The Hong Kong government has presented its budget for 2023, a comprehensive plan designed to promote economic growth and development in the territory. In 2022, the global economy experienced a slowdown due to the Russia-Ukraine conflict and global inflation, resulting in major central banks tightening their monetary policies. Hong Kong’s economy was also affected by the subdued global economy and fluctuating epidemic situation, leading to a decline in total exports of goods and services. Domestically, the outbreak of the fifth wave of the epidemic and tightened financial conditions weighed heavily on domestic demand. The Hong Kong economy contracted by 3.5 percent in 2022, but the labour market showed improvement with the seasonally adjusted unemployment rate declining gradually. Inflation remained moderate, and the Hong Kong stock market and residential property market underwent a marked correction.
The Hong Kong government has forecasted a visible rebound in the city’s economy this year. Despite facing severe challenges in the form of weakened growth momentum in advanced economies and heightened geopolitical tensions, the Mainland’s resilient and solid fundamentals, coupled with the lifting of restrictions on cross-boundary travel, are expected to alleviate some pressure. As economic activities revive from the pandemic and economic stabilization measures yield results, private consumption is expected to increase, and the growth of the Mainland economy is expected to accelerate visibly. The government has predicted a growth of 3.5 to 5.5 percent for the year as a whole. In the medium to long term, Hong Kong’s unique advantages under “One Country, Two Systems” and the government’s efforts to strengthen competitiveness and identify a new impetus for growth are expected to yield results gradually. Hong Kong has also forecasted an average annual growth of 3.7 percent in real terms from 2024 to 2027, higher than the trend growth of 2.8 percent during the decade before the epidemic.
To support people and enterprises and boost the momentum of economic revival, several measures have been implemented. Here are some key highlights of the Hong Kong Budget 2023.
Support for Businesses
- Reduced profits tax for the year of assessment 2022/23 by 100%, subject to a ceiling of $6,000, benefiting 134,000 businesses and reducing government revenue by $720 million.
- Rates concession for non-domestic properties for the first two quarters of 2023-24, subject to a ceiling of $1,000 per quarter for each rateable property, estimated to involve 430,000 non-domestic properties and reduce government revenue by $740 million.
- 50% rental or fee concession to eligible tenants of government premises and eligible short-term tenancies and waivers under the Lands Department for six months until end-2023, starting from July 2023, which will reduce government revenue by approximately $1 billion.
- SME Financing Guarantee Scheme (SFGS)
- The application period of all guarantee products under the SFGS has been extended from end-June 2023 to end-March 2024 to give SMEs more room to adjust and secure a firm footing on their path to recovery.
- Extension of Travel Agents Incentive Scheme for three months beyond end-March 2023. The Scheme offers cash incentives for travel agents based on the number of inbound and outbound overnight travellers they serve.
- Injection of $30 million into the Information Technology Development Matching Fund Scheme for Travel Agents to encourage industry upgrade and transformation through technology.
Measures to Support Technology Start-Ups
- HKSTPC to inject $400 million into Corporate Venture Fund to support technology start-ups
- HKSTPC to launch Co-acceleration Programme with additional $110 million to support growth of technology start-ups with high potential
- Cyberport to receive $265 million to launch a dedicated incubation programme for smart living start-ups, providing up to $500,000 in grant and professional support to eligible start-ups over the next five years.
Open up Target Emerging Markets
- The Hong Kong Trade Development Council (HKTDC) will receive additional funding of $550 million over the next five financial years to help Hong Kong enterprises seize opportunities in the Belt and Road Initiative and Greater Bay Area development and tap into emerging markets.
- The Dedicated Fund on Branding, Upgrading, and Domestic Sales (BUD Fund) will receive an injection of $500 million to expedite applications and enable more small and medium-sized enterprises (SMEs) to use the funding to develop their business.
- The Hong Kong Productivity Council will receive an allocation of $100 million over the next five years to enhance its service in assisting SMEs in applying for government subsidies.
Attracting Foreign Businesses through high-quality development
The Hong Kong government in efforts to promote high-quality development, has come up with a few strategies through the Hong Kong Budget 2023 to drive development through innovation and technology.
- The Hong Kong government will allocate $500 million to Cyberport for a Digital Transformation Support Pilot Programme to help SMEs apply basic digital solutions.
