Hong Kong Economic and Trade Office, Brussels
The Government of the Hong Kong Special Administration Region
The 2021-22 Budget of Hong Kong - 24 February 2021
 

Overcoming the epidemic, stimulating the economy
and building a liveable city

With the epidemic still lingering, Hong Kong's economy is yet to come out of recession. Through the introduction of counter-cyclical measures costing over HK$120 billion (about EUR 12.7 billion), the 2021-22 Budget announced by the Financial Secretary of the Hong Kong Special Administrative Region Government on 24 February 2020 aims at easing the financial burden on people and businesses while ensuring that essential public services as well as infrastructure development are maintained.  It is equally important to grasp the major directions and new trends of future development to strategically enhance policy steering, support measures and resources allocation in key areas.  This will not only bring new impetus to Hong Kong's industries, but also enable them to have a more dynamic, diverse and interactive development.  

Following are the relevant highlights -

Key initiatives to revive and stimulate the economy 
 
 
Financial Services
  • Issue green bonds totalling HK$175.5 billion (about EUR 18.6 billion) within the next five years, and plan to issue retail green no less than HK$24 billion (about EUR 2.5 billion);
  • Roll out Green and Sustainable Finance Grant Scheme to subsidise expenses on bond issuance and external review services;
  • Strive to launch Southbound Trading of Bond Connect within this year, and enhance the domestic Central Moneymarkets Unit;
  • Provide subsidy for Real Estate Investment Trusts to list in Hong Kong;
  • Launch a Pilot Insurance-linked Securities Grant Scheme to subsidise issuance costs (Insurance-linked Securities are financial instruments to transfer risks from the insurance market to capital markets.  The initiative aims to help enhance Hong Kong's role as an insurance hub with a wide-range of risk management tools);
  • Provide subsidy for Open-ended Fund Companies to set up in or re-domicile to Hong Kong;
  • Issue no less than HK$24 billion (about EUR 2.5 billion) of Silver Bonds and no less than HK$15 billion (about EUR 1.6 billion) of iBonds this year, and lower the eligible age for Silver Bond subscription from 65 to 60; (ibonds aim to help Kong Hong residents hedge their savings against inflation whereas Silver Bond aims to provide steady return to the elderly's savings for retirement); and 
  • Review tax arrangements relevant to family office businesses
 
Innovation and Technology (I&T)
  • Earmark over HK$200 million (about EUR 21.2 million) for a 'Knowing More About IT'; Programme, subsidise primary schools to enhance students' interests and knowledge in I&T and their application;
  • Regularise the pilot scheme which subsidises students studying science and technology in local universities to enrol in short-term I&T related internships; 
  • Inject HK$9.5 billion (about EUR 1 billion) into the Innovation and Technology Fund in annual instalments over the next two years; 
  • Hong Kong Monetary Authority to consider enhancing its Fintech Supervisory Sandbox to reduce time for launching innovative financial products in the market;
  • Press ahead with the development of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop; 
  • Continue to implement the Science Park expansion and Cyberport 5 development;
  • Continue to support the development of 5G networks and applications; and
  • Commence progressively the operation of the first batch of about 20 R&D laboratories under the 'InnoHK Research Clusters'; in the first quarter of this year
Digital Economy
  • Allocate HK$375 million (about EUR 39.7 million) to Hong Kong Trade Development Council (HKTDC) to enhance its capability to organise online activities and to proceed with digitalization;
  • Explore the use of HKTDC's physical and online Business-to-Consumer platforms to assist young business starters in promoting their original products and gauging the preference of consumers;
  • Develop the business version of the 'iAM Smart'; digital authentication platform (iAM Smart is a one-stop digital personalized platform to access services of the government and participating utilities);
  • Provide electronic submission means for most government forms and licence applications by mid-2022;
  • Provide e-payment options (including Faster Payment System) for making payments of most government bills and licences starting from mid-2022; and
  • Actively explore the development of the Hong Kong Legal Cloud, in order to sharpen Hong Kong's edge and raise our status in the provision of professional legal services
Green Economy
  • Announce Hong Kong's first roadmap on the popularisation of electric vehicles, measures include ceasing the new registration of fuel-propelled private cars in 2035 or earlier;
  • Complete updated Clean Air Plan for Hong Kong by mid-2021;
  • Earmark HK$1 billion (about EUR 0.1 billion) to install small-scale renewable energy systems at government buildings and infrastructure;
  • Earmark HK$150 million (about EUR 15.9 million) to conduct energy audits and install energy-saving appliances, free of charge, for social welfare NGOs; and
  • Inject HK$1 billion (about EUR 0.1 billion) into Recycling Fund and extend the application period to 2027.  An extra HK$1 billion (about EUR 0.1 billion) will also be set aside to install small-scale renewable energy systems at government buildings
Air Cargo
  • With the expansion of the existing express air cargo terminal, the commissioning of a new premium logistics centre and the Three Runway System, annual cargo handling capacity of Hong Kong International Airport (HKIA) is expected to increase to some 9 million tonnes in 2024;
  • Explore measures to facilitate trans-shipment through Hong Kong, so as to maintain Hong Kong's competitive edge as an international air cargo hub; and
  • Redevelop the Air Mail Centre at HKIA to become operational by end 2027 at the earliest

