Will we see more financial sweeteners in HK?

August 19, 2019 12:23
Hong Kong's Financial Secretary Paul Chan speaks at a press conference on Aug. 15 while announcing measures to help businesses and households weather the economic challenges. Photo: HKEJ

Hong Kong authorities last week unveiled a financial package worth more than HK$19 billion to provide relief to local businesses and households as the city grapples with multiple challenges, including the ongoing extradition bill-related protests.

Financial Secretary Paul Chan stressed that the economy is facing strong headwinds, and that the full-year GDP growth forecast has been revised down to 0 to 1 percent from a previous projection of 2-3 percent.

Chan's move appears to be a timely response that can help stimulate consumption and alleviate pressure for small and medium enterprises and low-income households.

The finance chief pointed out that the relief measures are targeted.

For example, 900,000 students in kindergarten, primary school and secondary schools will each receive a HK$2,500 subsidy. University students, however, are left out in the subsidy program.

Meanwhile, lower-income tenants living in public housing will have their rents waived for one month. But the government has offered little benefit for 1.2 million property owners living in private residential flats.

Though the current political crisis cannot be resolved by cash handout, Hong Kong does face deep-rooted economic issues, such as housing shortage, imbalanced industrial structure and a lack of job opportunities for young people.

Hence, some sort of economic relief measures are justified.

Some believe that the latest sweeteners are just appetizers, and that Chief Executive Carrie Lam will unveil more powerful measures during her upcoming annual Policy Address in October.

Wang Zhimin, the director of Beijing's liaison office in Hong Kong, is reported to have said at a meeting with pro-Beijing legislators last week that the Policy Address could present heavyweight measures to tackle the city’s long-time livelihood problems.

However, a number of senior government officials have been trying to pare down public expectations.

Faced with an external environment which is getting tougher amid the US-China trade war, if the government launches any drastic measures to increase the home supply and push down home prices, it could bring a property market slump and cause unintended economic shocks.

As the end of the day, other than maybe some new initiatives to make it easier for young people to buy their first homes, Lam may not offer much in addition.

This article appeared in the Hong Kong Economic Journal on Aug 16

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist