Hong Kong’s Paul Chan says exports likely to face significant hurdles in 2024, while perks of investment trawl may take time to appear

Hong Kong exports are likely to still face “significant challenges” next year, the city’s finance chief has said, adding that the effects of government efforts to attract investors may take time to become apparent.

“Looking ahead, the main drivers of our economy in the coming year will be the export of tourism services and consumption, both of which still need to be consolidated,” Financial Secretary Paul Chan Mo-po told a radio programme on Sunday.

“As for exports, we expect significant challenges will remain next year,” the minister said. “During this period, we will focus on our investment promotion work, which we will do vigorously.”

Financial Secretary Paul Chan has said that Hong Kong must shore up tourism services and consumption as main drivers of the local economy. Photo: Handout

But Chan added that the effects of such government efforts “may not be visible immediately”.

Authorities earlier this month adjusted Hong Kong’s growth forecast for 2023 from 4 to 5 per cent to 3.2 per cent.

Officials in October said economic growth in the third quarter had grown by 4.1 per cent year-on-year.

Chan on Sunday said authorities had downgraded the yearly forecast largely due to challenges in terms of exports.

“As we all know, Hong Kong’s exports rely heavily on re-exportation from the mainland, but mainland’s exports were reduced this year,” he said, but stressed that consumption and investment were seeing positive growth.

Exports from mainland China fell more than expected in October as shipments to major trading partners remained weak, marking six straight months of decline, as exports that month dropped 6.4 per cent from a year earlier to US$274.8 billion.

The decrease in exports was also sharper than the 6.2 per cent drop recorded in September.

The finance chief said that investments in Hong Kong had grown 8 per cent this year, a rebound from the contraction reported last year.

Hong Kong had seen a recovery in terms of consumption and tourism, with the number of tourists visiting the city reaching about 60 per cent of pre-pandemic levels, Chan said, stopping short of specifying the period for the data.

The number of international flights going to and from Hong Kong was also expected to reach about 80 per cent of pre-pandemic levels by the end of this year, he added.

The minister also stressed the importance of pursuing partnerships with key companies, citing AstraZeneca as an example.

The pharmaceutical giant earlier announced that it would open a research and development centre in the Lok Ma Chau Loop technology hub in 2024, and hoped to increase the number of staff there to about 100 over the next five years.

“We lobbied so hard for the company to come because we consider it a key corporate partner and it won’t just come by itself,” Chan on Sunday said.

“We hope with its arrival, it can also bring along upstream, midstream and downstream companies – about 80 companies from the mainland – as part of its supply chain and ecosystem.”

Chan described the state of the city’s research and funding sectors as “thriving”, as well as touting the strengths of the local medical research industry.

On the subject of a possible rise in taxes, the minister said it was “too early” to say if such a move would happen and that “thorough discussions and assessments” were required beforehand.

“We are a small economy and our tax system is relatively simple,” he said. “Taxes will fluctuate according to economic conditions. The most important thing is that within an economic cycle, we generally maintain a balance.”

Chan has faced questions on the subject in response to a blog post he wrote on November 19 as he returned from the Asia-Pacific Economic Cooperation (Apec) forum in San Francisco.

In the post, he wrote that some Apec members were looking at how to increase tax sources without hurting their respective economy’s investments and competitiveness.