More than 600 Hong Kong businesspeople attended the Chamber’s Joint Business Community Luncheon on 28 March to hear Financial Secretary Paul Chan give an exclusive insight into his recent Budget.
He explained that the Budget was focused on three themes: diversifying the economy; investing for the future, and being caring and sharing.
“This year, 2018, the economy is expected to grow between 3% and 4% in real terms,” he said. “Last year, the growth was impressive, about 3.8%, and the growth momentum is carrying on into this year.”
Despite the city’s robust economy, the Financial Secretary said we must take stock of outside events. “Anything happening outside in the world will unavoidably affect us.”
He pointed to three main trends that will affect Hong Kong: “The first mega trend is the unstoppable wave of innovation and technology, which not just changes business models but also affects the lives of many.”
The second trend is the shift from the West to the East, he said, noting that in the past decade, developing Asia has accounted for about two-thirds of global economic growth.
“And the third trend we observe is that protectionism is on the rise,” Chan said, pointing to the trade tensions between the United States and Mainland China.
But in terms of opportunities for the city, he said, “first and foremost is the development of China and the opportunities that will bring for Hong Kong.”
Under the 13th Five-Year Plan, which runs until 2020, the Central Government has pledged to support Hong Kong not just as a premier financial, trading and shipping centre, but also to develop innovation and technology.
“Two other major initiatives, the Belt and Road and the Guangdong-Hong Kong-Macao Bay Area, also present unprecedented opportunities for Hong Kong.” he added.
On the downside, the Financial Secretary admitted that land supply and manpower shortages were two key constraints, and that maintaining consensus among the community in Hong Kong was another challenge.
Chan then moved on to the role of the HKSAR Government. “The way we see it is that the Government is not just a public services provider, not just a regulator, but in the context of economic development we need to play the role of facilitator and promoter.”
This is why it has set aside over $50 billion to support the innovation and technology sectors.
“Even in sectors where we are perceived to have a competitive advantage, for example financial services, there are areas where we can do better,” he added. “That’s why I set aside $500 million to sustain growth and to help us develop areas in financial services that are not yet at an advanced stage, for example the bond market.”
Chan said that the Government would not hesitate to allocate resources to areas that are perceived to have potential. “This also includes tax policies, and the Government is contemplating draft amendment bills to enable us to allow super deduction for R&D expenditure.”
He highlighted that, out of the $50 billion for innovation and technology, $10 billion is intended to develop two research clusters, in healthcare and artificial intelligence. This will help attract overseas and Mainland research institutions, universities and technology companies to come to Hong Kong, and to bring along their talent.
“The core competitive factor to ensure the success of innovation and technology is human capital,” he said.
Moving on to the topic of public expenditure, Chan said that the Government had removed the previous cap of 20% of GDP.
“For the coming five years, this percentage will be about 21%. That will give us about $24 billion additional resources to use in terms of recurrent and capital expenditure. That is quite something.”
This is a “prudent move” due to Hong Kong’s fiscal reserves, he said. The extra funds will be invested in areas such as healthcare, including hospital development and training medical professionals.
Chan concluded his address by making the point that the government was increasing expenditure and not sitting on its huge reserves.
“We will make good use of that money to invest, no matter if it is in healthcare or education, or to invest to foster the development of our economy.”
The Financial Secretary also tackled a number of questions from the audience, including on the topic of outdated regulation. He said that the policy coordination office proposed by the Chief Executive in her Policy Address last year had been set up and would be operational from 1 April.
“This particular office is in charge of working with the different bureaus and departments to review our legislation,” Chan said. “It will see what can be simplified in terms of process, and what legislation needs to be amended, in order to make it more up-to-date and more conducive to the new economy.”
The Chamber regularly invites students from high schools and universities to its major events so they can get an insight into the business world. Below are some of their impressions of the event and of the Financial Secretary’s plans for Hong Kong.
“Such a valuable experience for us to gain experience and broaden our horizons. It also provided us with an authentic experience of interacting with Government officials.”
“I have consolidated my understanding of the fiscal report after listening to Mr Paul Chan point out the highlights of the Budget. I also learnt more about the concerns and opinions from different business sectors.”
“The Government mentioned it will focus on innovation and technology. I would like to hear more practical and concrete policies regarding the IT and business sectors.”
“I am a student from the Mainland. From this activity, I have a new and further understanding of Hong Kong’s economy and the latest Budget.”