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In Hong Kong, a Budget With a Surfeit of Surpluses In Hong Kong, a Budget With a Surfeit of Surpluses
(about 2 hours later)
HONG KONG — As the United States prepares for mandatory budget cuts Friday under so-called sequestration legislation, Hong Kong is grappling with a very different problem: spending money as fast as it sluices into government coffers. HONG KONG — As the United States prepares for mandatory budget cuts on Friday, Hong Kong is grappling with a very different problem: spending money as fast as it sluices into government coffers.
John Tsang, the financial secretary of the semiautonomous Chinese territory, announced Wednesday a budget that calls for a long list of one-time subsidies, particularly for the poor and elderly. John Tsang, the financial secretary of Hong Kong, the semiautonomous Chinese territory, presented on Wednesday a budget that calls for a long list of one-time subsidies, particularly for the poor and aging. He also said the government would waive business registration fees and reduce the profits tax, particularly for small businesses.
The stimulus measures follow heavy criticism in Hong Kong that the government consistently produces large budget surpluses, even during periods of weak economic growth, including the past year. The Hong Kong economy grew only 1.4 percent last year, well below its average of 4.5 percent over the past decade. The stimulus measures come after heavy criticism in Hong Kong that the government consistently produces large budget surpluses even during periods of weak economic growth, including the last year. The Hong Kong economy grew only 1.4 percent last year, well below its average of 4.5 percent over the last decade.
The Asian financial hub consistently runs budget surpluses mainly because it has low social spending and no military to fund. By comparison, the federal government in the United States dedicates about half its spending to assistance to the elderly and directs another quarter of its spending to the military. Hong Kong consistently runs budget surpluses mainly because it has low social spending and no military. By comparison, the federal government in the United States dedicates roughly half its spending to assisting the aging — through Social Security, Medicare and the nursing home portion of Medicaid — and directs another quarter of spending to the military.
The Hong Kong government is sharply increasing social spending in percentage terms, but from such a low base, this expenditure still falls short of revenues. And after years of accumulated surpluses, the city is sitting on fiscal reserves accumulated from previous surpluses equal to 23 months’ total spending. The Hong Kong government is now sharply increasing social spending in percentage terms but from such a low base that spending still falls short of revenue. After years of accumulated surpluses, the city is sitting on cash accumulated from previous surpluses equal to 23 months’ total spending.
Some of the heaviest criticism of previous budgets has come from activists speaking on behalf of what are known locally as the “multiple have-nots.” Some of the heaviest criticism of previous budgets has come from advocates speaking on behalf of what are known locally as the “multiple have-nots.” These are low-income residents, often young, who have not been on the waiting list long enough to qualify for public rental housing, so they do not qualify for a two-month rent waiver that Mr. Tsang announced on Wednesday.
These are low-income residents, often young, who have not been on the waiting list long enough to qualify for public rental housing, so they will not benefit from the two-month rent waiver announced Wednesday by Mr. Tsang, the financial secretary. Nor are they destitute enough to qualify for the extra month of welfare payment that was announced. And they live in shared apartments where they may not benefit directly from the government’s subsidy in the coming fiscal year of 1,800 Hong Kong dollars, or about $230, for each residential electricity bill. They are not older citizens, so they do not qualify for the extra month of old-age allowance payments that Mr. Tsang also announced, nor are they destitute enough to qualify for the extra month of welfare payment that was announced. And they live in shared apartments where they may not benefit directly from the government’s $230 subsidy in the coming fiscal year for each residential electricity bill.
Focusing help on this group of people, Mr. Tsang announced that the government would give an extra 15 billion dollars to the government-controlled Community Care Fund, which conducts social work, like offering rent assistance. To help them, Mr. Tsang announced that the government would give an extra $1.9 billion to the government-controlled Community Care Fund, which does social work like rent assistance.
