Letters | Hong Kong mustn’t wait to diversify revenue

Readers discuss the challenge of finding new revenue streams, three-dish rice queues in Central, a university head’s resignation, and the discovery of coral species in Victoria Harbour

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A general view of construction sites in Hong Kong. The fragility of Hong Kong’s land-centric revenue model has been laid bare by a spate of failed land tenders. Photo: Reuters

Published: 11:30am, 15 Jan 2024

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Hong Kong’s fiscal strategy, long underpinned by robust land sales and low tax rates, is showing signs of vulnerability. The spate of failed land tenders in the current financial year brings into sharp focus the perils of overreliance on this revenue stream, a practice that may also be to blame for the city’s housing affordability crisis.

The fragility of this model has been laid bare by the tepid land sales, amid reverberations from the United States’ monetary policy shifts, including interest rate hikes. Compounding the situation are shifts in workforce demographics in Hong Kong and diminished demand for property from mainland buyers.

Revenue diversification is a logical yet challenging solution. Previous efforts to diversify revenue, like the debate in 2006 about introducing a goods and services tax, faltered without reshaping the economy. Diversification was revisited in last year’s budget speech, when Financial Secretary Paul Chan Mo-po broached a plan for the city to increase borrowing; such a bond scheme would push the city’s debt-GDP ratio to a mere 9.5 per cent.

However, debt is not a cure-all. Its effective use requires disciplined management, such as investing in sectors that promise economic returns rather than merely funding expenditure on welfare – which is surely set to rise in tandem with population ageing.

The quest for new revenue streams calls for a determined and visionary governmental approach, and this challenge is not unique to Hong Kong. In the region, Macau has been actively pursuing a diversification strategy away from its gaming-centric revenue model.