support private consumption, while fixed asset investment is also expected to increase.

Taking these factors into account, the government forecasts the Hong Kong economy to expand by 2.5% to 3.5% in real terms for the year 2024. Domestic cost pressures are expected to increase alongside the economic recovery, while external price pressures should ease. The government forecasts an underlying inflation rate of 1.7% and a headline inflation rate of 2.4% for the year.

In the medium term, the Hong Kong economy is expected to see sustained and solid development, despite geopolitical tensions and vulnerabilities in the global economy and financial system. Global demand is anticipated to gradually revive, and Hong Kong’s focus on high-quality development will provide ample room for growth. The government’s efforts to expand economic capacity, enhance competitiveness, and cultivate new growth areas will strengthen Hong Kong’s medium- to long-term growth momentum.

Based on these considerations, the government forecasts an average annual real-term growth rate of 3.2% from 2025 to 2028, with an average underlying inflation rate of 2.5% per year.

 The government remains optimistic about the city’s economic prospects and believes in the abundance of opportunities through global trends and exploration. As the global economic gravity shifts eastward, Asia continues to be a key driver of growth, and Hong Kong’s institutional advantages and connectivity with the mainland and the world position it well to seize opportunities.

To showcase Hong Kong’s appeal and empower individuals and businesses, the government has implemented various measures and will continue to roll out policies and initiatives. Offices like the Office for Attracting Strategic Enterprises (OASES), Innovation, Technology and Industry Bureau (ITIB), Invest Hong Kong (InvestHK), and Hong Kong Investment Corporation Limited (HKIC) actively engage with companies from the mainland and overseas, attracting high-value technology industries and assisting them in establishing a presence in Hong Kong.

OASES will soon sign a partnership agreement with over ten strategic enterprises, which plan to set up or expand their businesses in Hong Kong. Combined with the first batch of companies, these enterprises are expected to bring over $40 billion in investment and create about 13,000 jobs in the coming years. Their presence will also attract partners from their industry chains, fostering vibrant development in the Innovation and Technology (I&T) sector.

The HKIC plays a crucial role in channeling capital and leveraging market resources. In the first half of the year, it will implement the first batch of direct investment and co-investment projects, focusing on areas such as life technology, green technology, finance, semi-conductors, chips, and manufacturing industry transformation. The HKIC will also encourage its portfolio companies to actively engage in local, mainland, and overseas I&T networks to explore more opportunities and attract potential investors.

To enhance Hong Kong’s attractiveness, the HKIC will host a Roundtable for International Sovereign Wealth Funds and a Summit on Start-up Investment and Development. These events aim to explore investment opportunities, develop partnerships, and support I&T enterprise development.

Hong Kong is also facilitating re-domiciliation mechanisms for funds, enabling existing foreign funds to establish and operate in the city. Additionally, efforts are being made to open up new capital sources, including from the Middle East. Collaborations with financial institutions are underway to list an Exchange Traded Fund (ETF) in the Middle East that tracks Hong Kong stock indices, further enhancing mutual access between markets.

In an effort to enhance economic development and competitiveness, Hong Kong has taken significant steps to expand its pool of talent. The implementation of various measures, such as the Top Talent Pass Scheme (TTPS), has resulted in a substantial influx of skilled individuals into the city. Over the past year, more than 140,000 applications were approved under different talent admission schemes, with approximately 100,000 individuals already settling in Hong Kong. To ensure the effectiveness of these measures in addressing manpower demand, the Labour and Welfare Bureau plans to review the arrangements later this year.

The TTPS, which has seen an average successful applicant age of 35, has attracted a diverse group of individuals. Over 60% of them are married and have brought their families to Hong Kong. More than half of those who have resided in the city for at least six months are gainfully employed, with a median monthly income of around $50,000.

Hong Kong Talent Engage (HKTE) is actively engaged in attracting talent from mainland China and overseas. The organization is dedicated to providing comprehensive support services for newcomers, helping them settle in Hong Kong seamlessly. In May, HKTE will host the Global Talent Summit and the Guangdong-Hong Kong-Macao Greater Bay Area High-quality Talent Development Conference, aimed at promoting Hong Kong as an international talent hub and facilitating talent flow within the Greater Bay Area.

Furthermore, the government has made significant adjustments to stimulate recovery in the property market. The demand-side management measures for residential properties, including the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), and New Residential Stamp Duty (NRSD), have been revised. Notably, a stamp duty suspension arrangement for incoming talents acquiring residential properties has been introduced and garnered over 500 approved applications, highlighting Hong Kong’s appeal to overseas talent. Considering the current economic and market conditions, the government has decided to cancel all demand-side management measures for residential properties with immediate effect, effectively eliminating the need for SSD, BSD, or NRSD payments in residential property transactions.

In the stock market, Hong Kong has taken significant strides in enhancing its offerings. Collaborative efforts between regulators and the Hong Kong Exchanges and Clearing Limited (HKEX) have resulted in the establishment of a listing regime for specialist technology companies and the Hong Kong Dollar – Renminbi Dual Counter securities model. HKEX has expanded its list of Recognised Stock Exchanges to include the Saudi Arabia and Indonesia stock exchanges, facilitating secondary listings in Hong Kong for enterprises primarily listed on these markets. Additionally, the government is actively implementing measures proposed by the Task Force on Enhancing Stock Market Liquidity, including the reform of the Growth Enterprise Market (GEM) and the introduction of a treasury share buy-back regime and trading operations under severe weather conditions.

To support small and medium enterprises (SMEs), the government has introduced measures to tackle capital-flow issues, explore new markets, and accelerate upgrading and transformation. The application period for the 80% and 90% Guarantee Products under the SME Financing Guarantee Scheme has been extended for two years until the end of March 2026, with an additional commitment of $10 billion. The Hong Kong Monetary Authority (HKMA) has been instructed to maintain close communication with banks and adopt an accommodating approach to help enterprises overcome liquidity challenges. Furthermore, SMEs in the food and beverage and retail sectors will have access to digital transformation support through the Digital Transformation Support Pilot Programme, benefiting around 8,000 eligible SMEs.

