Letters | Infrastructure bonds offer a path to investing in Hong Kong’s future

Readers address criticism of the Hong Kong government’s plan to raise funds through the issuance of infrastructure bonds, and question the timing of the initiative

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A bus crosses a new bridge in Tseung Kwan O on December 12. Capital expenditure costs Hong Kong HK$100 billion per annum. Photo: Xiaomei Chen

Published: 11:30am, 14 Mar 2023

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In his latest budget, the financial secretary revealed a plan to issue infrastructure bonds. The government’s plan to raise debt has raised a few eyebrows, with critics questioning whether borrowing money is wise.

Introducing new taxes or raising existing ones is never popular, especially while the economy recovers following the three-year Covid-19 pandemic.

However, funds for government spending must come from the public. Our Treasury has relied heavily on land sale proceeds to keep taxes low and our tax regime simple, but there is a disadvantage to this approach: public finance is vulnerable to fluctuations in the property market. Before 2020-21, Hong Kong’s last major deficits were the result of the Sars epidemic at the start of the millennium when property prices fell by over 40 per cent.

The financial secretary forecasts deficits of HK$139.8 billion in 2022-23 and HK$54.4 billion in 2023-24. Recent unsuccessful land tenders and the unexpectedly low price of the Mong Kok commercial parcel will undoubtedly adversely affect the city’s financial performance.

Before long, Hong Kong’s fiscal reserves will drop to less than HK$770 billion, which is only enough for a year of government expenditure. So the question arises: how to foot the bills?

Government bonds are a useful tool in modern public finance. They provide administrations with a stable funding source and may reduce the burden on tax revenue, leaving people with more disposable income. Government bonds are also considered a stable and low-risk option for investors. The US Treasury bond is a classic example.