- To enhance productivity and upgrade or transform their business processes, The Hong Kong Productivity Council launched the Biz Expands Easy one-stop online platform to assist enterprises in developing digital support facilities and funding applications.
The Hong Kong government recognizes the potential of the third-generation Internet (Web3) and aims to spearhead innovation development. A $50 million allocation will be made to expedite the Web3 ecosystem development, with plans to organise international seminars and workshops for young people.
International GreenTech and GreenFi Centre
The Hong Kong government is promoting a green economy for sustainable development and has set up a Green Technology and Finance Development Committee to formulate an action agenda for developing Hong Kong into an international green technology and finance centre. An International GreenTech Week will be organised at the end of this year to bring together representatives, enterprises, and investors from the green technology industries worldwide.
Attracting Overseas Companies to Re-domicile in Hong Kong
- Hong Kong will introduce a mechanism to provide facilitation for companies domiciled overseas, particularly enterprises with a business focus in the Asia-Pacific region, for re-domiciliation to Hong Kong.
- The purpose of this mechanism is to allow companies to utilise Hong Kong’s favourable business environment and professional services.
- Consultations will be conducted, and legislative proposals will be submitted in 2023-24.
Hong Kong Investment Corporation Limited
- The Hong Kong Investment Corporation Limited (HKIC) was established to optimise the use of fiscal reserves for promoting the development of the economy and industries.
- HKIC enhances Hong Kong’s ability to attract enterprises and investment and facilitates industrial co-operation between Hong Kong and sister cities in the Greater Bay Area (GBA).
Attracting Strategic Enterprises
- The Office for Attracting Strategic Enterprises (OASES) was established to attract representative and high-potential strategic enterprises from around the globe.
- An Advisory Committee on Attracting Strategic Enterprises and Dedicated Teams for Attracting Businesses and Talents were also established to support the work of OASES.
Measures to Attract Talents:
- Top Talent Pass Scheme
- Establishment of Hong Kong Talent Engage
- Updating the Talent List by the Labour and Welfare Bureau (LWB)
- Commencing a new round of manpower projections by the LWB to formulate appropriate strategies to address the overall manpower demand.
Capital Investment Entrant Scheme:
- New scheme to attract new capital and enrich the talent pool
- Applicants must make investments at a certain amount in the local asset market, excluding property
- Approved applicants can reside and pursue development in Hong Kong
Measures to Attract Family Offices
- The Hong Kong Government will allocate $100 million to InvestHK over the next three years for attracting more family offices to Hong Kong.
- The Financial Services and the Treasury Bureau have set up a steering group to oversee key projects, including the “Wealth for Good in Hong Kong” Summit in end‑March, as well as providing dedicated training for relevant wealth management talents.
Post-Pandemic Recovery to Attract Tourists
The Hong Kong government will allocate $100 million to attract more mega events, while the Hong Kong Tourism Board will spend over $250 million to organise or promote major tourism events including the Hong Kong Pop Culture Festival, Hong Kong Wine and Dine Festival, Hong Kong International Dragon Boat Races, Hong Kong Cyclothon, Hong Kong Sevens, and Arts Basel in Hong Kong.
Major Conventions and Exhibitions
The Hong Kong government plans to provide an additional $200 million in funding to the Hong Kong Tourism Board (HKTB) to attract high-value visitors by organising more international meetings, incentive travels, conventions, and exhibitions (MICE) related to finance, innovation, and technology (I&T), medicine, and other fields. The aim is to consolidate Hong Kong’s position as the leading MICE destination in the region.
Promote Hong Kong
Additionally, an extra $50 million grant has been allocated to support Hong Kong’s tourism industry with the themes of “Hello Hong Kong” and “Happy Hong Kong”.
In conclusion, the Hong Kong budget for 2023 has been designed to address the most pressing economic and social issues faced by the region. The budget is focused on promoting economic recovery, strengthening the healthcare system, and improving the livelihoods of citizens. The government has also announced measures to support small and medium-sized enterprises, stimulate innovation and technology, and invest in education and social welfare. The budget has been welcomed by various stakeholders, including business leaders, economists, and civil society groups, as a timely and well-crafted response to the challenges facing Hong Kong. However, the implementation of these measures and their impact on the ground will need to be closely monitored in the coming months and years. Overall, the budget reflects the government’s commitment to creating a more inclusive, sustainable, and prosperous Hong Kong in the post-pandemic era.