The government has also enhanced the Dedicated Fund on Branding, Upgrading, and Domestic Sales (BUD Fund) to assist SMEs in expanding their competitiveness and accessing mainland China and overseas markets. An additional injection of $500 million has been proposed, and the launch of “E-commerce Easy” under the fund will provide support for e-commerce projects in the mainland, with funding of up to $1 million per enterprise. Moreover, two enhancement measures for deduction of expenses under profits tax have been introduced to support businesses. Profits-tax payers will now be granted tax deductions for expenses incurred in restoring leased premises to their original condition, and the time limit for claiming allowances for industrial and commercial buildings and structures will be removed.

These comprehensive measures aim to foster economic growth, attract talent, and assist SMEs, positioning Hong Kong as a competitive international hub for talent and business.

Mega-events take centre stage

Hong Kong recognises the potential of mega-events in attracting tourists and providing entertainment options for its residents. To further boost its international profile, the city plans to host over 80 mega-events in various themes and genres in the first half of this year. The upcoming “Art March” will feature a series of arts and cultural events, including renowned exhibitions like Art Basel, Art@Harbour, and the Asian debut of the popular pop-culture festival ComplexCon. Additionally, Hong Kong will host the LIV Golf tournament, an international golf competition featuring musical entertainment and other activities, for the first time.

15th National Games and mega events coordination

In 2025, Hong Kong, along with Guangdong Province and Macao, will co-host the 15th National Games. This significant event will offer the public an opportunity to support athletes on home ground or travel to nearby cities in the Greater Bay Area (GBA) to witness the games. To ensure the success of mega-events, the government has established a Mega Events Coordination Group, actively seeking opportunities to host more events in Hong Kong. A budget of $100 million has been allocated over the next three years to enhance the promotion of mega-events.

Financial forums reinforce branding

Thematic conferences play a vital role in strengthening Hong Kong’s branding as an international financial hub. The city has successfully organized events like the Global Financial Leaders’ Investment Summit and the Asian Financial Forum. In March, the Financial Mega Event Week will be launched, featuring major financial gatherings such as the Wealth for Good in Hong Kong Summit, where family office owners and managers will convene, and the Global Investors’ Symposium by Milken Institute. These events will contribute to enriching Hong Kong’s brand. Additionally, the government plans to sponsor renowned scholars and industry leaders to attend overseas events and share their expertise, promoting Hong Kong and its advantages through the Sponsored Overseas Speaking Engagement Programme.

Harbourfront development and cultural resources

Hong Kong recognizes the allure of its iconic Victoria Harbour and aims to optimize its usage to create enchanting experiences for both locals and tourists. The Hong Kong Tourism Board (HKTB) plans to hold monthly pyrotechnic and drone shows against the backdrop of Victoria Harbour’s stunning night views. The HKTB will also revamp the renowned light-and-sound show, “A Symphony of Lights.” Furthermore, the Development Bureau (DEVB) intends to introduce commercial facilities such as food and beverage outlets, retail spaces, and entertainment options at suitable harbourfront locations on a pilot basis. This initiative aims to enhance visitor convenience and offer an improved experience.

Hong Kong’s tourism sector is set to receive a boost with the introduction of brand new seasonal, festival, and event experiences. These offerings will cater to the diverse interests of visitors, showcasing Chinese and Western arts, popular cultures, culinary delights, outdoor adventures, and more. The Hong Kong Tourism Board (HKTB) plans to encourage the industry to develop a wider range of tourism products, ensuring a diverse and engaging experience for tourists.

Enriched group tours and immersive experiences

The Tourism Commission is committed to enhancing local group-tour activities by organizing signature projects that combine creativity, arts, and culture. The Sai Kung Hoi Arts Festival, for instance, integrates arts with the island’s natural landscape, history, culture, and heritage, providing a unique experience for visitors. Another notable initiative is the Design District Hong Kong (#ddHK), which takes visitors on a journey to discover the local culture and distinct characteristics of Hong Kong.

To promote immersive and in-depth tourism experiences, the HKTB will focus on themes like “Citywalk” and introduce activities tailored to young adults, such as hiking, cycling, stand-up paddle-boarding, trail running, and stargazing in the wilderness. These initiatives aim to energize and showcase the softer side of Hong Kong.

Diversified promotions and business opportunities

The HKTB aims to diversify activities and promotions to draw more people to districts like the Temple Street Night Market, known for its distinctive character. By creating more business opportunities for local merchants, the HKTB seeks to stimulate retail, consumption, catering, and transportation demand throughout Hong Kong.

Enhanced publicity and multi-destination promotion

A new Hong Kong tourism brand will be launched by the HKTB, complemented by targeted marketing efforts in source markets. Collaborative initiatives with cities in the Greater Bay Area (GBA) will further promote multi-destination tourism, showcasing the combined attractions of various cities.

Hospitality and quality services

Sincerity and hospitality will be the cornerstones of Hong Kong’s popularity as a tourist destination. The HKTB plans to enhance the Quality Tourism Services Scheme and launch publicity activities, including reality shows and commendations for outstanding frontline staff in the service industry. By fostering a hospitable and people-focused environment, Hong Kong aims to strengthen its reputation as a welcoming city.

Support measures for people and enterprises

Recognising the economic pressures faced by certain industries and individuals, the government will introduce measures to alleviate the financial burden. These measures include rates concessions for domestic and non-domestic properties, reductions in salaries tax and profits tax, and allowances for eligible social security recipients. These support measures are estimated to involve significant government expenditure but aim to ease the financial strain on businesses and individuals.

With a focus on enriching tourism experiences, implementing support measures, and promoting Hong Kong’s unique offerings, the city aims to revitalise its tourism sector and position itself as a preferred destination for travellers from around the world.

Championing high-quality development
The drive towards high-quality development is fuelling economic innovation and growth while prioritizing environmental conservation and enhancing the quality of life for citizens. Green initiatives and digital advancements are central to this development strategy.

Leveraging Hong Kong’s unique position
Hong Kong aims to capitalise on its distinct advantages under the “One Country, Two Systems” policy, including the nation’s support and its global connectivity. High-quality development opens new horizons, providing ample opportunities for expansion and growth.

Embracing a green future
The pursuit of green development is at the heart of high-quality progress. As the world shifts towards carbon neutrality, green transformation unveils substantial business prospects and a demand for financial investment, fostering diverse industry clusters. Innovations in sustainable fuels, energy conservation, emission reduction, and carbon capture are rapidly evolving.

Advancing green finance
Hong Kong is establishing itself as a global hub for green finance, in addition to its status as an international financial centre.

