Straight Talk presenter Eugene Chan (left) interviews Financial Secretary Paul Chan Mo-po on TVB, March 5, 2024. (PROVIDED TO CHINA DAILY)

Financial Secretary Paul Chan Mo-po is on the show this week to talk about the 2024 Budget. 

The secretary explains how spending on events can bolster tourism and, in the end, create more revenue for Hong Kong. He also says all the measures to tighten and prioritize government spending will lead to fiscal balance in 2 to 3 years’ time.

Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Financial Secretary Paul Chan: 

Chan: Good evening! I'm Eugene Chan and welcome to this special Budget edition of Straight Talk. Our guest is Financial Secretary Paul Chan. He needs no introduction and was on this show about a year ago to talk about the 2023 Budget. Last week, Chan released the 2024 Budget with the theme “Advance with Confidence, Seize Opportunities, Strive for High-quality Development”. So, we have invited Chan again, to tell us if this Budget can turn the tide for Hong Kong. Welcome, Financial Secretary!

FS: Thank you, Eugene!

Chan: This is your second year in office and your eighth Budget. Would you say this Budget has been the most challenging one? 

FS: Well, you know, every year has its own unique circumstances and specific challenges. So, this year perhaps, it's a matter of inspiring confidence. 

Chan: Yes. So, your theme of the Budget, “Advance with Confidence, Seize Opportunities, Strive for High-quality Development”. Can you share with us how you arrived with this theme and why you think this is crucial for Hong Kong at this particular point?

FS: Well you know, last year, the asset market was weak, no matter if it was the stock market, or the property sector. It was because of the geopolitical tensions and the consequential capital outflows as well as the high interest rate, but our fundamentals are strong. And our prospects in the coming years are very positive. So, we do think that this should be the opportunity for us to address this issue and to show our people, “Look, Hong Kong is very unique.” We have been very competitive over the past few years in attracting strategic enterprises, talents and capital. We have achieved very good progress and with the support of the central authorities and the country, Hong Kong will be marching forward, strongly.

Chan: Paul, from what you're saying, things are just going to be much better in the years to come. So, is it your vision of the future of Hong Kong, I mean, with looking at the measures in the Budget. And you've also mentioned the strength and also the challenges. What will be your overall vision for Hong Kong?

FS: Well, Hong Kong will continue to play a unique role in our country's overall development because of the fact that under the "one country, two systems" arrangement, we, on one hand, have convenient access and the strong backing of the mainland, and, on the other hand, face the international community. So, this will be the best place to converge for the capital or the talents and that would enable us to continue to prosper. And the way I say among the eight centers’ positioning stipulated in the 14th Five Year Plan, the international financial center, the International Innovation and Technology Centre, this tool will be our key engines of growth.

Chan: Would you say Hong Kong now in 2024 is what we call at a turning point and we call this a “make or break” a Budget? 

FS: Well, you know, since this term of government, we have been very proactive in terms of using the government's catalytic role in fostering economic development and improving the living standard of the people. And from the business side, under the leadership of the chief executive, we go all out to attract businesses and capital and talents to come to Hong Kong and the response so far has been has been very encouraging. For enterprises, we have attracted over 40 strategic enterprises altogether. They are going to invest more than HK$40 billion in the coming years and create another more than 13,000 jobs. So, this would be an impetus for our development. This is just one example. And the talent scheme: we have approved over 140,000 applications. About 100,000 of them have arrived in Hong Kong. So, with this new development, we are very confident, very positive.

Chan: Paul, I noticed the color of your Budget booklet is like beige. Is there any significance, especially if you're wearing a similar color tie today?

FS: Well, you know, Eugene, the color of this year's Budget symbolizes a glimmer of dawn. It inspires hope, confidence and our longing for greater unity in the community to work together.

Chan: Just now when you're saying that you want to encourage our investors with confidence. Can you give us examples in your Budget that will encourage businesses and investors to do more in Hong Kong and come back to Hong Kong?

