Is the Hong Kong government facing financial difficulties and “fighting local tyrants to divide their land” again? (Photo) Hong Kong | Government | Fiscal Deficit | Real Estate Agents | Developers | Current Affairs Focus |

The picture shows Li Ka-shing’s Cheung Kong Group, a leading company in Hong Kong’s real estate industry. (Image source: Getty Images)
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[Watch China, November 4, 2023](Watch China reporter Li Huaiju’s comprehensive report) In the past, the main income of the Hong Kong government came from the sale of land. As the economy fell into a trough, land prices also fell sharply. This year, five pieces of auctioned land have failed to bid, and government revenue is not as good as before. So who will the government target? Earlier analysts predicted that real estate developers who have made a lot of money in the past few decades are likely to become lambs waiting to be slaughtered. On the 4th, some Hong Kong media published comments pointing the contradiction at real estate developers.
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At the end of last month, the Hong Kong government announced the financial situation for the first six months of this fiscal year (that is, as of September 30, 2023). The overall expenditure during the period was 355.6 billion yuan (Hong Kong dollars, the same below) and the revenue was 131.3 billion yuan. After taking into account the HK$46.6 billion in proceeds from green bonds issued under the government’s green bond program, the financial position for the first six months of this financial year was a deficit of HK$177.7 billion.

Excluding the revenue from bond issuance (Editor’s note: Because the debt must be repaid, strictly speaking it cannot be counted in the government’s fiscal revenue), the fiscal deficit in the first six months of this fiscal year is as high as 224.3 billion. As of September 30, 2023, the Hong Kong government’s financial reserves only amounted to NT$657.1 billion.

Looking back at the beginning of this year, when Financial Secretary Paul Chan Mo-po delivered the Budget, he optimistically estimated that there would only be a deficit of more than 50 billion for the whole year this year, and the revenue from land sales could reach 85 billion. In fact, the government has failed to bid for five pieces of land this year, and the revenue from land sales (including land premium income) is estimated to be only about NT$15.6 billion, which is far lower than the government’s expected target of NT$85 billion.

The “Domestic Research Society” (“Domestic Research Society”) published an article on the 2nd, saying that land prices in Hong Kong have continued to fall. Take the Kai Tak site located at the old Kowloon Airport as an example: a vacant commercial land in the runway area (No. 4, Area 4C). The land is for commercial use and has a buildable floor area of ​​863,158 square feet. The valuation of this land reached 14.67 billion yuan at its peak in 2018 (the bottom line was 12.09 billion yuan), with a price per square foot of 13,000 to 17,000 yuan.

However, the latest estimated price per square foot of the land this year is only 1,500 to 3,600 (per square foot). The corresponding land valuation is between 1.29 and 3.1 billion yuan. There is currently no sales plan. If calculated based on the lowest valuation of 1.29 billion, the value of the land has dropped by more than 90% within 5 years.

“This Research Institute” pointed out that when the government’s finances further deteriorate and there is nothing to do, who will be affected?

Some analysts told “Watch China” that the Hong Kong government is now facing a financial crisis. In addition to supporting a puppet bureaucracy and the Legislative Council with high salaries, it also has to pay for huge police force and national security expenses.

Checking government information, the total number of civil servants in Hong Kong in 2023 is 174,500 (excluding the Independent Commission Against Corruption and judicial officers, a total of about 1,500). The annual salary expenditure of civil servants is as high as NT$149.1 billion.

Analysts said that even with the government’s financial deficit, last month it still announced a 1.9% salary increase for legislators; a flat salary increase of 3.62% for judicial officers.

Taking the Legislative Council as an example, after the salary increase, the monthly salary of ordinary members increased from 105,000 yuan to 107,000 yuan; the monthly salary of the Legislative Council chairman, who can receive double the monthly salary, increased from about 210,000 yuan to 214,000 yuan; and the monthly salary of the legislative council chairman, who can receive 1.5 times the salary The monthly salary of the chairman of the internal committee increased from 157,000 yuan to 160,000 yuan. At the same time, members’ medical allowances have been increased accordingly, from NT$36,500 to NT$37,200 per year; office operating expenses have also been increased accordingly. As for the end-of-term remuneration, it will remain at 15% of the remuneration during the term of office.

Analysts said that it can be seen that the government is using money to win over people’s hearts to maintain governance. Even under the pressure of a huge financial deficit, it still wants to raise the salaries of its own people, that is, “patriots.” So this raises a question: If the government’s fiscal reserves are depleted, where will the money come from?

Analysts continue to point out that the richest people in Hong Kong are currently real estate developers. They have made a lot of money in the past few decades. The struggle between the government and developers will become a major attraction in the future.

Maybe the government will use “communism” to develop developers. Anyway, there is no difference between today’s SAR government and the Communist Party. There is no precedent for “attacking the local tyrants and dividing the land”. Maybe it will be replaced by a “communism” that is in line with the form of modern society, but the essence behind it it’s the same.

Another possibility is that the SAR government and real estate developers join forces to cut off the leeks of the public. For example, by inflating property prices, people have to use their life savings to finance a house. The government and real estate developers have both been beneficiaries of the property market bubble in the past few decades. Under the constraints of economic laws, this trick may not be effective in the future.

Of course, if real estate developers still have a conscience, they may engage in “soft confrontation” and transfer assets to overseas projects. Analysts believe that no matter what, in a totalitarian society, the biggest beneficiary must be the government, and the biggest victims must be the citizens.

On the 4th, a commentary article in “Hong Kong 01” pointed the finger at real estate developers. The article pointed out that the land auctioned by the government has repeatedly failed to bid, and some people have accused real estate developers of secretly joining forces to deliberately offer low prices to force the land to fail, forcing the Hong Kong government to sell the land at a low price, which in turn led to a significant decrease in treasury revenue and a fiscal deficit.

There are even more fierce voices wanting to report real estate developers to the central government and punish them. The article believes that this is the fault of the real estate developers themselves. “Whoever expects real estate developers to make big money in the long term will inevitably make the general public dissatisfied.”

However, the article believes that the Hong Kong government, as the largest land supplier, the largest real estate developer, and the biggest beneficiary of high property prices, has the responsibility to take measures to rescue the market. The article suggests that the first step is to return the property market transaction volume to normal and create more incentives to attract real estate developers to buy land, including canceling all current property market incentives. The article emphasizes that “in extraordinary times, extraordinary means must be used to rescue the market,” because the high interest rate environment that is unfavorable to the property market will remain for a relatively long time.

As for the “extraordinary means” mentioned in the article, most Hong Kong netizens interpreted it as “beating landlords”. Some comments lamented, is Hong Kong still a capitalist society and a free market? Is it a crime not to bid at an auction? History keeps repeating itself, and Cultural Revolution 3.0 is basically repeating itself in Hong Kong.

Source: Look at China

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