2002-2003 Budget
The 2002-2003 Budget at a glance*
Total public expenditure
|
HK$287.18 billion
(US$36.82 billion) |
Government expenditure |
HK$259.8 billion
(US$33.31 billion) |
Government revenue |
HK$214.6 billion
(US$27.51 billion) |
Consolidated deficit |
HK$45.2 billion
(US$5.79 billion) |
Fiscal reserves
(at 31-3-2003) |
HK$325.6 billion
(US$41.74 billion) |
*Forecast
In his first Budget since taking office in May 2001, the Financial
Secretary, Mr Antony Leung, outlined his vision for Hong Kong's economic
development and proposed measures to restore fiscal balance by 2006-07
and reduce the share of public expenditure in the economy. A package
of one-off relief measures to help the community was also announced.
The Financial Secretary revealed in his Budget of March 6, 2002, that
Hong Kong's economy grew by 0.1% in real terms in 2001, and was forecast
to grow by 1% in 2002. A trend growth rate of 3% in real terms was predicted
in the medium-term (from 2002 to 2006).
Consumer prices fell by 1.6% in 2001 and were forecast to decline
by 2.8% in 2002. Unemployment for 2001 as a whole was 5.1% but had since
risen to a record high of over 7% in early 2002.
Mr Leung said Hong Kong had to capitalise on its strengths and needed
to focus on high-added-value economic activities to move up the value
chain. He believed there were four economic sectors in particular that
could foster further economic development and create jobs
financial services, logistics, tourism, and producer and professional
services.
He said the government would upgrade the quality of manpower and increase
the number of talented individuals, by improving education and attracting
outside talent. It would also enhance flows of people, goods, capital,
information and services to and from the Mainland.
Mr Leung forecast a Budget deficit of HK$65.6 billion (US$8.4 billion)
for 2001-2002 compared to the original estimate of HK$3 billion (US$385
million). A deficit of HK$45.2 billion (US$5.8 billion) was forecast
for 2002-03 from revenues of HK$214.6 billion (US$27.5 billion) and
expenditure of HK$259.8 billion (US$33.3 billion).
But he made a firm commitment to restore fiscal balance by 2006-07.
From 2003-04 onwards, government spending would only be allowed to grow
by 1.5% in real terms per year over the medium-term, half of the trend
economic growth rate of 3%.
He pledged to reduce public expenditure as a percentage of GDP and
set a target of bringing it down from its current level of 23% to 20%
of GDP or below by 2006-07.
Because of difficult economic conditions, no major changes were introduced
on the revenue side. However, Mr Leung signaled that the government
would have to consider other options to raise revenue or reduce expenditure
other than those outlined in the Budget if the fiscal situation did
not improve in the medium-term.
Mr Leung also unveiled a HK$6.4 billion (US$820 million) relief package
to help Hong Kong citizens and businesses ride out the economic downturn.
The concessions would mean that about 85% of ratepayers (about 2.3
million) would pay no rates for one year, 80% of households and businesses
would pay no water and sewage charges for one year, and over 600 000
businesses would be exempt from paying business registration fees for
one year.
China's entry to the World
Trade Organisation
Hong Kong's strong links with the Mainland
- Hong Kong is the most important entrepot for China, handling
about 30% of the Mainland's foreign trade
- Hong Kong is the largest external investor in the Mainland,
accounting for about half or US$187 billion
of all realised direct investment in China
by end-2001
- Hong Kong is the largest, single external investor in all Mainland
provinces. There are about 110 000 Hong Kong firms investing in
the Mainland
- About five million people are employed in neighbouring Guangdong
Province by more than 36 000 companies wholly or partly-owned
by Hong Kong enterprises
- More than 190 000 Hong Kong people work in the Mainland, accounting
for 6% of the employed population in Hong Kong. About 80% of them
work as managers, professionals or administrators
|
China's entry into the World Trade Organisation (WTO) in December
2001 has changed the face of the global economy. It has thrown open
a huge market of 1.3 billion people and injects greater transparency
and certainty into a vast and growing trading regime.