FS: Well, you know, there are short- and medium- to long-term measures. In terms of short-term measures, the most important measure is to stabilize the property market and the stock market. So, we removed all the demand side measures in the property markets and we are going to implement the suggestions of the taskforce on enhancing liquidity of the stock market. This will be implemented step by step in the coming months. So, with this, we hope we will be able to stabilize the asset market. And in the meantime, we'll continue to reach out by showcasing Hong Kong's unique advantages and competitiveness. We'll be able to have more people to come and the brand of Hong Kong in the international arena will rise again. 

Chan: Yes, and, of course, I'm sure the viewers will know that the biggest item of the Budget that received a lot of publicity is the lifting of the special stamp duty, the buy stamp duty and the residential stamp duty … the new residential stamp duty. So, there has been a lot of discussion they have different opinions amongst the community, and I'm sure all our friends have different views. So, what has prompted your final decision and what impact do you expect this is going to have on the property market, and, if I may say, even to a greater extent to the overall economic outlook?

FS: Well, you know, when this measure was introduced over 10 years ago, the situation in the property market was very different. At that time, there was short supply, property prices went up very quickly and a lot of buying interest from people outside of Hong Kong. So, for the people of Hong Kong at the time, it was difficult to buy a property. Now that the market situation is completely different, we have seen the market with ample supply and the confidence at this moment, because of different reasons, are comparatively weak. So, this is the right time for us to remove all these measures without any significant adverse impact on the price as well as the volume. We do expect the volume to go up because by removing all these measures, those properties which were bought within the past two, three years, because of the removal of the special stamp duty, will be available to the market again. So, for home buyers, there will be more choices. And apart from removing all these demand-side measures, we also asked the Hong Kong Monetary Authority to relax their mortgage policies back to normal, basically. So, for average homebuyers, I think, now it is easier, a little easier for them if they want to buy a home.

Chan: Paul, I'd just like to confirm with you that it is the government's policy that Hong Kong's property market be on a healthy cycle, meaning the property can go up but not like a speculative sort of way that people can't get on the train, is that right? 

FS: Yes, we would like to see the property market develop in a healthy and stable manner.

Chan: So, would it be a good time for first (time) homebuyers to start considering buying right now with the relaxing measures in the mortgages and also it's for clear indication the government thinks this is the right time to do something?

FS: Well, buying a home, buying property is a significant decision. So, it is indeed really up to the individual depending on their specific circumstances, their needs, their financial capabilities, their employment situations, and their assessment of the interest rates outlook as well as their own employment situation. So, this is a very important decision. Everyone has to do it in a careful manner of course.

Chan: Right. Financial secretary, the prices fell 7 percent last year, according to statistics, and dropped another 1.6 percent last month. So, some say that simply removing these measures is not enough to reverse the downward trend of prices. Because there's such negative factors ... you've mentioned higher interest rates and also the so-called weaker economy. So, will this measure that you have done with the Budget, do you expect a slower pace of decline or do you think we will start slowly picking it up again?

FS: Well, you know the property price changes depend on a number of different factors, demand and supply, buyers’ interests, interest rate outlook, economic situation. So, we won't speculate as to how the price will react because there is also short-term and medium factors interplay. So, it is important for us to remove these measures because the specific circumstances giving rise to the introduction of these measures at the moment are no longer there.

Chan: But there're also some saying from the government that there will always be measures should there be any speculative behavior to ensure market stability. Is that the direction?

FS: We have been monitoring the property market very carefully and very closely. As I said, from the government standpoint, it is important that this sector continues to develop in a sustainable, stable and healthy manner. So, all the tools in our toolbox are available if we need, but, at the moment, we do not see such a need.

Chan: Right. Paul, let's take a break now and viewers, please stay tuned. We will be right back for more discussion on the 2024 Budget.

