Written by James Pomfret
HONG KONG (Reuters) – Hong Kong is expected to announce measures to boost the city’s economy in its annual policy speech on Wednesday, including cutting tariffs on alcohol, as it seeks to revive the financial hub that has struggled to recover since the pandemic.
Hong Kong’s small, open economy has felt the effects of China’s slowdown. The city’s economy expanded by 3.3% in the second quarter compared to the previous year, and is expected to grow by 2.5-3.5% for this year.
Although tourism numbers have rebounded since Covid-19, with 46 million visitors expected this year, consumption and retail spending remains sluggish, while stock listings have dried up and capital flight remains a challenge.
In February, Hong Kong’s finance minister announced new measures covering real estate, tourism and financial services, citing headwinds including a complex geopolitical environment and a ballooning budget deficit.
But in a meeting last month between China’s top official on Hong Kong affairs, Xia Baolong, and Hong Kong leader John Lee, Xia stressed the need for more “reforms” to stimulate economic growth, in line with China’s national strategy.
He called on the Hong Kong government to “unite and lead all sectors of society” to promote reforms, while urging business people to help in the campaign.
One commentator in the state-run China Daily newspaper said that Xia’s speech indicated the need for “economic and social reforms.”
Li said the focus this year will be on economic development and people’s livelihoods. His government passed new national security laws in March that Lee said improved stability.
Some countries, including the United States, have criticized Lee for leading a years-long security crackdown that has led to the imprisonment of opposition democrats, the closure of liberal media outlets and the restriction of freedoms.
Li will deliver his political speech on Wednesday at 0300 GMT.
Local media have also reported on possible plans to phase out some of Hong Kong’s most squalid apartments, small compartments that have been criticized as falling below acceptable standards of living. It is also expected to pay me more tourism related initiatives.
Regarding real estate, a mainstay of the economy, Lee is under pressure to do more to revive the market, which has fallen by about a fifth from its peak in 2021.
Some market players, including Sammy Po, CEO of Hong Kong residential developer Midland Realty, have called for further cutting of red tape to help Chinese buyers, including young people on talent schemes, transfer capital and secure mortgages.
It is also possible to reduce taxes on alcoholic beverages from the current 100% – one of the highest in the world – in an attempt to turn the city into a center for the spirits trade in the same way it became a center for the wine trade in Asia after the removal of wine duties in 2008.
The move may benefit local pubs and restaurants that have struggled since coronavirus, with many locals now choosing to travel across the northern border to the Chinese city of Shenzhen to eat cheaper.
Retail sales fell by 7.7% in the first eight months of 2024 compared to the same period the previous year.