As far as the annual ritual of hopes for the new year goes, the resounding response to Hong Kong’s financial secretary Paul Chan’s request for suggestions from the public for his next fiscal blueprint would be anything that’s an improvement on 2020.
‘Preparing the Budget is like cooking,’ explained the financial secretary from a spacious kitchen while dressed in full chef’s attire during a televised request for public input into his upcoming Budget preparations. ‘How could I cook to your taste if I don’t know what’s on your mind?’
While Chan has promised to focus on propping up businesses, safeguarding jobs and relieving people’s burden, he responded to calls for financial sweeteners in his 24 February Budget by pointing out he will have to keep some financial firepower in reserve to tackle any uncertainties Hong Kong may face in the coming year. Having allocated HK$300bn for numerous coronavirus pandemic relief measures last year, and with an expected HK$300bn-plus Budget deficit looming for the current fiscal year that ends 31 March, he has a point.
Positives
As Hong Kong bids a not-so-fond farewell to 2020, the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) – one of the richest and most developed regions in China – is expected to remain a key growth driver for many domestic and international business located in Hong Kong. Business confidence in the GBA continued to improve in the fourth quarter last year. The Standard Chartered GBA business confidence index rose just above its neutral level for the first time since the Covid-19 virus struck early in 2020. Conducted in collaboration with the Hong Kong Trade Development Council (HKTDC), the index surveys a broad range of companies, included those operating in manufacturing and trading, retail and wholesale, financial services, professional services, and innovation and technology.
Offering another sliver of positive outlook, the HKTDC expects to see a modest export trade rebound on the back of mainland China’s focus on its recently introduced ‘dual circulation’ economic model and a less volatile trade relationship with the US, partly driven by a change in the US presidency. According to China’s Hong Kong and Macau Affairs Office, Hong Kong has a key role to play in the dual-circulation strategy, which takes the domestic market as the mainstay for shoring up business while allowing domestic and foreign markets to give a boost to each other.
Hong Kong is at the intersection of China’s domestic economic circulation and outside international economic and business activities. Nevertheless, following a 4.1% drop in exports last year, Hong Kong’s external trade performance has remained painful for exporters and has yet to bounce back to the pre-trade war levels of 2017, when exports jumped 8%.
Cautious optimism
Meanwhile, according to the American Chamber of Commerce’s 2021 Hong Kong business outlook survey, it’s a case of being cautiously optimistic about what the year ahead holds, with the glass half-full or half-empty, depending on the viewpoint. Half of those surveyed are cautiously optimistic they will do better in 2021, but 40% expect the business environment to remain unstable, with concerns over US-China relations, a resurgence of Covid-19 cases and the cost of doing business in Hong Kong.
While Hong Kong’s business community may wish for 2021 to deliver the business equivalent of a five-star dining experience, it will all depend on which menu they are working from.
