Subject: Appropriation Bill 2026
MR CHAN CHUN-YING: President, amidst the turbulent external political and economic environment, the Government’s Consolidated Account has returned to a surplus ahead of schedule, allowing for a moderate increase in measures to benefit the public in response to their needs―much to the satisfaction of both the Government and the community. This year’s Budget devotes substantial space to key industries such as innovation and technology (“I&T”), finance, and artificial intelligence, as well as the development of the Northern Metropolis (“NM”). It proposes using “Finance+” to empower industrial upgrading and transformation, thereby proactively aligning with the key directions of the National 15th Five-Year Plan while also charting a course for Hong Kong’s long-term competitiveness. It strikes a prudent balance between alleviating short-term fiscal pressures and fostering long-term development momentum, making it a pragmatic budget that deserves full recognition.
The 15th Five-Year Plan includes, for the first time, the objective of accelerating the construction of a financial powerhouse. Hong Kong’s financial market needs to perform its capital allocation function more effectively for various industries. The Budget proposes many measures for concrete deployment in areas such as the expansion of offshore Renminbi (“RMB”) functions, market systems, innovative financing and green finance. Against the backdrop of the current complex geopolitical landscape, these measures will help Hong Kong continue to attract capital, industries and talent, thereby accumulating new development momentum and generating new quality productive forces.
Regarding offshore RMB business, I am pleased to see that the Budget has adopted several of my proposals, including the regular issuance of RMB bonds, the enrichment of product offerings in the market, and the improvement of the offshore RMB bond yield curve. The Hong Kong Monetary Authority will also increase the total size of the RMB Business Facility and promote more convenient foreign exchange transactions between RMB and regional currencies. I believe the financial sector will continue to participate deeply in this process, encouraging more international investors to use RMB to purchase investment products, thereby boosting trading volumes and advancing the internationalization of RMB.
In terms of functional expansion, the Budget proposes enhancing the tax regimes for family offices and funds, and including digital assets, precious metals and specified commodities within the scope of qualifying investments eligible for tax concessions. Notably, the measures to promote the development of the gold trading market―including the exploration of tax incentives for eligible institutions conducting gold trading and settlement in Hong Kong―fully align with the current development needs and trends of the global commodities market.
In terms of market systems, the Budget has adopted several proposals for optimizing listing rules that were jointly put forward earlier by the President, Mr Rock CHEN, and myself. More importantly, it explicitly promotes upgrading market infrastructure, such as enhancing the structured product listing framework and implementing the uncertificated securities market regime. This will also facilitate the listing of emerging industries, such as aerospace enterprises, in Hong Kong, thereby promoting the clustering of high-end industries. This series of measures is conducive to the diversified and sustained development of the capital market.
In terms of innovative financing, the Budget introduces measures to improve financing efficiency and broaden financing channels for enterprises. These include integrating trade and logistics data through the Commercial Data Interchange to improve enterprises’ access to trade finance, and vigorously promoting the trading and application of intellectual property to address the difficulties and pain points faced by I&T enterprises arising from the mismatch between their asset characteristics and traditional credit models. We hope to use this opportunity to overcome the funding bottlenecks hindering I&T development. Furthermore, the establishment of an Intellectual Property Academy will help to cultivate relevant professionals and accelerate the implementation of related policies.
In the area of green finance, the Budget proposes actively assisting in the development of the carbon market by achieving interoperability of standards and interconnection of markets, thereby enhancing our influence in the international green finance market. This will play a significant role in promoting the standardization and high-quality development of green finance in Hong Kong.
I believe that some of the aforementioned new financial initiatives will be incorporated into the financial section of Hong Kong’s first “five-year plan”, and I hope to see results soon. NM is an important carrier for Hong Kong’s I&T development, as well as being a key link in fostering closer technological cooperation and an industrial division of labour between Hong Kong and cities in the Greater Bay Area. The Budget proposes increased financial support, including injections of $10 billion each into the dedicated companies for the Loop and San Tin Technopole. This will certainly accelerate the establishment of I&T infrastructure and the development of the industry, laying a solid foundation for long-term development.