As the Mainland's closest trading and investment partner, Hong Kong stands
to be a key beneficiary of this development.
Hong Kong enterprises will face increased competition from international
companies vying for business in the huge Mainland market. But at the
same time, market potential will continue to expand
trade flows in the Mainland are projected to increase quickly and significantly
from their current annual level of US$510 billion. Their depth of knowledge
and experience in the Mainland will give them an unrivalled edge in
seizing opportunities.
China's WTO accession will not be a zero-sum game for Hong Kong
China's market is too big for just one or two major cities to take the
lion's share of trade and investment opportunities. The sheer size and
diversity of the market presents much room for further co-operation
and partnership. In the process, Hong Kong and Mainland cities can make
best use of their comparative strengths and advantages, creating a 'win-win'
situation.
For example, in Guangdong and adjoining provinces there are more than
270 million people. On the eastern seaboard, there are now some 230
million people in the provinces around Shanghai and the Yangtze River
Delta. Further north Tianjin is well-positioned in a market now of over
160 million people. Looking west Chengdu and Chongqing have the potential
to service another 250 million people, of which almost 85 million live
in Sichuan province.
While co-operation in services will remain the key theme in the prosperous
coastal regions and big cities like Guangzhou, Beijing and Shanghai
many other opportunities in the Mainland's domestic market will come
from the developing, resource-rich inner and western provinces.
The Chief Secretary for Administration, Mr Donald Tsang, led a 280-strong
Hong Kong delegation to Western China in May 2001 to assess business opportunities,
promote Hong Kong's strengths and advantages and better understand the
potential for development of western China's resources. That landmark
visit has paved the way for further activities to help cement closer economic
links between Hong Kong and western cities, where the Mainland government
is intent on developing the next high-growth areas.
Hong Kong businesses will have to work hard to leverage their existing
strengths and contacts in the Mainland to capitalise on the enormous
opportunities that will emerge in China over the next few decades.
Hong Kong's existing business links as well cultural
and language bonds can also be an enormous resource
for overseas companies, especially small and medium-sized enterprises,
wishing to do business in China.
By joining forces with established Hong Kong businesses, overseas
companies will be able to bring their products and services to the Mainland
market as well as draw on the decades of experience of Hong Kong's entrepreneurs.
Hong Kong companies have already joined forces with joint venture partners
in the Mainland to do just that.
Shanghai
Hong Kong's quality of life
boosted by good education and health services...
will help to ensure that it remains China's first entrepot for several
years to come. But the pace of change in Shanghai, and the excitement
the city generates among foreign investors, could quickly narrow the
gap. If Hong Kong is to remain superior to both Shanghai and Shenzhen,
it will have to reinforce both its strengths: its legal independence,
and its economic interdependence. The Economist,
March 29, 2002
Shanghai's impressive development over the past decade has led some
to question whether Hong Kong can retain its role as the premier international
financial centre for China.
Often, comparisons between Hong Kong and Shanghai
as well as elsewhere in China such as Shenzhen and Guangzhou
are explained in terms of 'win and lose'. That is, the increasing prosperity
in Shanghai and Guangzhou is to the detriment of Hong Kong.
This is a very simple and flawed argument that overlooks the complementary,
rather than competitive, roles that Hong Kong and Shanghai play, and
the different focus of development in the Pearl River Delta and Yangtze
River Delta.
The Pearl River Delta is much more externally-oriented economy than
the Yangtze River Delta; services and flourishing private sector enterprises
are the main economic drivers in the Pearl River Delta while the Yangtze
River Delta has accommodated more heavy industry as well as the recent
emergence of IT-related industry.
Hong Kong is and will remain the pre-eminent international financial
centre for the entire Mainland, a major hub for regional headquarters
in the Asia-Pacific and a growing centre of trade and investment for
the fast-developing domestic economy in the Pearl River Delta.