In the Media

Since China joined the World Trade Organization in 2001, Hong Kong's role as a transshipment hub had been steadily declining. Prof. Heiwai Tang, Associate Dean of HKU Business School and Director of the Asia Global Institute, shared his insights in a TVB (Television Broadcasts Limited) interview and explained that the rapid development of mainland ports had led to increasing competition and mounting cost pressures. He said, “Mainland productivity was rising, and transportation costs were falling, for example, handling a container in Hong Kong cost around $2,000 and took three to five days, while the same process in cities like Shenzhen or Shanghai could be much cheaper” Prof. Tang added that, “In 2000, for every dollar coming to Hong Kong for re-export, we earned about fifty cents; today, that was only twenty cents.” This trend affecting not just traditional Chinese medicine exports but the overall export landscape, revealing the challenges Hong Kong faced in the global trade arena. He stressed the need for industries that once depended on transshipment trade to explore new avenues.

Mandatory Provident Fund (MPF) is a compulsory saving scheme for the retirement of residents in Hong Kong. Over the past 25 years, the MPF has succeeded in encouraging household participation in securities markets and played a crucial role in improving financial inclusion in Hong Kong. However, it has faced ongoing criticisms for its low annualized rate of return. With the upcoming launch of the e-MPF platform to integrate disparate savings schemes into a single digital system, it presents a well-timed opportunity to drastically improve Hong Kong’s primary retirement savings system.

Hong Kong’s Mandatory Provident Fund (MPF) returns have been a major concern for employees. Dr. Tai Ming-chu, Associate Professor of Finance at HKU’s Faculty of Business and Economics, highlighted the issues of "high fees and low returns" in the MPF system. She pointed out that the current MPF framework operates as a free market, but suggested that more active participation by the Hong Kong government could help members achieve better investment returns, a strategy adopted by regions such as Singapore.

The pandemic has severely impacted cinemas in Hong Kong, with 16 theatres closing their doors. The rapid rise of streaming platforms like Netflix and Disney+ has made it easier for viewers to enjoy films at home, increasing pressure on cinemas. With ticket prices often exceeding over hundred dollar, streaming services offer a wealth of content for a similar cost, drawing many audiences away.

As an international financial center, Hong Kong has long played a significant role in global capital markets. However, in recent years, the local stock market has faced mounting challenges. Market performance has remained sluggish and the IPO market has experienced a concerning downturn, significantly reducing market activity. Liquidity issues have become increasingly pronounced, driven by an outflow of foreign capital and a decline in local trading activity that together undermine market stability. The trend of foreign capital outflows not only indicates external investors' negative expectations of the market but also reflects the challenges posed by geopolitical and economic conditions to Hong Kong's status as a global financial hub. What are the solutions that can revitalize Hong Kong’s stock market and restore investor confidence? Prof. Chen Lin and Dr. Shihua Qin explore the potential solutions which include attracting more investors and leading companies from the Middle East and Southeast Asia, lowering the threshold for the Shanghai-Hong Kong Stock Connect to enhance liquidity, launching government-guided investment funds and optimize the Mutual Recognition of Funds between mainland China and Hong Kong, promoting High-Frequency Trading, facilitating innovative technology firms to list on the Hong Kong Stock Exchange, lowering investment thresholds to broaden the investor base and strengthening regulatory oversight and corporate governance for better investor protection.

Donald Trump is set to return as President of the United States, ushering in the era of Trump 2.0. His new agenda focuses on tax cuts, reducing trade deficits, and limiting immigration. Trump aims to maintain low tax rates and has proposed a revamped tax structure in his "2025 Plan," which could worsen income inequality. Dr. Luk noted that while Trump's tax policies may stimulate the economy, they could also increase national debt and impact social welfare spending, thereby challenging government operations.

As Hong Kong faces an ageing population alongside a low birth rate, many retirees find themselves financially unprepared. Prof. Heiwai Tang, Associate Dean of HKU Business School and Director of the Asia Global Institute, shared his thoughts at the Asian Financial Forum (AFF), pointing out that “The subscription of pension life insurance products in Hong Kong is actually very small.” He further noted that the city’s Mandatory Provident Fund (MPF) can cover only around 40% of pre-retirement income, leading to a significant quality-of-life downgrade. With the city's public health system becoming increasingly crowded and private services costly, the Greater Bay Area (GBA) offers a promising alternative where living and healthcare costs are significantly lower. Prof. Tang also stated, “We started seeing a lot of Hong Kong people going north to consume... but increasingly more people are also going up for very generic medical and dental services.” He suggested that one potential path is to develop insurance products to cover citizens when they retire in the Greater Bay Area.

【𝗛𝗼𝗻𝗴 𝗞𝗼𝗻𝗴 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗣𝗼𝗹𝗶𝗰𝘆 𝗚𝗿𝗲𝗲𝗻 𝗣𝗮𝗽𝗲𝗿 𝟮𝟬𝟮𝟓 – 𝗖𝗵𝗮𝗽𝘁𝗲𝗿 𝟭】 The first chapter, written by Prof. Yang Liu, examines Hong Kong’s fiscal deficits. In recent years, fiscal deficits have emerged as a significant new challenge for the Hong Kong government, with the deficit levels reaching record high and ranking among the top in developed economies. The analysis finds that a significant portion of this deficit stems from structural deficits, which cannot be passively alleviated by economic growth alone but require proactive fiscal policy adjustments. While land revenue contributes a substantial proportion of fiscal income, its volatility also poses high risks, having driven most revenue fluctuations. More prudent risk management is therefore necessary. Looking ahead, the government must strike a balance between reducing deficits and implementing fiscal policies. Indeed, the government has actively adjusted fiscal policies. On the other hand, Hong Kong has accumulated substantial fiscal reserves over the years. Despite a decline in recent years, these reserves remain among the highest globally, with limited downside risks. Meanwhile, the government should consider making full use of the government bond program's capacity to raise funds for infrastructure investment. This approach would not compromise long-term fiscal sustainability but foster the development of capital markets and the internationalization of the renminbi.

The Hong Kong government is expecting a deficit of nearly HK$100 billion for the current year, significantly higher than the initial estimate of HK$48.1 billion made last February. The IMF has highlighted the necessity for Hong Kong to enhance its tax revenue to address increasing spending pressures linked to an ageing population. Prof. Heiwai Tang, Associate Dean of HKU Business School and Director of the Asia Global Institute, supports raising revenue either by raising tax rates or by broadening the tax base to address the issue of possible structural fiscal deficits. He highlighted a “mental trap” among government officials who believe that higher taxes would harm productivity, and he pointed out that Singapore’s implementation of a goods and services tax (GST) did not hinder productivity in the medium run. He stated, “Broadening the tax base, especially introducing the sales tax, will be a one-way street,” emphasising the need for sustainable revenue sources as government expenses grow.