In his recent Budget Speech, Financial Secretary Paul Chan clearly underscored the critical need to foster innovation and stimulate investment amid rising geopolitical uncertainties.
His raft of proposals successfully balances cost reductions with strategic investments, offering a hopeful outlook for achieving fiscal balance in the coming years – a promising sign of prudent recovery.
It’s important to remember that the fiscal deficits from 2022-2024 were primarily driven by expansionary measures designed to revitalize the post-pandemic economy, including employment subsidies, e-consumption vouchers and SME schemes. However, by 2024-25, we began to see deficits decrease, signalling economic stabilization.
I was pleased that the 2025-26 Budget incorporates several Chamber proposals to enhance fiscal management. Noteworthy plans include reducing the civil service establishment by 2% over the next few years and capping the HK$2 transport subsidy at 240 monthly trips, with eligible users covering 20% of fares over $10.
Allocating HK$1.5 billion to support SMEs, including the BUD Fund, is vital for empowering struggling businesses to innovate and grow. Corporations and individuals will welcome the waiver of profits tax and salary tax, capped at HK$1,500.
The Chamber strongly supports the Government’s proposal to issue bonds to fund essential infrastructure projects. With expected capital expenditures of up to $120 billion for the Northern Metropolis over the next five years, this strategy is crucial for enhancing our competitiveness.
Innovation and technology are the cornerstones of progress. Earmarking $3.7 billion for Phase 1 of the Hong Kong Park in the Hetao Co-operation Zone, alongside $1 billion for establishing the Artificial Intelligence Research and Development Institute, demonstrates a robust commitment to advancing AI as a core industry. We are also excited about the potential within the low-altitude economy and look forward to collaborating with the Government to develop the relevant legislation.
The Budget also includes several tax adjustments, including cross-border journey fees and tunnel tolls, without overburdening the public. Moreover, a global minimum tax projected to generate around $15 billion annually will strengthen our revenue framework.
Additionally, a new $300 million subsidy for 3,000 fast chargers and initiatives to support sustainable aviation and marine fuels will elevate Hong Kong as a leader in green transportation.
Lastly, increased funding for the culture and tourism sectors and new international mega-events will burnish our soft power, attracting a wide demographic of visitors and disseminating good stories about Hong Kong.
The Financial Secretary’s approach to tackling Hong Kong’s fiscal challenges will lay a robust foundation for economic prosperity. The Government and business community must continue collaborating and fostering innovation to ensure a sustainable future with confidence.
Agnes Chan
chairman@chamber.org.hk