Hong Kong current commentator Du Yaoming believes that Hong Kong’s economic recession is a foregone conclusion. The picture shows the street scene in Hong Kong. (Photo: Pang Dawei/Looking at China)
[Look at China News on February 26, 2023](See comprehensive report by Chinese reporter Li Huaiju) A few days ago, Hong Kong Financial Secretary Chen Maobo released a new “Financial Budget”. He optimistically predicts that Hong Kong’s GDP will grow by 3.5% to 5.5% this year, and the average annual GDP growth rate for the next three years will reach 3.7%. Hong Kong current commentator To Yao-ming questioned this forecast, thinking that Hong Kong’s economic recession is a foregone conclusion, and the external economic environment in Europe and the United States is also unstable, and Hong Kong cannot survive alone.
Hong Kong’s overall economy will contract (negative growth) by 3.5% in 2022. Chen Maobo predicts that Hong Kong’s economy will return to the right track this year, and the real growth rate in 2023 will reach 3.5%~5.5%. This year’s basic inflation rate and overall inflation rate will increase to 2.5% and 2.9% respectively.
Chen Maobo also predicts that the comprehensive deficit in 2022/23 will reach 139.8 billion yuan (Hong Kong dollars, the same below); the fiscal reserve will fall to 817.3 billion yuan on March 31, 2023. He also expects a deficit of $54.4 billion in 2023/24 and fiscal reserves will continue to decline to $762.9 billion, equivalent to 12 months of government spending.
Chen Maobo believes that except for the deficit recorded in 2023/24, the consolidated accounts of the next four years can achieve surpluses, while the non-operating accounts will achieve surpluses in 2027/28.
Du Yaoming wrote an article questioning Chen Maobo’s above prediction. Du pointed out that Hong Kong’s economic GDP experienced a negative growth of 3.5% last year, and the recession is a foregone conclusion. “It is mainly due to a 14% drop in exports of goods, a 15% drop in property prices and a 40% drop in property transactions, and an 8.5% drop in overall investment.”
He believes that the economic environment in Europe and the United States is unstable, and interest rates continue to be high, and it is difficult for Hong Kong’s economy to survive alone; it is quite doubtful to rely solely on the motherland to improve the economy.
Another Financial Times commentator Yan Baogang pointed out that Hong Kong’s economy is highly dependent on the mainland, so the Hong Kong government has recently made a high-profile publicity about the comprehensive customs clearance between China and Hong Kong, hoping to repeat the grand scene of the free travel army’s suppression of the border.
However, although the number of people coming to Hong Kong has increased significantly, only small shops such as pharmacies and cosmetics shops have benefited. Famous shops in Tsim Sha Tsui and Causeway Bay, which used to be crowded with people, have not seen any flow of people. Hysan, a large landlord in Causeway Bay, admitted that although the number of people in shopping malls has increased significantly after the Chinese New Year, there has been no surge in sales. At the same time, the property market in Hong Kong does not seem to see a large influx of funds. Yan believes that mainland residents would rather keep their money with them than spend huge sums of money to buy property in Hong Kong.
Du Yaoming believes that the current situation where the Hong Kong government is unable to make ends meet is difficult to improve. For example, last year’s land premium revenue (71 billion yuan) and stamp duty (67 billion yuan) were about 40% lower than expected, but the expenditure increased by about 17% compared with the previous year. 139.8 billion fiscal deficit. “If we don’t increase revenue and reduce expenditure, the government’s finances will further deteriorate and eventually fall into a financial crisis.”
However, the government lacks measures to reverse the decline. The “Budget” proposes to issue bonds of 65 billion yuan per year for at least five years in the future. Chen Maobo said on the program on the 25th that issuing bonds can be a means of managing cash flow, and part of the proceeds from bond issuance can also be used for infrastructure expenditures, but he emphasized that the proceeds from bond issuance will not be used for daily government expenses. In this regard, Du Yaoming pointed out that turning the liabilities (borrows) of the capital account into the income of the current account is self-deception and cannot solve the problem of not being able to make ends meet.
He continued to point out that another way for the government to increase revenue is to increase profits tax and salaries tax. However, the current economic downturn makes this not advisable; as for reducing expenditure, the Budget has not mentioned it. On the contrary, the government will continue to promote large-scale projects in the next five years, such as the 600 billion “Lantau Tomorrow” project and the “Northern Metropolitan Area” project. The former destroys ecology and reclaims land; the latter is a national-level task that must be done, integrating Hong Kong and Shenzhen, so that “Hong Kong integrates into the overall development of the country.”
Du Yaoming lamented that the Hong Kong government has no way to increase revenue, no way to reduce expenditure, and draw cakes to satisfy hunger. Is it moving towards or away from “governance and prosperity”?
Source: Watch China
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