Hong Kong Green Week
This week, the Government is hosting “Hong Kong Green Week,” featuring events that span technology, finance, and other sectors. The event has attracted industry leaders from the Asia-Pacific to discuss green development and climate finance. The upcoming Joint Climate Finance Conference in Hong Kong, scheduled for this autumn in collaboration with the Dubai Financial Services Authority, will focus on transition finance for the Middle East and Asia.

Enhancing Green Finance Schemes
The Green and Sustainable Finance Grant Scheme has supported the issuance of over 340 green and sustainable debt instruments, with subsidies totalling US$100 billion. Proposals are in place to extend the scheme beyond its mid-2024 expiry to 2027 and to include transition bonds and loans, promoting the use of Hong Kong’s financing platforms for regional decarbonisation efforts.

Government promotes new energy vehicles and adjusts electric vehicle incentives

To encourage the adoption of new energy vehicles, the Hong Kong government has been actively promoting trials of various types of electric public and commercial transport. The government plans to extend the first registration tax (FRT) concessions for electric vehicles for an additional two years. However, with the decreasing prices and wider availability of electric vehicles, the concessions will be reduced by 40 percent. The maximum FRT concession for electric private cars (e-PCs) under the “One-for-One Replacement” Scheme will be adjusted, and the concession ceiling for general e-PCs will be lowered. Additionally, certain high-value e-PCs will no longer be eligible for concessions. Other types of electric vehicles, such as electric commercial vehicles, motorcycles, and motor tricycles, will continue to have the FRT waived in full. Detailed information will be announced by the Electrical and Mechanical Services Department.

Government advances sustainable development in agriculture and fisheries industries

In December of last year, the Environmental Protection Department (EPD) released its Blueprint for the Sustainable Development of Agriculture and Fisheries. Under this plan, the government aims to establish a modernized Techno-Agricultural Park and launch a pilot project on modern urban farming. In the fisheries sector, four new fish culture zones will begin operation this year, leading to a significant increase in local mariculture production.

Digital economy drives economic development and enhances business opportunities

The digital economy has emerged as a key driver of economic development, connecting various industries and sectors through data and technological innovations. The Digital Economy Development Committee (DEDC) has been studying and making recommendations on digital policies, infrastructure enhancements, data flow facilitation, enterprise digital transformation, and talent development. The government has implemented some of these recommendations and is preparing to establish the Digital Policy Office.

Government aims to build a data trading ecosystem and develop international data trading rules

Recognising the importance of a robust data ecosystem in the era of global digitalisation, the Hong Kong government has commissioned an expert group to study the development of a data trading ecosystem. The study will cover Hong Kong’s role as a “super connector” in data trading and the promotion of international data trading rules. The government aims to leverage Hong Kong’s advantages as an international city to facilitate the growth of data trading as a new industry, contributing to the transformation of traditional industries.

Digital finance enhances financial services and expands cross-boundary payment services

Digital technology has revolutionised financial business models, enabling wider access to financial services and enhancing inclusiveness. The Hong Kong Monetary Authority (HKMA) has been actively exploring digital finance initiatives, such as the e-HKD Pilot Programme and Project mBridge. The government plans to expand the scope of e-CNY pilot testing, allowing the public to easily set up e-CNY wallets for cross-boundary payment services. Efforts are also being made to promote cross-boundary data flow, facilitating the exchange of data between Hong Kong and mainland China.

Hong Kong advances Web3.0 ecosystem and implements regulatory framework for Stablecoins

The government is making progress in developing the Web3.0 ecosystem, with over 220 technology enterprises specialising in related areas in Cyberport. Tokenized green bond issuances have been successful, attracting global institutional investors. In line with international trends, the government is consulting the public on a legislative proposal to regulate stablecoin issuers. The Securities and Futures Commission (SFC) has implemented a licensing regime for virtual asset trading platforms and is consulting on the regulation of over-the-counter trading of virtual assets, prioritising investor and customer protection.

Government introduces business version of “iAM Smart” for enterprises

To facilitate secure and efficient online transactions, the government plans to establish a “digital identity of enterprises” platform, known as the business version of “iAM Smart.” This platform will enable authentication and verification of enterprise identities and signatures for electronic government services and online business transactions. The platform is expected to be rolled out progressively from the end of 2026.

Government aims to reduce digital exclusion and promote digital inclusion

Efforts will be made to reduce digital exclusion and promote the widespread use of information technology, particularly among elderly individuals. The government will allocate $100 million under the Social Innovation and Entrepreneurship Development Fund to provide digital training courses and technical support to elderly people aged 60 and above. This initiative aims to help them integrate into the digital era and enjoy the benefits of digital technology. Additionally, the government will collaborate with community organizations to set up digital inclusion centres, providing access to digital devices, internet connectivity, and training for underprivileged groups.

Government enhances cybersecurity and promotes data privacy protection

The government recognises the importance of cybersecurity and data privacy protection in the digital age. It will continue to enhance cybersecurity measures, including strengthening the protection of government systems and critical infrastructure. The Office of the Government Chief Information Officer (OGCIO) will work closely with various sectors to promote cybersecurity awareness and provide guidance on best practices. In parallel, the government will review the Personal Data (Privacy) Ordinance to ensure it remains effective in safeguarding personal data in an evolving digital landscape.

Government supports research and development for innovation and technology advancement

The government remains committed to promoting innovation and technology development in Hong Kong. It will continue to provide funding and support for research and development activities, including the Innovation and Technology Fund and the Researcher Programme. The government will also encourage collaboration between academia, industry, and research institutions to drive technological advancements and foster an innovation ecosystem in the city.

Government embraces smart city development and enhances public services

Smart city initiatives will be further promoted to enhance the quality of life for residents. The government will leverage emerging technologies, such as artificial intelligence and Internet of Things, to improve public services and optimise resource allocation. Examples include the Smart Lamppost Programme, intelligent transport systems, and smart healthcare solutions. The government will collaborate with different sectors to explore innovative applications and ensure the sustainable development of smart city initiatives.

Government continues to foster innovation and entrepreneurship

To foster a vibrant innovation and entrepreneurship ecosystem, the government will launch various initiatives and programs. These include the Hong Kong-Shenzhen Innovation and Technology Park, which aims to attract global technology enterprises and nurture local startups. The government will also provide funding and resources to support the development of innovation and technology startups through the Innovation and Technology Commission. Furthermore, the government will establish co-working spaces and incubation centers to provide a conducive environment for idea incubation and business growth.