The Budget proposes that NM will deepen public-private partnerships and cross-boundary coordination. Specifically, this includes unlocking land potential, accelerating development and construction progress, and facilitating the convenient flow of various elements. Additionally, efforts will encompass the planning and development of a modern logistics cluster, the advancement of the construction of the NM University Town, and the establishment of a third medical school, with the aim of enhancing NM’s overall carrying capacity. Currently, NM’s development is at a critical construction stage and there is an urgent need to increase market participation and private enterprise enthusiasm. To further unleash market vitality, I propose, first, that the scope of public-private partnerships should be expanded to encourage developers, financial institutions and technology enterprises to participate jointly in large-scale land disposal in NM. This would leverage the combined advantages of land, capital, and industry, for example by allowing enterprises to exchange industrial investment and research and development resources for land development rights. Secondly, NM’s dedicated operating company should be encouraged to pursue market-based financing. Funds should be raised through means such as bond issuance and the introduction of strategic investors, thereby reducing reliance on government finances. Thirdly, the “infrastructure first, industry later” development model should be piloted in districts such as Hung Shui Kiu and Kwu Tung North. Under this model, construction of basic supporting facilities, such as commercial, leisure and transport infrastructure, would be prioritized to bring people and logistics together, thereby enhancing the area’s overall value and stimulating market participation.
I recently attended an industry seminar which I found highly enlightening. The speaker noted that the New York Stock Exchange is currently pursuing financial infrastructure reforms with full force and is advancing digital and intelligent transformation comprehensively. Against the backdrop of an accelerating reshaping of the global economic landscape and deepening technological change, Hong Kong must act proactively as an international financial centre and pursue reforms actively to consolidate its existing advantages and achieve sustainable development.
I believe that reform should focus on three levels. The first level requires fine-tuning the philosophy of public finance. For a long time, we have adhered to the principle of living within our means and prioritizing fiscal stability, as stipulated in the Basic Law. However, in the face of structural issues such as a rapidly ageing population and persistently tight housing supply, coupled with the time needed for our economic transformation, a new fiscal mindset that is both prudent and proactive can achieve long-term effective fiscal accumulation and promote current development without compromising either. This can be considered from two perspectives. First, we should appropriately relax the traditional constraint that public expenditure as a proportion of GDP (Gross Domestic Product) should not be too high. We should make moderate use of fiscal reserves and borrow to invest in the future. Secondly, we should introduce quantitative indicators of fiscal sustainability, such as assessing the impact of population ageing on long-term fiscal expenditure, and establish dynamic planning processes.
It must be emphasized that reform does not negate our principles of fiscal prudence. Rather, it is a shift from passive defence to proactive action: daring to invest in the future while precisely alleviating societal pain points. The new financial arrangements in NM fully demonstrate the Government’s commitment in this regard. In addition to bringing back $15.8 billion from 13 funds and $37 billion from the Bond Fund, the Government has also taken a groundbreaking move to transfer a total of $150 billion from the Exchange Fund over two years to support infrastructure development, on the premise of safeguarding financial and monetary stability. At the same time, the borrowing ceiling for green and infrastructure bonds has been raised to $900 billion, and the proportion of long-term bond issuance will be increased to better match the cash flow maturity with project funding requirements. This is commendable.
The second level is to optimize the tax system. The current tax regime, which has been in place for many years, remains relatively competitive. However, more targeted tax incentives could be offered to certain emerging and future industries to encourage relevant enterprises to set up operations in Hong Kong. Furthermore, different tax bases and rates should be reviewed to lower operating and transaction costs, thereby maintaining the appeal of Hong Kong’s tax system to global capital.
The third level is to accelerate the upgrading of financial infrastructure. Hong Kong should accelerate the adoption of digital currencies and blockchain technology, improve payment and settlement systems, enhance the efficiency of cross‑boundary transactions, and strengthen cybersecurity protection simultaneously to ensure the stability and reliability of the financial system, thereby laying a solid foundation for the future development of our digital economy. Only through reform can we seize opportunities amidst change, continue to fulfil Hong Kong’s unique role as a super connector and create sustained value for local and international investors.
Finally, I would like to point out that the recent conflict in the Middle East, which erupted after the Budget was announced, has led to a surge in international energy prices. The Government has responded swiftly by establishing an interdepartmental task force to closely monitor international energy prices and local supply situation. It has already introduced four targeted temporary measures, one of which is the diesel subsidy, which has been approved by the Finance Committee of this Council. This series of timely actions fully demonstrates a high regard for people’s livelihoods. However, the Government must continue to closely monitor subsequent developments in the international situation to avoid passing on the entire increase in energy costs to the public. After all, the core purpose of the Government’s annual budget compilation is to effectively address the various needs of the public in their daily lives and enhance their sense of well-being and fulfilment.
President, I support the Appropriation Bill 2026. I so submit.