Hong Kong’s public expenditure growth cannot exceed revenue rise: Paul Chan

Hong Kong’s public expenditure growth should not exceed that of its revenue despite signs of improving finances, Paul Chan Mo-po has said, while noting that the market expects increased government investment to speed up economic development. But the financial secretary on Sunday also painted a rosy picture for the city’s retail sector, revealing that sales figures for December, set to be released on Tuesday, would show that growth was continuing to rise. The value of total retail sales in November 2025 was provisionally estimated at HK$33.7 billion (US$4.3 billion), representing a 6.5 per cent increase year on year. Chan is expected to announce the next budget on February 25. In his weekly blog post on Sunday, he said the local economy had got off to a good start in 2026, seeing an unexpectedly high stamp duty revenue thanks to the stock market boom. The Hang Seng Index closed at 27,387 last Friday, rising by nearly 7 per cent for the month. January’s average daily turnover exceeded HK$272 billion, an increase of 90 per cent compared with the same period last year. Chan noted that a stock market boom over the past year had contributed to the government’s operating account returning to surplus in the 2025-2026 financial year, a year earlier than originally estimated. He added that the government would still need to continue issuing bonds to cover a shortfall in its capital account. In his budget last February, Chan estimated a consolidated deficit of HK$67 billion for 2025-26, and had forecast the operating account would return to a surplus in two years. The city already posted a HK$43.9 billion surplus for the nine-month period ending last December. “On the operating account, benefiting from last year’s buoyant financial markets, with average daily turnover in Hong Kong stocks nearly doubling year‑on‑year to around HK$250 billion, stamp duty revenue exceeded budget expectations,” the finance chief wrote. “In fact, whether viewed from the consolidated account or the operating account … Hong Kong’s public finances are indeed improving. “As for the capital account, continued investment in infrastructure and the Northern Metropolis means bond issuance will still be required.” The financial secretary acknowledged that different sectors of society had their own demands, while emphasising it was important to balance current needs with essential long-term investments. “However, even with improving public finances, we must continue to manage public resources prudently, ensuring that the growth of public expenditure does not exceed the growth of revenue,” he said. “During the budget consultation, people from various sectors and different walks of life expressed their hopes for strengthened support in meeting their needs. “At the same time … the market also expects the government to increase investment, accelerate the development of more high-value-added industries, and create more quality job opportunities so that the economy can grow faster and benefit people across all sectors. “It can be said that accelerating economic development is now a widely shared expectation in society. Expanding the economic pie will give us more resources to meet diverse social needs.” Looking ahead, Chan expressed cautious optimism regarding Hong Kong’s economic prospects this year, pointing to stable national development and steady economic growth. “With the strong support of the nation and the joint efforts of the government and all sectors of society, Hong Kong’s economy grew 3.5 per cent last year, better than initially expected,” he said. “Overall investment also accelerated significantly, recording a notable year‑on‑year increase of 10.9 per cent in the fourth quarter, marking four consecutive quarters of positive growth and a full-year increase of 4.5 per cent.” He also said the city’s financial system had remained stable and operated smoothly, despite heightened external geopolitical volatility, with total bank deposits exceeding HK$19 trillion. “In fact, confidence among overseas enterprises and investors about investing in Hong Kong is strengthening,” he wrote in his blog. He also vowed that the government would work to align with the national 15th five-year plan and accelerate integration into national development.