Chief Executive John Lee's term is barely halfway through, and Hong Kong's economy is teetering on the brink of collapse. The long-touted goal of "governing and prospering" seems elusive, and the government's finances are severely stretched, demonstrating that the new Hong Kong economy, under the National Security Law, cannot regain its footing. Furthermore, the government's shift to leading economic development, accompanied by unsustainable expenditures, has precipitated a structural fiscal crisis.
The writing is on the wall for the SAR's fiscal crisis. With hundreds of thousands of middle-class families emigrating, global instability and a sluggish mainland China economy have impacted the overall economy, weakened property prices, and dented government land sales revenue. This has resulted in an average annual government deficit of over NT$180 billion over the past three years (2022/23-2024/25), with this year's deficit estimated to be closer to NT$200 billion. While total budget expenditures have reached NT$776.9 billion, revenue is estimated at approximately NT$580 billion, less than three-quarters (74.66%) of spending.
Civil servant pay cuts have limited effectiveness, necessitating drastic measures to eliminate "white elephant projects."
However, faced with significant fiscal deficits in recent years, the SAR authorities have increased rather than reduced their engineering expenditures. For five consecutive years, starting from the 2024/2025 fiscal year, annual public works expenditure has been around HK$90 billion, nearly 90% of civil servants' annual salaries. In other words, if the government is serious about reducing the fiscal deficit, simply targeting civil servant salaries will have limited success. A 3% pay cut, while likely to spark widespread resentment, would only save less than HK$3 billion. A more drastic measure, such as postponing 20% to 30% of engineering projects, would reduce construction costs and land acquisition compensation by HK$30 to 40 billion