Government strengthens collaboration with mainland China and international partners

The government recognises the importance of collaboration with mainland China and international partners in driving innovation and technology development. It will actively participate in regional and international cooperation platforms, such as the Guangdong-Hong Kong-Macao Greater Bay Area and the Belt and Road Initiative. The government will establish joint laboratories, research centres, and innovation clusters with renowned institutions and companies to facilitate knowledge exchange and technology transfer.

Government commits to sustainable development and green initiatives

The Hong Kong government is committed to sustainable development and green initiatives to address climate change and promote environmental conservation. It will continue to implement measures to reduce carbon emissions, enhance energy efficiency, and promote renewable energy sources. The government will also promote green building practices, waste reduction, and promote eco-friendly transportation options. Through these efforts, Hong Kong aims to become a greener and more sustainable city for future generations.

Hong Kong’s vision for I&T development

The Hong Kong government has outlined its plans to establish the city as an international Innovation and Technology (I&T) center. The Hong Kong Innovation and Technology Development Blueprint, released in 2022, sets strategic goals and roadmaps for I&T development over the next five to ten years.

Focus on I&T ecosystem

Significant resources have been allocated by the government to build a thriving I&T ecosystem. Key institutions like the Hong Kong Science Park and Cyberport serve as flagship centers and incubators, supporting over 4,500 tenants and incubatees as of end-2023. Notably, 16 listed companies and nine unicorns have emerged from these centers, raising a total of around $130 billion. Moreover, a considerable number of local and non-local awards have been won, highlighting the success of the ecosystem.

Artificial Intelligence initiatives

Recognizing the transformative potential of Artificial Intelligence (AI), Hong Kong is accelerating the establishment of an AI Supercomputing Centre at Cyberport. This facility, expected to begin operations this year, will offer substantial computing power, equivalent to processing nearly 10 billion images in one hour by early 2026. Additionally, the government plans to allocate $3 billion to launch a three-year AI Subsidy Scheme at Cyberport, supporting local universities, research institutes, and enterprises to leverage the computing power and promote scientific breakthroughs in AI.

Microelectronics research and development

With the global demand for semiconductors on the rise, Hong Kong aims to foster research and development in microelectronics. The government plans to establish the Hong Kong Microelectronics Research and Development Institute (HKMSRDI), promoting collaboration among universities, R&D centers, and industries in the field of third-generation semiconductors. By leveraging the comprehensive manufacturing industry chain in the Greater Bay Area (GBA), the institute aims to drive R&D outcomes and contribute to the growing semiconductor market, projected to exceed US$1 trillion by 2030.

Life and health technology advancements

Hong Kong possesses strong capabilities in life and health technology research, making it well-equipped to become an international hub in this field. The government has earmarked $10 billion to support the development of life and health technology. A significant portion of this funding, $6 billion, will be used to establish research institutes through collaborations between local universities and Mainland or overseas organizations. The goal is to facilitate R&D activities, attract global I&T talent, and transform research outcomes into practical applications.

Strengthening industrial development

To promote advanced technologies such as AI, data analytics, and new materials, the government plans to launch a $10 billion New Industrialisation Acceleration Scheme (NIAS). This scheme will provide funding support to enterprises engaged in life and health technology, AI and data science, advanced manufacturing, and new energy technology. Enterprises participating in the NIAS may also receive subsidies to engage research talent and non-local technical personnel, further facilitating the development of emerging industries.

Hong Kong-Shenzhen Innovation and Technology Park

The Hong Kong-Shenzhen Innovation and Technology Park (HSITP) in the Lok Ma Chau Loop plays a crucial role in Hong Kong’s participation in the Greater Bay Area (GBA) development. The government is actively attracting enterprises, investments, and talent to the HSITP. A White Paper on the Development of the HSITP is currently being drafted and is expected to be announced this year, outlining the plans and strategies for the park’s growth.

Support for start-ups

Recognising the growth potential of start-ups, Hong Kong has made significant strides in fostering a favourable environment for their development. With Hong Kong ranked second globally in the Emerging Startup Ecosystems category, the government seeks to provide value-added support services through initiatives like the Corporate Venture Fund and the upcoming Co-acceleration Programme. These programs aim to nurture high-potential start-ups, helping them grow into regional or global enterprises.

Strengthening R&D and I&T infrastructure

To support cutting-edge research, the government will launch a Frontier Technology Research Infrastructure Support Scheme, allowing universities to procure facilities and conduct research projects in various fields. Additionally, subsidies will be provided to enhance technology transfer and marketing services in the Technology Transfer Offices of universities. In terms of infrastructure, the Science Park Expansion Programme and Cyberport 5 expansion project are underway, providing more space for the local I&T ecosystem to thrive.

Hong Kong’s role as a global financial centre boosts real economy development

Hong Kong’s highly efficient financial market accelerates the development of the real economy by effectively matching capital with industry needs. As an international financial centre, Hong Kong has a competitive edge in both “quantity” and “quality,” allowing various financial sectors to thrive.

Hong Kong establishes itself as the world’s largest offshore Renminbi hub

Hong Kong solidifies its position as the world’s largest offshore Renminbi (RMB) business hub. With China’s economy growing and closer economic ties being established with other regions, the demand for RMB as a global currency in international trade, investment, financing, and cross-border payments continues to rise.

Mutual market access between mainland China and Hong Kong expands

Mutual market access between Mainland China and Hong Kong’s financial markets expands in scope and capacity. Initiatives such as Bond Connect, the Cross-boundary Wealth Management Connect Scheme, ETFs in Stock Connect, and Swap Connect provide Mainland and international investors with more asset allocation and risk-management options.

Hong Kong’s asset and wealth management sector flourishes as a global centre

Hong Kong’s asset and wealth management sector thrives as a global centre, with over HK$30 trillion in assets under management. It serves as Asia’s largest hedge-fund centre and the second-largest centre for private equity management after Mainland China. Measures are being taken to further develop the industry and attract global family offices and asset owners to Hong Kong.

