The leaders of China and its Hong Kong Special Administrative Region have repeatedly stressed that boosting economic growth must be an underlying priority for 2025. In 2024, the city’s GDP was forecast to have increased by around 2.4 percent, pulling away from the struggles inflicted by the COVID-19 pandemic and the riots in 2019-20. In addition to that, Hong Kong, as a global financial hub, also plays an increasingly important role in facilitating the flow of capital and investment into the country. Accelerating this process will be the key this year in anticipation of renewed trade tensions and geopolitical uncertainties.
But how can Hong Kong’s economy fare better? What policy adjustments can its leaders make in order to accelerate growth? Accounting firm PwC recently proposed a range of policy recommendations that can be adopted to help the city leaders fulfill their goals. First, it argued that the city’s visa regime should be improved. As an international financial center that hosts many of the world’s top companies and firms, continued access to talent is critical, and thus calls for a “one-step visa facilitation service”. In addition to that, PwC’s report also calls for better measures to help families to ensure talent is nurtured at home as well, including “subsidies for daycare services and tax deductions for hiring domestic helpers and caretakers”.
Next, in strengthening Hong Kong’s role as an international financial and commercial center, it calls for “more preferential tax regimes for investment funds” and waiving the “buy side stamp duty” on stock trading to offer incentives. Similarly, it also recommends to “offer competitive tax and nontax/financial incentives to attract more multinational enterprises to establish regional headquarters in Hong Kong, subject to requirements on local spending and employment” and to also “expand the city’s tax treaty network”.
Hong Kong life is known to be expensive, and this itself is a downward pressure on consumerism and desirability to live there; thus it recommends “reviewing allowances and deductions levels for individual taxpayers coping with rising living costs” and to “expand tax deduction scope for health insurance premiums”
The PwC report also calls for boosting innovation in Hong Kong. Now although Hong Kong is traditionally seen as a “financial center”, it is in fact its neighbor city on the Chinese mainland, Shenzhen, that is often seen as the powerhouse of the country’s technological development. There is nonetheless always an opportunity in maximizing the potential of emerging technologies to secure growth, and at the highest levels of global commerce, this is an absolute necessity when it comes to artificial intelligence (AI). Thus, the PwC report suggests “enhancing Hong Kong’s AI startup ecosystem by encouraging collaboration between Cyberport, HKSTP (Hong Kong Science & Technology Parks Corp), and AI incubators in the (Guangdong-Hong Kong-Macao) Great Bay Area”.
Next is the subject of infrastructure. On the Chinese mainland, it is well known that State-driven investment in infrastructure projects has been key to sustaining development. This has included high-speed railway lines, airports, energy, and so on. Although Hong Kong is obviously tiny in size compared with the mainland, its demand for infrastructure is nonetheless high due to being a condensed and highly populated city requiring immense levels of human organization. The PwC report states that Hong Kong should pursue infrastructure investment through the creation of “public-private partnerships” and “leverage multilateral development banks, including the Asian Infrastructure Investment Bank, and expand the remit of the Hong Kong Investment Corp to include core infrastructure, thereby playing a key role in de-risking projects and attracting more private capital”. New infrastructure projects, for example, could include continuing to expand the city’s high-speed rail integration with the mainland, expanding the domestic MTR system to cover more areas, building new road links to the mainland, or improving local energy infrastructure. There are many opportunities.
Finally, the report recommends more measures to help the city’s aging population and also general costs of living. Hong Kong life is known to be expensive, and this itself is a downward pressure on consumerism and desirability to live there; thus it recommends “reviewing allowances and deductions levels for individual taxpayers coping with rising living costs” and to “expand tax deduction scope for health insurance premiums”. In conclusion, the report identifies an ample number of opportunities to propel economic growth in the SAR, and if successfully implemented can turn a year of uncertainties into one of maximum opportunity.
The author is a British political and international-relations analyst.
The views do not necessarily reflect those of China Daily.
