Sunnier skies ahead for Hong Kong, Paul Chan announces measures to help the SAR's talent and unemployed, despite the largest ever fiscal deficit on record.
30,000 temporary jobs to be created.
In the Hong Kong 2021-22 Budget, Paul MP Chan, Financial Secretary, forecast a deficit of more than $250 billion, with a further deficit of over $100 billion for 2021-22. These are the two most significant deficits on record. Hong Kong's fiscal reserves have dropped sharply in two years from the equivalent of 23 months of government expenditure to 13 months, leaving little room for relief measures.
Hong Kong's overall economy contracted for two consecutive years. With unemployment at a high level, the Government has decided to maintain a countercyclical fiscal policy and boost the economy by allocating additional fiscal resources. The plan is to provide support to talent across the SAR, relief to enterprises, benefit the overall economy and relieve the pressure on the job market.
Chan noted, "Taking the electronic consumption vouchers as an example. Even in the face of a deficit of over $100 billion for two consecutive years, I have decided to issue electronic consumption vouchers with a total scale of $36 billion to stimulate consumption in the local economy. With its multiplier effect, we hope that local consumption could be boosted to the largest extent and widely benefit our people and enterprises."
Learning from overseas experiences, consumption vouchers that were issued in instalments, with a limited validity period, the Government hopes that this model may benefit more small enterprises, bringing them more businesses and also incentives to adopt e-payment, so that they can grasp the new business opportunities brought by technological advancement. The design and the implementation details of the electronic consumption vouchers will affect user experience and the scheme's effectiveness. Details such as the number of instalments and the amount to be issued in each instalment proposed are currently just preliminary ideas, and the Government is taking on board feedback from various stakeholders regarding their exact format, application procedures and usage.
The electronic consumption vouchers scheme is designed to ensure that resources could support the local economy, benefit people and enterprises, and create more job opportunities. Both the indirect pulling effect generated by the consumption vouchers and the direct allocation of $6.6 billion proposed in the Budget for providing 30,000 time-limited jobs can help create job opportunities.
The unemployed who face financial pressures under the epidemic may need loans to tide them over the difficulties. There are only limited options provided in the market, and the loan products available are usually charged with a higher interest rate, which adds a burden to the borrowers. Given this, a Special 100% Loan Guarantee for Individuals Scheme will be launched to address these needs. As an extra measure, the scheme provides an extra financing option for the unemployed but not intended as an alternative to temporary unemployment assistance.
Chan said, "In proposing the initiatives in this Budget, I have made the best effort to strike a balance between the demands and affordability of different parties to provide support to society's needs while avoiding adding burden to people's livelihoods. In raising the rate of Stamp Duty on Stock Transfers, I have also duly considered relevant factors such as the competitiveness and future development of Hong Kong's financial market."
With the Country's support and the SAR Government's efforts, Hong Kong's financial market has flourished. Because of the emerging economy and technological advancement, the listing regime was amended in 2018 to allow innovative technology companies with weighted voting rights structure and pre-profit biotechnology enterprises to list in Hong Kong and facilitate China companies listed in other international markets to come to Hong Kong for a secondary listing. In doing so, Hong Kong's stock market composition has started to follow the global development trend of the tech-economy, and market capitalisation has increased by about 25%. Simultaneously, the average daily turnover has increased substantially from about $88 billion at the end of 2017 to nearly $130 billion in 2020. Average daily turnover in January 2021 amounted to a record-high of $240 billion.
The ample choices of companies with Mainland businesses or tech-companies from the Mainland, free flow of capital and common law jurisdiction in Hong Kong, as well as the SAR's close connection with the Mainland stock market under the Connects Scheme arrangement, have all further strengthen Hong Kong's stock market. With these unique advantages, the market has thrived with a surge in turnover volume, providing the room to increase Stamp Duty rates slightly.
Despite recent fluctuations in the Hong Kong stock market over the past few days due to external factors and price adjustment of individual stocks, in particular tech companies, Chan noted, "This will not affect our judgement on the broader situation of Hong Kong's market and our status as an international financial centre. Several markets in the region, such as Tokyo, Seoul and Shanghai, have also shown downward adjustments of different extent over the past few days." He added, "In deciding to raise the rate, we have already carefully assessed and considered the potential impact which may be brought to the competitiveness of our market. We will continue to closely monitor the development of the situation and take it as a reference in future. Maintaining and enhancing our market's competitiveness have always been the main considerations in our decision process. We will also continue to promote the diverse and robust development of our financial market."
Paul Arkwright
Publisher
