HK unveils stimulus budget

HONG KONG'S finance chief yesterday unveiled a budget to kick-start growth in the city and temper property prices, but warned the world economy could face headwinds from possible trade and currency battles.

During a speech interrupted by protests, Financial Secretary John Tsang also set out a series of measures to support the middle class and alleviate poverty in the first budget under an increasingly unpopular leader Leung Chun-ying.

The announcement came as data showed the southern Chinese financial hub saw growth of just 1.4 percent in 2012 and was tipped to expand only 1.5 to 3.5 per cent this year.

In unveiling measures to boost the city's financial sector and private equity industry he warned: "The whole world will have to face wars on three fronts, namely currency, trade and geopolitics.

"As a highly open and small economy, Hong Kong will be impacted by the development of these wars to a certain extent."

His comment come after a sharp drop in the value of the yen sparked accusations of government meddling and concerns about a possible global war in which nations weaken their currencies to gains give a jolt to softening exports.

Tsang outlined plans to boost the city's financial sector, including extending profits tax exemption for offshore private equity funds, with an eye on regional rival Singapore.

He also unveiled a string of populist measures aimed at supporting the middle class and poor, while looking to address the city's chronically high property prices, which have doubled since 2009, squeezing average citizens.

Tsang vowed to increase land-supply to allow the building of more houses while quarterly rates amounting to HK$11.6 billion and covering 75 per cent of properties will be waived. That follows last Friday's decision to double stamp duty on second homes to 8.5 per cent.

Also yesterday, Tsang said there will be a 75 per cent cut in salaries tax to a ceiling of HK$10,000.

However, analysts said the budget would do little to improve the lot of the middle-class or poor or give a lift to the popularity of Leung, whose government has been rocked by a series of protests since he came to power in July.

Leung has seen his support rating drop after scandals involving illegal structures at his home, and last year came close to facing impeachment proceedings. AFP