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Hong Kong economy
Hong KongHong Kong Economy

Exclusive | Hong Kong well-positioned to withstand currency attacks, even with coronavirus spending, Financial Secretary Paul Chan says

  • A currency-swap mechanism with the People’s Bank of China and a new US Federal Reserve deal are available to thwart speculators targeting the city
  • Even with a deficit that could hit HK$300 billion, the financial secretary does not anticipate issuing bonds, which could be interpreted as a lack of financial discipline

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In an exclusive interview with the Post, Financial Secretary Paul Chan Mo-po said the city is well-positioned to thwart any potential attacks on the Hong Kong dollar. Photo: Nora Tam
Olga WongandLilian Cheng
Hong Kong is capable of withstanding any currency attack, even as it digs deeper than ever before into its fiscal reserves to survive the coronavirus crisis, and the budget deficit may hit HK$300 billion (US$38.7 billion), according to Financial Secretary Paul Chan Mo-po.

Chan struck a reassuring tone in an exclusive interview with the Post, a week after he warned the city’s reserves would plunge from HK$1.1 trillion to about HK$800 billion, equivalent to about 15 months of public expenditure.

With the government spending more than HK$137 billion on a massive relief package for ailing businesses in an economy ravaged by the Covid-19 pandemic, the budget deficit is expected to balloon beyond HK$276.6 billion, accounting for 9.5 per cent of GDP.

Chan warned the deficit might surge to HK$300 billion by the end of the financial year, given the worsening business environment and possible reduction in land revenue, but he remained confident the city would still be able to fend off any currency attack.

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“We have been very careful as the risk is very genuine since the [anti-government] protests last year,” Chan said when asked if smaller reserves could withstand attacks.

He revealed that the GDP forecast for this year – a contraction of 1.5 per cent – was likely to be adjusted further downwards, while the unemployment rate would continue to rise despite relief measures to retain employment.
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