Securities and bond markets in Hong Kong set to grow in depth and vibrancy

Hong Kong has maintained its position as a leading issuer of bonds in Asia, holding the top spot for seven consecutive years in terms of international bond issuance volume. To further support the economy and improve people’s livelihoods, the Government has proposed expanding the Government Green Bond Programme to encompass sustainable finance projects and advancing the Infrastructure Bond Scheme to raise capital for infrastructure initiatives, expediting their completion. A borrowing ceiling of HK$500 billion will be set for these programs, allowing for greater flexibility in quota re-allocation. The borrowed funds will be allocated to the Capital Works Reserve Fund, supporting long-term development projects. These two initiatives are gradually replacing the existing Government Bond Programme. In the upcoming year, bonds worth HK$120 billion will be issued, with HK$70 billion dedicated to the retail tranche, including HK$50 billion in Silver Bonds, and HK$20 billion in green bonds and infrastructure bonds. This approach aims to foster financial inclusiveness and foster public engagement in infrastructure and sustainable development initiatives.

Hong Kong launches “WMC 2.0” to deepen financial co-operation in the GBA

The Cross-boundary Wealth Management Connect (WMC) Scheme in the Greater Bay Area (GBA) continues to evolve with the introduction of “WMC 2.0.” The new measures include increasing the individual investor quota to RMB 3 million and lowering the participation threshold for the Southbound Scheme. These enhancements aim to further strengthen financial co-operation and facilitate cross-border wealth management activities between Hong Kong and the GBA.

Collaborative framework for cross-boundary credit referencing to ease financing in the GBA

To facilitate easier access to financing in the GBA, the Hong Kong Monetary Authority (HKMA) and Mainland regulatory authorities are working together to establish a collaborative framework for cross-boundary credit referencing. This framework will enable banks in both regions to access credit data of relevant corporations with their consent. By streamlining the credit assessment process, this collaboration aims to enhance efficiency and security in securing financing for enterprises operating in the GBA.

Hong Kong enhances specialty insurance market and promotes insurance-linked securities

As an international risk-management centre, Hong Kong is actively developing its specialty insurance market. The city has been attracting Mainland and overseas enterprises to establish captive insurers, bolstering their corporate risk-management capabilities. Additionally, Hong Kong is promoting the development of insurance-linked securities (ILS) by establishing a dedicated regulatory regime and launching a pilot grant scheme. The city has already facilitated the issuance of catastrophe bonds and aims to attract more institutes to Hong Kong while fostering talent and driving industry growth.

Government allocates funds to boost growth in financial services industry

To enhance the competitiveness and advantages of Hong Kong’s financial services industry, the government has committed HK$100 million to support its sustainable development. This funding will be allocated to various areas, including green and sustainable finance, fintech, asset and wealth management, headquarters business, and risk management. The aim is to strengthen the industry’s capabilities and maintain Hong Kong’s position as a leading global financial hub.

Hong Kong seizes opportunities as a multinational supply chain management centre

Recognising the trend of Mainland manufacturing enterprises expanding their supply chains abroad, Hong Kong aims to become a multinational supply chain management centre Leveraging its status as a premier financial and commercial hub, Hong Kong offers comprehensive professional support services to enterprises seeking to meet their overseas business needs. The city provides consulting services, trade financing options, and corporate training to assist Mainland enterprises in managing multinational supply chains and expanding their presence in overseas markets.

Hong Kong expands economic and trade network in emerging markets

Hong Kong is actively expanding its economic and trade network in emerging markets to facilitate business opportunities for its enterprises. The government is engaged in negotiations with Saudi Arabia to establish an Investment Promotion and Protection Agreement (IPPA) and is considering setting up an Economic and Trade Office (ETO) in Riyadh. Consultant offices will also be established in Turkey and Egypt to attract foreign capital and enterprises. Furthermore, Hong Kong is exploring opportunities for trade agreements with countries such as Peru and Bangladesh, while enhancing engagement with the ASEAN region.

Hong Kong’s role in Belt and Road Initiative continues to develop

Hong Kong remains committed to its role as a functional platform for the Belt and Road Initiative (BRI). In addition to hosting the annual Belt and Road Summit, a new Belt and Road Festival will be launched to promote collaboration with BRI countries across various sectors. The city will also host the Conference of Belt and Road Initiative Tax Administration Cooperation Forum, facilitating connections and knowledge exchange among governments, international organisations, academic institutions, and strategic enterprises. Outbound missions will be organised to explore business opportunities for enterprises from BRI countries operating in Hong Kong.

Hong Kong aims to become a regional intellectual property trading centre

Recognising the importance of effective IP protection and efficient IP transactions, Hong Kong aims to become a regional intellectual property trading centre. The government plans to introduce a “patent box” tax incentive, reducing the tax rate for profits derived from qualifying IP to five percent. This incentive aims to encourage enterprises to invest more resources in research and development and utilise patents and other IP protections for commercialisation. Additionally, Hong Kong plans to establish a WIPO Technology and Innovation Support Centre (TISC) to provide specialised services, including patent search and analysis, to enhance IP trading and support the innovation and technology sector.

Establishment of WIPO Technology and Innovation Support Centre in Hong Kong planned

Hong Kong is actively planning the establishment of a WIPO Technology and Innovation Support Centre (TISC) within its borders. The TISC will focus on providing specialised services such as patent search and analysis to protect scientific research results and support the innovation and technology sector. It will also facilitate IP trading and nurture local talent in the field of intellectual property. This initiative aims to further enhance Hong Kong’s position as a hub for innovation and technology and promote collaboration between local and international entities.

Hong Kong explores opportunities in the digital economy and fintech

Hong Kong recognises the growing importance of the digital economy and fintech sector and is actively exploring opportunities in these areas. The government has launched various initiatives, including the Fintech Proof-of-Concept Subsidy Scheme and the Fintech Supervisory Sandbox, to foster innovation and provide a conducive environment for fintech startups. Hong Kong is also exploring the development of a central bank digital currency (CBDC) and collaborating with other jurisdictions to enhance cross-border payments and settlement systems. These efforts aim to position Hong Kong as a leading global fintech hub and drive digital transformation in various industries.

Hong Kong strengthens collaboration with international financial centres

Hong Kong recognises the importance of collaboration with other international financial centers and is actively strengthening its ties. The city has signed bilateral agreements with Switzerland, Luxembourg, and the United Arab Emirates to enhance cooperation in financial services, including asset management, Islamic finance, and fintech. These partnerships aim to promote information sharing, talent exchange, and market access for financial institutions in both jurisdictions. Hong Kong also continues to participate actively in global financial forums and initiatives to contribute to the development of international financial standards and regulations.

