Key takeaways from Hong Kong’s 2023/24 budget

By Edward Chui, Hong Kong director

This week gloriously marked the official end of the mask wearing mandate in Hong Kong, one of the world’s longest-running Covid restrictions (945 days!) and last remaining limitations for residents while marking an unofficial end to the pandemic for the territory. Against this backdrop, we here in the SAR are looking ahead at recently announced fiscal policies focused on recovery, growth and pre-pandemic norms.

Hong Kong’s financial secretary, Paul Chan, recently mapped out plans for the city’s post-pandemic economic transformation with new engines of growth, while seeking to boost revenue and offering a range of relief measures. Here are some of the key takeaways from the 2023/24 report:

Handouts and tax concessions are reined in

Mr Chan maintained the long tradition of announcing tax concessions and handouts, albeit to a less generous degree this year. The government is spending to support the economic recovery, but doing so with an awareness of the limitations of revenue sources, given the heavy reliance on land sales revenue. He offered reductions in salary tax for the coming year, electricity subsidies and another round of consumption vouchers, the third in as many years and brushed aside questions about the effectiveness of the scheme.

Support for the housing market is modest despite a downturn

The property market will be supported by lower stamp duty for the purchase of small and medium-sized properties worth up to HK$9m (US$1.1bn). The concession will only be available for permanent residents, not for foreign buyers (including those from mainland China). This will, however, help the recovery in prices this year, but the government has probably refrained from even more stimulus with a view to limiting the speed of the rebound in the market.

Attracting new specialised labour and capital is a priority

The financial secretary also outlined plans to introduce a Capital Investment Entrant Scheme, which would provide those investing in Hong Kong’s asset markets with an avenue to migrate to the territory (excluding property investment). The attempt to attract high-end talent dovetails with an industrial strategy to boost innovative sectors, seen as future growth-drivers, including subsidies for life and health technology and artificial intelligence research.

Hong Kong will promote itself as a “green” tech and finance centre, but the plans will be only partially successful.

The city plans to set up a Green Technology and Finance Development Committee to formulate policy to attract relevant investment. Hong Kong will issue HK$15bn in green bonds for retail investment to finance eligible environmental or low-carbon projects which should reap significant rewards in the medium term, given the territory’s already large international bond market and related local financial services. However, success in expanding local green technology industries will be modest, even with subsidies, owing to a small specialised labour pool and limited potential for domestic application.

The 2023/24 Hong Kong budget lays the initial groundwork for a longer term economic renaissance despite the population exodus of the past few years with the latest data showing three straight years of decline. There are no silver bullets to be had but there are signs of some green shoots. Hong Kong’s new talent scheme program, which offers a two-year visa for graduates from top universities or high-earners, has already received more than 10,000 applicants. About two-thirds came from the mainland. Dr. Allan Zeman, Chair of the Lan Kwai Fong Group, noted that December 2022 figures for his F&B establishments recorded numbers in line with pre-pandemic figures. With China’s borders reopening and travel resuming from up north and internationally, sentiment will continue to improve and we welcome your own insights and comments into a new maskless future.

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