Hong Kong leader says Asian financial hub faces ‘grave’ challenges

HONG KONG (Reuters) – In her maiden policy speech Hong Kong’s Chief Executive Carrie Lam on Wednesday warned the city faced “grave” challenges and must develop a diversified and high value economy, unveiling a mix of housing and tax relief policies to raise competitiveness.

Hong Kong, now among the world’s most costly cities, has battled rising income inequality, the slow implementation of marquee public projects, political tensions with mainland China, and a slide in regional competitiveness.

“In the face of competition from other economies as well as the rise of protectionism in recent years, Hong Kong is facing increasingly grave challenges. We must develop a high value-added and diversified economy,” Lam said.

Lam said she would bolster support for small and medium enterprises in the Asian financial hub by cutting company profits tax to 8.25 percent from 16.5 percent for the first HK$2 million of earnings. Earnings after that would be taxed at the current 16.5 percent.

On combating Hong Kong’s soaring housing prices, Lam said that despite a raft of property cooling measures, the government had “no magic wands”.

Lam pledged to increase land supply where possible and launch a new subsidized “starter homes” scheme to help families not eligible for cheap-rental public housing. The first phase would provide around 1,000 residential units.

“Even if our housing policy has broad community support, it takes time to find land for increasing the housing supply,” conceded Lam, Hong Kong’s first female leader.

Hong Kong — where people are squeezed into an average living space of just 150 square feet (14 square meters) per person — is the world’s most expensive city for flats, according to a recent UBS report ranking 20 leading global cities including New York, London, Tokyo and Singapore. 

Chinese President Xi Jinping also voiced concern over the financial hub’s property market when he visited on July 1.

Hong Kong Chief Executive Carrie…

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