Tsang Paints Optimistic Picture For Hong Kong Economy

by Mary Swire, Tax-News.com, Hong Kong

22 September 2003

In an interview with the Wall Street Journal last week, Hong Kong's Chief Secretary Donald Tsang said he believed the economic outlook for the city was encouraging and the worst of the deflationary period was over.

Tsang said he observed encouraging signs in many sectors of the economy and predicted a rebound in the real estate and tourism sectors. The Chief Secretary also noted that city residents were "far more optimistic" after the government was forced to withdraw controversial security legislation following a mass demonstration in July, an event he called "an awakening moment for the administration".

One of the major causes for optimism, said Tsang, was the economic agreement with China which will allow around 95% of all Hong Kong exports into China to enter tariff free. Though the governor of the Chinese central bank has indicated that a yuan exchange is not on the immediate horizon, Tsang assured the WSJ that Hong Kong banks would be allowed to take deposits in the Chinese currency "quite soon". He also reiterated the government's commitment to the territory's currency peg with the US dollar, saying the administration has "no intention" of departing from it.

Though the territory is facing a budget deficit of some $HK70 billion this year, Tsang said the situation wasn't "incurable" as the government has plenty of fiscal reserves and no debt. Therefore, he felt the idea of introducing a sales tax in the city was an "undesirable" one at the moment.

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