Tourism
  • Earmark HK$169 million (about EUR 17.9 million) to continue to take forward local cultural, heritage and creative tourism projects;
  • Earmark HK$765 million (about EUR 81.1 million) to support Hong Kong Tourism Board in reviving the tourism industry; and
  • Discuss and work out Air Travel Bubble arrangement with suitable places

Tax relief and other concessions -
 
 
Electronic Consumption Vouchers
  • Issue HK$5,000 (about EUR 530) electronic consumption vouchers in instalments to each eligible Hong Kong permanent resident and new arrival aged 18 or above to facilitate and stimulate local consumption 

Support Enterprises 

A HK$9.5 billion (about EUR 1 billion) package of financial relief measures – 
  • Extend the application period of 100% guarantee low-interest loan for enterprises to the end of this year, raise loan ceiling to HK$6 million (about EUR 0.64 million), extend repayment period and duration of principal moratorium;
  • Reduce profits tax for 2020-21 assessment year by 100%, subject to a HK$10,000 (about EUR 1,060) ceiling; and
  • Provide rates concession for non-domestic properties in 2021-22, subject to a ceiling of HK$5,000 (about EUR 530) per quarter in first two quarters and HK$2,000 (about EUR 212) per quarter in remaining two quarters;
  • Waive business registration fees for 2021-22
  • Continue to waive 75% of water and sewage charges of non-domestic households for 8 months, subject to a monthly ceiling of HK$20,000 (about EUR 2,120) and HK$12,500 (about EUR 1,325) respectively; and
  • Continue to grant 75% rental/fee concession for eligible Government properties/short-term tenancies and waivers for 6 months (100% concession for those closed at the Government's request)

Support Employment
  • Launch the fourth tranche of Love Upgrading Special Scheme, provide more training options and online courses; and
  • Allocate HK$6.6 billion (about EUR 0.7 billion) to create around 30 000 time-limited jobs.
Facing the Challenge

Despite the fiscal deficit, government spending would not be reduced in areas related to people's livelihood, especially the three policy areas of education, social welfare and healthcare.  In 2021-22, the recurrent funding for these three policy areas amounts to HK$302.3 billion (about EUR 32 billion) in total, accounting for 58% of the Government's total estimated recurrent expenditure. 

To ensure that financial stability is maintained and enhance confidence in Hong Kong's fiscal strength, the 2021-22 Budget has also put forward effective measures to ensure prudence in public finance –

Reduce Expenditure
 
  • Zero growth in the civil service establishment in 2021-22
  • Trim government recurrent expenditure by 1% in 2022-23 without affecting livelihood-related spending. About HK$3.9 billion (EUR 0.4 billion) savings is expected

 

Increase Revenue

  • Raise the rate of Stamp Duty on Stock Transfers, from the current 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively

Economic Performance in 2020

GDP growth: - 6.1%
Headline inflation: 0.3%
Underlying inflation: 1.3%
Unemployment: 7% in November 2020 – January 2021 (the highest in close to 17 years)

Economic Forecast for 2021

GDP growth: 3.5% to 5.5%
Headline inflation: 1.6%
Underlying inflation: 1.0%

2020-21 Estimated Fiscal Deficit - HK$257.6 billion (about EUR 27.3 billion)

2021-22 Estimated Fiscal Deficit -  HK$101.6 billion (about EUR 10.8 billion), equivalent of about 3.6% of GDP, mainly due to counter-cyclical fiscal measures and continued increase in recurrent expenditure

Total fiscal reserves of HK$902.7 billion forecast (about EUR 95.7 billion) by 31 March 2021 – equivalent to 13 months of government expenditure.
 

For more details as well as other measures to build a liveable city, with particular focus on measures to develop quality living, strengthen the healthcare system, promote caring and inclusion, enhance housing supply, please visit the website on the 2021-22 Budget.