This content was first published by Radio Free Asia, and it is now being reprinted with permission.
As part of an effort to reduce a growing fiscal deficit, Hong Kong plans to eliminate 10, 000 legal support positions and impose a freeze on public sector incomes, its top fund national announced on Wednesday as the city battled its third season of budget shortfalls.
Following shortfalls of August$ 122 billion in 2022/23 and HK$ 106.56 billion the previous year, Hong Kong’s deficit for the governmental season ending in March 2025 is estimated to be HK$ 86.2 % ( US$ 1.2 billion ).
In his 2025 budget speech on Wednesday, Hong Kong’s finance minister Paul Chan outlined actions to address the financial issues, including a 7 % decrease in government paying over the next three years.
The government may eliminate 10, 000 civil service opportunities by April 2027, which would represent a 2 % workforce decline over the next two years, according to Chan.
The saving slice will lay a solid foundation for a financially sound basis for the future, Chan said. It provides a clear path to a planned and progressive restoration of fiscal stability in the running account.
Chan added that he had also instructed all federal departments and ministries to reevaluate resource planning and work priorities. He emphasized the need for streamlining techniques, combining resources, and utilizing technology to deliver public companies more effectively.
Issues arising from the passage of the National Security Law
Hong Kong’s sector has faced mounting challenges, including U.S. and Western restrictions, cash flows, and shifts in investor confidence, since the introduction of a National Security Law in 2020 in response to occasionally violent pro-democracy rallies the year before.
Gross domestic product contracted by 6.1 % in 2020 before rebounding to 6.4 % in 2021, but growth has since slowed to 3.2 % in 2023 and 2.5 % in 2024.
The real estate industry has experienced severe damage, with property prices falling by nearly 30 %, significantly reducing government revenue from land sales, which once made up more than 20 % but are now only 5 %.
The state’s financial market has remained a pillar of its economy, drawing in Chinese companies.
In Hong Kong, in the first three rooms, the amount raised through initial public offerings, or IPOs, more than doubled in 2024, despite a worldwide decline in Investor activity. This rise is attributed to improved market efficiency and easier access to the US economic system.
But, the situation has changed as more multinational companies are starting to reconsider their operations in cities. European banks have a smaller role in major IPOs, which results in layoffs and a strategic shift away from investment banking, which is a trend that is reflected by Hong Kong’s closer ties to Beijing and a decline in European financial players.
According to pandemic restrictions and a decrease in mainland Chinese visitors, the retail and hospitality sectors, again important to the town’s economy, have had to contend with significant challenges.
Retail sales decreased by 7.3 % year over year in November 2024, making it the seventh consecutive quarter in a row. Notably, 53 % of visitors to the mainland were day travelers, spending roughly HK$$ 1,400 each, which is 42 % less than in 2018.
