A scholar from the University of Hong Kong's business school suggested the government issue bonds and spend its fiscal reserves, to reduce the nearly HK$100 billion deficit. Associate professor Liu Yang, along with other professors from the business school, released the “Hong Kong Economic Policy Green Paper 2025” on Thursday. Liu felt the SAR cannot rely on a natural economic recovery to resolve its fiscal challenges, adding the government should fully utilise its fiscal reserves. “Fiscal deficit can be short-term and the debt can absorb it. So we don't have to right away next year get a fiscal surplus. Fiscal deficit can last and there's not a problem to have a few years of a fiscal deficit as long as we have a good average condition for the long term,” Liu said. “According to the government, they're going to try to solve the problem and get back to surplus by 2027, which I think is a very good agenda. And apart from that, I think the easiest way of paying the deficit is actually to run down the reserves. So you don't have to issue debt, but as long as you have reserves, you pay out directly and that's going to cover the deficit." Liu also said the government can raise funds by issuing bonds. He said there is room for the SAR government to raise it debt-to-GDP ratio from currently around 10 percent, to 20 or 30 percent. “Reserve and debt, they are just two sides of the same coin. Suppose nothing happened and we issue lots of debt and we keep the money in our account, then that becomes our reserve. So you can let the reserve down and not issue in debt. That's one way to just basically to pay your deficit. You can also keep your reserve and issue some debt to directly pay your deficit. The actual question is how much reserve we want to have, how much is enough and how much debt we are comfortable with,” Liu said. The green paper also stressed the importance for Hong Kong to undergo an economic transformation. Associate dean Tang Heiwai said Hong Kong should find a new strategic role and strive to become a global supply chain management centre. He said the SAR should not only act as a bridge to the West, it should also become a gateway between China and other emerging economies.
