19 January 2020
Chief Executive Carrie Lam appears to have refined the approaches of her predecessors to better suit the current situation. Photo: HKEJ
Chief Executive Carrie Lam appears to have refined the approaches of her predecessors to better suit the current situation. Photo: HKEJ

Lam’s policy address: Old and new approaches

Chief Executive Carrie Lam Cheng Yuet-ngor has delivered her maiden policy address, which reminds us to a certain extent of the policy directions of her three predecessors.

But Lam appears to have refined their approaches to better suit the current situation and win the support of the people.

Housing is a major highlight of Lam’s speech. The Hong Kong leader unveiled several initiatives to boost home ownership, a move that will enhance the city’s social and political stability.

Imagine a young man who owns a home and pays the monthly mortgage: the chance for him to take to the streets would be rather slim.

Among others, Lam unveiled a new “Starter Homes” scheme to help middle-class families buy their own homes.

The government will also offer more than 4,000 new public flats as part of the Green Form Subsidized Home Ownership Pilot Scheme.

The strong emphasis on property ownership echoes the old ambition of Tung Chee-hwa, the city’s first chief executive.

In 1997 Tung set an aggressive target of boosting the home ownership ratio from 50 percent to 70 percent within a decade. He pledged to provide 85,000 housing flats each year. Unfortunately, the city’s economy was battered by the 1997 Asian financial crisis and SARS outbreak. The housing market collapsed and Tung’s plan backfired.

Aware that increasing housing supply could be a double-edged sword, Lam has refrained from setting specific targets for home ownership ratio or annual incremental supply. That would give her more leeway and flexibility in addressing the problem.

Meanwhile, Lam added more options including Green Form Subsidized Home Ownership and Starter Homes to help Hongkongers acquire their own homes.

These initiatives have a relatively indirect impact on the private housing market. Policymakers can also tweak or change the policy anytime, if necessary.

In her policy address, Lam also unveiled tax breaks that will primarily benefit small businesses.

The government will lower the profit tax rate for the first HK$2 million in profit to 8.25 percent from 16.5 percent.The tax rate for profits beyond the first HK$2 million will remain unchanged.

A small company with a pre-tax profit of HK$2 million will see its profit tax bill halved to HK$165,000 from HK$330,000. And its after-tax profit will increase 10 percent to HK$1.835 million.

When he was the chief executive, Donald Tsang Yam-kuen also put great emphasis on tax cuts. Salary tax and corporate tax were reduced while tax levies on wine and estate were removed.

Big corporates and high-income individuals are believed to benefit most from Tsang’s tax cuts.

By contrast, Lam’s tax break will tip in favor of small businesses. This may encourage more start-ups in the city, and it will only cost the government about HK$1 billion in tax money, which is not much of a burden at all.

Meanwhile, Lam has played down the political issues facing the territory, suggesting that her focus in the next few years will be largely on economic development, tech industry development, social welfare and other livelihood issues.

She will probably stick to the playbook of her predecessor, Leung Chun-ying, and toe the line of Beijing. Thus, there is little hope that political reform will be restarted during her term.

But unlike Leung’s confrontational style, Lam would adopt a more tactful approach in handling sensitive issues.

This article appeared in the Hong Kong Economic Journal on Oct. 12

Translation by Julie Zhu with additional reporting

[Chinese version 中文版]

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Hong Kong Economic Journal columnist