Financial Secretary Paul Chan Mo-po will deliver a new Budget early next year, and Hong Kong will record a fiscal deficit of more than $100 billion in the upcoming financial year, more than double the original estimate. Looking forward to the next financial year, it is inevitable that we will continue to record a fiscal deficit instead of blindly singing as we did earlier. In fact, Hong Kong's economy is not undergoing simple short-term adjustments, but is facing structural problems such as an aging population, industrial transformation, and huge livelihood expenditures. Under such circumstances, it is important to live within your means and manage your finances prudently, especially for major expenditure items. Although it is unavoidable to spend on people's livelihood such as medical care, education and social welfare, some large-scale infrastructure projects, such as the construction of cross-boundary railways, cross-sea railways, and reclamation of Kau Yi Chau, are negotiable
Concerns about Hong Kong's economic outlook are by no means unfounded, and this is not the first time that we have been blindly optimistic about the future. The first is that the fiscal deficit in the past fiscal year doubled more than expected, which is an overestimation of the speed of the post-pandemic economic recovery. At the beginning of the year, the SAR outlook for economic growth this year was 35% to 55%, at that time, some high-level ** said with more confidence that due to the resumption of normal customs clearance, the final economic growth rate is expected to be close to the high-end. However, at the end of the year, the financial lord Chan Mo-po wrote an article admitting that the overall external atmosphere continues to be weak, interest rates continue to be high, and the performance of the financial market and other factors have limited the strength of local consumption to a certain extent, and Hong Kong's annual economic growth will be lower than estimated at the beginning of the year. Some investment banks are now estimating that Hong Kong's full-year growth in 2023 could be only 32%, which is not even the lower limit at the beginning of the year. Looking ahead to 2024, everyone's estimates are conservative, with growth likely to be only 2% to 3%. Hong Kong's financial market is sluggish, and various industries such as shipping, real estate, and retail are struggling to improve in the short term.
Second, although Hong Kong has considerable fiscal reserves, it should still have about HK$700 billion, compared with the long-term deficits of many economies and the issuance of large amounts of government bonds. But you must know that Hong Kong is a very special economy, we are only a special administrative region, and we have a linked exchange rate, and we do not have our own monetary policy. Hong Kong's economy is small, and it does not have any special natural resources, and some of them are only some institutional advantages. Some people say that it is possible to issue bonds to develop land, but the cost of issuing bonds in Hong Kong is basically in the hands of foreign rating agencies. Earlier, the international rating agency Moody's (moody's) downgraded Hong Kong's credit rating outlook from stable to negative. Once the fiscal reserves shrink again, it is believed that the chances of Hong Kong being downgraded will increase, and the cost of financing will become higher and higher, forming a vicious circle.
In view of the short-term sluggish economic growth, Hong Kong should not be lavish, but should follow the requirements of the Basic Law to live within its means, strive to balance revenue and expenditure, and avoid deficits. It is true that Hong Kong lacks land**, but the simultaneous development of two large-scale infrastructure projects in the Kau Yi Chau artificial island and the Northern Metropolis will put too much pressure on the warehouseCan we choose a better plan to focus on?
Comparing the two projects of Kau Yi Chau Artificial Island and Northern Metropolis, the foundation and industrial planning and cooperation prospects with the mainland are better. **A lot of work has been done for the development of Beidu District, land resumption and transportation infrastructure have also been launched, and a special team has been set up with Shenzhen to communicate and promote the construction of Beidu District. Relatively speaking, every inch of land in Jiaoyi Island has to be obtained by reclamation, and there is not a single inch of ten paintings for the time being. To take forward two large-scale development projects at the same time, Hong Kong is relatively aggressive in terms of financial and manpower.
In addition, ** has stated that the cost of the entire Kau Yi Chau reclamation project is $580 billion, and according to the estimate of the Hong Kong Institute of Surveyors in 2019, the income from land sales on artificial islands can reach $974 billion to $1,143 billion, but with the adjustment of the property market and land**, the estimated income from land sales has been lowered to $750 billion. Last month, some media estimated based on the transaction prices of residential land in Kai Tak last year and this year, and concluded that the revenue from land sales on artificial islands was only $330 billion to $410 billion, far lower than the cost of $580 billion invested, but would have to lose about $200 billion, which would inevitably make the financial situation even worse. In view of this, why rush to reclaim the sea?
To sum up, this is by no means a good time to pour money on reclamation, and for the two large-scale land development projects, it is even more important to prioritize the development of the Northern Metropolis in the foreseeable future, and then consider Kau Yi Chau when it enters the harvest period, when Hong Kong's economy fully recovers and the foundation becomes stronger.
Text: Wu Tongshan