The Hong Kong government’s fiscal situation will likely be “worse than expected,” Financial Secretary Paul Chan has said, as he predicted the city could see a deficit of more than HK$100 billion this year, its second-ever highest.
Hong Kong is considered as one of the largest financial centres in the world. The situation in Hong Kong has developed ever since the colonial era. The government of Hong Kong have brought out different initiatives for investors in Hong Kong, Entrepreneurs and investors want to invest in Hong Kong due to the different schemes and benefits offered by the government of Hong Kong.
Owing to its reputation as the third largest financial centres in the world, different companies from USA, UK and India want to establish their business centres in Hong Kong. Companies that register themselves in Hong Kong get different benefits such as world-class technology, digitisation, government support, development of entrepreneurial initiatives. Hence foreign companies want to invest in Hong Kong.
What are the main reasons to invest in Hong Kong?
It is well known that the government of Hong Kong offer different incentives for production, development and growth for businesses. Seeing the number of vibrant opportunities offered by the government, foreign companies want to set up their business hubs and carry out business from Hong Kong.
Different form of Incentives offered by the Government- Government support is one of the main reasons for the development of any country. Going by the thumb rule, where there is more amount of liberalisation, there will be more amount of investment. This is one of the main reasons why companies and entrepreneurs prefer to invest in Hong Kong.
The government offers the following incentives for a company that wants to invest in Hong Kong:
Professional Services– Different types of professionals are engaged in providing services in Hong Kong. Hong Kong is considered as a one-stop-shop for all the professional services. For example, consider the legal sector. Hong Kong was under the British rule, and British common law would be applicable and followed in the courts of Hong Kong. Multi-national laws firms from the US, the UK and Australia have set up offices in Hong Kong to carry out legal services for clients in Hong Kong. Not only the legal sector is regulated in Hong Kong, but professional services from accountants, chartered surveyors, pension experts and other businesses are regulated. Hence different businesses can carry out their services with consistent quality. Therefore companies want to invest in Hong Kong.
Development of Creative Sectors such as Art and Drama– The government of Hong Kong has invested more than HKD 900 million for the development of different art sectors. Such sectors will include creative arts such as drama. All such investment opportunities are to sponsor other programs for the development of culture and drama arts in Hong Kong. This would be another reason to invest in Hong Kong.
Opportunity for Talent– Owing to the number of individuals in Hong Kong, the talent received in Hong Kong would be opportunistic. Institutions in Hong Kong attract some of the brightest minds to carry out work in Hong Kong. Due to these different forms of professional opportunities can develop in Hong Kong. All these provide reasons to invest in Hong Kong.
Hong Kong is one of the largest financial centres in the world. Being on the list of financial centres in the world, companies and international firms would want to invest in Hong Kong. The government of Hong Kong offers different initiatives for the development of the economy. Due to these reasons, investors are encouraged to invest in Hong Kong.
Why it isn’t the right place to invest now.
The financial minister estimated that the government’s fiscal reserves could plunge to the edge of HK$800 billion.If the city were to record a deficit of HK$100 billion for the 2022-2023 financial year, it would be around double the original forecast of HK53.6 billion stated in the annual budget, which Chan delivered in February.
It would also mark Hong Kong’s second-worst fiscal shortfall, after a deficit of HK$232.5 billion was recorded in 2020. Chan said the deficit would have been even more severe if he had not taken into account the HK$35 million the government is set to earn from green bonds to be issued this year. The financial chief attributed the deficit to the government’s income being “worse than expected,” while expenditure “increased significantly.” The local economy had also continued to be hit hard by the pandemic, as well as tightened monetary policies imposed by central banks.
“The decline in income and the increase in expenditure, coupled with the complicated and volatile external political and economic environment, Hong Kong’s future economic prospects are still full of challenges,” Chan’s blogpost read. One of the government’s primary goals in the short run was to “make good use of public funds” to support citizens and people’s livelihoods, Chan said. When rolling out financial assistance, the authorities must take into account the “soundness of public finances” and the appropriate use of public funds, the minister said, and hence isn’t the most ideal place to invest as of 2022.
Can the Hong Kong government combat these deficits?
Hong Kong is set to end the year in the midst of a full-blown recession, the city’s finance chief warned Thursday, as Covid-19 controls and spiralling interest rates hammer the economy.
The Chinese city’s monetary policy moves with the Federal Reserve because its currency, one of the cornerstones of its business hub reputation, is pegged to the US dollar. The Fed’s hawkish rate hikes, aimed at curbing inflation, come at an especially difficult time for Hong Kong because it will further dampen sentiment at a time when the economy is already struggling. The city is currently in a technical recession recording two consecutive quarters of negative growth this year.
For more than two and a half years Hong Kong’s government has adhered to a version of China’s zero-Covid policy, enforcing strict coronavirus controls and mandatory quarantine for international arrivals. Quarantine, once as long as three weeks, has now been reduced to three days and the government has signalled it may soon join the rest of the world in scrapping travel curbs. “The public should be prepared for the Hong Kong dollar interbank rates to rise further,“ HKMA Chief Executive Eddie Yue said.
Content sources : ani.com , bloomberg.com, theconversation.com , budget.gov.hk , chinadaily.com