Financial Secretary Paul Chan Mo-po attends the Straight Talk show on TVB, March 5, 2024. (PROVIDED TO CHINA DAILY)

Chan: Welcome back! Thank you, Financial Secretary, for explaining to us his strategies behind this year's Budget. So, Paul, in the first half, you said to us very clearly that you are very confident with the future, we are doing the right thing. For example, with the property market, things have changed, it is time to stabilize everything and …

FS: Yes.

Chan: … and, hopefully, everything will start from this as a good turning point. Let's look at another area that you had spent quite a lot of time in your Budget, which is you are allocating HK$1.1 billion to boost tourism, and sort of soft sell Hong Kong by hosting more mega events and more annual conferences. But some people have said is it really the key to our recovery? Will this work?

FS: Well, you know, the allocation to the tourism sector has a number of different reasons. Number one, we want to promote the Hong Kong brand. Over the past few years, particularly after the social unrest in 2019 and the COVID period, a lot of people have not been in Hong Kong. So, there has been negative narratives about Hong Kong, which is unfounded. We want more people to come, so that they know the situation better. And from the economic standpoint, as you know, the free driver of our economic growth are export consumption, and then private investment. Export, because of the geopolitical situation, because of the high interest rate environment, there is indeed not much we can influence. In terms of consumption, it is important for us to have more people, particularly high quality tourists, to come, to spend money, to enjoy Hong Kong, and to provide all the attractions, not just for them, but also for our locals, so that we can altogether spend happily, and in the process help our own economy. 

Chan: So, Financial Secretary, I am sure you want to leverage such initiatives to enhance our competitiveness and attract not only international but local people invest back into Hong Kong. However, if you look at the recent Chinese New Year time when we have very nice fireworks, people just come and go very quickly. And even we know that Shenzhen is sort of doing very similar initiatives like us. So, how do we maintain a niche, especially … I mean Hong Kong people are always smart and fast, but we are now facing quite a bit of competition. What would we do?

FS: We have to be confident in ourselves. Hong Kong people are very innovative. Well, you know, for those shows, we are going to change it every season with particular themes. And what is more important is not just the drones and the pyrotechnics, but along with that we to improve the product offering, the services. So, we need to work together with the retailers, with the F&B sectors, and with other event organizers, say for example, we organized those pyrotechnics and drone shows along with mega events so that people, when they come, can stay one night longer, say for example.

Chan: Right.

FS: And spend more. And I think in the process, it is important for us to work as a team, crossover different sectors together, and improve our service and offering. When these people come to Hong Kong, they have good experience, they enjoy their trip, they will tell their friends and they will come back. So, this is important to us.

Chan: Right. So, that means all the viewers must listen to what Secretary Chan said, we must take advantage of those mega events when that happens. Let's put more work into our actual services to attract more visitors.

FS: And Hong Kong’s international character, our diversity, is no comparison to any other mainland cities. Say for example, even for F&B, we have over 200 Michelin recommended restaurants. Nowhere in the world has such a high concentration of top class F&B. But at the same time, if they want to go to the different districts to try the local delicacies, still a lot to offer. So, it is up to us, how to package this together, so that people want to come. And when they come, they do have wonderful experience, and get the services that they deserve.

Chan: Right. Paul, let’s confirm, I want to confirm with you that in the Budget, you also have done something about to the hotel tax.

FS: Yes.

Chan: Does it mean that … I mean a 3 percent, it is not that much, but does it make sense, when we are trying to increase, more tourists to come because I am sure the cost will be passed on to the tourists eventually? So, what will you say to the hotel industry?

FS: Well, you know, that 3 percent hotel accommodation tax, according to our study, accounting for less than 1 percent of overnight visitors spending in Hong Kong, so about HK$60 to HK$70. People won’t because of that particular additional cost, not to come to Hong Kong. But what is important is when you look at the Budget, we spent over HK$1 billion in improving the product offerings in asking the Hong Kong Tourism Board to launch a quality service scheme. So, if we are able to enhance our offering, that particular slight increase won't be a deterrent.