Hong Kong’s commitment to sustainable finance and green initiatives

Hong Kong is committed to promoting sustainable finance and green initiatives. The government has issued green bonds and is actively encouraging the private sector to adopt sustainable practices and disclose environmental, social, and governance (ESG) information. Hong Kong is also enhancing its regulatory framework to support the development of green finance and exploring the establishment of a Green Investment Association to facilitate collaboration between investors, issuers, and service providers. These efforts align with global sustainability goals and reinforce Hong Kong’s position as a responsible and green financial hub.

Hong Kong promotes talent development in financial services and innovation

Recognising the importance of talent in driving the growth of the financial services and innovation sectors, Hong Kong is actively promoting talent development initiatives. The government has launched various programs to nurture local talent, including the Fintech Career Accelerator Scheme and the Greater Bay Area Youth Employment Scheme. Hong Kong is also collaborating with renowned universities and research institutions to establish research and development centres and attract top-tier talent. These efforts aim to cultivate a skilled workforce and support the long-term development of Hong Kong’s financial and innovation sectors.

Hong Kong’s resilience and flexibility in adapting to global economic changes

Hong Kong has demonstrated resilience and flexibility in adapting to global economic changes. Despite challenges, the city continues to attract international businesses and investors with its robust legal system, free flow of capital, and business-friendly environment. Hong Kong’s strategic location, well-established infrastructure, and deep pool of financial expertise contribute to its attractiveness as a regional and global business hub. The government remains committed to creating a favourable business environment, promoting innovation, and seizing new opportunities to ensure the sustainable development of Hong Kong’s economy.

Government initiatives aim to enhance competitiveness and expand services in Hong Kong’s maritime industry

In a bid to bolster its position as a leading international maritime centre, Hong Kong has unveiled an Action Plan on Maritime and Port Development Strategy. The plan, which aligns with the National 14th Five-Year Plan and the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, outlines ten strategies and thirty-two action measures to support the sustainable growth of the city’s maritime and port industry. By leveraging its strategic location, institutional strengths, extensive trade network, and favorable geographic conditions, Hong Kong aims to consolidate and reinforce its status as a global maritime hub.

Developing high value-added maritime services

As part of the Action Plan, Hong Kong aims to enhance its high value-added maritime services. Recent tax concession measures implemented by the government have already yielded positive results in areas such as ship leasing, marine insurance, ship agency, and ship management. Further studies will be conducted this year to explore additional enhancements in these sectors.

Modernising logistics development

Recognizing the importance of embracing technological advancements, the government seeks to assist the logistics industry in capitalizing on the latest developments and business opportunities in smart logistics and e-commerce. To encourage productivity improvements through technology adoption, the government launched a $300 million Pilot Subsidy Scheme for Third-party Logistics Service Providers in 2020. The scheme has already benefited over 190 enterprises, and its scope has been expanded to cover services related to the application of Environmental, Social, and Governance (ESG) technology solutions.

Hong Kong’s role as an international aviation hub

With Hong Kong International Airport (HKIA) serving as a key international aviation hub, the government aims to transform it into an Airport City, integrating various sectors such as commerce, conventions and exhibitions, tourism, lifestyle, and logistics. Taking advantage of the Hong Kong-Zhuhai-Macao Bridge’s convenience and opportunities, the vision is to shape HKIA into a world-class landmark.

Expanding aviation opportunities

The Airport Authority (AA) is making significant progress with the HKIA three-runway system (3RS) project, scheduled for commissioning later this year. Leveraging the opportunities presented by the 3RS and the support of the “Air Silk Road” initiative, the focus will be on strengthening aviation services between Hong Kong and countries along the Belt and Road routes. By expanding the aviation network, Hong Kong aims to enhance connectivity and facilitate trade and travel.

Intermodal transport for seamless connectivity

To fully utilise HKIA’s advantages in handling high-value, temperature-controlled air cargo, the AA is collaborating with Dongguan to develop a sea-air intermodal cargo-transshipment mode. This initiative will gradually increase handling capacity to one million tonnes per annum, meeting the international cargo demand of the Guangdong-Hong Kong-Macao Greater Bay Area. Additionally, the first phase of the permanent facility of the HKIA Logistics Park is set to be completed by the end of next year.

Establishing Hong Kong as Asia’s aviation logistics base

Hong Kong aims to actively expand its air cargo services, including the handling of cold-chain cargo at the logistics park in Dongguan. Collaboration with Zhuhai will further develop its international cargo business. By attracting international cargo forwarders and major global retailers to set up their Asian aviation logistics base in Hong Kong, the city aims to solidify its position as Asia’s aviation logistics hub.

Becoming a centre for international legal and dispute resolution services

Leveraging its robust legal system and elite legal talent, Hong Kong aims to position itself as a Centre for International Legal and Dispute Resolution Services in the Asia-Pacific region. The establishment of the International Organization for Mediation (IOMed) headquarters in Hong Kong, with the full support of the Central Government, will serve as a catalyst for attracting dispute parties, mediators, and legal professionals to conduct mediation in Hong Kong. The Department of Justice (DoJ) will continue to foster Hong Kong’s legal and dispute resolution services through international conferences, exchange activities, and delegations to strengthen ties with the Mainland, the Middle East, and ASEAN member states.

Fostering East-meets-West cultural exchange

Capitalising on its diverse and open community, Hong Kong aims to become a hub for international cultural exchange between East and West. By developing high-quality arts, cultural, and creative industries, the government aims to promote Chinese culture and foster exchanges between China and the rest of the world. A forthcoming Blueprint for Arts and Culture and Creative Industries Development will outline the vision and specific initiatives for this endeavour.

Boosting Creative Arts Branding

To support projects in various areas such as film, arts, and design, the government plans to inject substantial funding into the Film Development Fund and the CreateSmart Initiative. The annual Hong Kong Fashion Design Week will be organized, with the vision of establishing it as an Asian fashion design mega event, showcasing Hong Kong’s fashion design brands internationally.

