Hong Kong budget 2021-22: finance chief Paul Chan reserved on cash handouts, cites Covid-19 pandemic challenges

Financial secretary says he expects first half of new year to remain challenging, with 2020 figures on track for a full annual economic contraction
He also doubles down on news that hard-hit residents will not be able to access pension funds early

Hong Kong economy

Chris Lau

Published: 4:39pm, 9 Jan 2021

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Hong Kong financial chief Paul Chan Mo-po has expressed reservations about a fresh round of cash handouts for struggling residents amid the Covid-19 pandemic, citing challenges ahead in the first half of the year.

Chan told a Saturday radio programme on the coming budget address that the economy had shrunk 3.2 per cent in the first three quarters of 2020, on course for an overall contraction for the whole of last year.

It would be the first time Hong Kong had ever recorded two consecutive annual contractions, the financial secretary said, after the city was hit by months-long anti-government protests in 2019, when the economy shrank 1.2 per cent.

Hong Kong has weathered many storms over the past two years, such as the months-long social unrest, tense US-China relations and the Covid-19 pandemic. Photo: Sun Yeung

The unemployment rate stood at a high of 6.3 per cent compared to recent years, accounting for 240,000 residents, while the underemployment rate hovered at 3.4 per cent, or 130,000 people.

But Chan also maintained the government had no plan to allow those in desperate need to access their Mandatory Provident Fund, the city’s pension scheme early, saying authorities would “explore other ways”.

Hong Kong was hit by a fourth wave of Covid-19 infections late last November, with the number of daily cases surging past 100 at one point.

Apart from the battered retail and tourism sectors, the health crisis yet again forced many venues – from bars and beauty parlours – to cease operations under government control measures.

Chan said on Saturday he expected a stronger rebound in the second half of 2021, with 22.5 million doses of vaccines to arrive by then, but struck a gloomier tone for the first half of the year.

There will be challenges in the first half of the year although there will be some improvement

Paul Chan, financial secretary

“There will be challenges in the first half of the year although there will be some improvement,” he warned, pointing to the ravaged economy and tense US-China relations.

When asked by one listener on the call-in programme whether the government could afford another round of HK$20,000 (US$2,580) handouts, Chan said: “Should we be preserving some strength for the uncertainties or even greater challenges we have not yet seen?”

He said a balance had to be struck, as previous pandemic relief measures, initially thought to cost HK$13.9 billion, ended up totalling HK$30 billion for the government.

Chan added some in society had also objected to a new round of cash handouts, with only HK$80 billion, or 13 months of administrative expenses, left in the city’s coffers.

He said he would discuss with the Labour and Welfare Bureau to explore ways to help the unemployed.

Asked if he would scale back on additional stamp duties in place to curb properties prices, Chan ruled out such a suggestion. He said property prices had remained stable for the time being.

Chan will announce his budget on February 24.

This article appeared in the South China Morning Post print edition as: Chan cold to idea of more cash handouts