“I have every confidence that we will be able to assist more people in need, particularly that group of people who used to complain that they were being left out from the budget relief measures — the so-called multiple have-nots,” Carrie Lam, the territory’s chief secretary, said Wednesday.“I have every confidence that we will be able to assist more people in need, particularly that group of people who used to complain that they were being left out from the budget relief measures — the so-called multiple have-nots,” Carrie Lam, the territory’s chief secretary, said Wednesday.
Marcellus Wong, a senior adviser in the Hong Kong office of PricewaterhouseCoopers, noted that Mr. Tsang’s figures showed that government spending had risen twice as fast as economic output over the past 15 years, and expenditures were creeping above 20 percent of output. “The government needs to closely monitor this benchmark,” he said. Marcellus Wong, a senior adviser in the Hong Kong office of PricewaterhouseCoopers, a global professional services firm, noted that Mr. Tsang’s figures showed that government expenditures have risen twice as fast as economic output over the last 15 years, and expenditures are creeping above one-fifth of output. “The government needs to closely monitor this benchmark,” he said.
The Hong Kong government uses very conservative budget forecasts, consistently predicting small deficits that turn into large surpluses. The government predicted a year ago that it would run a deficit of 3.5 billion dollars for the fiscal year through the end of March, but its most recent estimate is that it will run a surplus of 64.9 billion dollars instead. Mr. Wong predicted that the final figure would be a surplus of more than 70 billion dollars. The Hong Kong government uses conservative budget forecasts, consistently predicting small deficits that turn into large surpluses. The government predicted a year ago that it would run a deficit of $449 million for the fiscal year through the end of March, but its most recent estimate is that it will now run a surplus of $8.3 billion instead, and Mr. Wong predicted that the final figure would be a surplus of more than $9 billion.
Social spending has stayed low until now partly because Hong Kong has a single-payer government health care system with low pay for doctors and nurses by U.S. standards But recurrent social spending is on track to rise 33 percent in the coming year, mainly because the government is introducing a monthly payment of 2,200 dollars to all low-income elderly residents. For the coming fiscal year, Mr. Tsang again predicted a deficit of $628 million.
Hong Kong has also begun gradually building a mandatory retirement savings system based on bank-managed mutual funds. But many elderly residents retired before it was started. Social spending has stayed low until now partly because Hong Kong has a single-payer government health care system with low pay for doctors and nurses by American standards, and with supplemental charges and waiting lists for expensive medical procedures. But recurrent social spending is on track to rise 33 percent in the coming year, mainly because the government is introducing a monthly payment of $282 to all low-income residents 65 and older.
In western Hong Kong island, an area with a large population of senior citizens, four elderly people on the street each said that they did not expect much money from the government because they lived with their children. Hong Kong has also begun gradually building a mandatory retirement savings system based on bank-managed mutual funds. But many of the current older citizens retired before it was started and do not benefit. Many current workers have had extremely low returns on their savings because of annual fees of 2 percent of assets or more.
A fifth, Wu Jinyao, a retired construction worker who is recovering from oral cancer, complained that the government was too frugal in promising an extra one-month payment of disability allowances in the coming fiscal year, because he had high medicine and transportation costs. “I have been to the various government agencies and they tell me to come back when I am down to my last 500 Hong Kong dollars. What system is this?” he said. Families have tended to look after aging members, further limiting social spending for the government.
Hilda Wang contributed reporting In western Hong Kong island, an area with a large population of older residents, four elderly people on the street each said in interviews on Wednesday that they did not expect much money from the government because they lived with their children, who supported them.
A fifth resident, Wu Jinyao, a retired construction worker who is recovering from oral cancer, did complain that the government was too frugal in only promising an extra month’s payment of disability allowances in the coming fiscal year starting on April 1. He said he had high medicine and transportation costs to go to a distant government hospital for continued chemotherapy and radiation therapy.
“I have been to the various government agencies and they tell me to come back when I am down to my last 500 Hong Kong dollars,” or about $64, he said. “What system is this?”

Hilda Wang contributed reporting.