Promoting Hong Kong as a global maritime hub

To promote Hong Kong as a global maritime hub, the government plans to strengthen cooperation with Mainland China and international partners. This includes collaborating with Guangdong and Macao to develop the Guangdong-Hong Kong-Macao Greater Bay Area into a world-class shipping and logistics cluster. The government will also actively participate in international maritime organisations and strengthen partnerships with overseas maritime centres.

Enhancing talent development and training

Recognising the critical role of talent in the maritime industry, the government will enhance training programs and initiatives to cultivate a pool of skilled professionals. This includes establishing a Maritime and Aviation Training Fund to support training courses and providing scholarships to nurture talent in the industry.

Improving maritime infrastructure and services

To enhance Hong Kong’s competitiveness as a maritime center, the government will continue to invest in infrastructure development. This includes expanding port facilities and optimizing the port layout to accommodate larger vessels and increase handling capacity. The government will also explore the development of smart port technologies and promote the use of green and sustainable practices in the maritime industry.

Strengthening maritime safety and security

Ensuring the safety and security of maritime operations is crucial for Hong Kong’s maritime industry. The government will enhance maritime safety regulations, promote the use of advanced technologies for maritime surveillance and risk management, and strengthen cooperation with international partners in combating maritime crimes and piracy.

Emphasising the value of local talent

Local talent is the cornerstone of economic and sectoral growth. While global talent acquisition is crucial, fostering homegrown expertise remains a priority. Our commitment extends to bolstering post-secondary education and specialized training programs, ensuring a robust local talent pipeline.

Innovation and Technology (I&T) talent development

Support is strong for training programs in new industrial sectors, including the STEM Internship Scheme for university students engaging in I&T work. The “Knowing More About IT” Programme aims to spark primary students’ interest in technology, with an additional $134 million allocated to provide up to $300,000 in subsidies for each public primary school over the next two academic years.

Cultivating healthcare professionals

The emphasis on local healthcare training continues with improved teaching facilities and increased training placements. Since last April, subsidies have been provided for clinical practicum training fees, and capacity building initiatives in Chinese medicine have been launched, including a collaborative talent training program with the National Administration of Traditional Chinese Medicine, utilizing the $500 million fund injection from last year’s budget.

Maritime and aviation sector training

Initiatives like the Professional Training on Smart and Green Logistics Scheme and the Logistics Promotion Funding Scheme, introduced under the Maritime and Aviation Training Fund (MATF), enhance talent in smart and green logistics. The Aviation Promotion Project Funding Scheme supports local aviation industry development, with a review of MATF’s effectiveness in talent attraction planned for this year.

Advancing patent professionals

An additional $12 million over three years will be invested in the IPD to prepare for local patent agent service regulations, enhancing the original grant patent system. Efforts to strengthen the patent examiner team and improve examination capabilities are in place, aiming for institutional autonomy by 2030.

Fostering international legal experts

The Department of Justice (DoJ) is establishing the Hong Kong International Legal Talents Training Academy to cultivate legal professionals with global perspectives and diverse legal system knowledge.

Boosting land and housing supply

Land supply strategy

The 2024-25 Land Sale Programme includes eight residential sites, railway property developments, and Urban Renewal Authority projects, expected to deliver about 15,000 units—a 14% increase over the annual demand. Commercial and industrial site sales are also planned, aligning with market conditions.

Five-year private housing plan

The government pledges land for at least 80,000 private housing units over five years, with 60% from New Development Areas and 40% from government and railway development projects.

Public housing goals

Land identified for the next decade will meet the target of 308,000 public housing units. About 105,000 units are already under construction, with the Cash Allowance Trial Scheme extended to June 2025 for waiting list families.

Private housing outlook

With an estimated annual average of over 19,000 private residential units completed over five years, a 15% increase from the past, the market anticipates around 109,000 new units in the next three to four years.

Expanding transport infrastructure

Vision for connectivity

The government’s “infrastructure led” and “capacity creating” approach advances major transport projects, including smart and green mass transit systems. Expressions of interest will be sought for East Kowloon, Kai Tak, and Hung Shui Kiu/Ha Tsuen projects.

Greater Bay Area (GBA) integration

Efforts continue with Shenzhen to enhance GBA connectivity, advancing the Hong Kong-Shenzhen Western Rail Link and the Northern Link Spur Line.

Construction productivity and innovation

A cross-departmental committee will promote Modular Integrated Construction (MiC), aiming to establish MiC as a leading GBA industry. The Building Testing and Research Institute will launch this year to foster industry innovation.

Ensuring quality healthcare

The estimated healthcare recurrent expenditure for 2024-25 is HK$109.5 billion, representing 19% of government spending. Initiatives aim to enhance medical service quality, develop primary healthcare, and promote industry growth.

Chinese medicine development

The government supports Chinese Medicine (CM) with increased service quotas, integrated care services, and scientific research. The upcoming Chinese Medicine Hospital and Government Chinese Medicines Testing Institute will begin phased services from late 2025.

Tobacco control efforts

Taxation as a deterrent

Raising tobacco duty is a proven strategy to discourage smoking. An increase of 80 cents per cigarette stick takes immediate effect, with other tobacco products seeing a proportional tax increase. The duty rise aims to move closer to the World Health Organisation’s recommended retail price proportion, enhancing public health and continuing the fight against illegal tobacco trading.

Investing in Hong Kong’s youth

Preparing for the future

Hong Kong recognises its youth as the cornerstone of future prosperity. The government is committed to nurturing this demographic with a phased implementation of the Youth Development Blueprint. A key goal for the current year is to provide at least 30,000 young individuals with opportunities for Mainland China and international exchanges and internships. This initiative is designed to acquaint young people with significant developmental trends in their country and enhance their global perspectives.

Summit for youth engagement

Mid-year, the government will host a Youth Development Summit, an event forecasted to attract over 1,000 participants. It will serve as a platform for youth from Hong Kong, the Mainland, and abroad to engage in dialogue and share insights on topics that hold importance to their generation.

Enhancing vocational and professional training

Strengthening industry links

With an investment of $680 million, the government is bolstering the Vocational Training Council’s efforts to promote vocational and professional education and training (VPET). This includes the extension of both the Pilot Incentive Scheme for Employers and the Pilot Subsidy Scheme for Students in Part-time Programmes. Support for student exchange, aid for students with special educational needs, and encouragement of workplace learning opportunities are also among the planned enhancements.

