Hong Kong E-News - Budget Speech 28 February 2018
Budget to diversify the economy, invest for the future and enhance liveability of Hong Kong
Hong Kong's Financial Secretary, Mr Paul Chan, presented his 2018-2019 Budget to the Legislative Council on Wednesday 28 February 2018.
He announced that there is a fiscal surplus of HK$138.0 billion (EUR 14.62 billion), the fiscal reserves are expected to reach HK$1,092 billion (EUR 115.68 billion) by 31 March 2018. Part of the surplus (about 40%) will be shared with the community through one-off concessionary measures, tax breaks and tax rebates and the remaining will be used for improving services and investing for the future. It is estimated that the 2018-19 Budget would have a stimulus effect of 2.0% on the growth of GDP.
Mr Chan pledged to proactively promote economic development by providing favourable conditions for emerging industries such as innovation and technology (I&T) and identifying growth opportunities on the one hand, and strengthening the competitiveness of the pillar industries. He also committed to improving existing services and quality of life, meeting the community's long-term needs for healthcare and elderly care, enhancing support for the disadvantaged and enabling members of the public to enjoy the fruits of the economic success of Hong Kong.
Economic Performance in 2017
- Hong Kong's economic growth continued to pick up over the course of 2017. Exports registered appreciated growth and domestic demand remained particularly resilient. GDP grew by 3.8% for the year as a whole, up from 2.1% in 2016. The labour market was in full employment, with the latest unemployment rate dropped to a 20-year low of 2.9%. Underlying inflation eased for the sixth consecutive year, averaging 1.7% in 2017.
- Hong Kong is one of the most advanced economies in the world, despite the relatively small scale of its economy. Its GDP per capita has now reached US$46,000 (EUR 37,862), and is among the highest in the world.
Economic Outlook for 2018
- Favourable employment and income conditions will spur consumption growth in Hong Kong this year. Sanguine local economic sentiment and positive business confidence should also sustain investment growth. In the light of the global and local economic situations at this juncture, Mr Chan said he was cautiously optimistic about Hong Kong's economic prospects in the near term, predicting GDP growth of between 3% and 4% for 2018.
- Apart from working towards the implementation of the two-tiered profits tax rates system and the additional tax deduction for R&D expenditure as announced by the Chief Executive in her first Policy Address delivered in October 2017, measures including widening the tax band, adjusting tax rates and increasing allowances and tax deductions will also be introduced to reduce tax burden on individuals.
- Moreover, one-off tax relief measures include reducing salaries tax and profits tax by 75%, subject to a ceiling of HK$30,000 (EUR 3,177.97) will be provided. These measures will benefit 1.88 million salaries taxpayers and 142 000 profit taxpayers.
Diversify the Economy
Mr Chan said Hong Kong needs to keep abreast of and ride on three major trends of the global economic landscape: the development of I&T that has revolutionised the traditional and capital intensive business model based on tangible assets, the shift in global economic gravity from West to East, and the rise of protectionism in some advanced economies. In response to the three major trends, Mr Chan announced a broad range of measures to diversify Hong Kong's economy.
- HK$10 billion (EUR 1.06 billion) was reserved last year for supporting I&T development. This year an additional HK$50 billion (EUR 5.30 billion) will be set aside, with focus on 4 areas: biotechnology, artificial intelligence (A.I.), smart city and financial technologies.
- HK$20 billion (EUR 2.12 billion) will be used on the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau.
- Inject HK$10 billion (EUR 1.06 billion) to support the establishment of two research clusters on healthcare technologies and on A.I. and robotics technologies and to attract the world's top scientific research institutions and technology enterprises to Hong Kong.
- Allocate HK$10 billion (EUR 1.06 billion) to the Science Park.
- Allocate HK$300 million (EUR 31.78 million) to Cyberport.
- A dedicated provision of HK$500 million (EUR 52.97 million) has been set aside to develop financial services industry in the coming five years, providing necessary support for bond market development, Fintech, green finance, manpower training and other aspects of financial services.
- To upgrade and enrich our pool of financial talent, Hong Kong Monetary Authority (HKMA) will make plans to set up an academy of finance in collaboration with the Financial Services Development Council, the financial sector, tertiary institutions, professional training bodies and regulators for promoting cross-sector expertise sharing and collaboration in applied research.
- A three-year Pilot Bond Grant Scheme will be launched to attract local, Mainland and overseas enterprises to issue bonds in Hong Kong.
