Hong Kong Wants to Invest in Its Future

Hong Kong’s economy will get 2018 off to a good start, riding on growth in exports, robust domestic demand and the end of a tourism slump, the city’s financial chief said.

Paul Chan Mo-po said it would take the whole community to overcome the city’s housing crisis, rather than simply the “will of superiors”, Xinhua reported.

He brushed aside speculation on how he will use a huge government surplus for the current financial year, saying it takes more than a budget or two to solve issues such as poverty.

Hong Kong’s economy has shown strong growth over recent months, expanding by 3.6% between July and September, above the 2.9% average for the past decade. The government expected 2017 economic growth to be 3.7%.

“We must invest in Hong Kong’s future, not dish out sweeteners,” the finance chief said.

The positive story continued into 2018, most notably in the stock market–the Hang Seng Index closed on a record high for four straight days over the past week, finishing at a historic 32,254 on Friday.

“We expect to continue the upward trend from 2017,” Chan told a financial forum on Saturday. “Currently both our external trade and internal demand are very robust.” He noted that the unemployment rate–which hit a two-decade low of 2.9% during the last quarter of 2017–and rebounding tourism numbers as further reasons to be optimistic.

  Housing Crisis

Chan admitted the government still had economic challenges ahead, with the city’s land shortage the most pressing.

Chan, who served nearly five years as secretary for development before replacing John Tsang Chun-wah as financial secretary, admitted that freeing up land was not easy. “It is with great shame that I gave it my all during my 4½ years as development chief, and I could only meet the land supply target for private residential developments,” he said.

Since Chan took office as development chief in July 2012, the supply of new private homes on the local market has grown steadily, with a record 97,000 homes expected to be available over the coming three to four years. But the huge demand for public housing remains unsatisfied, with an average applicant now having to wait for 4.6 years before getting a subsidized government flat.

Chan admitted that freeing up land to ease the city’s housing crisis was not easy. In a thinly veiled attack against groups who regularly oppose the rezoning of certain sites for residential purposes, Chan said there cannot be all talk and no action.

“Different methods will have different controversies. That’s fine, we can bring it up for discussion. But after discussing we have to act, hopefully with the support of the public and not under opposition, or else everyone will suffer,” he said.

  Budget Surplus

Chan, due to unveil his second budget at the end of February, has already forecast a “a very high level” of budget surplus this year.

Recent large surpluses have already fattened the government’s fiscal reserves. In his last budget, Chan announced a HK$92.8 billion ($11.87 billion) surplus, taking the reserves to more than HK$935 billion. The public coffers already took in a cumulative surplus of HK$57.2 billion in the first eight months of the current financial year, ending in November.

Chan noted that the latest forecast for the whole year’s gross domestic product is higher than expected at 3.7% thanks to good performances in exports and the travel and retail sectors alongside an improvement in the global economy.

And income from land revenues and stamp duties exceeded expectations, backed by the booming stock market and the property business. Chan said he is working on the 2018-19 budget at present for delivery on February 28.

While that would cover government spending plans in the fiscal year, he said a budget plan must help build a foundation for long-term development. “Handing out candies” during the fiscal year, which would mean the immediate return of some wealth to the people, is a relatively easy way to win applause, Chan said.

But the government puts a high value on long-term investment and development, he added. “We should find a balance between investing in the future, increasing recurrent expenditure and proposing mitigation measures.”