Analysts warn that Hong Kong’s famous fiscal reserves are at risk because the city’s unopposed legislature has approved record public spending in the past year.
Experts added that as the city prepares to build projects that are conducive to the further integration of Hong Kong and China, its finances will face greater pressure.
Legislators approved more than 305 billion Hong Kong dollars (US$39 billion) in government projects at the 2020-21 legislative session that ended in October, the highest level in nine years. Before approval, politicians only discussed 46 minutes on average, which is less than about two hours in previous years.
Critics say the expenditure shows that the legislature has become the government’s “de facto ATM.”
This Asian financial center has long been known for its huge fiscal reserves, mainly from land sales and taxes. But by September this year, due to further expenditures from the pandemic support program, the city’s military expenditure had fallen from nearly HK$1.2 trillion in March last year to HK$812 billion.
Most people in the Hong Kong democracy camp collectively resigned from the Legislative Council in November 2020 to protest the removal of four colleagues, leaving the legislature almost no objection.
After Beijing reforms the electoral system that bans “unpatriotic” candidates from running for elections, opposition politicians are unlikely to return to the legislature.
“If there are no proper checks and balances, [fiscal reserves] Will increase,” said Kevin Lai, chief economist for Asia (excluding Japan) at Daiwa Capital Markets.
Andy Kwan, director of the ACE Center for Business and Economic Research, agreed, saying that the government “it is easy to no longer have fiscal discipline… Especially when it comes to huge expenditures on upcoming large-scale projects.”
Last month, the city’s leader, Carrie Lam, announced plans to develop a huge residential area near the border of mainland China within 20 years, known as the “Northern Metropolis,” but did not specify its cost.
The “Lantau Tomorrow Vision” is another large-scale government project in the planning stage that aims to build houses on a man-made island in the south of the city. The government estimates that the project will cost more than HK$600 billion.
Guan said that it is expected that more large-scale infrastructure projects will be approved to help Hong Kong establish more complex links with the mainland, which will put more pressure on Hong Kong’s cash reserves.
“The northern metropolis alone has involved five railway projects connecting Hong Kong and the mainland. The government needs to explain the cost-effectiveness of these plans,” Guan said.
Chen Jianbo, chairman of the Finance Committee of the legislature, denied that the institution had become a rubber stamp and argued that there was more “quality discussion.” .. More efficient” without opposition.
In addition to the cost of large infrastructure projects, Hong Kong’s revenue has also been hit by Covid-19 border restrictions, which means fewer tourists and business travelers. Before the pandemic hit, the city was shocked by anti-government protests in 2019, which analysts said weakened its position as Asia’s premier financial center.
The HK$305 billion approved by the last Legislative Council is nearly 10% higher than the HK$279 billion approved in 2019-20. This expenditure does not include the 205 billion Hong Kong dollar emergency funds approved by lawmakers in the past two years for relief purposes related to the new crown virus.