- To demonstrate the Government's commitment to promote green finance, a green bond issuance programme with a borrowing ceiling of HK$100 billion (EUR 10.59 billion) will be launched for Government's green public works projects.
- The HKMA is prepared to launch a Faster Payment System offering 24-hour real-time payment function.
Trading and Logistics Industry
- To help Hong Kong businesses and investors open up new markets, protect their overseas investments and attract foreign investors to Hong Kong, the HKSAR Government will actively seek to sign Free Trade Agreements, Investment Promotion and Protection Agreements and Comprehensive Avoidance of Double Taxation Agreements with other economies, including those along the Belt and Road, to fortify our position as an international trade and investment hub.
- The HKSAR Government is actively considering the redevelopment of the Air Mail Centre at the Hong Kong International Airport to enhance its efficiency and capacity, and has set aside HK$5 billion (EUR 529.67 million) for the project.
- To encourage the trading and logistics industry to move up the value chain, the Government will cap the charge for each declaration at HK$200 (EUR 21.19), so as to further lower the cost of importing and exporting high-value goods to and from Hong Kong, and enhance Hong Kong's advantage as a trading hub. The measure is expected to save the trade HK$458 million (EUR 48.52 million) per year and benefit about 900 000 cases.
- On tourism, the HKSAR Government will allocate an additional HK$396 million (EUR 41.95 million) to the industry.
- A further HK$310 million (EUR 32.84 million) will be allocated in the next few years to support Ocean Park in developing education and tourism projects.
Business and Professional Services / SMEs
- The HKSAR Government is committed to expanding its network of Economic and Trade Offices to open up emerging opportunities.
- HK$1.5 billion (EUR 158.90 million) will be injected into the Dedicated Fund on Branding, Upgrading and Domestic Sales and enhance the relevant programmes, and HK$1 billion (EUR 105.93 million) to the SME Export Marketing and Development Fund to boost SMEs' competitiveness
- In the five financial years from 2018-19, a total of HK$250 million (EUR 26.48 million) additional funding will be provided to the Hong Kong Trade Development Council for assisting local enterprises (SMEs in particular) in seizing opportunities arising from the Belt and Road Initiative and the Bay Area development, promoting the development of e-commerce, and enhancing Hong Kong's role as a premier international convention, exhibition and sourcing centre.
- Set up a HK$1 billion (EUR 105.93 million) Construction Innovation and Technology Fund for the construction industry to adopt new technology, and support the industry to harness innovative technology.
- Since 2009, the HKSAR Government has injected a total of HK$1 billion (EUR 105.93 million) into the CreateSmart Initiative (CSI). In the new financial year, the HKSAR Government intends to inject another HK$1 billion (EUR 105.93 million) into the CSI to strengthen support for the development of the creative industries, especially in nurturing youths and helping start-ups.
Invest for the Future and Enhance liveability
- The HKSAR Government will optimise the use of surplus to improve existing services and quality of life, and at the same time to invest for the future, in particular on education, land resources, healthcare and the environment, to make Hong Kong an ideal smart city to work and live in.
- In education, the current-term Government has already pledged to boost recurrent education expenditure by HK$5 billion (EUR 529.67 million).
- Youth development has a significant bearing on the future of Hong Kong. HK$1 billion (EUR 105.93 million) will be set aside to support the work of the Youth Development Commission, with a view to giving young people more room to unleash their potential and more opportunities for upward mobility.
- On land and housing supply, the Task Force on Land Supply will soon launch a public engagement exercise to discuss options and priorities of increasing land supply.
- To improve healthcare services, the HKSAR Government will allocate additional recurrent funding of nearly HK$6 billion (EUR 635.59 million) to the Hospital Authority in 2018-19 to increase the number of hospital beds, operating theatre sessions and the manpower required. Moreover, a HK$500 million (EUR 52.97 million) fund will be established to promote the development of Chinese medicine.
- On arts, HK$20 billion (EUR 2.12 billion) will be set aside to continuously upgrade our cultural hardware.
- HK$1 billion (EUR 105.93 million) will be injected into the sports portion of the Arts and Sport Development Fund to train athletes and host competitions. In support of elite athletes, a further HK$5 billion (EUR 529.66 million) will be added to the Elite Athletes Development Fund.
- To improve the environment and combat climate change, HK$800 million (EUR 84.75 million) will be earmarked this year to promote the installation of renewable energy facilities at government buildings, venues and community facilities.
Full details of the 2018-2019 Budget here.