It may take “a few years” for the Hong Kong government to turn a profit, the city’s finance chief has said, pointing to a sluggish economy and weak land and asset sales that have led to a shortfall in government revenue.
Financial Secretary Paul Chan said on Saturday that government reserves were estimated to fall to HK$720 billion when the 2023-24 fiscal year comes to a close in March.
Chan was speaking at a televised consultation hosted by government-funded broadcaster RTHK, less than a week after the government announced it would not sell any sell any residential or commercial land in the current quarter amid weak market sentiment and high vacancy rates.
Land sales have brought in HK$12.3 billion in revenue this financial year, accounting for around 14.5 per cent of the originally projected HK$85 billion, after six failed land tenders.
Despite the weak market sentiment, the government would continue to create new developable land while taking into account livelihood issues, Chan said, adding that the government aimed to break even in “a few years.”
Speaking at the session, Associate Professor of the Department of Accountancy, Economics and Finance at the Hong Kong Baptist University Billy Mak agreed with Chan, adding that plots could be developed in a short period of time as long as there was supply.
Chan last month backtracked on an earlier projection that the government would turn a profit in the next fiscal year, saying that the city could expect to see another year in the red in 2024-25.
On Saturday, that it could take “one or two more years” on top of that before the government turns a profit.
Asked whether the government would consider imposing new taxes, Chan said the international community was discussing the global minimum corporate tax rate, a scheme that, when implemented in Hong Kong, may bring in some HK$15 billion from companies every year, from 2026.
Regarding his earlier announcement that the government would have to cut costs by 1 per cent in the 2024-25 financial year, Chan said authorities would made adjustments “as far as practicable” without affecting public services and welfare expenses.
Mak said there was no urgent need to solve all of the city’s financial woes as Hong Kong still had hundreds of billions in fiscal reserves. “However, it is necessary to consider whether to be more cautious in financial management,” he added.
Public services
Writing in his blog on Sunday, Chan said the government was looking into reviewing charges for public services as it looked to cut costs and increase income.
He said the government should consolidate its finances while ensuring disadvantaged communities received social security support and access to public services.
“However, establishing land reserves, developing transport infrastructure, and creating stable housing supply should not be slowed down… due to short-term market conditions,” he wrote.
Simon Lee, honorary fellow at the Asia-Pacific Institute of Business at the Chinese University of Hong Kong, told Ming Pao that large-scale infrastructure projects should be postponed temporarily, and that the government should review the civil service structure.
Lee said there were “fundamental” issues, given the government’s inability to increase revenue in the short term, adding that he believed the government should make adjustments to the national security law to attract foreign investment.
