TAIPEI, Taiwan – Hong Kong plans to eliminate 10,000 civil service jobs and freeze public sector salaries as part of an effort to curb a growing fiscal deficit, its top finance official announced on Wednesday, as the city grapples with its third year of budget shortfalls.
Hong Kong’s deficit for the fiscal year ending in March 2025 stands at an estimated HK$87.2 billion (US$11.2 billion), following deficits of HK$122 billion in 2022/23 and HK$101.6 billion the previous year.
Hong Kong Financial Secretary Paul Chan outlined in his 2025 budget speech on Wednesday measures to address the financial challenges, including a 7% reduction in government spending over the next three years.
As part of the initiative, the government will cut 10,000 civil service positions by April 2027, representing a 2% workforce reduction per year over the next two years, said Chan.
“The spending cut will establish a sustainable fiscal foundation for future development,” said Chan. “It provides a clear pathway toward restoring fiscal balance in the operating account in a planned and progressive manner.”
Chan added he had also instructed all government bureaus and departments to reassess resource allocation and work priorities. He emphasized the need for streamlining procedures, consolidating resources and leveraging technology to deliver public services more effectively.
Challenges after National Security Law
Since the introduction of a National Security Law in 2020, in response to sometimes violent pro-democracy protests the year before, Hong Kong’s economy has faced mounting challenges, including U.S. and Western sanctions, capital outflows, and shifts in investor confidence.
Gross domestic product contracted by 6.1% in 2020 before rebounding to 6.4% in 2021, but growth has since slowed to 3.2% in 2023 and 2.5% in 2024.
The real estate sector has been hit hard, with property prices dropping nearly 30%, significantly reducing government revenue from land sales, which once contributed over 20% but now make up only about 5%.
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The city’s financial sector has remained a cornerstone of its economy, attracting Chinese company listings.
In 2024, funds raised through initial public offerings, or IPOs, in Hong Kong more than doubled in the first three quarters, despite a global downturn in IPO activity. This surge is attributed to market efficiency improvements and enhanced access to mainland financial markets.
However, the landscape has shifted, with multinationals increasingly reconsidering their presence in the city. Western banks play a diminished role in major IPOs, leading to layoffs and a strategic pivot towards wealth management over investment banking – a trend reflecting Hong Kong’s closer alignment with Beijing and a retreat of Western financial players.
The retail and tourism sectors, once vital to the city’s economy, have faced significant challenges due to pandemic restrictions and a decline in mainland Chinese visitors.
In November 2024, retail sales fell by 7.3% year-on-year, marking the ninth consecutive month of decline. Notably, 53% of mainland visitors were day-trippers, spending about HK$1,400 each – 42% less than in 2018.
Edited by Mike Firn.