Building an alliance

An additional $100 million in start-up funding has been allocated to aid self-financing, post-secondary institutions in forming an Alliance of Universities in Applied Sciences. This initiative aims to elevate the status of VPET among students, parents, and society.

Prioritising elderly care

Sustaining community support

The Community Care Service Voucher (CCSV) Scheme, now a regular fixture since September 2023, has broadened its purview to include the rental of assistive technology products. In the 2024-25 cycle, the number of CCSVs will rise to 11,000, with an annual budget of approximately $900 million. The Residential Care Service Voucher (RCSV) Scheme has also been regularized, with the number of RCSVs set to increase to 5,000, representing a $1,440 million annual investment.

Empowering persons with disabilities

Expanding services and incentives

The government’s dedication to improving services for persons with disabilities includes increasing the number of day rehabilitation, residential care, and respite service places, which reached 36,400 by the end of 2023. Additionally, a three-year pilot scheme funded by approximately $130 million from the Community Care Fund will incentivize employment among disabled CSSA recipients with a monthly subsidy of $500, potentially benefiting around 6,800 persons.

Advancing women’s development

Funding for empowerment

Recognising the importance of women’s advancement, the government has earmarked $100 million to support related initiatives. The Women Empowerment Fund, established in June 2023, has already funded over 140 projects aimed at facilitating women’s participation in the labor market and providing training in childcare and eldercare.

Supporting working families with childcare

Expanding childcare services

To aid working families, the government has planned the phased introduction of 10 more aided, standalone child-care centers, aiming to create nearly 900 additional places for child day-care services within three years. The After School Care Programme for Pre-primary Children will also be expanded to cover all districts, increasing the service places to nearly 1,200 in the same timeframe.

2023-24 financial review and 2024-25 forecast

Economic and fiscal challenges

Hong Kong’s past year saw economic growth hampered by global interest rate hikes, a slowing economy, and ongoing geopolitical tensions. Reduced government expenditure post-pandemic could not offset the decreased revenue from land premium and stamp duty in a softened asset market, leading to a larger-than-anticipated deficit.

Revised budget and projections

The revised estimate for government revenue in 2023-24 stands at HK$554.6 billion, 13.7% below the original estimate. The total government expenditure has been reduced by 10.2% from the previous year.

A surge in public spending during the pandemic

Amid the global health crisis, the government initiated a series of substantial counter-cyclical and anti-epidemic measures. This proactive stance led to a significant increase in public spending, which reached an all-time high of $810.5 billion during the fiscal year 2022-23. Although efforts have been made to curtail expenses post-pandemic, the total expenditure for 2023-24 tallied at HK$727.9 billion. This amount marks a 36.9% surge from the fiscal year 2018-19. This increase notably includes a 40.2% jump in operating expenditure, while operating revenue in the same timeframe saw a more modest 13.1% rise.

Capital works expenditure on the rise

The government’s determination to enhance land and housing supply projects, alongside other critical infrastructure developments, has led to a sizable increase in capital works spending. The average annual expenditure in this area rose from approximately HK$76 billion over the past five years to about $85 billion in 2023-24, reflecting the administration’s commitment to improving environmental conditions and the standard of living.

Fiscal reserves and the long-term outlook

The combination of pandemic-related spending and external economic challenges has resulted in a reduction of fiscal reserves to HK$733.2 billion. The focus, however, remains on long-term fiscal health over the entire economic cycle, in accordance with Article 107 of the Basic Law, which advocates for expenditure to stay within revenue limits to avoid deficits and ensure financial sustainability.

Fiscal consolidation efforts

The government has embarked on a broad fiscal consolidation initiative, balancing the need for economic growth against the burden on businesses and the general public. The plan leans towards expenditure reduction to restore fiscal equilibrium within a few years, supplemented by pragmatic revenue measures.

Maintaining service quality while reducing expenditure

Despite the emphasis on controlling expenditure growth, the government pledges to meet public needs through continued resource allocation for public services. This includes zero growth in civil service establishment and a two-year one percent cut in recurrent government expenditure under the Productivity Enhancement Programme.

Anticipated slowdown in expenditure growth

The government’s measures are expected to decelerate the growth of operating expenditure from an annual average of 7% in the past five years to an average of 2.2% in the next five years. This rate is projected to be lower than the anticipated GDP growth rate of 5.5% over the same period.

Review of transport subsidy schemes

Given the rapid growth in expenditures for transport subsidy schemes, the government plans to review these programs to ensure their financial sustainability. Notably, the $2 Scheme for the elderly and disabled, and the Public Transport Fare Subsidy Scheme have seen expenditures more than double in recent years.

Reviewing and prioritising capital works

As the government pushes forward with land and housing supply projects and other vital works, it also recognizes the need to review and prioritise these projects based on cost-effectiveness and urgency. The goal is to maintain sustainable capital works expenditure while continuing to invest in infrastructure that will benefit the economy and society.

Measures to increase revenue

The government is focused on high-quality economic growth as the primary driver of increased public revenue. This involves careful consideration of tax adjustments and fee increases to avoid harming the local economy or burdening citizens. Notable revenue measures include:

  • Implementing a two-tiered standard rates regime for higher-income taxpayers.
  • Introducing a progressive rating system for domestic properties.
  • Reviewing various fees and charges, including an increase in business registration fees.
  • Resuming the collection of the Hotel Accommodation Tax at a rate of three percent.

International taxation and investment returns

In line with global efforts to curb base erosion and profit shifting, the government is moving forward with the implementation of the global minimum tax rate of 15%. The Future Fund’s investment returns will also be progressively reflected in the Operating Account to support fiscal stability.

Bond issuance and fiscal discipline

The government emphasises that bond issuances are intended for driving green, sustainable, and infrastructure projects, not for covering recurrent expenditures. The approach to developing the Northern Metropolis and other projects includes a planned bond issuance to support these initiatives. Additionally, the government is committed to maintaining a prudent debt-to-GDP ratio, ensuring fiscal discipline while investing in the future.

It is imperative in the near term to solidify the impetus behind Hong Kong’s economic recovery. For the long term, a recalibration of our economic growth strategy is in order, with a focus on enhancing both its “quality” and “quantity”. Steering toward a trajectory of high-quality growth, the government is committed to spurring further innovation, ushering in novel services and products, stimulating emergent demand, and penetrating new commercial territories. This strategic approach is indispensable for Hong Kong’s forward development.