Chan: Right. Thank you, Paul, for explaining to us.

FS: And in fact, most of the neighboring cities, international cities, they have this kind of tax one way or the other.

Chan: I see. I am going to throw you some figures and hopefully you can explain to the viewers. The consolidated deficit estimated to be HK$101 billion compared to the forecast provided last year. And our reserve now, by end of March, is HK$733 billion by end of March. With the projected decrease in government reserves of HK$685 billion by the end of 2024-2025. How does the government plan to manage this deficit and ensure the sustainability, so to say, or public finances? Because as a citizen, we do worry. You are saying “we’d love you to spend more money to the economy”, but everything is still dropping compared to what we had before. How would you reassure our viewers this is the right thing to do?

FS: Well, there is no cause for alarm. When you look at the other jurisdictions internationally, during the COVID period, different governments recorded substantial deficits. For us, we still have a very healthy physical reserve. And in the coming years, starting from this year, we introduce what we call a fiscal consolidation plan.

Chan: Right.

FS: On one hand, cut expenditure, on the other hand, increase our revenue. And this fiscal consolidation plan’s focus is mainly on cutting government expenditures. So, at the moment, government’s expenditure in 2024-2025, accounting for about slightly over 24 percent of our GDP. Five years later, it will be reduced to slightly over 20 percent.

Chan: Right.

Financial Secretary Paul Chan Mo-po (right) attends the Straight Talk show on TVB, March 5, 2024. (PROVIDED TO CHINA DAILY)

FS: And at the same time, by increasing our revenue, currently revenue accounting for slightly more than 20 percent of our GDP. Five years later, over 22 percent. It is by carefully navigating the process, minimizing the impact to the livelihood of the people, and minimizing the impact on business cost, to achieve this fiscal balance in 2-3 years. 

Chan: Earlier we mentioned about some of the housing taxes that have been scrapped. How do you mitigate the loss of revenue from that? 

FS: Well, the demand side measures for the property market was never a handle to increase government revenue. The proper policy consideration should be the residential market itself. And in terms of our revenue, by growing our economy, we are confident that we would be able to balance our book in a few years’ time.

Chan: Right. And most people will know that Hong Kong now is very close to our motherland, and know that we must be aware of the key factors that will influence China’s, our nation’s economic outlook. How do you anticipate such changes going to affect Hong Kong's future?

FS: Well, our assessment of the mainland’s economic development is that it will continue to grow in a comparatively faster manner, compared to other major economies. In the past year, we have seen some transformation. But now it got stabilized. So, we believe in the future economic development of the mainland. And under the “one country, two systems” arrangement, we are specially positioned. On one hand, we have convenient access to the mainland market and, on the other hand, we have the international facing. So, Hong Kong is the only city in the world where the international advantage and the mainland advantage converge.

Chan: Right. 

FS: If we can play our role properly and maximize our competitive advantage, we will be able to continue to prosper.

Chan: Right. Paul, I am going to ask you the last question. I think people in Hong Kong, they want to do business, they want to do better. However, we are concerned about the imported inflation from the US because of the monetary policy and the pack. So, with what measures can we mitigate that? A short answer.

FS: Well, you know, in the past few years US interest rate heights by more than 4.5 percent. Our increase is just slightly over 2 percent. So, liquidity here is ample.

Chan: Right. 

FS: And for our daily necessities, actually they are mainly from the mainland. 

Chan: Okay. 

FS: The inflation impact was minimal. So, we will be able to ride through this challenge.

Chan: Thank you, Paul, for joining us today, and providing valuable insights into the 2024 Budget. As we conclude, it is evident that Hong Kong faces both challenges and opportunities on its path to recovery. The emphasis on bolstering confidence, seizing opportunities, and striving for high-quality development, demonstrates a commitment to charting a resilient and prosperous future. As Robert Schuller said, “Tough times never last, but tough people do.” And we, as Hong Kong people, are certainly a tough lot. Have a good evening and see you next week!