HONG KONG – Hong Kong is set to shift its focus from security to boosting its economy in the upcoming annual policy address on Wednesday, with expectations of measures such as cutting liquor tariffs as part of efforts to revive the city’s struggling financial sector.
After facing economic challenges linked to a slowdown in China, the financial hub is looking for ways to enhance growth. While Hong Kong’s economy grew by 3.3% in the second quarter compared to the previous year, it is forecast to expand by just 2.5-3.5% for the entire year. Despite a rebound in tourism, with 46 million visitors expected in 2024, retail spending and consumption have remained sluggish, and capital flight continues to be a concern.
Earlier this year, Hong Kong’s financial secretary unveiled initiatives aimed at boosting property, tourism, and financial services sectors but acknowledged headwinds, including geopolitical tensions and a growing budget deficit.
In a meeting last month between China’s top official on Hong Kong affairs, Xia Baolong, and Hong Kong leader John Lee, Xia emphasized the need for “reforms” to drive economic growth in line with China’s broader national strategy. He urged Hong Kong’s government and business leaders to work together to promote these reforms.
Lee has signaled that this year’s policy address will focus on economic development and improving livelihoods. This comes after years of pushing through national security laws, which have led to political crackdowns that sparked international criticism, including from the U.S.
There are also reports that Lee may address social issues such as phasing out sub-divided flats, small, often squalid living spaces, and pushing tourism-related initiatives. With the real estate market, a vital pillar of Hong Kong’s economy, falling by around 20% since its 2021 peak, there is pressure on the government to implement measures to revive it.
In a bid to attract more international business, liquor taxes, currently at 100%, could be slashed to position Hong Kong as a spirits trading hub, similar to how the abolition of wine duties in 2008 helped the city become an Asian wine trading center.
Local businesses, especially in the hospitality sector, may benefit from such measures, as many residents have been crossing the border to Shenzhen for cheaper dining options. Hong Kong’s retail sales have fallen by 7.7% for the first eight months of 2024 compared to the same period in 2023.
Lee’s policy address is scheduled for delivery on Wednesday at 0300 GMT, and is expected to unveil a series of economic and social reforms aimed at revitalizing Hong Kong’s economy.